As filed with the Securities and Exchange Commission on October 26, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
WORLDWIDE FIBER INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Canada 1731 Not Applicable
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
1510-1066 West Hastings Street
Vancouver, BC Canada V6E 3X1
(604) 681-1994
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------
CT Corporation System
1633 Broadway
New York, New York 10019
(212) 246-5070
(Name, address, including ZIP Code, and telephone number,
including area code, of agent for service)
with a copy to:
Roger Andrus, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
(212) 701-3000
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 for an offering
pursuant to Rule 426(b) under the Securities Act, check the following 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. |_| _____________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=====================================================================================================================
Proposed Proposed Maximum
Title of Each Class of Securities Amount to be Maximum Price Aggregate Offering Amount of
to be Registered Registered Per Unit Price (1) Registration Fee (2)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12% Senior Notes due 2009 $500,000,000 100% $500,000,000 $139,000.00
=====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933, as amended
(the "Securities Act").
(2) Calculated pursuant to Rule 457(f)(2) under the Securities Act.
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 or until this registration statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
================================================================================
<PAGE>
Information contained in this prospectus is subject to completion or amendment.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of the relevant
jursidiction.
PROSPECTUS
Subject to Completion, dated October 26, 1999
WORLDWIDE FIBER
[GRAPHIC OMITTED]
Worldwide Fiber Inc.
Offer to Exchange our 12% senior notes due 2009,
which have been registered under the Securities Act,
for our 12% senior notes due 2009, which have not been registered
Terms of the Exchange Offer:
o Offer to exchange up to $500,000,000 aggregate principal amount of our
new 12% senior notes, which will mature in 2009, for an equal amount
of our old 12% senior notes, which will mature in 2009.
o Expires 5:00 p.m., New York City time, on , 1999 unless extended.
o You may withdraw your tender of old notes any time before the exchange
offer expires.
o We will accept any and all old notes validly tendered and not
withdrawn for exchange before the exchange offer expires.
o Not subject to any condition, other than that the exchange offer not
violate applicable law or any applicable interpretation of the staff
of the Securities and Exchange Commission and certain other customary
conditions.
o We will not receive any proceeds from the exchange offer.
o The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes.
o The terms of the new notes and the old notes are identical in all
material respects, except for certain transfer restrictions relating
to the old notes.
o The new notes will be evidence of the same indebtedness as the old
notes and will be issued under, and entitled to the benefits of, the
same indenture that governs the old notes.
The New Notes:
o Interest Payment: semiannually in arrears on February 1 and August 1,
beginning on February 1, 2000.
o Redemption: The new notes will be redeemable on or after August 1,
2004. Up to 35% of the new notes will be redeemable before August 1,
2002, from the net proceeds of one or more Public Equity Offerings.
See "Risk Factors," which begins on page 14, for a discussion of certain
factors that should be considered by holders before tendering their old notes in
the exchange offer.
----------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved 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
Page
Available Information......................................................i
Prospectus Summary.........................................................1
Risk Factors..............................................................14
Capitalization............................................................34
Selected Financial Data...................................................35
Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................38
Business..................................................................47
Management................................................................65
Transactions with Our Parent..............................................67
Regulation................................................................70
Description of WFI-USA Agreements.........................................81
Description of IC and CN Agreements.......................................83
Description of Our Recently Completed Private Equity Placements...........85
The Exchange Offer........................................................88
Description of Notes......................................................96
Description of Other Indebtedness........................................136
Book-Entry, Delivery and Form............................................139
Material United States and Canadian Income Tax Considerations............142
Plan of Distribution.....................................................144
Legal Matters............................................................147
Experts..................................................................147
Enforceability of Civil Liabilities Against Foreign Persons..............148
Currency Translation.....................................................148
Glossary.................................................................A-1
Index to Pro Forma Financial Information................................PF-1
Index to Financial Statements............................................F-1
AVAILABLE INFORMATION
We filed with the Securities and Exchange Commission a registration
statement on Form F-4, including amendments and exhibits, under the Securities
Act concerning the new notes offered by this prospectus. This prospectus, which
forms a part of the registration statement, does not contain all of the
information included in or annexed as exhibits or schedules to the registration
statement. This additional information, and other information filed by Worldwide
Fiber, may be inspected and copied at the public reference facilities maintained
by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Any statements made in this prospectus concerning the
provisions of certain documents may be incomplete and, in each instance, you
should refer to the copy of the document filed as an exhibit to the registration
statement otherwise filed with the Securities and Exchange Commission.
We are a "foreign private issuer" as defined in Rule 405 of the Securities
Act. As a foreign private issuer, we are exempt from provisions of the Exchange
Act which prescribe the furnishing and content of proxy statements to
shareholders and relating to short swing profits reporting and liability. We
have agreed that for so long as any notes remain outstanding we will furnish to
the holders of notes the information required to be delivered under Rule
144A(d)(4) under the Securities Act. Whether or not we are subject to Section
13(a) or 15(d) of the Exchange Act, we will file with the Securities and
Exchange Commission and furnish to the holders of notes and the trustee (1)
within 140 days after the end of each fiscal year, annual reports on Form 20-F
or 40-F, as applicable (or any successor form), containing the required
information, or required in the successor form,
-i-
<PAGE>
and (2) (a) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, reports on Form 10-Q or (b) within 60 days after
the end of each of the first three fiscal quarters of each fiscal year, reports
on Form 6-K (or any successor form) which, regardless of applicable
requirements, shall, at a minimum, contain a "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Copies of any documents referred to in this prospectus and filed with the
Securities and Exchange Commission can be obtained without charge to any holders
of notes by contacting Stephen Stow c/o Worldwide Fiber Inc., 1510-1066 West
Hastings Street, Vancouver, BC Canada V6E 3X1. Telephone number: (604) 681-1994.
In order to obtain timely delivery of these documents holders of notes must
request this information no later than five business days before the date on
which they would like to receive their documents.
-ii-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data, including the related notes, appearing elsewhere
in this prospectus. Industry and market data in this prospectus are based on or
derived from sources that we believe are reliable. There can be no assurance,
however, as to the accuracy of the industry or market data. As used in this
prospectus, unless the context indicates otherwise, "we" or "us" refers to the
combined business of Worldwide Fiber Inc. (and its predecessor) and all of its
subsidiaries. In this prospectus, except where otherwise indicated, all dollar
amounts are expressed in U.S. dollars. Certain terms used in this prospectus are
defined in Annex A--Glossary or elsewhere in this prospectus.
<TABLE>
<CAPTION>
The Exchange Offer
<S> <C>
Purpose and Effect........................ Worldwide Fiber sold the old notes on July 28, 1999 to Donaldson
Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co.
Incorporated, Salomon Smith Barney Inc. and TD Securities (USA)
Inc., the initial purchasers, who privately placed the old notes
with certain institutional investors. In connection with this
sale, we executed and delivered for the benefit of the holders of
the old notes a registration rights agreement providing for,
among other things, the exchange offer. See "The Exchange
Offer--Terms of the Exchange Offer."
Terms of the Exchange Offer............... New notes are being offered in exchange for an equal amount of
old notes. Old notes may be exchanged only in integral multiples
of $1,000. We will issue the new notes on or promptly after the
expiration of the exchange offer. See "Risk Factors--Consequences
of Failure to Exchange."
Minimum Condition......................... The exchange offer is not conditioned upon any minimum total
amount of old notes being tendered or accepted for exchange. See
"The Exchange Offer--Certain Conditions to the Exchange Offer."
Expiration Date........................... 5:00 p.m., New York City time, on , 1999, unless
the exchange offer is extended, in which case the expiration date
means the latest date and time to which the exchange offer is
extended. See "The Exchange Offer--Terms of the Exchange Offer."
Conditions................................ The exchange offer is subject to certain customary conditions,
which may be waived by us. We reserve the right to terminate or
amend the exchange offer at any time before the expiration date
if these conditions occur. The exchange offer is also subject to
the terms and provisions of the registration rights agreement.
See "The Exchange Offer--Certain Conditions to the Exchange Offer."
<PAGE>
Procedures for Tendering Old Notes........ If you wish to tender your old notes through the exchange offer,
you must either (1) complete, sign and date the letter of
transmittal, or a facsimile of it, according to the instructions
contained in this prospectus and in the letter of transmittal or
(2) send an agent's message to the exchange agent, which is a
message that indicates you have agreed to the contents of the
letter of transmittal and the letter of transmittal may be
enforced against you. You must mail or otherwise deliver the
letter of transmittal, or a facsimile of it, or the agent's
message with the old notes or a Book-Entry Confirmation (as
defined) and any other required documentation to the exchange
agent at the address listed in this prospectus. The method of
delivery of this documentation is at your election and risk. By
executing the letter of transmittal, or sending the agent's
message you will represent to us, among other things, that:
o the new notes acquired through the exchange offer by you
and any beneficial owners of old notes are being obtained in the
ordinary course of business of the person receiving the new
notes;
o neither you nor the beneficial owner is participating in,
intends to participate in or has an arrangement or understanding
with any person to participate in the distribution of the notes;
and
o neither you nor the beneficial owner is an affiliate, as
defined under Rule 405 of the Securities Act, of Worldwide Fiber.
Each broker-dealer that receives new notes for its own account in exchange for old
notes, where the old notes were acquired by the broker or dealer as a result of
market-making activities or other trading activities (except for old notes
acquired directly from us), must acknowledge in the letter of transmittal that it
will deliver a prospectus for any resale of the new notes. See "The Exchange
Offer--Procedures for Tendering Old Notes" and "Plan of Distribution."
-2-
<PAGE>
Special Procedures for Beneficial
Owners............................... If you are a beneficial owner whose old notes are registered in
the name of a broker, dealer, commercial bank, trust company or
other nominee and you wish to tender your old notes in the
exchange offer, you should contact the registered holder promptly
and instruct the registered holder to tender on your behalf. If
you wish to tender on your own behalf, you must, before
completing and executing the letter of transmittal and delivering
your old notes, either make appropriate arrangements to register
ownership of the old notes in your name or obtain a properly
completed bond power from the registered holder. The transfer of
registered ownership may take considerable time and may not be
able to be completed before the expiration date. See "The
Exchange Offer--Procedures for Tendering Old Notes."
Book-Entry Transfer....................... Any financial institution that is a participant in the Book-Entry
Transfer Facility's (as defined) system may make book-entry
delivery of old notes by causing the Book-Entry Transfer Facility
to transfer these old notes into the exchange agent's account at
the Book-Entry Transfer Facility in accordance with the
Book-Entry Transfer Facility's procedures for transfer. See "The
Exchange Offer--Book Entry Transfer."
Withdrawal Rights......................... Tenders may be withdrawn at any time before 5:00 p.m., New York
City time, on the expiration date. See "The Exchange
Offer--Withdrawal of Tenders."
Acceptance of Old Notes and Delivery
of New Notes......................... Upon satisfaction or waiver of all conditions of the exchange
offer, we will accept for exchange any and all old notes which
are properly tendered and not withdrawn before 5:00 p.m., New
York City time, on the expiration date. The new notes issued
through the exchange offer will be delivered promptly following
acceptance of the old notes by us after the expiration date. See
"The Exchange Offer--Acceptance of Old Notes for Exchange;
Delivery of New Notes."
U.S. Federal Income Tax Consequences...... The exchange of old notes for new notes by tendering holders will
not be a taxable exchange for United States federal income tax
purposes as a result of the exchange. See "Material United
States and Canadian Federal Income Tax Considerations--United
States."
Regulatory Approvals...................... We do not believe that the receipt of any material federal or
state regulatory approvals will be necessary for the exchange
offer. See "The Exchange Offer--Regulatory Approvals."
Use of Proceeds........................... We will not receive any proceeds from the exchange offer.
-3-
<PAGE>
Exchange Agent............................ HSBC Bank USA is serving as exchange agent in the exchange
offer. See "The Exchange Offer--Exchange Agent."
Resales of the New Notes.................. The new notes are being offered by this prospectus to satisfy
certain obligations contained in the registration rights
agreement. Based on positions of the Securities and Exchange
Commission and no-action or interpretive letters issued to
others, we believe that the new notes issued through the exchange
offer may be offered for resale, resold and otherwise transferred
by you, without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that:
o you are acquiring the new notes in the ordinary course of
your business;
o you are not participating, do not intend to participate
and have no arrangement or understanding with any person
to participate in the distribution of the new notes; and
o you are not an affiliate of Worldwide Fiber.
If you acquire new notes in the exchange offer to distribute or participate in a
distribution of new notes, you cannot rely on the position of the staff of the
Securities and Exchange Commission contained in its no-action and interpretive
letters and must comply with the registration and prospectus delivery requirements
of the Securities Act concerning a secondary resale transaction, unless an
exemption from registration is otherwise available. Each broker-dealer that
receives new notes for its own account through the exchange offer must acknowledge
that:
o old notes tendered by it in the exchange offer were acquired in the
ordinary course of its business as a result of market-making or other
trading activities; and
o it will deliver a prospectus in connection with any
resale of new notes received in the exchange offer.
This prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with any resale of the new notes received
in exchange for old notes where the old notes were acquired by a broker-dealer as a
result of market-making or other trading activities, except for old notes acquired
directly from us. We have agreed that, for a period of 180 days following the
consummation of the exchange offer, we will make this prospectus available to any
broker-dealer for use with resale. See "The Exchange Offer--Resales of the New
Notes" and "Plan of Distribution."
-4-
<PAGE>
Summary Description of New Notes
Securities Offered........................ $500,000,000 aggregate principal amount of 12% senior notes that
will mature in 2009.
Issuer.................................... Worldwide Fiber Inc.
Maturity Date............................. August 1, 2009.
Interest.................................. Interest on the new notes will accrue from the last interest
payment date on which interest was paid on the old notes
surrendered in exchange for new notes or, if no interest has been
paid on the old notes, from the date of original issuance of the
old notes and will be payable in cash in arrears semiannually on
February 1 and August 1 of each year, commencing on February 1,
2000.
Ranking of the New Notes.................. The new notes are senior debts and will rank ahead of all our
future debts that expressly provide that they are subordinated to
the new notes. They will effectively rank behind all of our
secured debts to the extent of the value of the assets securing
our debts and all existing and future debts and other liabilities
of our subsidiaries.
They will rank equally with all of our existing and future unsubordinated, unsecured
debts that do not expressly provide that they are subordinated to the new notes,
including any old notes not exchanged. On June 30, 1999 the notes were effectively
subordinated to approximately $130.1 million of liabilities of our subsidiaries.
No debt of ours having an equal ranking with the new notes or which is subordinate
to the new notes would have been outstanding at this date.
Optional Redemption....................... On or after August 1, 2004, we may redeem some or all of the new
notes at any time at the redemption prices, and subject to certain
limitations, described in the section "Description of Notes" under
the heading "Optional Redemption."
Upon a change in the withholding tax laws of Canada, we may redeem
all of the new notes at any time at the face amount of the new
notes.
Before August 1, 2002, we may redeem up to 35% of the new notes with the proceeds of
certain public offerings of our equity at the price listed in the section
"Description of Notes" under the heading "Optional Redemption."
-5-
<PAGE>
Mandatory Offer to Repurchase............. If in certain circumstances we sell certain assets, receive
certain excess cash flows, or experience specific kinds of changes
in control, we must offer to repurchase the new notes at the
prices listed in the section "Description of Notes" under the
heading "Repurchase at the Option of Holders."
Basic Covenants of Indenture.............. The indenture governing the new notes contains certain limitations
on our ability, and the ability of some of our subsidiaries, to:
o borrow money,
o pay dividends on stock or repurchase stock,
o make investments,
o use assets as security in other transactions, and
o sell certain assets or merge with or into other companies.
For more details, see the section "Description of Notes" under the
heading "Certain Covenants."
</TABLE>
-6-
<PAGE>
The Company
We are a provider of technologically advanced fiber optic communications
infrastructure in North America using our state-of-the-art fiber optic network.
We recently have begun marketing bandwidth services and intend to provide these
services by the end of the year.
o We completed construction of a 5,068 route mile fiber optic network
development across Canada and the Northern United States in January
1999. Our interests in this development include a total of 74,000
fiber miles along the following routes:
-- a 2,735 route mile segment from Vancouver to Detroit, via
Calgary, Winnipeg, Minneapolis/St. Paul and Chicago and
-- a 2,333 route mile segment from Edmonton to Toronto and
additional fiber strands along the route from Seattle to Detroit.
o In May 1999, we completed construction of the segment of our network
that extends from Seattle to Portland.
Together this fiber forms the initial backbone of our high-bandwidth fiber optic
communications network and related infrastructure in North America. Our
terrestrial network, when complete, is expected to cover approximately 21,600
route miles and encompass both long haul and intra-city route miles in North
America (comprising in excess of 1,000,000 fiber miles). Our terrestrial network
will consist of:
o fiber optic strands installed in protective conduit buried along
diverse rights-of-way and strands acquired from other developers and
carriers through swaps, and
o related infrastructure such as regeneration shelters.
Our network is being developed to satisfy increasing demand for fiber optic
capacity for the transmission of data, voice and video generated by
high-bandwidth communications and the requirements of new entrants to the
telecommunications business. We plan to realize the value of the network
through:
o the sale, grant of indefeasible rights-of-use, lease or swap of dark
fiber strands and conduit, and
o the provision of bandwidth services, initially along the route from
Seattle to Toronto via Vancouver, Calgary, Winnipeg, Minneapolis/St.
Paul, Chicago and Detroit and, in the future, along other parts of our
network.
Our present and targeted customer group includes:
o communications carriers,
o Internet service providers, and
o large corporations with enterprise network needs.
We have also contracted to install a transatlantic fiber optic cable to
expand the connectivity of our network.
-7-
<PAGE>
We will continue to construct fiber optic networks for third parties on a
contract basis when a project will allow us to retain fiber or conduit assets,
including through indefeasible rights-of-use. We plan to construct these
networks only on routes that complement and reduce the costs of completing our
network or enhance our ability to make a sale, grant of indefeasible
rights-of-use, lease or swap of network capacity or the provision of bandwidth
services.
Market Opportunity
Our network is designed to provide our customers with secure, independent
transmission facilities and sufficient capacity on a local, regional or national
basis to accommodate their increasing demand and plans for expansion. According
to The Yankee Group and other industry sources, growth in the high-bandwidth
telecommunications industry is expected to continue due to a number of factors,
which include:
o innovations and advances in transmission technology,
o increasing demand for high-bandwidth applications, largely driven by
the increase in Internet traffic, and
o deregulation within the telecommunications industry, which has
resulted in a proliferation of service providers.
The North American telecommunications industry has been characterized by
significant demand for high-bandwidth communications services. According to an
industry survey by The Yankee Group:
o voice and data telecommunications services revenue in the United
States is expected to grow at a compounded annual growth rate of
approximately 8%, from approximately $167 billion in 1997 to
approximately $241 billion in 2002,
o data telecommunications services revenue is expected to grow at a
compounded annual growth rate of approximately 26%, from approximately
$15 billion in 1997 to approximately $47 billion in 2002, and
o carriers' carrier telecommunications services revenue, which our
bandwidth services strategy is specifically intended to target, is
expected to grow at a compounded annual growth rate of approximately
60%, from approximately $1.2 billion in 1997 to approximately $12.3
billion in 2002.
Business Strategy
Our strategy is to be a leading independent provider of technologically
advanced dark fiber and related infrastructure and high-bandwidth fiber optic
transmission capacity. The key elements of our business strategy include:
o developing and building a technologically advanced fiber optic network
connecting many of the major population centers in North America,
o maximizing route diversity and connectivity of the network, enabling
us to target a broad range of customers, by offering participation on
a local, regional, national or international basis,
o creating a low cost position,
-8-
<PAGE>
o realizing the value of the network through the sale, grant of
indefeasible rights of use, lease or swap of network assets and the
provision of bandwidth services,
o providing our customers with low-cost bandwidth services and the
flexibility to control their service platforms,
o allowing for technological upgrades and additional capacity,
o installing at least one additional conduit in each segment we develop,
and
o capitalizing on management experience.
The Network
Our terrestrial network will consist of the following:
o a North American long-haul fiber optic network including: (1) two
primary east-west routes, running from Vancouver to Halifax and
Sacramento to Boston, and (2) three primary north-south routes,
running along the West Coast, the Mississippi River valley and the
East Coast, and
o a series of high-bandwidth intra-city networks planned in Toronto,
Vancouver, Montreal, Ottawa, and Calgary in addition to the intra-city
network currently under construction in Seattle.
In addition, we are expanding our network outside of North America through
our transatlantic fiber optic cable project, "Hibernia."
Products and Services
In connection with the development of our network, we offer customers a
broad range of products and services which enable us to provide customized
solutions. See "Business--Products and Services."
Our products and services include:
o dark fiber and conduit for sale, grant of indefeasible rights-of-use,
lease or swap, and
o construction services supporting the development of our network.
We recently have begun marketing bandwidth services, including optical
transmission, private line, virtual voice, IP transport and ATM. We plan to
begin providing these services by the end of 1999.
Recent Developments
Private Equity Investment. On September 9, 1999 we completed a private
placement of our convertible preferred shares for $345 million to affiliates of
Tyco International Ltd., Providence Equity Partners Inc., DLJ Merchant Banking
II Inc. and GS Capital Partners III, LP. Together, the privately placed
securities represent a minority equity interest in us. Under the terms of the
sale, each purchaser nominated a representative to our Board of Directors who
has been elected a Director.
Hibernia Project. In connection with the financing of our $850 million
transatlantic fiber optic cable Hibernia project, we will utilize $300 million
of the proceeds from our equity private placement to fund the equity portion of
the project. We have entered into a project financing commitment letter with
Goldman Sachs
-9-
<PAGE>
Credit Partners LP, DLJ Capital Funding, Inc. and Credit Suisse First Boston.
Under the project financing commitment, it is anticipated that the lenders will
provide up to $600 million in project debt financing to one of our subsidiaries,
non-recourse to Worldwide Fiber Inc.
Financing Plan
In addition to the fiber assets contributed by Ledcor, we formed a capital
plan in 1998 to develop approximately 12,900 route miles. That plan and the
implementation of bandwidth services contemplate capital expenditures of
approximately $1.26 billion through 2001.
Consistent with our strategy to create a low-cost position, we have
agreements, subject to terms and conditions we consider customary, with
co-developers and participants. These parties in the aggregate have agreed to
commit approximately $480 million in cash to fund the completion of segments of
our terrestrial network. We expect to complete our network in 2001. We intend to
enter into additional arrangements with co-developers and participants.
We expect to obtain the balance of the funding necessary to complete our
terrestrial network and to implement our bandwidth services strategy from
o the cash remaining from the notes and the 12 1/2% notes issued in
December 1998, and
o up to $150 million in cash available under our planned bank credit
facility.
We anticipate that these funding sources will provide us with sufficient
capital to complete our network and to implement our bandwidth services
strategy. However, our costs will depend on a variety of factors, many of which
are beyond our control, including changes in the competitive environment of our
current and planned markets. Our actual costs may vary materially from those
currently budgeted.
The plan described above does not include equity or debt financing for
Hibernia, which we are funding with the proceeds of our recently completed
equity private placement as well as from our planned non-recourse project
facility.
We cannot assure you that we will be successful in raising the capital
necessary for the unfunded portion of the remainder of our planned network
development, the implementation of our bandwidth services strategy or for the
Hibernia project on a timely basis or on terms that are acceptable to us, or at
all.
-10-
<PAGE>
Summary Financial Data
The summary historical financial data for the year ended March 31, 1996,
the five months ended August 31, 1996, the year ended August 31, 1997 and the
nine months ended May 31, 1998 of our predecessor, the telecommunications
division of Ledcor, are derived from the audited financial statements of the
predecessor division, which have been audited by Deloitte & Touche LLP,
independent auditors. Worldwide Fiber was incorporated on February 5, 1998 and
acquired certain assets of the predecessor division on May 31, 1998. Before May
31, 1998, Worldwide Fiber was a shell company. The summary consolidated
historical financial data for the period from February 5, 1998 to December 31,
1998 of Worldwide Fiber are derived from our audited consolidated financial
statements, which have been audited by PricewaterhouseCoopers LLP, independent
auditors. The unaudited pro forma financial data for the year ended December 31,
1998 are derived from the audited consolidated financial statements of Worldwide
Fiber, the financial statements of the predecessor division, and the
consolidated financial statements of Worldwide Fiber (USA), Inc. included
elsewhere in this prospectus. The summary consolidated historical financial data
as of and for the periods ended June 30, 1999 and 1998 are derived from
Worldwide Fiber's unaudited consolidated financial statements and include, in
the opinion of Worldwide Fiber's management, all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the data for those
periods. The unaudited pro forma financial data for the six months ended June
30, 1999 are derived from the unaudited interim consolidated financial
statements for the six month period ended June 30, 1999 of Worldwide Fiber
included elsewhere in this Prospectus. Our consolidated financial statements and
the divisional financial statements of the predecessor division have been
prepared in accordance with U.S. GAAP. The results of operations for the
predecessor division are not comparable to our results of operations after the
Reorganization. You should read the following information along with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and the related notes included
elsewhere in this prospectus.
Capital expenditures represent actual cash expenditures incurred during the
period and do not include acquisitions of assets for non-cash consideration.
Route miles represent the number of miles spanned by fiber optic cable owned at
the end of the period, calculated without including physically overlapping
segments of cable. Fiber miles represent the number of strands of fiber in a
length of fiber optic cable owned at the end of the period, multiplied by the
length of the cable in miles.
-11-
<PAGE>
<TABLE>
<CAPTION>
Summary Financial Data
(Dollars in thousands)
Predecessor Division Worldwide Fiber
------------------------------------------ ------------------------------------------------------
Six Pro
Five Nine February February Pro Forma Months Forma
Year Months Year Months 5, 1998 5, 1998 Year Ended Six
Ended Ended Ended Ended to to Dec- Ended Dec- June Months
March August August May 31, June 30, ember 31, ember 31, 30, Ended
31, 1996 31, 1996 31, 1997 1998 1998 1998 1998(2)(3) 1999 1999(2)(3)
--------- -------- -------- -------- --------- ---------- ---------- ------- ----------
Income Statement
Data:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue........... $3,824 $7,373 $58,008 $54,634 $12,280 $164,319 $207,038 $123,884 $123,884
Operating
expenses:
Costs........... 3,440 5,739 48,474 44,919 10,621 147,621 182,518 85,614 85,614
General &
administrative. 57 91 863 710 403 2,274 8,140 5,837 7,087
Depreciation.... 24 15 112 317 49 464 639 453 453
------ ------ ------- ------- ------- -------- -------- ------- -------
Total operating
expenses.......... 3,521 5,845 49,449 45,946 11,073 150,359 191,297 91,904 93,154
------ ------ ------- ------- ------- -------- -------- ------- -------
Operating income.. 303 1,528 8,559 8,688 1,207 13,960 15,741 31,980 30,730
Interest expense, -- 15 600 86 -- 225 85,352 5,671 36,871
net...............
Equity income..... -- -- -- -- 2 928 -- -- --
------ ------ ------- ------- ------- -------- -------- ------- -------
Earnings (loss)
before income
taxes........... 303 1,513 7,959 8,602 1,209 14,663 (69,611) 26,309 (6,141)
Income tax
expense 139 686 3,620 3,909 526 5,643 (26,710) 10,921 (1,574)
(recovery)......
164 827 4,339 4,693 683 9,020 (42,901) 15,388 (4,567)
------ ------ ------- ------- ------- -------- -------- ------- -------
Income
attributable
to minority -- -- -- -- -- -- 464 2,995 2,995
interest........
------ ------ ------- ------- ------- -------- -------- ------- -------
Net income (loss). $164 $827 $4,339 $4,693 683 $9,020 $(43,365) $12,393 $(7,562)
====== ====== ======= ======= ======= ======== ======== ======= =======
Other Financial
Data:
EBITDA (4)........ $327 $1,543 $8,671 $9,005 $1,256 $15,352 $16,380 $32,433 $31,183
Capital
expenditures...... $72 $ 181 $1,119 $6,828 -- $1,065 -- $19,215 --
Ratio of earnings
to fixed 24.3x 45.5x 10.3x 17.7x 200.0x 26.8x -- 3.8x --
charges (5).....
Statement of Cash
Flows Data:
Operating $666 $(3,078) $(3,921) $(2,502) $681 $(13,059) $ -- $(49,824) $ --
activities........
Investing (72) (181) (1,119) (6,828) -- 1,177 -- (19,215) --
activities........
Financing $(595) $3,259 $5,040 $9,330 $(681) $168,350 $ -- $(352) $ --
activities........
Operating Data:
Route miles....... -- -- 1,090 1,430 -- 2,735 -- -- --
Fiber miles ...... -- -- 22,740 34,320 -- 36,179 -- -- --
June 30, 1999
-------------------------------
Actual Pro Forma (6)
------ -------------
Balance Sheet Data:
Cash and cash equivalents...................................................... $ 86,812 $ 873,812
Fixed assets, net.............................................................. 57,790 83,790
Total assets................................................................... 365,025 1,206,025
Total debt..................................................................... 175,000 675,000
Redeemable preferred stock..................................................... -- 345,000
Shareholder's equity.......................................................... $ 55,510 19,310
</TABLE>
-12-
<PAGE>
- ---------------------------------------------------
(1) Gives pro forma effect to (1) the transfer on May 31, 1998 of certain of
the operations of the predecessor division and the Construction Services,
Management Services and Employee Services Agreements between Worldwide
Fiber and affiliates of Ledcor, (2) the consolidation of WFI-USA as a
result of Worldwide Fiber's agreement to increase its interest in WFI-USA
from 50% to 75% on December 31, 1998 and (3) the effect of the interest
expense, including amortization of deferred financing costs, relating to
the $175,000,000 12 1/2% senior notes issued December 23, 1998 and the
$500,000,000 12% senior notes issued July 28, 1999.
(2) Gives pro forma effect to the interest expense, including amortization of
deferred financing costs, on the $500,000,000 12% senior notes issued July
28, 1999.
(3) The initial annual interest expense on the $500,000,000 12% senior notes is
$62,400,000 and the initial annual interest expense on the $175,000,000
12 1/2% senior notes is $23,200,000.
(4) EBITDA consists of net income (loss) before interest expense, net of
interest income, income tax expense (recovery), depreciation and income
attributable to minority interest. EBITDA is presented because we believe
it is a useful indicator of a company's ability to meet debt service and
capital expenditure requirements. It is not intended as an alternative
measure of operating results or cash flow from operations (as determined in
accordance with generally accepted accounting principles). EBITDA is not
necessarily comparable to similarly titled measures for other companies and
does not necessarily represent amounts of funds available for management's
discretionary use.
(5) For purposes of calculating the ratio of earnings to fixed charges,
earnings consists of earnings (loss) before equity income, income tax
expense (recovery), income attributable to minority interest and fixed
charges. Fixed charges consists of interest expensed and capitalized, plus
the portion of rental expense which we believe to be representative of
interest (assumed to be one-third of rental expense). Pro forma loss for
the year ended December 31, 1998 would have been insufficient to cover
fixed charges by $69,611,000 and pro forma loss for the six month period
ended June 30, 1999 would have been insufficient to cover fixed charges by
$6,141,000.
(6) Gives pro forma effect to (1) the issuance on July 28, 1999 of the
$500,000,000 12% senior notes, (2) the issuance on August 31, 1999, of
150,000 Class B Subordinate Voting Shares for $3,000,000 of cash, (3) the
issuance on September 9, 1999 of 8,866,808 Series A Non-Voting Preferred
Shares for $345,000,000 of cash, (4) a stock dividend on September 9, 1999
of 5,000,000 Series C Redeemable Preferred Shares and a redemption on
September 9, 1999 of 45,000,000 Series C Redeemable Preferred Shares for
$45,000,000 of cash and (5) the acquisition on September 27, 1999, from
affiliates of Ledcor Inc., of certain fiber optic network assets in
exchange for 4,500,000 Class C Multiple Voting Shares of the Company.
-13-
<PAGE>
RISK FACTORS
In addition to the other matters described in this prospectus, you should
carefully consider the following risk factors before making an investment in the
notes.
Limited History of Operations--Given our limited operating history while our
network is being built, you should consider the notes to be a highly speculative
investment.
You have very limited historical financial information upon which to base
your evaluation of our performance and an investment in the notes. We began
operations as an independent company in May 1998 and have a limited operating
history. Before that time we conducted business as the telecommunications
division of Ledcor. We believe our financial results are not directly comparable
to theirs. You must consider our prospects in light of the risks, expenses and
difficulties frequently encountered by companies in an early stage of
development.
Negative Cash Flows--Given our negative cash flows while our network is being
built, you should consider the notes to be a highly speculative investment.
Continued negative cash flow may restrict our ability to pursue our
business strategy. In addition, if we cannot achieve profitability or positive
cash flows from operating activities, we may not be able to meet our debt
service obligations, including our obligations under the notes, capital
expenditure requirements or working capital needs.
We intend to use most of the proceeds from the sale of these notes and a
significant amount of additional capital to develop and construct our network.
Until the principal segments of the network are complete, we will spend more
money building the network than we will earn from exploiting it. Accordingly, we
expect to experience negative cash flows after capital expenditures during
network development. We cannot assure you that the exploitation of our network,
including the sale of our fiber and bandwidth services, will result in an
adequate revenue base to meet our debt service obligations or that we will ever
generate profitability or positive cash flow.
Substantial Leverage--Our substantial debt could adversely affect our financial
health and prevent us from fulfilling our obligations under the notes.
We have substantial debt and debt service requirements.
Our substantial indebtedness could have important consequences to you. For
example, it could:
o make it more difficult for us to satisfy our obligations under the
notes,
o increase our vulnerability to general adverse economic and industry
conditions,
o limit our ability to fund future capital expenditures, working capital
and other general corporate requirements,
o require us to dedicate a substantial portion of our cash flow from
operations to make interest and principal payments on our
indebtedness, reducing the availability of our cash flow to fund
capital expenditures, working capital, and other general corporate
purposes,
o make it more difficult for us to make interest and principal payments
on our other indebtedness, which would be a default under the
indenture,
-14-
<PAGE>
o limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate, and
o place us at a competitive disadvantage compared to our competitors
that have less debt.
We intend to obtain credit facilities from one or more institutional
lenders in an aggregate amount of up to $150 million. Borrowings under these
credit facilities may be secured by certain of our assets. See "Description of
Other Indebtedness." We also intend to obtain other sources of financing for the
construction of the network, including project financing for individual segments
of our network. This project financing would also be secured by the assets being
financed. The following chart shows certain important credit statistics as of
the date or for the periods specified below:
As of June 30, 1999
--------------------------------------
Actual Pro Forma (1)(2)
----------------- -------------------
Total indebtedness.................... $175,000,000 $675,000,000
Shareholder's equity.................. $55,510,000 $19,310,000
Debt to equity ratio.................. 3.2x 34.5x
(1) Gives pro forma effect to (1) the issuance on July 28, 1999 of the
$500,000,000 12% senior notes, (2) the issuance on August 31, 1999 of
150,000 Class B Subordinate Voting Shares for $3,000,000 of cash, (3) a
stock dividend on September 9, 1999 of 5,000,000 Series C Redeemable
Preferred Shares and a redemption on September 9, 1999 of 45,000,000 Series
C Redeemable Preferred Shares for $45,000,000 of cash and (4) the
acquisition on September 27, 1999, from affiliates of Ledcor Inc., of
certain fiber optic network assets in exchange for 4,500,000 Class C
Multiple Voting Shares of the Company.
(2) Does not give pro forma effect to the issuance on September 9, 1999 of
8,866,808 Series A Non-Voting Preferred Shares for $345,000,000 of cash.
The initial annual interest expense on the $500,000,000 12% senior notes is
$62,400,000 and the initial annual interest expense on our $175,000,000 12 1/2%
senior notes is $23,200,000.
Pro forma loss for the year ended December 31, 1998 would have been
insufficient to cover fixed charges by $69,611,000 and pro forma loss for the
six month period ended June 30, 1999 would have been insufficient to cover fixed
charges by $6,141,000.
Additional Borrowings Required--Despite our current debt level, we and our
subsidiaries plan to incur substantially more debt. Increased debt could worsen
the risks described above, but failure to obtain the debt needed could prevent
the completion of the network.
If additional debt is incurred, the risks mentioned above that are
associated with high leverage will increase. We expect to need significant
amounts of additional capital to complete the build-out of our planned network
and fulfill our long-term business strategies. The terms of the indenture
generally permit us and our restricted subsidiaries to incur additional debt to
finance the cost of designing and building or acquiring our network. The
indenture also allows us to incur additional indebtedness for other purposes,
subject to certain limitations. In addition, the indenture permits us to create
"unrestricted subsidiaries" that will be allowed to incur debt without regard to
the limitations on debt incurrence contained in the indenture. Our ability to
arrange financing and the cost of financing depend upon many factors, including:
o general economic and capital markets conditions, and in particular the
non-investment grade debt market,
-15-
<PAGE>
o conditions in the telecommunications industry,
o regulatory developments,
o investor confidence and credit availability from banks or other
lenders,
o the success of our network, and
o provisions of tax and securities laws that affect raising capital.
Our inability to raise additional funds would have an adverse effect on our
ability to complete the network. If we decide to raise additional funds through
the incurrence of debt, we may become subject to additional or more restrictive
financial covenants. In addition, we expect to incur additional debt that is
secured by our assets and therefore those assets will be available to other
creditors before they are available to you.
We are funding a portion of our anticipated investment in Hibernia from our
recently completed private sale of our equity securities. We also expect the
indebtedness to finance that project to be incurred by our subsidiary without
recourse to Worldwide Fiber Inc. We estimate that approximately $550,000,000 of
indebtedness will be required for the Hibernia project. Hibernia will be owned
by one or more subsidiaries created for the purpose of owning the project. They
will not hold any assets unrelated to Hibernia. We currently expect that these
subsidiaries will not be restricted subsidiaries under the indenture. If we were
to incur additional debt at the Worldwide Fiber Inc. level in order to
contribute to the financing of Hibernia, however, it would further increase the
risks associated with high leverage.
Ability to Service Debt--To service our debt we will require significant amounts
of cash and our ability to generate sufficient cash will depend on many factors
beyond our control.
We cannot assure you that we will be successful in implementing our
strategy or in realizing our anticipated financial results. You should be aware
that our ability to repay or refinance the notes and any other debt we incur
will depend on our successful financial and operating performance and on our
ability to successfully implement our business strategy. You should also be
aware that our financial and operating performance depends upon a number of
factors, many of which are beyond our control. These factors include:
o our ability to complete our network on time and in a cost-effective
manner,
o the economic and competitive conditions in the telecommunications
industry, including the demand for fiber-optic systems,
o any construction or operating difficulties, increased operating costs
or pricing pressures we may experience,
o the passage of legislation or other regulatory developments that may
adversely affect us, and
o any material delays in implementing any strategic projects.
We cannot assure you that our cash flow and capital resources will be
sufficient to repay the notes and any other debt we may incur in the future, or
that we will be successful in obtaining alternative financing. If we are unable
to repay our debts, we may be forced to reduce or delay the completion or
expansion of our network, sell some of our assets, obtain additional equity
capital or refinance or restructure our debt. If we are unable to meet our debt
service obligations or comply with our covenants, a default under our debt
agreements would result. To avoid a default, we might need waivers from third
parties, which might not be granted.
-16-
<PAGE>
Holding Company Structure--We will depend on the cash flow of our subsidiaries
to satisfy our obligations under the notes.
Our operating cash flow and our ability to service our indebtedness,
including the notes, depends upon the operating cash flow of our subsidiaries
and their payments to us in the form of loans, dividends or otherwise. Our
subsidiaries are separate legal entities and have no obligation to pay any
amounts due on the notes or to make any funds available for that purpose,
whether by dividends, interest, loans, advances or other payments. In addition,
our subsidiaries' payment of dividends and the making of loans, advances and
other payments to us may be subject to regulatory and contractual restrictions.
These restrictions include requirements to maintain minimum levels of working
capital and other assets. Subsidiary payments are contingent upon earnings and
various business and other considerations.
Restrictions Imposed by Terms of Our Indebtedness--We may be unable to repay the
notes and our other indebtedness if there is an event of default.
If an event of default occurs under any of our credit facilities or the
indenture, the lenders under the credit facilities and the holders of our notes
could elect to declare all amounts outstanding under the credit facilities and
the notes, along with accrued and unpaid interest, to be immediately due and
payable. The indenture will limit, and the indenture for our $175,000,000 12
1/2% senior notes due 2005 does limit, among other things, our ability to incur
additional indebtedness, pay dividends and make certain other restricted
payments, incur liens, enter into certain transactions with affiliates and
consummate asset sales and does impose restrictions on our ability to merge or
consolidate with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of our assets. In addition, credit
facilities that we may enter into in the future may contain other and more
restrictive covenants, including concerning debt incurrence and the making of
capital expenditures and may require us to meet or maintain specified financial
ratios and tests. Our ability to meet these financial ratios could be affected
by events beyond our control, and no assurance can be given that we will be able
to comply with these provisions. A breach of any of these covenants could result
in a default under these credit facilities and/or the indenture. If we were
unable to repay any of these amounts, the lenders could proceed against any
collateral securing the indebtedness, which could include security interests, in
all future accounts receivable and inventory of Worldwide Fiber and other
assets. If the lenders under potential credit facilities were to accelerate the
payment of the indebtedness under these credit facilities, there would be no
assurance that our assets at the time would be sufficient to repay in full the
indebtedness and our other indebtedness, including the notes.
Failure to Exchange or Comply with the Exchange Offer--This will result in
continuing transfer restrictions or result in the inability to exchange.
There has previously been only a limited secondary market, and no public
market, for the old notes. To the extent that old notes are tendered and
accepted in the exchange offer, the trading market, if any, for the old notes
not so tendered could be adversely affected. We cannot assure the future
development of a market for the old notes or the ability of holders of the old
notes to sell their old notes or the price at which the old notes may be sold.
If you do not exchange your old notes for new notes under the exchange offer,
you will continue to be restricted from transferring your old notes.
In general, the old notes may not be offered or sold, unless registered
under the Securities Act, except under 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 the old notes under the
Securities Act. Based on interpretations by the staff of the Securities and
Exchange Commission contained in no-action letters issued to third parties, we
believe that the new notes issued to you under the exchange offer in exchange
for old notes may be offered for resale, resold or otherwise transferred by any
holder of them, except for any holder which is an affiliate of Worldwide Fiber
within the meaning of Rule 405 under the Securities Act, without compliance with
the
-17-
<PAGE>
registration and prospectus delivery provisions of the Securities Act, if the
new notes are acquired in the ordinary course of the holder's business and the
holder is not participating, does not intend to participate and has no
arrangement or understanding with any person to participate in the distribution
of the new notes. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer for any resale of new notes
received in exchange for old notes where the old notes were acquired by this
broker-dealer as a result of market-making activities or other trading
activities, except for old notes acquired from us. We have agreed that, for a
period of 180 days following the completion of the exchange offer, we will make
this prospectus available to any broker-dealer for use in any resale. However,
your ability to resell the new notes is subject to applicable state securities
laws. See "The Exchange Offer" and "Plan of Distribution."
To participate in the exchange offer and avoid the restrictions on transfer
of the old notes, you must deliver a properly completed letter of transmittal,
including all other documents required by the letter of transmittal, to the
exchange agent at one of the addresses listed below under "The Exchange
Offer--Exchange Agent" on or before the expiration date. In addition, either
o certificates for the old notes must be received by the exchange agent
along with the letter of transmittal,
o a timely confirmation of a book-entry transfer of the old notes, if
this procedure is available, into the exchange agent's account at the
Book-Entry Transfer Facility under the procedure for book-entry
transfer described in this prospectus must be received by the exchange
agent before the expiration date, or
o the holder must comply with the guaranteed delivery procedures
described in this prospectus and in the letter of transmittal. You may
elect to choose method of delivery of the old notes and the letter of
transmittal and all other required documents to the exchange agent but
it is at your own risk. See "The Exchange Offer."
Effective Subordination--Although your notes are referred to as "senior notes,"
they will be effectively subordinated to our secured debt and the debt of our
subsidiaries.
The notes are unsecured and therefore will be effectively subordinated to
any secured debt we may incur to the extent of the value of the assets securing
it. In the event of a bankruptcy or similar proceeding involving us, our assets
which serve as collateral will be available to satisfy the obligations under any
secured debt before any payments are made on the notes. In addition, our
subsidiaries will not guarantee the notes. In the event of a bankruptcy,
liquidation or reorganization of any of our subsidiaries, creditors of our
subsidiaries will generally be entitled to payment of their claims from the
assets of those subsidiaries before any assets are made available for
distribution to us, except to the extent we may also have a claim as a creditor.
Risks Associated with Construction and Expansion of Our Network--Our inability
to implement our business strategy and manage our growth could cause significant
delays in the completion of our network.
Successful implementation of our business strategy depends on numerous
factors beyond our control, including economic, competitive and other conditions
and uncertainties, the ability to obtain licenses, permits, franchises and
rights-of-way on reasonable terms and conditions and the ability to hire and
retain qualified management personnel. Adverse economic or competitive
conditions or the failure to obtain the necessary authorizations or to hire and
retain qualified management personnel could prevent or delay the completion of
all or part of our network or increase completion costs. In order to implement
our proposed business strategy, we must accomplish the following in a timely
manner at a reasonable cost to us and on conditions acceptable to us:
o obtain access to capital markets,
-18-
<PAGE>
o design and engineer fiber networks,
o install fiber optic facilities, transmission equipment and related
infrastructure,
o acquire rights-of-way,
o attract and retain high-quality operating personnel and management,
and
o continue to implement and improve our operational, financial and
accounting systems.
In addition, construction of future networks entails significant risks,
including:
o management's ability to effectively control and manage these projects,
o shortages of materials or skilled labor,
o unforeseen engineering, environmental or geological problems, and
o work stoppages, weather interference, floods and unanticipated cost
increases.
We cannot assure you that the anticipated costs of our current and future
projects will not be exceeded or that these projects will commence operations
within the contemplated schedules, if at all.
Our ability to implement our business plan depends, to a significant
degree, upon our ability to secure a market for our fiber capacity and obtain
and maintain contractual and other relationships with communications carriers
and corporate customers. If we are unable to enter into contracts, comply with
the terms of contracts or maintain relationships with these constituencies, our
operations would be materially and adversely affected. Certain of our current
contracts to supply fiber capacity allow the buyer or lessee to terminate the
contracts and provide for liquidated damages if we do not supply the stated
fiber capacity by a specified time. Terminating any of these contracts could
adversely affect our operations.
Additionally, we may expand the range of services that we offer. These
services may include leasing bandwidth or entering into joint ventures where we
supply customers with dark fiber and our partners supply the appropriate optical
transmission equipment by facilitating the involvement of third party suppliers,
vendors and contractors. We also intend to offer bandwidth services to carriers
and other service providers. We cannot assure you that a market will develop for
our new services, that implementing these services will be technically or
economically feasible, that we can successfully develop or market them or that
we can operate and maintain our new services profitably.
Need for Rights-of-Way--A failure to obtain or maintain appropriate
rights-of-way could delay the completion of the network and increase its cost.
We cannot assure you that we will be successful in obtaining additional
rights-of-way and other permits required to install underground conduit from
parties such as railroads, utilities, highway authorities and local governments
and transit authorities. After we have obtained rights-of-way, we may not be
able to maintain them. Some of our rights-of-way agreements may be short-term or
revocable at will. Certain rights-of-way may require regulatory filings or may
be subject to legal challenge by third parties such as municipal governments,
aboriginal citizens or land owners concerning rights-of-way granted for specific
purposes. For example, one of our subsidiaries is seeking an order from the
Canadian telecommunications regulatory authority which will permit us to
continue to have access to street crossings and other municipal properties in
the City of Vancouver. See "--Extensive Regulation--Canada--CRTC Applications."
In addition, landholders who granted rights-of-
-19-
<PAGE>
way to certain railroad companies in the past have filed class action lawsuits
against communications carriers that received rights-of-way from railroad
companies in order to develop their fiber optic networks. The rights-of-way
challenged in these class action lawsuits are similar to some of the
rights-of-way that we use to develop our network, including the rights-of-way
granted to us in the agreements with Illinois Central Railroad Company and
Canadian National Railway Company. Loss of substantial rights and permits or
loss of the ability to use these rights-of-way or the failure to enter into or
maintain required arrangements for the network could have a material adverse
effect on our business, financial condition and results of operations, if, as a
result, the completion of our network is delayed or becomes more costly. See
"Business--General."
Limited Nature of our Activities--We do not offer a broad range of products or
services and this could increase our vulnerability to changing trends in our
industry or increased competition.
The limited nature of our current activities could limit potential revenues
and result in lower revenues than competitors who now provide a wider array of
services. Presently, we derive substantially all of our revenues from the sale,
grant of indefeasible rights-of-use or lease of dark fiber and conduit and
construction services. While we have recently commenced marketing bandwidth
services to carriers and other service providers, we cannot assure you that we
will be successful in entering this business. See "Business--Customers" and
"--Competition."
Pricing Pressures--We anticipate that prices for fiber assets and bandwidth
services will start to decline.
We anticipate that prices for our products and services specifically, and
network transmission capacity in general, will continue to decline over the next
several years, due primarily to the following:
o price competition as various network providers complete construction
of networks that might compete with our network,
o installation by us and our competitors of excess fiber capacity,
o recent technological advances that permit substantial increases in the
transmission capacity of both new and existing fiber optic networks,
and
o strategic alliances or similar transactions, such as long distance
capacity purchasing alliances among certain Regional Bell Operating
Companies, that increase the parties' purchasing power.
Risk of Network Failure--Network disruptions could adversely affect our
operating results.
Our success will require that our network provide competitive reliability,
capacity and security. Some of the risks to our network and infrastructure
include:
o physical damage,
o power loss,
o capacity limitations,
o software defects,
o excessive sustained or peak user demand,
o breaches of security, and
-20-
<PAGE>
o disruptions beyond our control.
These disruptions may cause interruptions in service or reduced capacity
for customers, any of which could have an adverse effect on our ability to
retain customers.
We intend to offer bandwidth services which will require the addition of
transmission equipment to our network. The network will use a combination of
communications equipment, software, operating protocols and proprietary
applications for the high speed transportation of large quantities of digital
signals among multiple locations. Given the complexity of our network, digital
signals may become lost or distorted, which may cause significant losses to our
customers. The network may also contain undetected design faults and software
"bugs" that, despite our testing, may be discovered only after the network has
been completed and is in use. The failure of any equipment or facility on our
network could result in the interruption of customer service until we make
necessary repairs or install replacement equipment and have an adverse impact on
our ability to secure customers in the future. We do not possess adequate
insurance to guard against the losses we could incur as a result of the factors
enumerated above.
Risks Associated with Joint Ventures--Our business strategy contemplates
investments in joint ventures to leverage our fiber assets. These investments
may involve significant risks and our capital or assets may not be returned.
We are continually evaluating potential joint ventures and strategic
opportunities. An affiliate of Michels Pipeline Construction Inc., a U.S.
pipeline construction company, has a 25% interest in Worldwide Fiber (USA), Inc.
Illinois Central Railroad Company and Canadian National Railway Company have
minority interests in our subsidiaries which will construct our network along
the rights-of-way of these railroads and we are seeking equity participants in
our transatlantic cable project. Although, except as described in this
prospectus, we do not have any definitive commitment or agreement concerning any
material investment, strategic alliance or related effort, we may seek
additional arrangements of this sort. Any investments, strategic alliances or
related efforts are accompanied by risks such as:
o the difficulty of identifying appropriate joint venture partners or
opportunities,
o the time our senior management must spend negotiating agreements and
monitoring joint venture activities,
o potential regulatory issues applicable to telecommunications
businesses,
o the investment of our capital or fiber assets and the loss of control
over the return of this capital or assets,
o the inability of management to capitalize on the growth opportunities
presented by joint ventures, and
o the insolvency of any joint venture partner.
We cannot assure you that we would be successful in overcoming these risks
or any other problems encountered with these joint ventures, strategic alliances
or related efforts.
-21-
<PAGE>
Risks Associated with International Markets--We will encounter additional risks
as we pursue international business opportunities.
Our strategy includes expanding our services to provide fiber optic
networks and bandwidth services outside of North America. In particular, we have
recently entered into an agreement for a transatlantic cable project called
Hibernia. We are still evaluating all of the risks associated with this new
project. We expect that the risks associated with Hibernia include:
o activities from our competitors which could limit the market share
obtained by Hibernia,
o pricing pressures which could reduce profitability,
o risk that there will be delay under our supply agreement as a result
of the highly concentrated nature of the cable manufacturing and
installation industry, and
o inability to obtain sufficient pre-construction sales commitments and
post-construction sales below targets.
Other risks associated with Hibernia and our international plans include:
o regulatory limitations restricting or prohibiting us from providing
our services,
o additional regulatory requirements, tariffs, customs, duties and other
trade barriers,
o difficulties in staffing and managing foreign operations,
o problems in collecting accounts receivable,
o political risks,
o fluctuations in the currency exchange and restrictions on the
repatriation of earnings,
o delays from customs brokers or government agencies, and
o potentially adverse tax consequences resulting from operating in
multiple countries with different laws and regulations.
Furthermore, the international rates customers are charged are likely to
decrease in the future for many reasons, including increased competition between
existing carriers, increased competition with new carriers in the international
markets and additional strategic alliances or joint ventures among large
international carriers that facilitate targeted pricing and cost reductions. We
cannot assure you that we will be successful in overcoming these risks or any
other problems arising from operating in international markets.
Dependence on Third Parties, Including Suppliers--The loss of key sources of
supply could adversely affect us.
We are dependent upon third party suppliers, including Pirelli Cables and
Systems Inc., for a number of components and parts used in the network. We are
also dependent on Nortel Networks, Newbridge Networks and Fore Systems for the
transmission equipment we will need to offer bandwidth services. We believe that
there are alternative suppliers or alternative components for all of the
components and transmission equipment contained in the network or required to
offer bandwidth services. However, any delay or extended interruption
-22-
<PAGE>
in the supply of any of the key components, changes in the pricing arrangements
with our suppliers and manufacturers or delay in transitioning a replacement
supplier's product into the network could disrupt our operations. If the
disruption continued for an extended period of time, it could have a material
adverse effect on our business, financial condition and results of operations.
In addition, we have contracted with Tyco Submarine Systems Ltd. as our primary
contractor for our transatlantic cable project. See "Prospectus Summary--Recent
Developments--International Expansion." We plan to continue to use third party
contractors on various segments of the network. The failure of the contractors
to complete their activities in a timely manner, within anticipated budgets and
in accordance with our quality standards and performance criteria could have a
material adverse effect on our business, financial condition and results of
operations, if, as a result, the completion of our network is delayed or becomes
more costly.
Competition--Our business is very competitive and increased competition could
adversely affect us.
The telecommunications industry is extremely competitive, particularly
concerning price and service. We face competition from existing and planned
telecommunications systems on each of our planned routes. Our competitors
include:
o interexchange carriers, including AT&T Corp., MCI WorldCom, Inc. and
Sprint Corporation,
o wholesale providers, including Qwest Communications International
Inc., Williams Communications Group, Inc., IXC Communications, Inc.,
DTI Holdings, Inc., Global Crossing Ltd. and Level 3 Communications,
Inc.,
o incumbent local exchange carriers, which currently dominate their
local telecommunications markets, including Ameritech Corporation and
GTE Corporation,
o competitive local exchange carriers, including GST Telecommunications,
Inc. and Metromedia Fiber Network, Inc., and
o potential competitors capable of offering services similar to those
offered by us, including communications service providers, cable
television companies, electric utilities, microwave carriers,
satellite carriers, wireless telephone operators and large end-users
with private networks.
Some of our competitors have already made substantial long term investments
in the construction of fiber optic networks and the acquisition of bandwidth.
Some of these competitors have substantially greater resources and more
experience than us and could directly compete with us in the market for fiber
assets or bandwidth services.
In addition, some communications carriers and local cable companies have
extensive networks in place that could be upgraded to fiber optic cable, as well
as numerous personnel and substantial resources to begin construction to equip
their networks. If communications carriers and local cable companies decide to
equip their networks with fiber optic cable, they could become significant
competitors of ours in a short period of time.
Other companies may choose to compete with us in our current or planned
markets, by selling or leasing fiber assets or bandwidth to our targeted
customers. A significant increase in industry capacity or reduction in overall
demand would adversely affect our ability to maintain or increase prices.
Additional competition could materially and adversely affect our operations. See
"Business--Competition."
-23-
<PAGE>
Rapid Technological Change--New technologies could reduce the demand for fiber
optic systems.
The telecommunications industry generally is subject to rapid and
significant changes in technology that may adversely affect the continued use of
fiber optic cable. Although we have been able to capitalize on certain recent
technological advances, such as the use of dense wave division multiplexing to
greatly expand the capacity of our network at constant construction costs, we
cannot assure you that the introduction of new products or the emergence of new
technologies will not enable competitors to install competing systems at a lower
per-circuit cost on routes currently targeted by us. Moreover, these potential
competitors may be able to expand capacity on existing competitive systems,
which could render our network and bandwidth services uncompetitive from a cost
perspective. We cannot predict the likelihood of these changes and we cannot
assure you that any technological changes will not materially and adversely
affect our business and operating results.
Potential Conflicts of Interest with Ledcor--We are controlled by Ledcor and
rely on it for certain things. Its interests may conflict with your interests.
As of the date of this prospectus, Ledcor holds shares in us which entitle
Ledcor to over 99% of the votes attached to our shares and Ledcor has the
ability to control our affairs and business. It is possible that Ledcor's
interests could conflict with your interests. In addition, Ledcor may have an
interest in causing us to pursue transactions that, in its judgment, enhance the
value of its equity investment in us, even though these transactions may involve
greater risks to you. There can be no assurance that any of these conflicts of
interests will be resolved in your favor.
Ledcor has agreed not to compete with us in the business of developing or
constructing fiber optic communications infrastructure for a period ending on
the earlier of May 31, 2008 and six months after a change of control of
Worldwide Fiber. Ledcor has also agreed to grant to us a worldwide exclusive
license for the use and other exploitation of the railplow technology. The
license will cease to be exclusive six months after a change of control of
Worldwide Fiber. As a result, if a change of control of Worldwide Fiber were to
occur, Ledcor would be legally entitled to compete with us and to grant a
license for the use and other exploitation of the railplow technology to
competitors of ours. Either of these events could have a material adverse effect
on our business, financial condition and results of operations. See
"Transactions with Our Parent--Description of Reorganization and Related
Agreements."
We also rely on Ledcor to provide us with administrative and other
services. Ledcor has the right to cease providing these services at any time.
See "Transactions with Our Parent--Description of Reorganization and Related
Agreements."
Year 2000 Compliance--We could be adversely affected if Year 2000 problems are
significant.
The Year 2000 issue is the result of many computer programs being written
using two digits rather than four to define the applicable year. Computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. Most of our systems that would require
Year 2000 modifications are currently maintained by Ledcor under the Management
Services Agreement and by Worldwide Fiber Networks, Inc. While we believe that
they are taking adequate steps to prepare our computer systems for the Year
2000, if necessary modifications and conversions are not made, or are not
completed in time, the Year 2000 issue could have a material adverse impact on
our operations. Furthermore, the systems of other companies on which our systems
rely, including those of Ledcor, may not be prepared for the Year 2000, or these
companies may implement Year 2000 preparations with systems that are
incompatible with our systems. In that event, our operations and financial
condition may be materially and adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Year 2000 Date
Conversion."
-24-
<PAGE>
Extensive Regulation--Regulatory matters could impact our ability to conduct our
business.
Existing and future governmental regulation may substantially affect the
way in which we conduct business, and the procedural and substantive regulatory
requirements with which we must comply. These regulations may increase the cost
of doing business or may restrict the way in which we offer products and
services. There is no way to predict the future regulatory framework of our
business. These regulations are summarized in more detail in the section
entitled "Regulation."
United States
Federal telecommunications law directly shapes the telecommunications
market. Consequently, regulatory requirements and/or changes could adversely
affect our operations by increasing our costs or restricting the way in which we
offer products and services. Federal telecommunications law imposes special
legal requirements on "common carriers" who engage in "interstate or foreign
communication by wire or radio," and on "telecommunications carriers." The
different ways we intend to offer fiber-optic supported services could trigger
four alternative types of regulatory requirements: (1) non-communications
services, (2) private carrier services, (3) telecommunications services or
common carriage, and (4) competitive local exchange carrier offerings. The law
establishing these alternative regulatory requirements is often unclear, so it
is impossible to predict in many instances how the Federal Communications
Commission will classify our services. Risks associated with each type of
offering are described below.
Non-communications Services
The provision of dark fiber can be viewed as a non-communications service
in that it is not a service, but rather the provision of a physical facility
that is indistinguishable from other non-communications offerings such as the
construction of an office building. Many providers of dark fiber are currently
operating on the assumption that they are providing unregulated facilities.
Nevertheless, the Federal Communications Commission had previously found that
when an incumbent local exchange carrier provided dark fiber it was providing a
common carrier service. A federal appeals court reversed and remanded this
decision to the agency for further proceedings. The Federal Communications
Commission's action in response to this remand could affect our position that
dark fiber is not a communications service.
Private Carrier Services
Even if some of our offerings are treated as communications services, they
could be viewed as a private carrier offering. Private carrier offerings
typically entail the offering of telecommunications, but are provided to a
limited class of users on the basis of individually negotiated terms and
conditions that do not meet the definition of a telecommunications service under
the Telecommunications Act of 1996. If our services are treated as private
carriage, they are generally unregulated by the Federal Communication
Commission, but would be subject to universal service payments based on the
gross revenues from end users. See "Regulation--United
States--Federal--Telecommunications Service--Universal Service." Private
carriers may also be subject to access charges if they interconnect with local
exchange carriers.
Telecommunications Services
Some of our services, such as the provision of bandwidth capacity and lit
fiber, may be treated as telecommunications services by the Federal
Communications Commission. If any of our services are treated as
telecommunications services, we could be subject to a number of new and
potentially burdensome regulations.
The precise parameters of the definition of a telecommunications service
are currently unclear. A decision by the Federal Communications Commission that
telecommunications and common carrier services are
-25-
<PAGE>
essentially the same is on appeal to a federal appeals court. A reversal or
remand of that decision could impact the Company's position that it should not
be regulated as either a telecommunications or a common carrier. In addition,
certain railroad, power and telecommunications providers have asked the Federal
Communications Commission to clarify the status of fiber providers. If the
Federal Communications Commission decides that these companies are
telecommunication carriers, we would be subject to certain regulatory
requirements which may impose substantial administrative and other burdens on
us. If any of our services are treated as telecommunications services, we may be
subject to a number of new and potentially burdensome regulations. These general
regulations include the obligation not to charge unreasonable rates or engage in
unreasonable practices, the obligations not to unreasonably discriminate in our
service offerings, the need to tariff our services (subject to the proceeding
described below), the potential obligation to permit others to offer their
services for resale under certain circumstances, and the fact that third parties
may file complaints against us at the Federal Communications Commission for
violations of the Communications Act of 1934 or the Federal Communications
Commission's regulations. Certain statistical reporting requirements may also
apply. Telecommunications carriers are also required to interconnect, either
directly or indirectly, with the facilities of other telecommunications carriers
and to ensure that they do not install network features, functions or
capabilities that do not comply with Federal Communications Commission
guidelines on accessibility by disabled persons and regulations promoting
interconnectivity of networks. In addition, Federal Communications Commission
rules require that telecommunications carriers contribute to universal service
support mechanisms, the Telecommunications Relay Services fund, the number
portability fund and the North American Numbering Plan Administrator fund. Also,
the Communications Assistance for Law Enforcement Act requires
telecommunications carriers to provide law enforcement officials with
call-related information and reserved circuits. There can be no assurance that
the cost of compliance with these various programs will not have a material
adverse effect upon our results of operations and financial condition and our
ability to meet our obligations under the notes.
The continuation of tariff filing requirements for interstate domestic
services provided by nondominant carriers is in dispute. The Federal
Communications Commission has ordered that all nondominant carriers, the
classification we would qualify for, may not file tariffs with the Federal
Communications Commission for domestic service. The D.C. Circuit has stayed the
effect of this decision. Filing tariffs can entail increased costs and may lead
to intrusive regulation by the Federal Communications Commission, although to
date the Federal Communications Commission has engaged in only minor regulation
of nondominant carriers. On the other hand, if tariffs are no longer required,
telecommunications carriers will no longer be able to rely on the filing of
tariffs with the Federal Communications Commission as a means of providing
notice to customers of prices, terms and conditions on which they offer
interstate services, since tariff provisions limit carriers' liability for
defects in service and consequential damages from such defects. The FCC has
ruled that non-dominant interexchange carriers must post on their Internet web
site their rates, terms and conditions for all of their interstate, domestic
services if they have an Internet web site. This ruling is to be effective when
the decision to mandate de-tariffing takes place. In addition, if tariffs are
eliminated, we may become subject to significantly increased liability risks,
and there can be no assurance that the liabilities will not have a material
adverse effect on our results of operations and financial conditions and our
ability to meet our obligations under the notes.
The Federal Communications Commission adopted rules which govern the use of
customer proprietary network information by telecommunications carriers. These
rules may impede our ability to effectively market integrated packages of
services and to expand existing customers' use of our offerings.
Competitive Local Exchange Carrier Offerings
It is also possible that some of our lit fiber or bandwidth capacity
services could be viewed as the provision of local exchange service. See
"Regulation--United States--Federal--CLEC Offerings." To the extent that any of
our offerings are treated as competitive local exchange carrier services, we
would also be subject to a number of interconnection obligations under the
Telecommunications Act of 1996. We would be required to offer our services for
resale at retail prices, provide number portability if technically feasible,
provide dialing
-26-
<PAGE>
parity to competing providers, and nondiscriminatory access to telephone
numbers, directory assistance, operator services and directory listings, provide
access to poles, ducts, conduits and rights-of-way, and establish reciprocal
compensation arrangements for the transport and termination of
telecommunications. Although CLEC interstate access charges are generally
regulated as non-dominant carrier offerings and subject to minimal burdens, the
FCC recently adopted a Notice of Proposed Rulemaking that asks whether it should
regulate the terminating access charges of such providers.
The Federal Communications Commission recently determined that Internet
traffic is interstate in nature, not local, and has initiated a proceeding to
determine appropriate carrier-to-carrier compensation. At the same time, the
Federal Communications Commission declined to overturn a multitude of state
decisions requiring incumbent local exchange carriers to pay competitive local
exchange carriers compensation for delivering Internet traffic to Internet
service providers. To the extent we are treated as a competitive local exchange
carrier, this ruling would adversely affect the revenues that we might expect to
receive from the carriage of Internet service provider-bound traffic.
International Facilities
The Company is required to obtain regulatory approval to construct and
operate facilities used to provide international telecommunications services. If
any of our services are treated as international telecommunications services, we
may be required to obtain regulatory approvals and file tariffs to offer these
international services. Although these facilities authorizations and tariffs are
regulated on a streamlined basis subject to minimal regulation, there is a risk
that the Federal Communications Commission may deny or place burdensome
conditions on authorizations and tariff filings.
Other Federal Communications Regulations
With limited exceptions, the current policy of the Federal Communications
Commission prohibits incumbent local exchange carriers from lowering prices to
some customers without also lowering charges for the same service to all
similarly situated customers in the same geographic area. The Federal
Communications Commission, however, modified this constraint on incumbent local
exchange carriers who have specified levels of competition from competing local
exchange service providers and permit them to offer special rate packages to
certain customers, as it has done in a few cases, and permit other forms of rate
flexibility. The rules contemplate an increasing level of flexibility on a
city-by-city basis as competitors have facilities in place to compete for local
exchange services in those markets. Once such facilities attain 50% coverage the
rules contemplate only minimal regulation of carrier access offerings. This
added flexibility could have a material adverse effect on our ability to compete
in providing facilities or services that compete with incumbent local exchange
carrier interstate access services.
The Telecommunications Act of 1996 currently requires Regional Bell
Operating Companies to obtain Federal Communications Commission authorization
prior to providing inter-LATA telecommunications. None has received such
authority to date. It is anticipated that some Regional Bell Operating Companies
may receive authorization in some states to provide inter-LATA
telecommunications as early as the end of 1999. If such authority is granted,
this could increase competition from Regional Bell Operating Companies in
providing fiber and fiber services, which could adversely affect our business
operations.
The Federal Communications Commission has the responsibility under the
Telecommunications Act of 1996 to determine what elements of an incumbent local
exchange carrier's network must be provided to competitors on an unbundled
basis. In August 1999, the Federal Communications Commission required dark fiber
to be offered as an unbundled element. In addition, the Federal Communications
Commission had previously allowed state commissions to establish additional
unbundling requirements, and some states have required that incumbent local
exchange carriers unbundle dark fiber. The decisions by the Federal
Communications Commis-
-27-
<PAGE>
sion to require unbundling of incumbent local exchange carriers' dark fiber
could increase the supply of dark fiber and decrease the demand for our dark
fiber, and thereby have an adverse effect on the results of our operations.
The FCC recently instituted a proceeding that could impose obligations on
telecommunication carriers' obligation to provide access to competitors or
customers to their wiring located in multi-tenant residential and business
buildings. It is unknown at this time how the FCC will rule in this proceeding
so it is impossible to evaluate its impact on our operations.
State Regulation
Each state in the United States, as well as the District of Columbia and
U.S. territories, which are treated as states for the purpose of regulation of
telecommunications services, has its own laws for regulating providers of
certain telecommunications-related services as "common carriers," as "public
utilities," or under similar rubrics. We believe that the sale or lease of dark
fiber facilities is not subject to this type of regulation in most jurisdictions
in which we plan to construct facilities. However, our offering of transmission
services, as distinct from dark fiber capacity, likely will be subject to
regulation in each of these jurisdictions to the extent that these services are
offered for intrastate use, and the regulation may have an adverse effect on the
results of our operations.
Local Regulation
In addition to federal and state laws, local governments exercise legal
authority that may affect our business. For example, some local governments
retain the ability to license public rights-of-way, subject to the federal
limitation that local authorities may not prohibit entities from entering
telecommunications markets. Compliance with local requirements may delay entry
and increase our costs of doing business.
Canada
Regulation under the Telecommunications Act (Canada)
We intend to retain fiber assets in our network which will be available for
sale, grant of indefeasible rights-of-use, lease or swap. To the extent that we
engage in these activities, particularly when we provide dark or lit fiber on a
leased basis, we will be subject to the provisions of the Telecommunications Act
(Canada) and to regulation by Canada's telecommunications regulatory authority,
the Canadian Radio-television and Telecommunications Commission. Although we do
not believe that these activities will be subject to extensive regulation, there
can be no assurance that the underlying policies of the Canadian
Radio-television and Telecommunications Commission, which generally foster
competition in Canada's local and long distance telecommunications services
markets, will not change in the future.
In a 1995 decision, the Canadian Radio-television and Telecommunications
Commission concluded that telecommunications services provided by non-dominant
carriers should not be subject to extensive regulation. We believe that all of
the telecommunications services that we will provide qualify under this decision
as non-dominant carrier services. As such, we do not believe that our operations
in Canada will be subject to extensive regulation by the Canadian
Radio-television and Telecommunications Commission. However, the Canadian
Radio-television and Telecommunications Commission's view as to the need for and
extent of regulation over non-dominant carriers may change. As a result, there
can be no assurance that the regulatory environment in Canada will continue to
be favorable to non-dominant carriers. Any change in the Canadian
Radio-television and Telecommunications Commission's policies or regulations
relating to non-dominant carriers could have a material adverse effect on our
business, financial condition and results of operations if, as a result of those
-28-
<PAGE>
changes, our services, rates or operations become subject to greater regulatory
oversight and intervention by the Canadian Radio-television and
Telecommunications Commission.
Restrictions on Foreign Ownership
Under the Canadian ownership provisions of the Telecommunications Act, a
"Canadian carrier" is not eligible to operate as a Canadian telecommunications
common carrier unless it is Canadian owned and controlled. Furthermore, no more
than 20% of the members of the board of directors of a Canadian carrier may be
non-Canadians, and no more than 20% of the voting shares of a Canadian carrier
may be beneficially owned by non-Canadians. In addition, no more than 33-1/3% of
the voting shares of a non-operating parent corporation holding a Canadian
carrier may be beneficially owned or controlled by non-Canadians and neither the
Canadian carrier nor its parent may be otherwise controlled in fact by
non-Canadians.
To the extent that we make available the retained fiber in our network in
Canada on an indefeasible rights-of-use or lease basis, we will be subject to
the Canadian ownership provisions of the Telecommunications Act. Although we
believe that we are in compliance with the relevant legislation, there can be no
assurance that a future Canadian Radio-television and Telecommunications
Commission determination or events beyond our control will not result in us
ceasing to comply with the ownership provisions of the Telecommunications Act.
Should this occur, our ability to operate as a Canadian carrier under the
Telecommunications Act could be jeopardized and our business could be materially
adversely affected.
On October 1, 1998, the Canadian Radio-television and Telecommunications
Commission issued Telecom Decision CRTC 98-17, which established a framework for
competition in Canada's international telecommunications services market to
coincide with the Government of Canada's decision to terminate the monopoly of
Teleglobe Canada Inc. over telecommunications facilities linking Canada to
overseas destinations. In that decision, the Canadian Radio-television and
Telecommunications Commission determined that a party acquiring an indefeasible
rights-of-use interest in an international submarine cable would not necessarily
fall within the definition of a telecommunications common carrier. As a result,
acquirors of indefeasible rights-of-use in international submarine cables need
not be Canadian owned and controlled. However, given the fact that the Canadian
Radio-television and Telecommunications Commission's findings in Decision 98-17
were limited to indefeasible rights-of-use interests held in international
submarine cables, as well as the fact that indefeasible rights-of-use
arrangements can involve varying degrees of ownership and control over fiber
facilities, there can be no assurance that holders of indefeasible rights-of-use
acquired in domestic fiber facilities, including those constructed by us, would
be exempt from the Canadian ownership provisions contained in the
Telecommunications Act.
In addition to determining the status of indefeasible rights-of-use under
the Telecommunications Act, the Canadian Radio-television and Telecommunications
Commission made a determination in Decision 98-17 to eliminate Canada's "bypass"
rules, which had prohibited the routing of Canada-Canada and Canada-overseas
traffic through the United States. Effective October 1, 1998, telecommunications
service providers and users in Canada may route basic telecommunications traffic
which either originates or terminates in Canada through the United States. Given
the fact that a decision to bypass Canadian network facilities may be based on a
variety of factors, including, but not limited to, cost, technology, traffic
patterns, and the availability of suitable facilities, there is a risk that
prospective customers for segments of the network in Canada may choose to
purchase, lease or obtain indefeasible rights-of-use in dark or lit fiber in the
United States rather than in Canada. There can be no assurance that we will be
able to attract and retain a sufficient number of customers for the Canadian
portions of our network, which could have a material adverse effect on our
business, financial condition and results of operations.
-29-
<PAGE>
Contribution
As a result of a September 17, 1998 application by four interexchange
carriers, the Canadian Radio-television and Telecommunications Commission is
considering reform of the current contribution regime. The Canadian
Radio-television and Telecommunications Commission's contribution regime was
originally established in 1992 as a means of ensuring that rates for local
residential telephone service remain affordable. Under the regime, providers of
certain types of long distance voice and data services are required to pay a
subsidy or "contribution" on each minute of traffic that is originated or
terminated on local switched telephone networks or on cross-border or overseas
access circuits. These contribution payments are pooled within each incumbent
local exchange carrier's territory and are paid out to incumbent local exchange
carriers and competitive local exchange carriers serving residential local
customers, based on the number of residential network access services they serve
and the level of the subsidy available in the rate band being served. On March
1, 1999, the Canadian Radio-television and Telecommunications Commission
initiated a proceeding to consider possible reforms to the current contribution
mechanism. In the public notice that initiated the proceeding, the Canadian
Radio-television and Telecommunications Commission invited interested parties to
submit proposals on other mechanisms which could be used to collect
contribution. If the Canadian Radio-television and Telecommunications Commission
decides to adopt the approach advocated in the application filed by the four
interexchange carriers, the current contribution regime would be converted to a
revenue-based regime under which contribution would be paid on a percentage of a
telecommunications service provider's revenues (regardless of the types of
services offered by the service provider), rather than on certain types of
telecommunications traffic.
We do not believe that our operations in Canada would be subject to the
requirement to pay contribution under the current contribution regime, except
with the possible exception of fiber which we may lease on a lit basis. However,
given that the current contribution regime is under review by the Canadian
Radio-television and Telecommunications Commission, there can be no assurance
that we would be exempt from the requirement to pay contribution in the future,
particularly if the Canadian Radio-television and Telecommunications Commission
decides to adopt a revenue-based regime.
CRTC Applications
On March 19, 1999, we filed an application with the Canadian
Radio-television and Telecommunications Commission seeking orders under the
Telecommunications Act which would permit us to continue to have access to
street crossings and other municipal properties in the City of Vancouver for the
purpose of constructing, testing and operating our network facilities within
that city. In an answer to our application, the City of Vancouver took the
position that we were not eligible to apply to the Canadian Radio-television and
Telecommunications Commission for relief under the Telecommunications Act. On
the same day, the City filed an application with the Canadian Radio-television
and Telecommunications Commission requesting orders which would permit certain
of the carriers that have obtained indefeasible rights-of-use from us to
continue to construct, operate and maintain those facilities on a zero rate
basis until the Canadian Radio-television and Telecommunications Commission has
made a determination on the appropriate terms, conditions and compensation that
should be payable to the City for the use of municipal property. The Canadian
Radio-television and Telecommunications Commission has yet to render a decision
with respect to these applications. Failure to obtain the orders we have
requested could have a material adverse effect on our business, financial
condition and results of operations.
Bankruptcy and Related Laws--Your rights concerning the notes could be adversely
affected in a United States or Canadian bankruptcy proceeding.
Canadian courts have exercised their powers under the Bankruptcy and
Insolvency Act, and particularly under the Companies' Creditors Arrangement Act,
broadly to protect a restructuring entity from actions taken by creditors and
other parties. Accordingly, it is impossible to predict if payments under the
notes would be made
-30-
<PAGE>
during these proceedings, whether or when the trustee could exercise rights
under the indenture or whether and to what extent you would be compensated for
any delays in payments, if any, of principal and interest.
There could also be a bankruptcy filing by or against us in the United
States. U.S. bankruptcy courts typically have jurisdiction over a debtor's
property, wherever it is located, including property located in other countries.
However, courts outside of the United States might not recognize the U.S.
bankruptcy court's jurisdiction. Accordingly, difficulties may arise in
administering a United States bankruptcy case involving a Canadian debtor with
property located outside of the United States. Orders or judgments of a
bankruptcy court in the United States may not be enforceable against third
parties outside the United States.
We are organized under the laws of Canada. At present, a significant
portion of our assets is located in Canada. The notes and the indenture will be
governed by New York law. The rights of the trustee under the indenture to
enforce remedies could be significantly impaired by the restructuring provisions
of applicable Canadian or United States federal bankruptcy, insolvency and other
restructuring legislation if the benefit of this legislation is sought
concerning us. For example, in Canada, both the Bankruptcy and Insolvency Act
(Canada) and the Companies' Creditors Arrangement Act (Canada) contain
provisions enabling "an insolvent person" to obtain a stay of proceeding against
its creditors and others and to prepare and file a proposal for consideration by
all or some of its creditors to be voted on by the various classes of its
creditors. This restructuring proposal, if accepted by the requisite majorities
of creditors and if approved by the court, would be binding on all creditors who
fall within one of the classes of creditors contemplated by the restructuring
proposal. Moreover, this "proposal" legislation permits, in certain
circumstances, the insolvent debtor to retain possession and administration of
its property, even though it may be in default under the applicable debt
instruments.
If there were a filing by or against us in the United States, the U.S.
Bankruptcy Code provides for an automatic stay of virtually all proceedings
against a debtor which stay continues until a bankruptcy plan of reorganization
is confirmed or the stay is lifted under a noticed motion. Similar to the
Canadian laws, the U.S. Bankruptcy Code provides that a plan of reorganization,
if accepted by the requisite majorities of creditors and if approved by the
court, would be binding on all creditors who fall within one of the classes of
creditors contemplated by the plan of reorganization. Moreover, the U.S.
Bankruptcy Code also generally permits the insolvent debtor to retain possession
and administration of its property, even though it may be in default under the
applicable debt instruments. Accordingly, it is also impossible to predict if
payments under the notes would be made during a U.S. bankruptcy proceeding,
whether or when the trustee could exercise its rights under the indenture or
whether and to what extent you would be compensated for any delays in payments,
if any, of principal and interest.
Financing Change of Control Offer--We may not have the ability to raise the
funds necessary to finance the change of control offer required by the
indenture.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding notes. However, it is
possible that we will not have sufficient funds at the time of the change of
control to make the required repurchase of notes or that restrictions in our
credit facilities or other indebtedness will not allow these repurchases. In
addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, would not
constitute a change of control under the indenture. See "Description of
Notes--Repurchase at the Option of Holders."
There may be no public market for the new notes.
There has previously been only a limited secondary market, and no public
market, for the old notes. The new notes are a new issue of securities, have no
established trading market, and may not be widely distributed. Worldwide Fiber
does not intend to list the new notes on any national securities exchange or the
Nasdaq Stock Market or to apply for the trading of the notes on any automated
quotation system. No assurance can be
-31-
<PAGE>
given that an active public or other market will develop for the new notes or as
to the liquidity of or the trading market for the new notes. If a trading market
does not develop or is not maintained, holders of the new notes may experience
difficulty in reselling the new notes or may be unable to sell them at all. If a
market for the new notes develops, this market may be discontinued at any time.
If a public trading market develops for the new notes, future trading prices of
the new notes will depend on many factors, including, among other things,
prevailing interest rates, our results of operations and the market for similar
securities, and the price at which the holders of new notes will be able to sell
the new notes is not assured and the new notes could trade at a premium or
discount to their purchase price or face value. Depending on prevailing interest
rates, the market for similar securities and other factors, including our
financial condition, the new notes may trade at a discount from their principal
amount.
You may not be able to rely on forward-looking statements.
The information contained in this prospectus includes some forward-looking
statements that involve a number of risks and uncertainties. A number of factors
could cause our actual results, performance, achievements or industry results to
be very different from the results, performance or achievements expressed or
implied by our forward-looking statements. These factors include, but are not
limited to:
o general economic and business conditions, both nationally and in the
markets in which we operate or will operate,
o our ability to access markets, design effective fiber optic routes,
install cable and facilities, and obtain rights-of-way, building
access rights and any required governmental authorizations, franchises
and permits, all in a timely manner, at reasonable costs and on
satisfactory terms and conditions,
o demographic change,
o competition,
o existing government regulations and changes in, or the failure to
comply with, government regulations,
o the loss of any significant number of customers,
o changes in business strategy or development plans,
o technological developments,
o the ability to attract and retain qualified personnel, and
o other factors we refer to throughout this prospectus.
Certain of these factors are discussed in more detail elsewhere in this
prospectus including, without limitation, under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
In addition, forward-looking statements depend upon assumptions, estimates
and dates that may not be correct or precise and involve known and unknown
risks, uncertainties and other factors. Accordingly, a forward-looking statement
in this prospectus is not a prediction of future events or circumstances and
those future events or circumstances may not occur. Given these uncertainties,
you are warned not to rely on the forward-
-32-
<PAGE>
looking statements. Neither we nor any other person assumes responsibility for
the accuracy and completeness of these statements. A forward-looking statement
is usually identified by our use of certain terminology, including "believes,"
"expects," "may," "will," "should," "seeks," "pro forma," "anticipates" or
"intends" or by discussions of strategy or intentions. We are not undertaking
any obligation to update these factors or to publicly announce the results of
any changes to our forward-looking statements due to future events or
developments.
-33-
<PAGE>
CAPITALIZATION
The following table sets forth our actual and pro forma consolidated cash
and capitalization as of June 30, 1999. This table should be read along with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the consolidated financial statements and related notes and the Pro
Forma Financial Information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of June 30, 1999
Actual Pro Forma (1)
(In thousands)
(unaudited)
<S> <C> <C>
Cash and cash equivalents.................................................. $86,812 $873,812
Debt (including current portion):
12 1/2% senior notes due 2005........................................... 175,000 175,000
12% senior notes due 2009............................................... -- 500,000
-------- ---------
175,000 675,000
Redeemable preferred stock................................................. -- 345,000
Shareholder's equity:
Common stock ........................................................... 32,419 43,419
Contributed surplus..................................................... 2,242 2,242
Retained earnings (deficit)............................................. 21,413 (25,787)
Accumulated other comprehensive income (loss)........................... (564) (564)
-------- ---------
Total shareholder's equity.............................................. 55,510 19,310
-------- ---------
Total capitalization...................................................... $230,510 1,039,310
======== =========
</TABLE>
- ---------------------
(1) Gives pro forma effect to (1) the issuance on July 28, 1999 of the
$500,000,000 12% senior notes, (2) the issuance on August 31, 1999 of
150,000 Class B Subordinate Voting Shares for $3,000,000 of cash, (3) the
issuance on September 9, 1999 of 8,866,808 Series A Non-Voting Preferred
Shares for $345,000,000 of cash, (4) a stock dividend on September 9, 1999
of 5,000,000 Series C Redeemable Preferred Shares and a redemption on
September 9, 1999 of 45,000,000 Series C Redeemable Preferred Shares for
$45,000,000 of cash and (5) the acquisition on September 27, 1999, from
affiliates of Ledcor Inc., of certain fiber optic network assets in
exchange for 4,500,000 Class C Multiple Voting Shares of the Company.
-34-
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below for the year ended March 31,
1996, the five months ended August 31, 1996, the year ended August 31, 1997 and
the nine months ended May 31, 1998 of our predecessor, the telecommunications
division of Ledcor, are derived from the audited financial statements of the
predecessor division, which have been audited by Deloitte & Touche LLP,
independent auditors. Worldwide Fiber was incorporated on February 5, 1998 and
acquired certain assets of the predecessor division on May 31, 1998. Before May
31, 1998, Worldwide Fiber was a shell company. The selected historical financial
data presented for the period February 5, 1998 through December 31, 1998 of
Worldwide Fiber are derived from our audited consolidated financial statements,
which have been audited by PricewaterhouseCoopers LLP, independent auditors. The
unaudited pro forma financial data for the year ended December 31, 1998 are
derived from the audited consolidated financial statements of Worldwide Fiber,
the financial statements of the predecessor division, and the consolidated
financial statements of Worldwide Fiber (USA), Inc. ("WFI-USA") included
elsewhere in this prospectus. The selected historical financial data presented
for the periods ended June 30, 1999 and 1998 are derived from Worldwide Fiber's
unaudited consolidated financial statements and include, in the opinion of
Worldwide Fiber's management, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the data for those periods.
The unaudited pro forma financial data for the six months ended June 30, 1999
are derived from the unaudited interim consolidated financial statements for the
six month period ended June 30, 1999 of Worldwide Fiber included elsewhere in
this Prospectus. Our consolidated financial statements and the divisional
financial statements of the predecessor division are not comparable to our
results of operations after the Reorganization. You should read the following
information along with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and the financial statements
and the related notes included elsewhere in this prospectus.
Capital expenditures represent actual cash expenditures incurred during the
period and do not include acquisitions of assets for non-cash consideration.
Route miles represent the number of miles spanned by fiber optic cable owned at
the end of the period, calculated without including physically overlapping
segments of cable. Fiber miles represent the number of strands of fiber in a
length of fiber optic cable owned at the end of the period, multiplied by the
length of the cable in miles.
-35-
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(Dollars in thousands)
Predecessor Division Worldwide Fiber
------------------------------------------ ------------------------------------------------------
Six Pro Forma
Five Nine February February Pro Forma Months Six
Year Months Year Months 5, 1998 5, 1998 Year Ended Months
Ended Ended Ended Ended to to Dec- Ended Dec- June Ended
March August August May 31, June 30, ember 31, ember 31, 30, June 30,
31, 1996 31, 1996 31, 1997 1998 1998 1998 1998(2)(3) 1999 1999(2)(3)
--------- -------- -------- -------- --------- ---------- ---------- ------- ----------
Income Statement Data:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue............ $3,824 $7,373 $58,008 $54,634 $12,280 $164,319 $207,038 $123,884 $123,884
Operating expenses:
Costs............ 3,440 5,739 48,474 44,919 10,621 147,621 182,518 85,614 85,614
General &
administrative.. 57 91 863 710 403 2,274 8,140 5,837 7,087
Depreciation..... 24 15 112 317 49 464 639 453 453
------ ------ ------- ------- ------- -------- -------- ------- --------
Total operating
expenses........... 3,521 5,845 49,449 45,946 11,073 150,359 191,297 91,904 93,154
------ ------ ------- ------- ------- -------- -------- ------- --------
Operating income... 303 1,528 8,559 8,688 1,207 13,960 15,741 31,980 30,730
Interest expense, -- 15 600 86 -- 225 85,352 5,671 30,571
net................
Equity income...... -- -- -- -- 2 928 -- -- --
------ ------ ------- ------- ------- -------- -------- ------- --------
Earnings (loss)
before income 303 1,513 7,959 8,602 1,209 14,663 (69,611) 26,309 (6,141))
taxes............
Income tax expense
(recovery)....... 139 686 3,620 3,909 526 5,643 (26,710) 10,921 (1,574)
------ ------ ------- ------- ------- -------- -------- ------- --------
164 827 4,339 4,693 683 9,020 (42,901) 15,388 (4,567))
Income attributable
to minority -- -- -- -- -- -- 464 2,995 2,995
interest.........
------ ------ ------- ------- ------- -------- -------- ------- --------
Net income (loss).. $164 $827 $4,339 $4,693 683 $9,020 $(43,365) $12,393 $(7,562)
====== ====== ======= ======= ======= ======== ======== ======= ========
Other Financial
Data:
EBITDA (4)......... $327 $1,543 $8,671 $9,005 $1,256 $15,352 $16,380 $32,433 $31,183
Capital $72 $181 $1,119 $6,828 -- $1,065 -- $19,215 --
expenditures.......
Ratio of earnings
to fixed 24.3x 45.5x 10.3x 17.7x 200.0x 26.8x -- 3.8x --
charges (5)......
Statement of Cash
Flows Data:
Operating $666 $(3,078) $(3,921) $(2,502) $681 $(13,059) $ -- $(49,824) $ --
activities.........
Investing (72) (181) (1,119) (6,828) -- 1,177 -- (19,215) --
activities.........
Financing $(595) $3,259 $5,040 $9,330 $(681) $168,350 $ -- $(352) $ --
activities.........
Operating Data:
Route miles........ -- -- 1,090 1,430 380 2,735 3,825 --
Fiber miles ....... -- -- 22,740 34,320 4,940 36,179 91,825 --
Balance Sheet Data:
Cash and cash
equivalents........ $ -- $-- $-- $ -- -- $156,366 $ -- $86,812 $ 873,812
Fixed assets, net.. -- 464 1,471 7,982 -- 15,475 -- 57,790 83,790
Total assets....... -- 6,476 32,268 39,549 -- 236,260 -- 365,025 1,206,025
Total debt......... -- 2,067 6,774 10,933 -- 175,000 -- 175,000 675,000
Redeemable Preferred
Stock.............. -- -- -- -- -- -- -- -- 345,000
Shareholder's equity $ -- $1,473 $5,825 $8,870 -- $18,261 $ -- $55,510 $ 19,310
</TABLE>
-36-
<PAGE>
- ---------------------------------------------------
(1) Gives pro forma effect to (1) the transfer on May 31, 1998 of certain of
the operations of the predecessor division and the Construction Services,
Management Services and Employee Services Agreements between Worldwide
Fiber and affiliates of Ledcor, (2) the consolidation of WFI-USA as a
result of Worldwide Fiber's agreement to increase its interest in WFI-USA
from 50% to 75% on December 31, 1998 and (3) the effect of the interest
expense, including amortization of deferred financing costs, relating to
the $175,000,000 121/2% senior notes and the $500,000,000 12% senior notes.
(2) Gives pro forma effect to the interest expense, including amortization of
deferred financing costs, on the $500,000,000 12% senior notes due 2009.
(3) The initial annual interest expense on the $500,000,000 12% senior notes
due 2009 is $62,400,000 and the initial annual interest expense on the
$175,000,000 12 1/2% senior notes due 2005 is $23,200,000.
(4) EBITDA consists of net income (loss) before interest expense, net of
interest income, income tax expense (recovery), depreciation and income
attributable to minority interest. EBITDA is presented because we believe
it is a useful indicator of a company's ability to meet debt service and
capital expenditure requirements. It is not intended as an alternative
measure of operating results or cash flow from operations (as determined in
accordance with generally accepted accounting principles). EBITDA is not
necessarily comparable to similarly titled measures for other companies and
does not necessarily represent amounts of funds available for management's
discretionary use.
(5) For purposes of calculating the ratio of earnings to fixed charges,
earnings consists of earnings (loss) before equity income, income tax
expense (recovery), income attributable to minority interest and fixed
charges. Fixed charges consists of interest expensed and capitalized, plus
the portion of rental expense which we believe to be representative of
interest (assumed to be one-third of rental expense). Pro forma loss for
the year ended December 31, 1998 would have been insufficient to cover
fixed charges by $69,611,000 and pro forma loss for the six month period
ended June 30, 1999 would have been insufficient to cover fixed charges by
$6,141,000.
(6) Gives pro forma effect to (1) the issuance on July 28, 1999 of the
$500,000,000 12% senior notes, (2) the issuance on August 31, 1999 of
150,000 Class B Subordinate Voting Shares for $3,000,000 of cash, (3) the
issuance on September 9, 1999 of 8,866,808 Series A Non-Voting Preferred
Shares for $345,000,000 of cash, (4) a stock dividend on September 9, 1999
of 5,000,000 Series C Redeemable Preferred Shares and a redemption on
September 9, 1999 of 45,000,000 Series C Redeemable Preferred Shares for
$45,000,000 of cash and (5) the acquisition on September 27, 1999, from
affiliates of Ledcor Inc., of certain fiber optic network assets in
exchange for 4,500,000 Class C Multiple Voting shares of the Company.
-37-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following should be read along with our Consolidated Financial
Statements and the Divisional Financial Statements of the telecommunications
division of Ledcor Industries Limited, including the related notes, included
elsewhere in this prospectus.
General
We are a provider of technologically advanced fiber optic communications
infrastructure in North America using our state-of-the-art fiber optic network.
We recently have begun marketing bandwidth services and intend to provide these
services by the end of the year. We are developing our network to satisfy
increasing demand for fiber optic capacity for the transmission of data, voice
and video generated by high-bandwidth communications and the requirements of new
entrants to the telecommunications business. We currently derive our revenues
from the sale, grant of indefeasible rights-of-use ("IRU") and lease of dark
fiber optic strands and conduit and related infrastructure. We have commenced
the process of adding the necessary optical transmission equipment to enable us
to provide bandwidth services to carriers and other service providers. Our
targeted customers include communications carriers, Internet service providers
("ISPs") and large corporations with enterprise network needs.
The development and build-out of our network will require significant
capital expenditures through 2001, when the network is scheduled to be complete.
Depending upon market demand, we may expand the network and will require
additional capital if we decide to do so. See "--Liquidity and Capital
Resources."
Reorganization
We were incorporated on February 5, 1998. However, we did not commence
operations until May 31, 1998. As of May 31, 1998 we entered into a series of
agreements whereby Ledcor transferred the construction equipment, certain fiber
optic strands and certain other assets of Ledcor's telecommunications division
(the "Reorganization"). Because this series of transactions was between entities
under common control, the assets have been reflected in our financial statements
using the carrying amounts recorded in Ledcor's accounts. We believe that the
fair market value of the fiber assets we received is significantly greater than
their carrying amounts.
We entered into two Construction Services Agreements in which we agreed to
fulfill Ledcor's fiber optic network construction commitments concerning certain
builds along the fiber optic transmission system across Canada and the Northern
United States (the "FOTS"). In return, Ledcor paid us an amount equal to our
costs incurred plus 15%. Our obligations under these agreements were
substantially performed by the end of January 1999. We also entered into a
Management Services Agreement and two Employee Services Agreements with Ledcor.
See "Transactions with Our Parent--Description of Reorganization and Related
Agreements."
Prior to the Reorganization, we were a shell company created for the
purpose of continuing the business of Ledcor's telecommunications division and
did not have any operations or material assets. Accordingly, two sets of
financial information are included in this prospectus. The Divisional Financial
Statements of Ledcor's telecommunications division prior to May 31, 1998 reflect
the operations of our predecessor as a contractor and network developer for the
FOTS. Our Consolidated Financial Statements for the period from the date of
incorporation through December 31, 1998 primarily reflect our operating results
due to the Construction Services Agreements.
-38-
<PAGE>
Sources of Revenue
To date, we have primarily generated revenues from the construction of our
fiber optic network. We will continue to construct fiber optic networks for
third parties on a contract basis when these networks will either allow us to
retain fiber or conduit assets on routes that complement and reduce the costs of
completing our network, or to enhance our ability to make a sale, grant of
indefeasible rights-of-use, lease or swap of network capacity or the provision
of bandwidth services. We anticipate that, as we proceed with the development of
our network, the percentage of revenues which we receive from construction
services will decline from the level reflected in our results of operations to
date.
Revenues from construction contracts to develop fiber optic systems are
calculated on the percentage of completion basis using the cost-to-cost method
over the life of the build. This method is used because we consider costs
incurred to be the best available measure of progress of these contracts. We
make provisions for all potential losses as soon as they become evident.
As a developer, we use a condominium strategy to develop the network. Our
condominium strategy allows multiple participants to purchase, obtain
indefeasible rights-of-use or lease fiber or conduit along a segment of our
network at a fixed price. We generally commence construction of a segment when
we have pre-sold sufficient strands and conduit to cover approximately 50% of
our anticipated construction costs of that segment. Under participation
agreements, we typically receive an initial deposit with the final payment
coming after acceptance by the customer. To expedite route development or
decrease development risk, we may seek a co-developer. Co-developers typically
make a deposit and progress payments that represent their share of the project
construction costs. They may also enter into co-marketing arrangements with us
to sell the assets along the build.
We recognize revenue for participation agreements on a percentage of
completion basis. Following completion of a build, our retained fiber or conduit
may be sold, granted through an indefeasible right-of-use or leased to a third
party. Revenues and costs for a sale or grant of indefeasible rights-of-use of
these fiber or conduit assets are recognized at the time of the transaction.
Lease revenues are recognized as earned over the life of the lease.
In the future we anticipate a significant amount of our revenues will be
derived from providing bandwidth services, including optical transmission,
private line, virtual voice, IP transport and ATM.
Joint Ventures
Our consolidated balance sheet at June 30, 1999 and December 31, 1998
includes the assets and liabilities of WFI-USA, and a minority interest in it,
reflecting our 75% interest in WFI-USA. A fifty percent interest in WFI-USA was
transferred to us by Ledcor on August 31, 1998, and the additional 25% was
acquired on December 31, 1998 from the treasury of WFI-USA. The consolidated
income statements for the periods ended June 30, 1998 and December 1998 account
for Worldwide Fiber's initial 50% interest in WFI-USA using the equity method.
Worldwide Fiber Networks, Inc. ("WFNI") will be the primary subsidiary through
which we will develop the U.S. segments of the network. Subsequent to December
31, 1998 we also began consolidating WFI-USA's income statement and became
responsible for supplying all of the capital necessary to fund those segments of
the network developed through WFNI. See "Business--Description of WFI-USA
Agreements."
We have entered, and may in the future enter, into joint ventures to
develop particular segments of the network, to secure rights-of-way ("ROW") or
to enable us to provide bandwidth or other services on a more timely or capital
efficient manner or for other reasons. For example, we entered into agreements
with Illinois Central Railroad Company ("IC") and Canadian National Railway
Company ("CN") which allow us to develop
-39-
<PAGE>
our network on both railroads' ROW in Canada and the United States. See
"Business--Description of IC and CN Agreements."
Results of Operations
Worldwide Fiber Inc.
Six Months Ended June 30, 1999
Revenue for the six month period ended June 30, 1999 was $123,884,000. This
revenue was primarily derived from sales of conduit and fiber optic strands
along the Seattle-Portland, Portland-Sacramento and northeast segments of our
network. The Seattle-Portland segment was completed in May 1999.
Costs were $85,614,000 for the six months ended June 30, 1999 and reflect
the costs incurred in development of our network which include costs related to
subcontractors, rights-of-way and equipment purchases. Costs as a percentage of
revenue for the period were 69%. The resulting gross margin for the period of
$38,270,000 and gross margin percentage of 31% have increased from prior periods
due to the higher margins achieved in network development compared to
construction services rendered to Ledcor and third parties during prior periods.
General and administrative expenses were $5,837,000 or 5% of revenue for
the six months ended June 30, 1999. We are continuing the process of
implementing our own management information and accounting systems. General and
administrative expenses are expected to continue to increase as we develop our
systems, hire additional personnel and implement our bandwidth services
strategy.
Interest expense was $7,970,000 for the six months ended June 30, 1999 and
was principally due to the issue of the 1998 Notes. Interest income totalled
$2,299,000 for this period and arose from the investment of the proceeds of the
1998 Notes in short-term, investment grade securities. Interest capitalized for
the period totaled $2,481,000.
Income taxes provided for the six month period of $10,921,000 consist
primarily of current taxes arising from our U.S. and Canadian operations.
Minority interest for the six month period of $2,995,000, represents 25% of
WFI-USA's net income.
Period from February 5, 1998 to June 30, 1998
(Operations commenced June 1, 1998)
Revenue for the period ended June 30, 1998 was $12,280,000 and was
principally derived from the Construction Services Agreements with Ledcor.
Costs were $10,621,000 for the period ended June 30, 1998 and reflects the
costs incurred to complete the FOTS under the Construction Services Agreements
with Ledcor. The gross margin of $1,659,000 for the period primarily represents
the 15% margin earned under the Construction Services Agreements.
General and administrative expenses were $403,000 in the period and
represent the monthly fee of Cdn. $200,000 and direct costs reimbursed by Ledcor
under the Management Services Agreements.
Income taxes provided for the period ended June 30, 1998 of $526,000
consist primarily of current taxes arising from our U.S. and Canadian
operations.
-40-
<PAGE>
The results of operations for the period ended June 30, 1998 are not
comparable to the six-month period ended June 30, 1999 as operations commenced
on June 1, 1998 and revenues were derived primarily from the Construction
Services Agreements with Ledcor.
Period from February 5, 1998 to December 31, 1998
(Operations commenced June 1, 1998)
Revenue for the period from February 5, 1998 to December 31, 1998 was
$164,319,000. Revenue for this period was principally derived from the
Construction Services Agreements to complete the FOTS for Ledcor. This project
was completed in January 1999.
Costs were $147,621,000 for the period from February 5, 1998 to December
31, 1998. Costs reflect primarily the costs incurred in completing the FOTS.
Costs as a percentage of revenue for the period were 90%, reflecting the costs
incurred plus 15% earned under the Construction Services Agreements. A portion
of the costs related to the FOTS were reimbursed without the 15% earned margin,
including costs associated with marine subcontractors.
General and administrative expenses for the period from February 5, 1998 to
December 31, 1998 were $2,274,000, representing 1.4% of our revenues, and
consisting of the monthly fee of Cdn. $200,000 and direct costs reimbursed by
Ledcor under the Management Services Agreement.
Income taxes for the period from February 5, 1998 to December 31, 1998 of
$5,643,000 consist primarily of current taxes arising from Worldwide Fiber's
Canadian and U.S. taxes of $2,599,000 and $3,044,000, respectively.
Telecommunications Division -- Ledcor Industries Limited
Nine Months Ended May 31, 1998
Revenues generated from contracts for the nine months ended May 31, 1998
were $54,633,888. The revenues for this period were principally derived from
developing the FOTS for Ledcor Industries Limited ("LIL").
Contract costs were $45,321,566 for the nine months ended May 31, 1998.
Contract costs primarily represent the costs associated with engineering,
designing and building the FOTS and managing third party construction contracts.
Contract costs as a percentage of revenue for the nine months ended May 31, 1998
were 83%.
General and administrative expenses for the nine months ended May 31, 1998
were $710,240 representing 1.3% of revenues for the period. General and
administrative expenses for the nine month period ended May 31, 1998 are
primarily derived from overhead to accommodate progress on the FOTS and
management of builds for third parties.
Income tax expense (recovery) for the nine months ended May 31, 1998
represents a current expense of $5,509,000 and a recovery, on a deferred basis,
of $1,600,000 using an effective tax rate of 45%. As a division, we would not in
fact report taxes, but would have been consolidated within the tax return filed
by LIL. The difference between current tax expense and deferred tax recovery is
due to temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
-41-
<PAGE>
Telecommunications Division -- Ledcor Industries Limited
Year Ended August 31, 1997
Revenues generated from contracts for the year ended August 31, 1997 were
$58,007,652. The revenues for this period are principally derived from the
commencement of building the FOTS and management of the Alaska Fiber Star build
in Alaska.
Contract costs were $49,184,985 for the year ended August 31, 1997.
Contract costs for this period are primarily derived from the costs associated
with engineering, design and building of the FOTS and management of the Alaska
Fiber Star build in Alaska. Contract costs as a percentage of revenue for the
year ended August 31, 1997 were 85%. Contract revenues and contract costs for
the year ended August 31, 1997 increased significantly due to the business in
which LIL had entered into, which was the building of the FOTS and selling of
its components to third-parties. This was a different business than the business
previously conducted by the telecommunications division in which LIL would
construct and develop fiber optic systems on a contract basis for specific
telecommunications clients. Since this was a new business for LIL the gross
margin compared to prior years is not comparable.
General and administrative expenses for the year ended August 31, 1997 were
$863,373, representing 1.5% of revenues for the period. The general and
administrative expenses for this period are primarily comprised of the overhead
necessary to accommodate the commencement of FOTS and management of the Alaska
Fiber Star build in Alaska.
Income tax expense for the year ended August 31, 1997 represents a current
expense of $338,000 and a deferred expense of $3,282,000 using an effective tax
rate of 45%. As a division, we would have been included within the tax return
filed by LIL. The difference between current tax expense and deferred tax
expense is due to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Telecommunications Division -- Ledcor Industries Limited
Five Months Ended August 31, 1996
Revenues generated from contracts for the five months ended August 31, 1996
were $7,372,942. The revenues for this period are principally derived from the
fiber optics development between Calgary and Edmonton, Alberta.
Contract costs were $5,768,543 for the five months ended August 31, 1996.
Contract costs for this period are primarily comprised of the design,
engineering and construction costs associated with the development project
between Calgary and Edmonton. Contract costs as a percentage of revenue for the
five months ended August 31, 1996 were 78%.
General and administrative expenses for the five months ended August 31,
1996 were $90,993, representing 1.2% of revenues for the period. The general and
administrative expenses for this period are primarily derived from the overhead
necessary to commence the Calgary-Edmonton project.
Income tax expense for the year ended August 31, 1997 represents a current
expense of $5,000 and a deferred expense of $681,000, using an effective tax
rate of 46%. As a division, we would have been consolidated within the tax
returns filed by LIL. The difference between current tax expense and deferred
tax expense is due to temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.
-42-
<PAGE>
Liquidity and Capital Resources
At June 30, 1999, we had working capital of $167,910,000, including
$86,812,000 in cash or cash equivalents.
Cash used in operations during the six months ended June 30, 1999 totaled
$49,824,000. We have an aggressive business plan to build out the network in the
United States and Canada that will require a significant investment in the
development of fiber and conduits held for sale, grant of indefeasible
rights-of-use, swap or lease and the purchase of transmission facilities. We
anticipate that we will continue to experience negative cash flow (after capital
expenditures) as we build out the network.
In addition to the fiber assets contributed by Ledcor, we formed a capital
plan in 1998 to develop approximately 12,900 route miles. The plan and the
implementation of bandwidth services contemplate capital expenditures of
approximately $1.26 billion through 2001. This plan includes the building of
five intra-city networks ("city rings") in Canada and the installation of
electronics and transmission equipment along our entire terrestrial network,
commencing with the Vancouver-Detroit segment during the third and fourth
quarters of 1999. This plan does not include the Hibernia project, which is
discussed below. The following table describes funding sources contemplated by
the plan:
Net proceeds from the $500,000,000 12% senior notes due 2009
(the "Notes") ............................................. $484,000,000
Net proceeds from the $175,000,000 12 1/2% senior notes due
2005 (the "1998 Notes").................................... 168,350,000
Credit facilities (1)........................................ 127,650,000
Co-developers and participant sales ......................... 480,000,000
--------------
$1,260,000,000
==============
- ---------------------------------------------------
(1) We anticipate that up to $150 million may be available under our planned
bank credit facility.
Consistent with our strategy to create a low-cost position, we have
agreements, subject to terms and conditions we consider customary, with
co-developers and participants. We have received, in the aggregate to date,
commitments of approximately $480,000,000 in cash to fund the completion of
segments of our terrestrial network from co-developers and participants.
Approximately $138,000,000 of the $480,000,000 is associated with revenue from
construction services we are providing to two customers under which we will earn
a specified margin and also retain dark fiber. The remainder of the $480,000,000
is derived from the sale, IRU or lease of fiber and conduit and additional
construction services we are providing to third parties along network segments
we are developing ourselves. We intend to enter into additional arrangements
with co-developers and participants, prior to completion of the network in 2001.
We expect to obtain the balance of the funding necessary to complete our
terrestrial network and to implement our bandwidth services strategy from (1)
the cash remaining from the notes and the 1998 Notes and (2) our planned bank
credit facility. We have accepted a commitment letter from a bank lender which
contemplates that up to $150,000,000 could be made available to us in the form
of revolving credit borrowings. See "Description of Other Indebtedness--Proposed
Worldwide Fiber Credit Facility." We expect the facility to close in the fourth
quarter of 1999.
We anticipate that these funding sources will provide us with sufficient
capital to complete our terrestrial network and to implement our related
bandwidth services strategy. However, because the cost of developing our network
and implementing our bandwidth services strategy will depend on a variety of
factors, many of
-43-
<PAGE>
which are beyond our control, including changes in the competitive environment
of our current and planned markets, we expect that our actual costs may vary
materially from those currently budgeted. In the event that our actual costs
exceed our current budget or we do not have the funds we anticipate, we have the
ability to adjust the number or sequence of segments we develop.
On September 9, 1999 we completed a private placement of our convertible
preferred shares for $345,000,000. See "Description of Our Recently Completed
Private Equity Placements." Of this amount, $45,000,000 was used to repurchase
certain of our shares held by an affiliate of our parent with the balance to be
used in the manner described below.
The plan described above does not include the Hibernia transatlantic fiber
optic cable project. We estimate the total cost of this project to be
approximately $850,000,000. We will use $300,000,000 of the proceeds from our
recently completed private equity placement to fund the equity portion of the
cost of construction of the Hibernia project. We currently expect that the debt
component of the total cost will be approximately $550,000,000, and we have
entered into a project financing commitment letter with Goldman Sachs Credit
Partners LP, DLJ Capital Funding, Inc. and Credit Suisse First Boston. Under the
project financing commitment, it is anticipated that the lenders will provide up
to $600,000,000 in debt financing to one of our subsidiaries, non-recourse to
Worldwide Fiber. See "Description of Other Indebtedness - Proposed Hibernia
Credit Facility"
We expect to pursue opportunities in addition to our planned network.
Accordingly, from time to time we may seek to raise additional capital in the
debt and/or equity capital markets prior to completion of our planned network.
We cannot assure you that we will be successful in raising the capital necessary
for the completion of construction for the remainder of our planned network
development, the implementation of our bandwidth services strategy, the Hibernia
project or for other opportunities on a timely basis or on terms that are
acceptable to us, or at all.
Impact of Year 2000
The Year 2000 problem impacts computer programs and hardware timers using
two digits (rather than four) to define the applicable year. We rely on our
computer systems and software applications in the operations and monitoring of
all major aspects of our business. Any of our computer programs that have
time-sensitive functions may recognize a date using "00" as the year 1900 rather
than 2000, which could result in miscalculations or system failures. A failure
of our computer systems, or those of Ledcor, major vendors, other material
service providers or customers, could have a material adverse effect on our
ability to develop our network and retain customers and on our ability to make
payment on the notes.
Risks of Year 2000 Issues
We can not reasonably estimate the extent to which we may experience Year
2000 problems. We are reviewing our potential exposure to the Year 2000 problem
in the course of our Year 2000 program. We have not experienced any problems to
date related to the Year 2000 problem.
Description of our Year 2000 Program
Our Year 2000 program began in 1997 while we were still a division of
Ledcor. We initiated a review of all computer related equipment and software.
This review encompassed all information and processing systems and related
equipment that were critical to the operations of our business. A list of
non-compliant equipment and software was developed and has resulted in the
replacement of certain equipment. This process was completed prior to the
commencement of our operations as Worldwide Fiber. The assets that were
transferred to us in the reorganization in May 1998 are, to the best of our
knowledge, Year 2000 compliant. Since we com-
-44-
<PAGE>
menced operations in May 1998, we have required that all of our equipment
purchased be Year 2000 compliant. We are currently reviewing the work performed
by Ledcor and developing our own Year 2000 plan.
Our plan includes obtaining written confirmation from Ledcor concerning the
status of Year 2000 compliance of Ledcor systems that were transferred to us in
1998. We will also review and test all equipment that we currently use. This
project began in the first quarter of 1999 and is expected to be completed by
the end of November 1999. This review will not delay or eliminate any other
information technology or related programs that are performed in the normal
course of our business.
We will review and document the systems in use and determine the possible
affect on each system that would result from a systems failure due to the Year
2000 problem. The critical systems to be reviewed include, but are not limited
to: purchasing, payables, asset management, equipment management, payroll, sales
and receipts, management information systems, accounting and project management.
The review will include an inventory and testing of equipment that is critical
to the operations of our systems. Where testing is not possible, inquiry letters
will be sent to the suppliers in order to assess the Year 2000 status of their
systems. Significant suppliers will be contacted with a request for information
about their ability to provide services into the year 2000. The process is
expected to be complete by November 1999.
Any equipment or software that is determined to be non-compliant as a
result of this review will be replaced as it is identified. The projected cost
of the Year 2000 assessment project is not expected to be material because
substantially all of the systems we acquired since our commencement were Year
2000 compliant.
The extent to which our vendors, customers and service providers are Year
2000 compliant is not determinable at this time. We expect to receive
confirmations from these third parties before the end of September 1999 that
will allow us to determine the effect that any disruption of service will have
on our results of operations and financial position. We are developing a
contingency plan that will allow us to reduce or eliminate the disruption to our
business that a third party's noncompliance may cause.
State of Readiness
We are implementing the Year 2000 plan and we plan to achieve the following
goals:
Expected
Action Completion Date Status
- ----------------------------------------- -------------------- ----------------
Identification of critical systems July 1999 Complete
Inventory of equipment July 1999 Complete
Testing of equipment October 1999 In Progress
Request for confirmations November 1999 In Progress
Replacement or repair of equipment November 1999 Pending
Contingency Plans and Costs to Address Year 2000 Issues
We are currently developing plans, including a contingency plan, to assess
the likelihood of any Year 2000 issues and to address potential Year 2000
problems caused by a failure of our computer systems or the systems of Ledcor,
principal vendors, service providers and customers. These plans will include
increased staff awareness, advance preparation of invoices and payments and
backup of potential systems. Due to the relatively low number of transactions
processed by us, we will consider implementing a manual system for many
functions in the case of a failure of any of our systems.
-45-
<PAGE>
We have expended $25,000 to date, and we expect to spend no more than an
additional $150,000 to complete our Year 2000 readiness efforts. We may,
however, have to bear costs and expenses relating to the failure of Ledcor,
principal vendors, service providers and customers to be Year 2000 compliant on
a timely basis. No material Year 2000 issues have been identified to date
relating to third parties. Therefore, we cannot reasonably estimate costs which
may be required for remediation or for implementation of our contingency plans.
-46-
<PAGE>
BUSINESS
General
We are a provider of technologically advanced fiber optic communications
infrastructure in North America using our state-of-the-art fiber optic network.
We recently have begun marketing bandwidth services and intend to provide these
services by the end of the year. Our present and targeted customer group is
communications carriers, ISPs and large corporations with enterprise network
needs. In January 1999 we completed construction of the FOTS, a 5,068 route mile
fiber optic network development across Canada and the Northern United States.
Our interests include: (1) a 2,735 route mile segment (approximately 36,000
fiber miles) of the FOTS from Vancouver to Detroit, via Calgary, Winnipeg,
Minneapolis/St. Paul and Chicago and (2) an additional 2,333 route miles
(approximately 38,000 fiber miles) along the FOTS extending from Seattle to
Detroit and Edmonton to Toronto. In May 1999, we completed construction of the
segment of our network that extends from Seattle to Portland. Together this
fiber forms the initial backbone of our high-bandwidth fiber optic
communications network and related infrastructure in North America.
Our network is being developed to satisfy increasing demand for fiber optic
capacity for the transmission of data, voice and video generated by
high-bandwidth communications and the requirements of new entrants to the
telecommunications business. Our network consists of fiber optic strands
installed in protective conduit buried along diverse ROW and includes related
infrastructure such as regeneration shelters. In order to expedite completion of
our network, we install sufficient fiber along our builds to allow us to swap
fiber with other developers and carriers where we believe it is more economical
or time efficient to swap for, rather than construct, fiber assets. When
complete, our terrestrial network is expected to cover approximately 21,600
route miles in North America (comprising in excess of 1,000,000 fiber miles).
The anticipated terrestrial network footprint initially will include two primary
east-west routes and three primary north-south routes. In addition to our long
haul builds, we intend to build city rings to enhance the attractiveness of our
network. We are currently developing a 67-mile Seattle metropolitan network and
intend to build city rings in five additional cities: Toronto, Vancouver,
Montreal, Ottawa and Calgary. In addition, we are developing a 7,600 mile
transatlantic fiber optic system and have contracted with Tyco Submarine Systems
Ltd. for its construction.
We believe that our network's transmission capacity, route diversity,
national route design and connectivity, together with our status as an
independent developer and carrier's carrier, will enhance the marketability of
the network as a primary or redundant route. We believe the network will be
attractive to communications carriers, ISPs and large corporations with
enterprise network needs.
We plan to realize the value of the network through the sale, grant of
indefeasible rights-of-use ("IRU"), lease or swap of dark fiber strands and
conduit. The North American footprint of our network allows us to offer
customized products to our customers by providing fiber or conduit on a
segmented basis or throughout our entire network. We have commenced the process
of adding the necessary transmission equipment to enable us to provide bandwidth
services to carriers and other service providers along the route from Seattle to
Toronto via Vancouver, Calgary, Winnipeg, Minneapolis/St. Paul, Chicago and
Detroit. Beginning the first quarter 2000, we intend to install the necessary
transmission equipment to provide the services along multiple segments of our
network in North America. We have selected Nortel Networks, Newbridge Networks
and Fore Systems as major suppliers of transmission equipment. We may also swap
bandwidth, enter into joint ventures or purchase bandwidth to enhance the
connectivity of the network.
We generally reduce the capital risk necessary to build and develop the
network by pre-selling sufficient strands and conduit to cover approximately 50%
of our anticipated construction cost on a condominium or co-development basis.
We also exploit certain construction, technological and ROW expertise and
agreements. The "condominium" concept comes from the construction development
industry. Our condominium development strategy allows multiple participants to
purchase or lease fiber or conduit from an experienced developer
-47-
<PAGE>
capable of delivering a pre-designed fiber optic system on schedule at a fixed
price. Generally, we install more fiber along any specific route than one
customer would typically install for its own use. Our condominium style of
development encourages participants to commit to purchasing or leasing fiber or
conduit during the initial stages of construction. If participants commit to a
build early enough, they may have more flexibility with regard to choice of
fiber and other infrastructure decisions. This development strategy reduces our
risk and may allow participants favorable pricing for fiber assets. To expedite
route development or decrease development risk, we may enter into co-development
or swap arrangements. Under a co-development arrangement, the co-developer funds
a portion of the project in exchange for receiving fiber or conduit assets or an
equity position in that segment.
We will continue to construct fiber optic networks for third parties on a
contract basis when a project will allow us to retain fiber or conduit assets,
including through IRUs. We plan to construct these networks only on routes that
complement and reduce the costs of completing our network or enhance our ability
to make a sale, grant of IRU, lease or swap of network capacity or the provision
of bandwidth services.
Network Construction Experience
We have been designing, engineering and constructing telecommunications
networks for 12 years, first as the telecommunications division of, and since
May 1998 as a separate subsidiary, of our parent, Ledcor. The FOTS was
originally engineered, designed and partly constructed by our predecessor. As
the successor to Ledcor's telecommunications division, we have acquired all of
its construction assets, certain fiber assets and construction contracts, its
management and personnel and the expertise gained from various
telecommunications network construction projects. In addition to the
construction and development of the FOTS, Ledcor, through its telecommunications
division, has a long history of successfully designing, engineering and
constructing networks for third parties. Ledcor's telecommunications division
has installed more than 10,000 route miles of telecommunications networks for
major telecommunications carriers. In the summer of 1996, Ledcor began its first
project as a developer of fiber optic networks by designing, engineering and
building a fiber optic network from Calgary to Edmonton. In addition to
retaining six fibers for its own account, Ledcor pre-sold the remaining fibers
on the project to Sprint Canada, AT&T Canada Corp. and fONOROLA, Inc.
Market Opportunity
The North American telecommunications industry has been characterized by
significant demand for high-bandwidth communications services. According to an
industry survey by The Yankee Group:
o voice and data telecommunications services revenue in the United
States is expected to grow at a compounded annual growth rate of
approximately 8%, from approximately $167 billion in 1997 to
approximately $241 billion in 2002,
o data telecommunications services revenue is expected to grow at a
compounded annual growth rate of approximately 26%, from approximately
$15 billion in 1997 to approximately $47 billion in 2002, and
o carriers' carrier telecommunications services revenue, which our
bandwidth services strategy is specifically intended to target, is
expected to grow at a compounded annual growth rate of approximately
60%, from approximately $1.2 billion in 1997 to approximately $12.3
billion in 2002.
Our network is designed to provide our customers with secure, independent
transmission facilities and sufficient capacity on a local, regional or national
basis to accommodate their increasing demand and plans for expansion. According
to The Yankee Group and other industry sources, growth in the high-bandwidth
telecommunications industry is expected to continue due to a number of factors,
which include:
-48-
<PAGE>
o Innovations and advances in transmission technology. Technological
innovations are increasing both the supply of and demand for
high-bandwidth telecommunications transmission capacity while the
desire to obtain services from a reduced number of vendors and the
trend towards providing end-to-end digital services continue to drive
increased integration of voice, data and video services. Innovations
in optics technology have increased the capacity and speed of advanced
fiber optic networks while decreasing the cost of transmission,
allowing for continued growth in Internet usage and increases in the
number of network users. This increased capacity and speed has
resulted in the development of bandwidth-intensive applications. We
are developing our advanced fiber optic network to meet the increasing
demand for high-bandwidth capacity.
o Increasing demand for high-bandwidth applications, largely driven by
the increase in Internet traffic. There is and will continue to be a
significant growth in demand for Internet, long distance, local loop
data and video services. The increase in computer power and usage, as
well as the continued demand for and development of faster Internet
connection speeds, are driving significant increases in communications
use for Internet and data services. Prices for cellular services have
decreased, resulting in increased demand for these services. It is
expected that video conferencing, digital television and other
multimedia applications being developed will continue to increase
demand for bandwidth. We believe our high-bandwidth network is well
positioned to capture some of this growing demand.
o Deregulation of the telecommunications industry, which has resulted in
a proliferation of service providers. The telecommunications industry
continues to experience liberalization on a global basis. Although the
Federal Communications Commission ("FCC") has not granted any Regional
Bell Operating Companies ("RBOCs") the authority to provide in-region
inter-LATA telecommunications services and it is uncertain when it
will do so, the Telecommunications Act of 1996 has opened local
markets to competition and defined a path for the RBOCs to compete in
long distance markets. Our high-bandwidth platform allows both new
entrants to compete in this market and existing service providers to
expand into new markets. We believe our network will offer an
attractive alternative to network construction and ownership for these
carriers.
Business Strategy
Our strategy is to be a leading independent provider of technologically
advanced dark fiber and related infrastructure and high-bandwidth fiber optic
transmission capacity. The key elements of our business strategy include:
o Developing and building a technologically advanced fiber optic
network. The network is designed with the most advanced, commercially
available technology to provide the highest levels of reliability,
security and flexibility demanded by our customers. We intend to use
our fiber optic design, engineering and construction expertise to
enhance and broaden the desirability of our network.
o Maximizing route diversity and connectivity of the network. The
footprint of our network is designed with the input of our customers
and will connect many of the major population centers in North
America. We believe that route diversity and connectivity increase the
network's inherent value. We intend to participate in international
cable construction projects to expand the reach, connectivity and
attractiveness of our network. Further, our expanding footprint should
enhance the value of the network by enabling us to target a broad
range of customers by offering participation on a local, regional,
national or international basis.
-49-
<PAGE>
o Reducing capital risks and creating low cost position. We generally
commence construction of a network segment when we have pre-sold
sufficient strands and conduit to cover approximately 50% of our
anticipated cost of that segment. In some segments, we may seek a
co-developer to fund a portion of the project in exchange for
receiving fiber or conduit assets or an equity position in that
segment. We believe that our network will have a low cost basis for
the following reasons:
-- as a result of our condominium development strategy, we generally
install 144 fibers (or a significantly higher number of fibers in
high demand areas), reducing the per fiber mile cost to construct
and operate our network,
-- we use a patented railplow to install fiber optic cable along
rail lines quickly and cost effectively,
-- we retain fiber assets for our own use along routes where we
complete third party construction, and
-- we believe that certain of our current ROW, licenses, permits and
franchises are, and others currently being negotiated will be,
valuable assets that would be costly and difficult for others to
procure or replicate in the future.
o Realizing value of the network. As an independent provider of fiber or
conduit, we believe that telecommunications carriers will be more
likely to purchase or lease facilities from us than from their
competitors that are telecommunications carriers or are affiliated
with one. We intend to realize the value of our network through:
-- sales, grants of IRU, leases on a short or long term basis, or
swaps of network assets, and
-- the provisioning of bandwidth services.
o Providing bandwidth capacity. We have commenced the process of adding
the necessary transmission equipment to provide bandwidth services to
carriers, ISPs and large corporations with enterprise network needs.
We also intend to offer our customers low cost bandwidth and the
flexibility to control their own service platforms so that they choose
to buy services from us rather than build these service capabilities
themselves or purchase them from another bandwidth provider.
o Allowing for technological upgrades and additional capacity. We
generally install at least one additional conduit along each segment
that we develop, allowing for network expansion and permitting
technological upgrades. Our network's optical design will enable us to
upgrade installed equipment or to add new technology to any segment of
the network.
o Capitalizing on management experience. We have assembled and will
continue to build a strong management team comprised of executives
with extensive experience in the design, engineering construction and
maintenance of fiber optic networks, general telecommunications
infrastructure and telecommunications bandwidth services. The
management team also has considerable experience in the development
and financing of growth stage international companies.
The Network
Our anticipated terrestrial network footprint includes: (1) a North
American long-haul fiber optic network and (2) city rings. Upon completion of
these builds, our network will cover approximately 21,600 route miles
(comprising in excess of 1,000,000 fiber miles). The footprint will consist of
the following:
-50-
<PAGE>
o a North American long-haul fiber optic network including: (1) two
primary east-west routes, running from Vancouver to Halifax and
Sacramento to Boston, and (2) three primary north-south routes,
running along the West Coast, the Mississippi River valley and the
East Coast, and
o a series of city rings in Toronto, Vancouver, Montreal, Ottawa and
Calgary, in addition to the city ring currently under construction in
Seattle.
In addition, we plan to expand our network outside of North America and have
recently announced plans for our transatlantic fiber optic cable project.
We expect to complete the development of our network in 2001. Our policy on
major builds is to install an average of 144 fibers and three conduits. In high
demand areas, we may install 264 fibers or more and additional conduit in order
to meet projected demand. The additional fiber assets installed along our builds
enable us to swap fiber for fiber in other geographic areas both in the North
American market and internationally. Fiber swaps should allow us to complete the
network expeditiously and cost effectively by, among other things, reducing the
need and time required to obtain additional ROW.
Although the following table summarizes our current plans for completing
the terrestrial network, the segments, scheduled completion dates and proposed
participants/co-developers/swaps/joint ventures listed below may change due to
market and other circumstances, some of which may be beyond our control:
<TABLE>
<CAPTION>
Proposed Participant/
Estimated Co-developer/Swaps/Joint
Segment Route Miles Scheduled Completion Date Ventures
<S> <C> <C> <C>
Transcontinental FOTS:
Vancouver--Detroit 2,735 Complete fONOROLA
Edmonton-Toronto (Canadian 2,333 Complete fONOROLA
National Railway ROW)
Edmonton-Toronto (Canadian Pacific 2,050 Fourth Quarter 2000 Telus
Railway ROW)
West Coast Build:
Vancouver--Seattle 175 Third Quarter 2000 Telus
Call-Net
Qwest
Seattle--Portland 185 Complete Qwest
Call-Net
Metromedia
GST
Worldnet
Nextlink
Williams
Level 3
Edmonton--Vancouver 823 Fourth Quarter 2000 *
Portland--Sacramento 689 First Quarter 2000 GST
Metromedia
Level 3
FTV
Williams
Sacramento--Los Angeles 551 First Quarter 2000 GST
(to be acquired via swap)
-51-
<PAGE>
Proposed Participant/
Estimated Co-developer/Swaps/Joint
Segment Route Miles Scheduled Completion Date Ventures
Los Angeles--San Diego 206 First Quarter 2000 GST
Level 3
Phoenix--San Antonio 1,084 Fourth Quarter 2000 *
Northeast Build:
Detroit--Toronto 273 Third Quarter 1999 Telus
AT&T Canada
CN
Toronto--Ottawa 364 First Quarter 2000 Telus
AT&T Canada
CN
Metronet
Ottawa--Montreal 119 Fourth Quarter 1999 Telus
AT&T Canada
CN
Montreal--Quebec City 153 Fourth Quarter 1999 Telus
AT&T Canada
CN
Montreal--Albany 245 Fourth Quarter 2000 *
Montreal--Toronto 404 Fourth Quarter 1999 Level 3
(redundant route)
Toronto--Buffalo 110 Fourth Quarter 1999 Level 3
Buffalo--Albany 200 Fourth Quarter 1999 Telus
Quebec City--Halifax 574 Fourth Quarter 2000 CN
Albany-Boston (to be acquired via 210 Second Quarter 2000 Williams
swap)
Albany--New York City (to be 290 Second Quarter 2000 Williams
acquired via swap)
East Coast Build:
New York--Washington DC 290 Fourth Quarter 1999 Metromedia
(to be acquired via swap)
Memphis--Atlanta 450 First Quarter 2001 *
Jacksonville--Miami (to be acquired 349 Second Quarter 2000 Qwest
via swap)
Miami-New Orleans (to be acquired 1,170 Second Quarter 2000 Qwest
via swap)
Central Build:
Chicago--New Orleans 1,120 Fourth Quarter 2000 IC
Mid-America Build:
Chicago--Omaha 549 Fourth Quarter 1999 Pathnet Inc.
Omaha--Denver 571 Fourth Quarter 2000 Pathnet Inc.
Denver--Sacramento 1,200 First Quarter 2001 *
-52-
<PAGE>
Proposed Participant/
Estimated Co-developer/Swaps/Joint
Segment Route Miles Scheduled Completion Date Ventures
Denver--New Orleans (to be acquired 1,300 Third Quarter 2000 *
via swap)
Intra-City Networks:
Seattle Ring 71 First Quarter 2000 Metromedia
Qwest
Level 3
GST
Toronto 100 Fourth Quarter 2000 *
Vancouver 100 Fourth Quarter 2000 *
Montreal 60 Fourth Quarter 2000 *
Ottawa 60 Fourth Quarter 2000 *
Calgary 60 Fourth Quarter 2000 *
----------
Total route miles 21,612
==========
</TABLE>
- ---------------------------------------------------
(1) * We have begun discussions with potential third parties, but have yet to
finalize an agreement.
Future Network Expansion and Infrastructure Development
We believe there may be opportunities in the future to continue the type of
network development we are currently deploying in North America. In addition to
further North American development and our announced transatlantic fiber optic
cable project, future network development locations could include areas of
Europe, South America and Asia. We have developed our marine capability through
our activities as contract manager on the NorthStar submarine cable build from
Anchorage, Alaska to Pacific City, Oregon. We believe that these further
developments will enhance the connectivity and value of our network.
We believe that Hibernia represents an opportunity to connect our existing
North American terrestrial network to future European customers because it will
allow us to provide an undersea cable system link between and among Halifax,
Canada; Boston, Massachusetts; Dublin, Ireland, and Liverpool, England. Hibernia
is expected to be completed by the first quarter of 2001. On June 18, 1999, we
entered into a supply agreement with Tyco Submarine Systems Ltd. ("Tyco")
whereby Tyco will serve as the primary contractor for Hibernia. The initial
contract price is approximately $607 million. The Company has paid $60.7 million
in advance payments to Tyco.
We also believe there is an opportunity to operate, for multiple network
participants, carrier hotel facilities and other network infrastructure near
points-of-presence ("POPs") that are presently at or near capacity. Our parent,
Ledcor, currently constructs network infrastructure for us, including
regeneration shelters and access boxes. We believe our and our parent's
collective operations and construction expertise will enable us to develop
carrier hotel facilities.
Network Design and Infrastructure
Network Technology
The network uses state-of-the-art fiber optic strands which allow for the
high speed, high quality transmission of data, video and voice communications.
Fiber optic systems use laser-generated light waves to trans-
-53-
<PAGE>
mit data, video and voice in digital formats through ultra-thin strands of
glass. Fiber optic systems are generally characterized by large circuit
capacity, good sound quality, resistance to external signal interference and
direct interface to digital switching equipment or digital microwave systems. We
plan to install an average of 144 fiber optic strands on major builds throughout
the network. In high demand areas, we may install 264 fibers or more in order to
meet anticipated demand.
Each fiber optic strand is capable of transmitting significantly greater
bandwidth than traditional copper cables or older fibers. The advanced technical
operating characteristics of the network will enable us to provide
technologically advanced dark fiber to our customers at low cost by permitting
higher capacity transmission over longer distances between regeneration and
amplifier facilities than can be provided by less advanced fiber systems. Using
current dense wave division multiplexing ("DWDM") fiber optic transmission
technology, a single pair of fiber optic strands used in the network can
transmit up to 320 gigabits of data per second ("gbps"), the equivalent of
approximately 4.2 million simultaneous voice conversations.
We anticipate that continuing developments in compression technology and
multiplexing equipment will increase the capacity of each fiber optic strand,
providing more bandwidth carrying capacity at relatively low incremental cost.
Our network is compatible with the highest commercially available transmission
capacity, i.e., OC-192, and can accommodate advanced capacity-intensive data
applications such as Frame Relay, ATM, multimedia and Internet-related
applications. Our network will allow us to offer end-to-end fiber optic capacity
compatible with SONET Ring architecture. This design routes customer traffic in
either direction around its ring design, assuring that fiber cuts do not
interrupt service to network customers. Our network is also capable of
supporting DWDM.
Bandwidth Services Technology
The provision of bandwidth services requires optical and ATM-packet
switching technology. A backbone of DWDM optical equipment provides optical
services as well as the transport for the lower speed services that are
delivered on an ATM-packet switching technology.
Optical Technology
Our network's optical design will enable us to upgrade installed equipment
or to add new technology to any segment of the network. Our initial optical
platform will have a capacity of 32 wavelengths at 2.5 gbps or 10 gbps
expandable to 160 wavelengths within twelve months. We intend to utilize optical
ring protection devices where a customer requires redundant services.
ATM-Packet Switching Technology
We believe that most of our bandwidth services customers will use our
state-of-the-art high availability ATM layered architecture. The initial layers
will consist of high capacity core switches and a number of multi-service
platform ("MSP") switches located at each POP along the network.
The initial core switches will have a throughput capacity of 40 gbps and
network link speed of 2.5 gbps. We anticipate these switches will be upgradeable
to 10 gbps network links and total throughput capacity of 480 gbps at major POP
locations.
The core switches will provide:
o ATM customer link connections at speeds of 155 megabits of data per
second ("mbps") to 2.5 gbps,
-54-
<PAGE>
o network to network interface ("NNI") links to the MSP switches, and
o high speed private line services at 155 mbps, 622 mbps and 2.5 gbps.
The MSP switches will be linked to the core switch via redundant 622 mbps
ATM NNI connections. The initial MSP switches will have a capacity of 12 gbps
and may be upgraded to 50 gbps to meet customer requirements. These switches
will allow us to provide a wide range of voice and data services. The inherent
capabilities of the MSP will support the following services:
o low speed ATM at DS-3,
o private line services at DS-3, OC-1 and OC-3 (155 mbps),
o IP Internet connectivity,
o video services,
o transparent switched voice (64 kilobits of data per second ("kbps")),
o compressed switched voice (8-16 kbps),
o LAN interconnect,
o high speed Internet delivery via xDSL, and
o digital wireless services such as local multipoint communication
services.
Network Operations Center
Our Network Operations Center ("NOC") will be the human service connection
between our customers and the technology that ultimately delivers their
services. We are currently designing and plan to construct our NOC in Vancouver.
We intend to enter into an agreement with Nortel to provide redundant network
management services on a transitional basis. The NOC will allow us to provide
the following services:
o directing the repair efforts of cable restoration, optical and ATM
system repairs and maintenance,
o providing network management for the optical and ATM elements,
o providing POP and customer record management, and
o providing circuitry for customer and internal circuits.
We are using a design based on IP technology that will integrate all of the
alarm and monitoring of the network elements into an adaptive fabric to satisfy
our service level agreements. With this technology, access to the network
management layer is not restricted to the physical NOC as full operations
capabilities may be located at multiple locations. This allows us to extend
certain management services to our customers in a secure and reliable way.
-55-
<PAGE>
Network Construction
The network is designed to access areas of significant end user
telecommunications traffic, as well as the POPs of most interexchange carriers
("IXCs") and the principal incumbent local exchange carrier ("ILEC") central
offices in each city on the network, in a cost-efficient manner.
Upon commencement of the development of a network segment, our development
staff is responsible for obtaining the necessary permits and ROW. In certain
jurisdictions, a construction permit is required. We strive to obtain ROW on
favorable terms that afford us the opportunity to expand the network as business
develops. ROW are typically leased or licensed under multi-year agreements with
renewal options and are generally non-exclusive. We obtain ROW from entities
such as railroads, pipeline owners, local government transit authorities,
municipalities, highway authorities, and other utilities.
We establish general requirements for the design of each segment of the
network. In-house or external engineers render drawings of the contemplated
segment and the required deployment. Construction and installation may be
completed by us or provided by independent subcontractors. Our personnel provide
project management services, including contract negotiation, construction, and
testing and certification of all facilities. The construction period for a
segment varies, depending upon the number of route miles to be installed.
Testing and delivery of a new segment typically takes place within 30 days of
the completion of construction.
Our network installation process along railroad ROW combines traditional
railroad activities and modern engineering and building techniques. We generally
install conduit and fiber on railroad ROW with the patented railplow. When the
railplow is in use, a plow car travels along the railroad track and
simultaneously plows a slot to bury multiple conduit with approximately 42
inches of cover, buries a warning tape approximately one foot from the surface,
and returns the land to its original contour. A railplow can cover between five
and ten miles a day, depending on the availability of track time and the
severity of the terrain. Other loaders on rail carry the conduit and other
construction materials needed to construct the fiber route and are designed to
continuously feed supplies to the railplow. Installation of conduit and fiber
utilizing a railplow is completed by an installation team. The team may consist
of numerous specialized crews, such as a pre-rip crew, a plow crew, a cable
jetting crew, and a splicing crew. These crews, in aggregate, may include 60 or
more persons.
Ledcor developed the railplow because traditional plow trains are both
expensive to purchase or lease and inefficient when attempting to install fiber
on busy railroad routes where available track time comes in small blocks and on
relatively short notice. The plow train and supply cars frequently must travel
several miles down the route into sidings to permit regular railway traffic to
pass, during which time the fiber optic cable must be unrolled and then
re-rolled to avoid a splice. The railplow allows us to move on and off the
tracks on short notice. Each of Ledcor and us currently owns 50% of the common
shares of a holding company that owns the patent to the railplow and we have
received a commitment that a royalty-free, exclusive worldwide license to use
the railplow will be granted to us. In certain circumstances, our ownership of
this company would be subject to change and our license would become
non-exclusive. See "Transactions with Our Parent--Description of Reorganization
and Related Agreements."
For routes not using railroad ROW, we use tractor plows. Tractor plows are
tractor pulled plow vehicles equipped to plow trenches and install conduit.
Tractor plows also may be used in certain places along railroad ROW, depending
on space, availability of track time and other factors. These tractor plows
generally perform the same functions as railplows. Many of the skills developed
in connection with the installation of fiber optic cable along railways are
transferable to non-rail installations.
If fiber or conduit must be laid across a bridge or through a tunnel, we
typically place the conduit in a galvanized steel pipe that is attached to the
side of the bridge or along the tunnel floor or wall. When necessary to install
fiber or conduit under rivers or other obstructions, we use directional boring
techniques to bore small
-56-
<PAGE>
tunnels underneath the river or obstruction and feed the conduit through the
tunnel. Through our relationship with Michels Pipeline Construction Inc., an
industry leader in directional drilling, we believe we have a competitive
advantage over other builders lacking a high degree of directional drilling
expertise.
After the conduit has been buried (or attached to a bridge or tunnel), and
as a segment nears completion, the fiber optic cable is installed or "jetted"
through the conduit. We accomplish this through the use of access boxes that are
installed along the network at approximately four to five mile intervals. The
access boxes also allow us to make repairs, replace fiber and install additional
fiber. The access boxes typically contain an additional loop of fiber optic
cable to provide slack in the system to accommodate displacement, disruption or
movement of the conduit as a result of digging or excavation activities, floods,
earthquakes or other events. The presence of additional fiber optic cable
reduces the risk that the cable will be cut or broken.
We design and manufacture regeneration shelters that are installed along
our network at 40-75 mile intervals. These shelters are secure, climate
controlled structures with an individual compartment for each participant to
install its optical transmission equipment and related electronics.
The optical system electronics are installed in the shelter compartments
described in the preceding paragraph. Each route includes several spans that use
Optical Terminals at each end of the span and Optical Line Amplifiers,
regeneration shelters, and Optical Add/Drop between Optical Terminals. The
current generation of equipment may be upgradeable to 160 separate OC-192 (10
gbps) transponder channels per fiber, or 1.6 terabits per second ("tbps") of
capacity per fiber pair. Each linear route includes a redundant system for
reliability and maintenance. In the case of diverse parallel routes, one of the
parallel routes will include a redundant system for additional reliability and
system maintenance.
The ATM-packet switching elements use multiple, diverse or redundant
optical channels to connect the core switches together. A hierarchical source
routing protocol called Private Network--Network Interface ("PNN") has been
adopted to provide the scalability and restoration capabilities required to
deliver the highest levels of reliability and availability. With this
implementation we are able to utilize the redundant path between the switches to
deliver a secondary set of services that do not require the high reliability, or
may be scaled down in the event of a link or nodal failure.
Rights-of-Way
To implement our business plan successfully, we must obtain licenses and
permits from third party landowners and governmental authorities and complete
certain regulatory filings to permit us to install conduit and fiber. ROW are
generally non-exclusive. Where possible, we lease them under multi-year
agreements with renewal options. We may lease underground conduit and other ROW
from entities such as utilities, railroads, highway authorities, local
governments and transit authorities. ROW agreements and permits provide us with
a contractual interest and do not create an interest in land. See "Risk
Factors--Need for ROW."
In the ordinary course of business each build requires us to either obtain,
lease, cure (or condemn) ROW or design re-routes, on a daily basis. For example,
to complete the Seattle-Portland segment of the West Coast Build we obtained ROW
agreements and permits from more than 700 individual landowners and local
authorities. Many ROW will be obtained just prior to the arrival of crews and
contractors. Alternative ROW for certain route miles must be identified,
negotiated and obtained in the event that the original route cannot be secured.
It is also possible to obtain ROW in bulk. The majority of the ROW for the
FOTS was obtained from two Canadian railways. In June 1999, we announced
agreements with IC and CN which provide access to over 950 track miles in the
United States and 2,900 track miles in Canada which we believe will
substantially satisfy the ROW and permit requirements for the Central and
Northeast Builds. See "Description of IC and CN Agree-
-57-
<PAGE>
ments." We believe these ROW will be valuable to us, particularly with the
advantages of the railplow and the ROW's geographic location. The ROW obtained
from IC and CN may be subject to legal challenge. See "Risk Factors -- Need for
ROW."
Products and Services
In connection with the development of our network, we offer customers a
range of products and services which enable us to provide customized solutions.
Our products and services include:
Dark fiber and conduit for sale or grant of IRU. During the pre-development
and development stages of the network, we generally enter into contracts with
participants for the sale, lease or grant of IRUs for dark fiber or conduit
along one or more segments of the network. A typical contract for sale currently
provides for a sale price of $1,500 to $2,000 per fiber mile (depending on
geography and number of strands bundled together in the sale) and requires a
deposit upon execution of the contract. See "Risk Factors-Pricing Pressures."
Upon completion of the build, the participant is usually entitled to a short
period of time to test the system specifications and inspect the shelters and
other facilities (generally 15 to 20 days) prior to paying the balance of the
purchase price. In the case of a sale, title to the fiber or conduit passes to
the participant. An IRU is a long-term lease, usually of 10 to 20 years, with an
option period for the lessee to renew at lower rates. The present value of the
initial contract term and extensions of an IRU usually equates to the comparable
sale price per fiber mile, which amount is generally paid in full at
commencement of the IRU.
Dark fiber and conduit for lease. We lease dark fiber or conduit for a term
less than the period for which IRUs are typically granted. Leases are normally
structured with monthly payments over the term of the lease. We generally
realize a premium in lease pricing for bearing the risk that the lease will not
be renewed for the balance of the life of the asset.
Dark fiber and conduit for swap. We swap some of our excess fiber or
conduit with other developers and carriers for fiber assets along routes where
excess fiber assets exist and where we believe it is more economical or time
efficient to swap for, rather than construct, fiber assets.
Construction services supporting the development of our network. We are
continuing to construct fiber optic networks for third parties on a contract
basis. We focus on projects where we can retain fiber or conduit assets on
routes that complement and reduce the costs of completing the network or where
our construction services are connected to a sale of network capacity.
Bandwidth services. We have commenced the process of adding the necessary
transmission equipment to enable us to utilize the fiber installed on the
existing installed fiber routes to provide bandwidth services to carriers, other
service providers and large corporations with enterprise network needs along the
FOTS. Beginning the first quarter 2000, we intend to install the necessary
transmission equipment to provide the services along multiple segments of our
network in North America.
The services we intend to offer through our sale of bandwidth capacity
include:
Optical Transmission Services. DWDM technology in our network will allow us
to sell a customer exclusive long term use of a portion of the transmission
capacity of a fiber optic strand rather than the entire strand. We expect to be
able to derive up to 160 individual wavelength channels at either OC-48 or
OC-192 per fiber pair. A purchaser of a wavelength will install their own
switching and routing equipment and will have the choice of installing their own
protection equipment or use optical protection supplied as part of our service.
The following are the service highlights:
o transparent OC-48 under IRU or lease,
-58-
<PAGE>
o transparent OC-192 under IRU or lease,
o optical ring protection,
o linear routes available, and
o add/drop along route.
Private line services. We intend to offer fixed amounts of point-to-point
capacity across the network. We believe our service will have an advantage due
to a low price point and flexible commitment levels with higher reliability than
is currently available on traditional multiplexed services. We will offer these
services through the grant of IRUs or leases and will provide transparent
connectivity up to OC-12.
Virtual switching solutions. We intend to provide customers with voice
trunking services that can be configured for sale as minutes of use. These
services will enable these customers to originate and terminate long distance
telephone calls connecting to ILECs or to competitive local exchange carriers
("CLECs") with switched transport through our ATM network. Because we will be
able to offer these connections on an as needed basis we are able to offer
extremely competitive and flexible pricing. In addition, we will be able to
provide a simple bill to our customers. The services we intend to offer include:
o DS-1 to OC-3 structured services,
o DS-0 switching and billing for usage,
o transparent local interface,
o SS7 signaling transport, and
o advanced services, including compression.
Packet-based data services (IP Transport and ATM). We intend to provide
customers with variable capacity across our network to connect multiple service
locations into a single "Virtual Network" specific for each customer. Specific
packet-based services include ATM and IP transport.
ATM service will include the following service attributes:
o DS-3 to OC-48 interface rates,
o all 5 classes of ATM service: UBR, ABR, VBRrt, VBRnrt and CBR, and
o switched virtual circuits available on customer premises equipment
edge.
IP transport will include the following service attributes:
o protocol supports including PNN, ATM and packet over SONET,
o nodes in all major Internet-network access points, and
o IP voice and modem transport and distribution, including virtual
switching and compression.
-59-
<PAGE>
Sales and Marketing
Network
Our approach is to market to customers on a local, regional and national
basis. We market participation in segments of our network through personal
contacts and relationships with prospective customers, who consist primarily of
large telecommunications companies. Our current targeted customer base is
comprised of approximately 200 companies. We believe that we are known to most
of our target customer group and that we have good relations with them. Our
relationships are cultivated and maintained by a marketing and sales staff based
in 15 offices across North America. Most of our marketing and sales team have
prior industry experience with telecommunications companies such as MCI
Worldcom, Sprint, AT&T, Qwest and US West. In addition, as a result of our more
than ten years of experience in constructing fiber optic networks, our
management also has long standing relationships in the telecommunications
industry. We believe that relationships established by our sales team and
management result in interactive exchanges that help us to design and market our
network in response to the needs of our potential customers. We are also able to
identify potential participant and co-development customers who initially
approach us because of our reputation and experience in the design, construction
and development of fiber optic facilities.
Bandwidth Services
We commenced marketing our bandwidth services in the second quarter of 1999
to targeted customers through a number of focused direct sales methods. Our
strategy is to target customers who have a need for bandwidth services in areas
covered by those portions of our network on which we initially will be
installing transmission equipment. As this equipment is deployed across our
network, we expect that the number of our target customers will become larger
than for our network services. We will be marketing a broad and technically
advanced range of bandwidth products and services. Consequently, we are
developing a dedicated sales and marketing team with the necessary distinct
expertise. This team is expected to grow to 15 members by the first quarter of
2000 and will be located in offices throughout North America.
In addition to our direct sales efforts, contacts made when marketing our
network services identify highly qualified prospective bandwidth customers. We
also receive referenced introductions from our suppliers when bandwidth
requirements are identified while they are making customer contacts in the
process of doing their business. Our experienced sales team will qualify
potential customers from their personal contacts and direct sales efforts.
Customers
We are focused on providing our broadband fiber optic network and bandwidth
services to communications carriers, ISPs and large corporations with enterprise
network needs. Our targeted customers include a broad range of companies, such
as:
o ILECs,
o CLECs,
o ISPs,
o long distance companies (North American and international),
o RBOCs,
-60-
<PAGE>
o IXCs,
o multi-service operators,
o local multipoint distribution service providers, and
o large corporations with enterprise network needs.
Customers typically buy or lease fiber optic capacity with which they
develop their own communications networks or satisfy a need for redundant
capacity. The network provides such customers with a low-cost alternative to
building their own infrastructure or purchasing metered services from
communications carriers. Our customers can buy or lease fiber optic capacity on
a segmented basis or along our entire network.
As of September 30, 1999, we had finalized, or were in the final stages of
negotiating, agreements for the sale, lease or IRU of dark fiber or conduit with
approximately 30 communications carriers and owners of corporate networks. In
addition, we are currently in various stages of negotiating similar agreements
with a number of other potential customers. Described below are a number of our
arrangements with communications carrier customers.
GST. In August 1998, we entered into agreements with GST
Telecommunications, Inc. relating to the construction and marketing of a
multiple conduit fiber optic system between Portland and Sacramento and the
installation of one fiber optic cable. We will have a reciprocal maintenance
arrangement with GST during the term of the agreement. GST will receive
approximately 50% of the total fibers and will be entitled to use 50% of the
capacity of the regeneration facilities. We have a reciprocal two-year option to
exchange fiber assets with GST along specified portions of the network for fiber
assets owned by GST located in California.
In April 1999, we entered into an additional agreement with GST for the
design, engineering, construction and installation by them of a multiple conduit
fiber optic system between Mira Mesa and San Diego. Upon completion of this
segment we will receive approximately 50% of the total fibers and conduits and
be entitled to use the associated regeneration facilities. In addition, we
agreed to exchange with GST conduit from our Seattle city ring for segments of
GST's network route in Southern California.
Williams. In December 1998, we, together with GST as co-developer, entered
into a development agreement with Williams Communications, Inc. for the design,
engineering, construction and installation of a multiple conduit fiber optic
system between Portland and Sacramento which is expected to be completed in the
fourth quarter of 1999. The parties expect to enter into a maintenance agreement
in which we, together with GST, will agree to maintain the multiple conduit
fiber optic system.
Level 3. In December 1998, we entered into a construction services
agreement with Level 3 Communications, Inc. relating to the construction of a
multiple conduit fiber optic system between Montreal and Buffalo. In connection
with this agreement, we will be paid a fee and retain dark fiber on this build
through an IRU.
In February 1999, we entered into an agreement with Level 3 for the
construction and installation of a multiple conduit fiber optic system in the
greater Seattle area. In connection with this build, we will be paid a fixed fee
for each route mile, plus amounts for additional services and materials. In May
1999, we also agreed with Level 3, under a co-development agreement to design,
engineer, install and construct a multiple conduit fiber optic system between
Springfield, Oregon and Anderson, California.
Qwest. In February 1998, we entered into a participation agreement with
Qwest Communications International Inc. relating to the design and construction,
by us, of a multiple conduit fiber optic system, approximately 199 miles long,
between Seattle and Portland. In February 1999, we amended the agreement to add
ad-
-61-
<PAGE>
ditional city ring segments in the greater Seattle area. Qwest will pay us a
fixed fee per route mile, plus amounts for additional services and materials,
including the installation of additional fiber optic network infrastructure.
AT&T Canada. We have agreed to sell to AT&T Canada dark fiber and related
regeneration shelters within five segments of the network to be designed and
constructed by us. The five segments comprise approximately 1,100 route miles
and will be installed between Calgary and Edmonton, Detroit and Toronto, Toronto
and Ottawa, Ottawa and Montreal, and Montreal and Quebec City. The expected
completion date of these segments is December 1999. We will be responsible for
the operation and maintenance of the fiber optic cable and regeneration shelters
following completion.
Telus. We have agreed to grant an IRU to BCT. Telus Communications Inc.,
now known as "Telus", for dark fiber and related regeneration facilities within
a multiple conduit fiber optic system to be designed and constructed by us. The
approximately 175 mile long project will run from Vancouver to Seattle. We will
lease the dark fibers for a fixed price per fiber mile for the shorter of 25
years or the useful life of the assets, subject to renewal, and Telus will pay
additional amounts for its pro rata share of services and maintenance costs. The
expected completion date for the project is the third quarter of 2000. We will
be responsible for the operation and maintenance of the fiber optic cable system
and regeneration shelters for the duration of the lease.
In the second quarter of 1999, we entered into agreements with Telus for
the design and construction of multiple conduit fiber optic systems and sale of
dark fiber on segments from Edmonton to Toronto, from Detroit to Halifax through
Toronto, Ottawa, Montreal and Quebec City, and connecting segments from Toronto
to Buffalo, Albany and Montreal. Construction of the segments is scheduled to be
completed by December 2000. Telus has an option to acquire additional dark fiber
on segments from Calgary to Edmonton and Albany to New York City. For the route
which connects Detroit to Halifax, we will be responsible for the maintenance
and for the Edmonton to Toronto route, the parties have agreed on principles to
be included in the maintenance agreement.
Metromedia. We entered into an IRU exchange agreement with Metromedia Fiber
Network, Inc. in which Metromedia agreed to grant a multi-year IRU for dark
fiber in a segment between New York and Washington, DC. In exchange, we have
agreed to grant a comparable IRU to Metromedia in relation to segments from
Seattle to Portland, Portland to Pacific City and Albany to Montreal. We will
have a reciprocal maintenance arrangement with Metromedia during the term of the
IRUs.
Call-Net. A subsidiary of Call-Net Enterprises Inc. has agreed to purchase
conduit and related infrastructure running between Seattle and Portland which we
are designing and constructing. We completed construction in May 1999. We will
maintain the conduit and related infrastructure following completion.
Pathnet. In March 1999, we entered into a co-development agreement with
Pathnet, Inc. for the design, engineering, construction and installation by us
of a multiple conduit system, approximately 1,100 miles long, between Denver and
Chicago. The first segment, Chicago to Omaha, is scheduled to be completed in
1999 with the second segment, Omaha to Denver, scheduled to be completed by the
end of 2000. The parties expect to enter into a maintenance agreement in which
we will agree to maintain the multiple conduit system, including the portion of
the system to be held by Pathnet.
Suppliers
The principal components of our network are fiber optic cable and conduit,
which are purchased from third party suppliers. Fiber optic cable suppliers
generally require three to six months lead time for large orders, while conduit
is generally available on a spot basis from numerous suppliers. Although in the
past we have purchased cable from a single supplier, there are a number of
alternative suppliers from whom we regularly obtain quotes which are competitive
on price, delivery, and specifications.
-62-
<PAGE>
We purchase optical components and ATM-packet switches from third party
suppliers. Manufacturers generally require two to three months lead time for
both new systems and specific transponder cards. ATM switches and expansion
cards are generally available in four to eight weeks.
We purchase the optical components from a single vendor. A number of
alternative suppliers have been identified from which it would be possible to
purchase the optics required to complete a new system with only minor changes to
the design of the NOC. With respect to the provision of ATM switches, we have
adopted a dual supplier approach.
Competition
Fiber optic systems are currently under construction or development
throughout North America. The construction of these networks enables their
owners to sell or lease access to their networks to other communications
entities or large corporate or government customers. In addition, various
communications carriers already own fiber optic cables as part of their
communications networks. Accordingly, each of these parties could, and some do,
compete directly with us in the market for selling and leasing fiber capacity.
There are currently at least four principal long distance fiber optic
networks in North America. We are aware that others are planning networks that,
if constructed, could employ advanced technology similar to that of the network.
These competitors may also sell fiber to other carriers and thus compete
directly with us for customers.
Bandwidth services is an area that has seen a number of new entrants who
initially focus on the provision of bandwidth and other services on a wholesale
basis, promising independence from traditional or incumbent suppliers that
compete directly in the market at the retail customer level. In the recent past,
carriers such as Williams, Qwest, Global Crossing and Level 3, who initially
focused on the wholesale market, have entered the retail segment of the market,
or closely aligned themselves with a major retail service provider. These
companies continue to market wholesale services to their current customers while
also pursuing new customer opportunities.
We anticipate that competition for our bandwidth services will come from
the above companies as well as IXC and DTI, which have not entered the retail
market. We believe our competitive advantage will be our ability to enable our
customers to establish and maintain a strong competitive position in providing
services to their end users. We believe independence, services designed for the
wholesale market and simple billing systems will enable us to gain a significant
position in this market niche.
In the future, we may be subject to additional competition due to the
development of new technologies and increased supply of domestic and
international transmission capacity. The telecommunications industry is in a
period of rapid technological evolution, marked by the introduction of new
product and service offerings and increasing satellite transmission capacity for
services similar to those provided by us. For instance, recent technological
advances permit substantial increases in transmission capacity of both new and
existing fiber, and the introduction of new products or emergence of new
technologies may reduce the cost or increase the supply of certain services
similar to those provided by us. We cannot predict which of many possible future
products and service offerings will be important to maintain our competitive
position or what expenditures will be required to develop and provide such
products and services.
Employees
As of August 31, 1999, approximately 700 full-time and seasonal people were
engaged in building the network. Depending upon the level of development or
construction activity, we will increase or decrease our work force. Generally,
non-management employees from Canada are covered by a collective bargaining
agree-
-63-
<PAGE>
ment with the Christian Labor Association of Contractors which expires on
February 28, 2000 and is automatically renewable unless either party gives prior
notice. We believe that our work force is highly capable and motivated and that
our relations with our employees are good. In connection with the construction
and maintenance of our fiber optic networks, we may use third-party contractors
to meet excess demand and harness local construction knowledge, some of whose
employees may be represented by other unions or covered by collective bargaining
agreements.
The provision of bandwidth services will require a team of highly skilled
technical and sales personnel. Under our current plan we anticipate requiring a
total staff of 35 persons in network operations, billing and sales support by
the end of 1999. Most of this staff will be located in Vancouver, with
additional offices in Denver, Toronto and Washington, DC. New staff will be
added to existing Worldwide Fiber offices throughout Canada and the United
States as the network expands into new service areas.
Properties
Our executive and administrative offices are located in Vancouver, British
Columbia. Our principal sales, engineering and operations offices are located in
Toronto and Denver.
Ledcor leases the Vancouver office premises to us under agreements that
expire in 2002. Ledcor owns the facilities (approximately 40,600 square feet) in
Toronto and makes it available to us. An additional 24,130 square feet in the
building in Toronto is leased by Ledcor to a number of tenants and will become
available to us from time to time if it is required. WFNI leases the space
(approximately 4,200 square feet) in Denver under an agreement that expires on
October 31, 2001. We also currently lease offices or property in Blaine, WA,
Vancouver, WA, Snohomish, WA, Portland, OR, Anderson, CA, Ankeny, IA and
Ramoulaod, Que. We also intend to open other regional offices related to
development and supervision of the network as required on a short-term basis.
Legal Proceedings
From time to time, we may be a party to various legal proceedings arising
in the ordinary course of our business.
Patents
The patent for the railplow is owned by a company which is 50% owned by
Ledcor and 50% owned by us. We have a non-exclusive license in North America for
the use of the railplow. Ledcor has committed to cause a worldwide exclusive
license to be granted to a subsidiary of ours. This license would cease to be
exclusive after a change of control of Worldwide Fiber. See "Transactions with
Our Parent--Description of Reorganization and Related Agreements--Railplow."
-64-
<PAGE>
MANAGEMENT
Directors and Officers
Our directors and executive officers are listed below:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
David Lede........................ 52 Chairman of the Board and Chief Executive Officer
Clifford Lede..................... 44 Vice Chairman
Larry Olsen....................... 50 Vice Chairman and Chief Financial Officer
Ron Stevenson..................... 47 President and Director
Stephen Stow...................... 45 Executive Vice President and Director
Jim Voelker....................... 46 Director
Glenn Creamer..................... 37 Director
Neil Garvey....................... 44 Director
Robert Gheewalla.................. 32 Director
Andrew Rush....................... 41 Director
William Ramsey.................... 48 Director and Treasurer
Lionel Desmarais.................. 46 Senior Vice President
</TABLE>
David Lede has served as Chairman and Chief Executive Officer since our
inception and as Chairman of the Board and Chief Executive Officer of Ledcor
Inc. since 1983. Mr. Lede has been with Ledcor for 31 years and, before becoming
Chairman of the Board and Chief Executive Officer of Ledcor, he held positions
such as President, Vice President, Operations Manager and Superintendent.
Clifford Lede has served as Vice Chairman since our inception and as Vice
Chairman and President and Chief Operating Officer of Ledcor Inc. since 1983.
Mr. Lede has been with Ledcor for 24 years and, before becoming President and
Chief Operating Officer of Ledcor, he held positions such as Vice President,
Operations Manager and Superintendent. Clifford Lede and David Lede are
brothers.
Larry Olsen has served as Vice Chairman and Chief Financial Officer since
our inception. Mr. Olsen is also a member of the Board and Executive Committee
of First Heritage Savings, a Canadian financial institution. Mr. Olsen was
previously involved in several international business ventures throughout Asia,
Australia and the Middle East. He has held the position of Managing Director,
Chief Executive Officer and Executive Chairman of Crownhampton International
Limited and Promet Petroleum and various other public and private companies
involved in several different industries including offshore oil petroleum and
exploration, offshore work vessels, high technology manufacturing, construction
development and marketing for major technology companies.
Ron Stevenson has served as President and a Director since our inception
and is a director of Ledcor Inc. Before joining us, Mr. Stevenson spent 28 years
with Ledcor. From 1989 to 1998, Mr. Stevenson was Senior Vice President of
Operations for Ledcor's telecommunications and civil divisions and was
responsible for construction and project development.
Stephen Stow has served as Executive Vice President, Corporate Development
and a Director since our inception. Mr. Stow previously served as a principal in
various venture capital activities. From 1992 to 1995, Mr. Stow was co-head and
Director of Corporate Finance for National Westminster Bank's Asian investment
banking operations.
-65-
<PAGE>
Jim Voelker joined us as an independent director in July 1999. Mr.
Voelker's career in telecommunications spans almost 20 years and includes
experience in many different segments of the industry in a variety of executive
positions. Before joining us, Mr. Voelker was most recently President of
NEXTLINK Communications Inc. He has also been Vice Chairman and Chief Executive
Officer of US Signal Inc., a director of Phoenix Network Inc., and Vice Chairman
of ALTS, the industry Association of Local Telephone Service providers.
Glenn Creamer recently joined us as a director. Mr. Creamer is a managing
director of Providence Equity Partners Inc. where he has served in that capacity
since its inception in 1996. Mr. Creamer is also a general partner of Providence
Ventures L.P. and a Vice President of Narragansett Capital Inc. Mr. Creamer is a
director of American Cellular Corporation, Carrier 1 International S.A.,
Celpage, Inc., Epoch Networks Inc., and Wireless One Network L.P.
Neil Garvey recently joined us as a director. Mr. Garvey is President of
Tyco Submarine Systems Ltd.'s Telecommunications Group. This group includes Tyco
Submarine Systems Ltd., Simplex Technologies Inc., The Rochester Corporation,
Tyco Printed Circuit Group, Transoceanic Cable Ship Company and Temasa. Before
being named President of Tyco's Telecommunications Group, Mr. Garvey was
president of Simplex Technologies, a subsidiary of Tyco International. Mr.
Garvey has also held positions including Vice President in the areas of Finance
and Marketing.
Robert Gheewalla recently joined us as a director. Mr. Gheewalla is Vice
President, Principal Investment for Goldman Sachs & Co. Mr. Gheewalla is also a
director of Diginet Americas, Group Telecom, Tunes.com, and North American
Railnet.
Andrew Rush recently joined us as a director. Mr. Rush has been a Managing
Director of DLJ Merchant Banking Partners, L.P. since January 1997. From 1992 to
1997 Mr. Rush was an officer of DLJ Merchant Banking Partners, L.P. and its
predecessors. Mr. Rush currently serves as a member of the advisory board of
Triax Midwest Associates, L.P., and as a member of the board of directors of
Societe d'Ethanpol de Synthese, Nextel Partners, Inc., and American Tissue Inc.
Mr. Rush previously served as a director of Doane Products Company.
William Ramsey has been with us since September 1998 with responsibility
for treasury functions. He was previously Chief Financial Officer, for 13 years,
of WIC Western International Communications Ltd., a publicly traded Canadian
broadcasting company.
Lionel Desmarais has served as Senior Vice President since our inception.
Before joining us, Mr. Desmarais spent 12 years with Ledcor. From 1993 to 1998,
Mr. Desmarais was Vice President for Ledcor's telecommunications division and
has been responsible for overseeing the successful execution of numerous
long-distance fiber optic networks, including the FOTS and the Calgary-Edmonton
network.
Executive Compensation
The total remuneration received by our officers and directors for their
services to us and our predecessor for the period from January 1, 1998 through
December 31, 1998 was approximately $1.7 million. We do not currently, and have
not in the past, set aside any amounts for pension, retirement or other similar
benefits for our directors and officers.
-66-
<PAGE>
TRANSACTIONS WITH OUR PARENT
Description of Reorganization and Related Agreements
Effective May 31, 1998, we entered into a series of agreements with Ledcor
to purchase the equipment, fiber optic strands and certain other assets related
to the business of Ledcor's telecommunication division. As part of the
Reorganization, we also entered into the Construction Services Agreements to
complete the FOTS. Effective August 31, 1998, Ledcor transferred to us their 50%
interest in WFI-USA and, on December 31, 1998, we increased our interest in
WFI-USA to 75%.
The material agreements we entered into with Ledcor in connection with the
Reorganization are described below.
Railplow
Effective May 31, 1998, the patent for the railplow which we use in
connection with the construction of our network was transferred to a subsidiary
of Ledcor ("Patent Co.") and we were concurrently granted a non-exclusive
license for its use. Effective December 1, 1998, one of our subsidiaries
acquired 50% of the shares of Patent Co. Ledcor has agreed to cause Patent Co.
to grant to us a royalty-free worldwide exclusive license for the use and other
exploitation of the plow technology. The license will cease to be exclusive six
months after a change of control of Worldwide Fiber. The Shareholders Agreement
relating to Patent Co. provides that Ledcor and our subsidiary have the option
to acquire the other party's shares of Patent Co. if the other party becomes
insolvent, bankrupt or subject to a change of control.
Management Services Agreement; Employee Services Agreements
We have entered into a Management Services Agreement and two Employee
Services Agreements with Ledcor. Under the Management Services Agreement, Ledcor
provides us with management staff and administrative and other support services.
We reimburse Ledcor for certain costs and pay a monthly fee of Cdn. $200,000
under the agreement. Under the Employee Services Agreements, Ledcor provides us
with personnel for the design, engineering, construction and installation of the
network and we reimburse Ledcor for the direct costs of these personnel. These
agreements are terminable at any time by either party. On January 1, 1999, the
personnel covered by the Employee Services Agreements, together with the
officers involved in our day-to-day management, became our employees.
Construction Services Agreements
We entered into Construction Services Agreements with Ledcor under which we
agreed to provide fiber optic network construction services to Ledcor and
fulfill Ledcor's fiber optic network construction commitments for certain
builds. We also agreed to procure the requisite insurance necessary for these
builds and perform all work in strict compliance with the appropriate contract
and applicable laws. In addition, we agreed to indemnify Ledcor for certain
losses, liabilities, damages and claims that may arise under the agreement. In
return, Ledcor will pay us an amount equal to costs incurred plus 15% of our
total costs. Either party may terminate this agreement at any time. Our
obligations under these agreements were complete by the end of January 1999.
Non-compete Agreement
Ledcor has agreed not to compete with us in the business of developing or
constructing fiber optic communications infrastructure for a period ending on
the earlier of May 31, 2008 and six months after a change of control of
Worldwide Fiber.
-67-
<PAGE>
Sale and Transfer Agreements
We entered into a series of agreements that transferred equipment and other
assets of Ledcor's telecommunications division including a minimum of 12 strands
of dark fiber along the FOTS.
Effective August 31, 1998, each of Ledcor and Mi-Tech Communications LLC
transferred their 50% interest in WFNI to WFI-USA, a newly-incorporated Nevada
corporation. In exchange, each of Ledcor and Mi-Tech acquired 50% of the common
shares of WFI-USA. At the same time, Ledcor exchanged with WFI-USA a promissory
note in the amount of $3,915,000 payable by WFNI to Ledcor for a promissory note
of the same face value payable by WFI-USA to Ledcor. In addition, Mi-Tech
exchanged with WFI-USA a promissory note in the amount of $7,231,230 payable by
WFNI to Mi-Tech for a promissory note of the same face value payable by WFI-USA
to Mi-Tech.
In a subsequent series of transfers, also effective August 31, 1998, Ledcor
transferred to us their shares of WFI-USA and the $3,915,000 promissory note
payable by WFI-USA to Ledcor. In exchange, we issued additional shares and a
promissory note of the same face value to Ledcor.
Acquisition of Fiber Optic Network Assets
On September 27, 1999, we concluded a transaction with affiliates of Ledcor
whereby we acquired certain fiber optic network assets in consideration of the
issue of 4,500,000 of our Class C Multiple Voting shares. Each Class C Multiple
Voting share entitles the holder to 20 votes per share. In addition, we assumed
certain rights and obligations of the affiliates under their build agreements
with a third party including obligations relating to the completion of those
builds and certain support structure, maintenance, license and access and
underlying rights obligations.
Background of Ledcor
Ledcor, established in 1947, is among the largest diversified construction
companies in Canada and has substantial experience as a construction contractor
in the United States. Ledcor's core business activities, in addition to the
activities of the telecommunications division, are pipeline and civil
construction and diversified contracting, including major commercial and
industrial buildings and industrial and mining projects. Ledcor reported
revenues of more than Cdn. $700 million for the fiscal year ended August 31,
1998 from all activities, with significant contribution from the
telecommunications division.
Ledcor began designing, engineering and constructing buried long distance
power generation and fiber optic telecommunications systems more than ten years
ago and has installed fiber optic cable networks on a contract basis for
numerous telecommunications companies, including Bell Canada (532 miles), MTS
Netcom Inc. (45 miles), AT&T (50 miles), AT&T Canada (227 miles), Alaska Fiber
Star (410 miles), Call-Net (200 miles), Bell Canada, AT&T Canada and Call-Net
(5,200 miles), Mi-Link Communications, LLC and Champlain Telephone (245 miles)
and World Net Communications Inc. (2,400 miles).
In 1996, Ledcor installed its first fiber optic cable as a developer
between the cities of Edmonton and Calgary, Alberta. Ledcor sold fiber strands
of this cable, on a "condominium" basis prior to construction, to Call-Net,
Sprint Canada and AT&T. After the successful completion of this project, Ledcor
began, as a developer, the FOTS, the first trans-Canadian fiber optic cable
network. To date, approximately 50% of the capacity on the FOTS available for
sale to third parties has been sold for an aggregate price of approximately Cdn.
$400 million to Bell Canada and AT&T Canada. Call-Net received a portion of
these proceeds as an owner of certain of these strands.
-68-
<PAGE>
The foundation of Ledcor's success and growth over the last 50 years has
been built on the strength of its dedicated people, ability to control costs and
its conservative but entrepreneurial approach to business. Ledcor believes it
has maintained an excellent reputation for the quality of its products and
services in its markets and enjoys substantial repeat business from major
customers.
-69-
<PAGE>
REGULATION
We do not believe our dark fiber offering is currently subject to extensive
regulation that would have a material adverse effect on our business, financial
condition, or operations. See "Risks Factors--Extensive Regulation." However, we
are part of an industry that is highly regulated by federal, state and local
governments whose actions are often subject to regulatory, judicial, or
legislative modification. In addition, to the extent that any bandwidth capacity
and lit fiber offerings are treated as private carriage, telecommunications
services or CLEC offerings in the United States, additional federal and state
regulation would apply to those offerings. Accordingly, there can be no
assurance that regulations, current or future, will not have a material adverse
effect on us.
United States
Federal
U.S. Federal regulation has a significant impact on the telecommunications
industry. Federal regulations have undergone major changes in the last two years
as the result of the enactment of the Telecommunications Act of 1996 (the "1996
Act") on February 8, 1996. The 1996 Act is the most comprehensive reform of the
U.S. telecommunications law since the Communications Act was enacted in 1934.
For example, the 1996 Act imposes a number of interconnection and access
requirements on telecommunications carriers and on all local exchange carriers,
including ILECS and CLECs.
The different ways we intend to offer fiber-optic supported services could
trigger four alternative types of regulatory requirements: (1)
non-communications services, (2) private carrier services, (3)
telecommunications services or common carriage, and (4) CLEC offerings. The law
establishing these alternative regulatory requirements is often unclear, so it
is impossible to predict in many instances how the FCC will classify our
services. Regulations associated with each type of offering are described below.
Non-communications Services
The provision of dark fiber can be viewed as a non-communications service
in that it is not a service, but rather the provision of a physical facility
that is indistinguishable from other non-communications offerings such as
constructing an office building. Many providers of dark fiber are currently
operating on the assumption that they are providing unregulated facilities.
Although the FCC attempted to regulate dark fiber as a common carrier service,
this position was vacated by the U.S. Court of Appeals for the District of
Columbia Circuit in 1994. The FCC has not addressed the issue since that time
and, thus, we believe that dark fiber is not regulated as a common carrier
service at this time. However, there is no assurance that the FCC, on remand,
may not take the position again that dark fiber offerings are subject to common
carrier regulation.
Private Carrier Services
Even if some of our offerings are treated as a communications service, they
could be viewed as a private carrier offering. Private carrier offerings
typically entail the offering of telecommunications, but are provided to a
limited class of users on the basis of individually negotiated terms and
conditions that do not meet the definition of a telecommunications service under
the 1996 Act. If our services are treated as private carriage, they are
generally unregulated by the FCC, but would be subject to universal service
payments based on the gross revenues from end users. See "Regulation--United
States--Federal--Telecommunications Service--Universal Service." Private
carriers may also be subject to access charges if interconnected to local
exchange carriers.
-70-
<PAGE>
Telecommunications Services
Some of our services, such as the provision of bandwidth capacity and lit
fiber, may be treated as telecommunications services by the FCC. If some of our
services are treated as telecommunications services a significant number of
federal regulatory requirements will be applicable to those services.
The law essentially defines telecommunications carriers to include entities
offering telecommunications services for a fee directly to the public or to
classes of users so as to be effectively available directly to the public,
regardless of the facilities used. "Telecommunications" is defined as the
transmission, between or among points specified by the user, of information of
the user's choosing, without change in the form or content of the information as
sent and received. For the reasons stated above regarding our belief that we are
not a common carrier, we also believe that we are not a telecommunications
carrier concerning our dark fiber offerings. The FCC has ruled that the term
"telecommunications carrier" is the same as the definition of common carrier
and, therefore, a company providing fiber facilities on an individualized and
selective basis, as we propose, is probably not a telecommunications carrier. A
decision to this effect has been appealed to federal court. A decision on this
appeal reversing or remanding the FCC's conclusion could require that our
services be treated as common carriage. In addition, certain railroad, power and
telecommunications associations--none of which are affiliated with us--have
petitioned the FCC to clarify the status of fiber providers in this regard. The
FCC's pending court remand, described above, might also address the application
of these requirements to us. If the FCC decides that these companies are
telecommunications carriers, we would be subject to certain regulatory
requirements which may impose substantial administrative and other burdens on
us.
If the FCC finds some of our services to be a telecommunications service,
we may be regulated as a nondominant common carrier. The FCC imposes regulations
on common carriers such as the RBOCs that have some degree of market power
("dominant carriers"). The FCC imposes less regulation on common carriers
without market power ("nondominant carriers"). Under the FCC's rules, we would
be a nondominant carrier and as such do not need authorization to provide
domestic services and can file tariffs on one day's notice. The FCC requires
common carriers to obtain an authorization to construct and operate
telecommunication facilities, and to provide or resell telecommunications
services, between the United States and international points.
General Obligations of All Telecommunications Carriers. To the extent that
any of our offerings are treated as telecommunications services, we would be
subject to a number of general regulations at the federal level that apply to
all telecommunications carriers, including the obligation not to charge
unreasonable rates or engage in unreasonable practices, the obligation to not
unreasonably discriminate in our service offerings, the need to tariff our
services, the potential obligation to allow resale of our services in certain
circumstances, and the fact that third parties may file complaints against us at
the FCC for violations of the Communications Act of 1934 or the FCC's
regulations. Certain statistical reporting requirements may also apply. In
addition, FCC rules require that telecommunications carriers contribute to
universal service support mechanisms, the Telecommunications Relay Service fund,
the number portability fund, and the North American Number Plan Administrator
fund.
Interconnection Obligations of All Telecommunications Carriers. All
telecommunications carriers have the basic duty to interconnect, either directly
or indirectly, with the facilities of other telecommunications carriers. This is
the minimum level of interconnection required and is generally viewed to impose
only minimal requirements as compared with the interconnection obligations
imposed on ILECs and CLECs described in the next section. All telecommunications
carriers must also ensure that they do not install network features, functions
or capabilities that do not comply with guidelines and standards established by
the FCC to implement requirements to ensure accessibility for individuals with
disabilities and to regulations designed to promote interconnectivity of
networks. These regulations could be burdensome or expensive and could adversely
affect us. The FCC adopted regulations recently that clarify these statutory
requirements.
-71-
<PAGE>
If the FCC takes the position that some or all of our fiber offerings are
subject to common carrier regulation, we nonetheless believe that we could
provide facilities in the United States. To do so we would be obligated to
obtain Section 214 authorization to provide fiber between Canada and the United
States and to disclose, among other things, the extent to which we are owned or
controlled by non-U.S. entities. However, FCC policy permits 100 percent direct
or indirect non-U.S. investment in common carriers that do not hold radio
licenses. Thus, we believe that we could obtain Section 214 authority to provide
international common carrier services despite our foreign ownership.
Nevertheless, compliance with these regulatory requirements may impose
additional administrative and other burdens on us that could have a material
adverse effect on our business, financial condition or operations.
Tariffs and Pricing Requirements. In October 1996, the FCC adopted an order
in which it eliminated the requirements that nondominant interstate
interexchange carriers maintain tariffs on file with the FCC for domestic
interstate services. The order does not apply to the switched and special access
services of the RBOCs or other local exchange carriers. The FCC order was issued
pursuant to authority granted to the FCC in the 1996 Act to "forbear" from
regulating any telecommunications services provider under certain circumstances.
After a nine-month transition period, relationships between interstate carriers
and their customers would be set by contract. At that point, long distance
companies would be prohibited from filing tariffs with the FCC for interstate,
domestic, interexchange services. Carriers have the option to immediately cease
filing tariffs. Several parties filed notices for reconsideration of the FCC
order and other parties have appealed the decision. On February 13, 1997, the
United States Court of Appeals for the District of Columbia Circuit stayed the
implementation of the FCC order pending its review of the order on its merits.
Currently, that stay remains in effect and interstate long distance telephony
companies are therefore still required to file tariffs. A requirement to file
tariffs could lead to regulation of our offerings at the federal level, although
the FCC's regulation of nondominant carriers' tariff filings has been minimal to
date. Competitive access providers do not have to file tariffs for their
exchange access services, but may if they choose to do so.
If the stay is lifted and the FCC order becomes effective,
telecommunications carriers will no longer be able to rely on the filing of
tariffs with the FCC as a means of providing notice to customers of prices,
terms and conditions on which they offer their interstate services. The FCC has
required that nondominant interexchange carriers post their rates, terms and
conditions for all their interstate, domestic services on their Internet web
sites if they have one; this rule is effective once its mandatory detariffing
order takes effect. The obligation to provide non-discriminatory, just and
reasonable prices remains unchanged under the Communications Act of 1934.
Tariffs also allow a carrier to limit its liability to its customers, including
in connection with service interruptions. If tariffs are eliminated, we may
become subject to liability risks that we would have been able to limit through
tariff filings, and there can be no assurance that potential liabilities will
not have a material adverse effect on our results of operations and financial
condition and ability to meet our obligations under the notes. In addition, we
must obtain prior FCC authorization for installation and operation of
international facilities and the provision (including resale) of international
long distance services. We are considering whether to file tariffs for these
services and would have to file tariffs to the extent our international services
are treated as telecommunications services. There has been no proposal to
detariff international services.
With limited exceptions, the current policy of the FCC for most interstate
access services dictates that ILECs charge all customers the same price for the
same service. Thus, the ILECs generally cannot lower prices to some customers
without also lowering charges for the same service to all similarly situated
customers in the same geographic area, including those whose telecommunications
requirements would not justify the use of the lower prices. The FCC in 1999,
however, modified this constraint on the ILECs when they face specified levels
of competition, which permits them to offer special rate packages to certain
customers, as it has done in few cases, and other forms of rate flexibility. The
rules contemplate an increasing level of flexibility on a city-by-city basis as
competitors have facilities in place to compete for local exchange services in
those markets. Once such facilities attain 50% coverage the rules contemplate
only minimal regulation of carrier access offerings.
-72-
<PAGE>
Customer Proprietary Network Information. In February 1998, the FCC adopted
rules implementing Section 222 of the Communications Act of 1934, which governs
the use of customer proprietary network information by telecommunications
carriers. Customer proprietary network information generally includes any
information regarding a subscriber's use of a telecommunications service, where
it is obtained by a carrier solely by virtue of the carrier-customer
relationship. Customer proprietary network information does not include a
subscriber's name, telephone number, and address, if that information is
published or accepted for publication in any directory format. Under the FCC's
rules, a carrier may only use a customer's proprietary network information to
market a service that is "necessary to, or used in," the provision of a service
that the carrier already provides to the customer, unless it receives the
customer's prior oral or written consent to use that information to market other
services. The Court of Appeals for the Tenth Circuit recently invalidated the
FCC's rules with respect to how a carrier must obtain customer authorization for
the use of customer proprietary network information. The FCC is challenging this
court decision. In addition, the FCC recently relaxed a number of the
requirements it originally adopted, which gives some flexibility to carriers on
how to comply with these rules. These rules, either as adopted or as modified,
may impede our ability to effectively market integrated packages of services and
to expand existing customers' use of our services.
Universal Service. On May 8, 1997, the FCC released an order establishing a
significantly expanded federal universal service subsidy regime. For example,
the FCC established new subsidies for telecommunications and certain information
services provided to qualifying schools and libraries and for services provided
to rural health care providers. The FCC also expanded or revised the federal
subsidies for local exchange telephony services provided to low-income consumers
and consumers in high-cost areas. Providers of interstate telecommunications
services, as well as certain other entities, such as private carriers offering
excess capacity to end user customers, must pay for these programs. Our share of
these federal subsidy funds would be calculated based on end-user revenues. The
schools and libraries and rural health care support mechanisms are assessed
against interstate, international, and intrastate end-user revenues. Currently,
the FCC is calculating assessments based on the prior year's revenues and has
recently increased the size of the schools and libraries fund by 50 percent.
Assuming that the FCC continues to calculate contributions based on the prior
year's revenues, we believe that we will not be liable for subsidy payments in
any material amount during 1999 because we had no significant end user revenues
in 1998. With respect to subsequent years, however, we are currently unable to
quantify the amount of subsidy payments that we will be required to make or the
effect that these required payments will have on our financial condition. In the
May 8th order, the FCC also announced that it would revise its rules for
subsidizing service provided to consumers in high-cost areas. The FCC has
recently adopted the cost model which it will use to determine the subsidies
needed for high-cost areas. The FCC also established the mechanism which will be
used starting January 1, 2000 to determine the level of high cost support
non-rural carriers will receive. This decision is expected to increase the fund
by only a modest amount. In addition, the Court of Appeals for the Fifth Circuit
recently affirmed the FCC's universal service program in large part, except that
contributions must be based entirely on interstate and international services of
interstate carriers (except for carriers providing predominately international
services). This decision could substantially affect the level of contributions
depending on the jurisdictional nature of the services provided by a carrier.
Several petitions for administrative reconsideration of the original FCC order
are pending.
CALEA. We might incur significant expenses to assure that our networks
comply with the requirements of CALEA. Under CALEA, telecommunications carriers
are required to: (1) provide law enforcement officials with call content and
call identifying information pursuant to a valid electronic surveillance warrant
("assistance capability requirements"), and (2) reserve a sufficient number of
circuits for use by law enforcement officials in executing court authorized
electronic surveillance ("capability requirements"). To the extent that we
provide facilities-based services, we may incur costs in meeting both of these
requirements. In particular, regarding the assistance capability requirements,
the government is only required to compensate carriers for the costs of making
equipment installed or deployed before January 1, 1995 CALEA complaint. While
the telecommunications industry is attempting to negotiate legislative and
administrative changes to this reimbursement cut-off date, as it stands today,
we will be financially responsible for ensuring that our post-1995 equipment is
in compliance.
-73-
<PAGE>
Regarding the capacity requirements, the government will finance any necessary
increases in capacity for equipment installed or deployed prior to September 8,
1998, and we are responsible for paying for any necessary increases in capacity
for equipment installed or deployed after that date.
Wiring in Multi-tenant Buildings. The FCC recently instituted a proceeding
that could impose obligations on telecommunication carriers' obligation to
provide access to competitors or customers to their wiring located in
multi-tenant residential and business buildings. It is unknown at this time how
the FCC will rule in this proceeding so it is impossible to evaluate its impact
on our operations.
CLEC Offerings
It is unclear whether we would be viewed as a local exchange carrier with
respect to the provision of some of our services. A local exchange carrier is
defined as a provider of telephone exchange service, which is an interconnected
service of the character ordinarily furnished by a single exchange, covered by
the local exchange charge, or comparable service provided through a system of
switches, transmission equipment, or other facilities, or combination thereof,
by which a subscriber can originate and terminate a telecommunications service.
The full parameters of what carriers are classified as a CLEC have never been
fully defined by the FCC. We do not intend to operate as a CLEC. However, the
FCC may disagree with this position. If we are classified as a CLEC, obligations
described below that are applicable to CLECs would apply.
Interconnection Obligations. The 1996 Act is intended to increase
competition. The act opens the local services market by requiring ILECs and
CLECs, including us to the extent we are treated as a common carrier providing
local exchange service, to permit interconnection to their networks and
establishing obligations with respect to:
Reciprocal Compensation. Requires all ILECs and CLECs to complete
calls originated by competing carriers under reciprocal arrangements. The
prices charged by ILECs for terminating calls originated on a CLEC's
network must be based on a reasonable approximation of additional cost or
through mutual exchange of traffic without explicit payment.
Resale. Requires all ILECs and CLECs to permit resale of their
telecommunications services without unreasonable restrictions or
conditions. In addition, ILECs are required to offer all retail
telecommunications services to other carriers for resale at discounted
rates, based on the costs avoided by the ILEC in the offering.
Interconnection. Requires all ILECs and CLECs to permit their
competitors to interconnect with their facilities. Requires all ILECs to
permit interconnection at any technically feasible point within their
networks, on nondiscriminatory terms, at prices based on cost (which may
include a reasonable profit). At the option of the carrier seeking
interconnection, collocation of the requesting carrier's equipment on the
ILEC's premises must be offered, except where an ILEC can demonstrate space
limitations or other technical impediments to collocation.
Unbundled Access. Requires all ILECs to provide nondiscriminatory
access to unbundled network elements (including network facilities,
features, functions, and capabilities) at any technically feasible point
within their networks, on nondiscriminatory terms, at prices based on cost
(which may include a reasonable profit). In response to the Supreme Court's
decision in AT&T v. Iowa Utilities Board that required the FCC to
reconsider which elements should be unbundled, the FCC has adopted an order
on remand that affirms its original decision in all significant respects.
-74-
<PAGE>
Number Portability. Requires all ILECs and CLECs to permit users of
telecommunications services to retain existing telephone numbers without
impairment of quality, reliability or convenience when switching from one
local exchange carrier to another.
Dialing Parity. Requires all ILECs and CLECs to provide
nondiscriminatory access to telephone numbers, operator services, directory
assistance, and directory listing with no unreasonable dialing delays. They
must also provide dialing parity for inter-LATA services and for intra-LATA
toll services. LECs are required to implement dialing parity for intra-LATA
toll services during 1999.
Access to Rights-of-Way. Requires all ILECs and CLECs to permit
competing carriers access to poles, ducts, conduits and ROW at reasonable
and nondiscriminatory rates, terms and conditions.
ILECs are required to negotiate in good faith with carriers requesting any
or all of the above arrangements. If the negotiating carriers cannot reach
agreement within a prescribed time, either carrier may request binding
arbitration of the disputed issues by the state regulatory commission. Where an
agreement has not been reached, ILECs remain subject to interconnection
obligations established by the FCC and state telecommunication regulatory
commissions.
In August 1996, the FCC released a decision (the "Interconnection
Decision") establishing rules implementing the 1996 Act requirements that ILECs
negotiate interconnection agreements and providing guidelines for review of
these agreements by state public utilities commissions. On July 18, 1997, the
Eighth Circuit vacated certain portions of the Interconnection Decision,
including provisions establishing a pricing methodology and a procedure
permitting new entrants to "pick and choose" among various provisions of
existing interconnection agreements between ILECs and their competitors. On
October 14, 1997, the Eighth Circuit issued a decision vacating additional FCC
rules. The Supreme Court has reversed the Eighth Circuit's decision on the
pricing and "pick and choose" rules. The Eighth Circuit recently issued its
mandate to implement the Supreme Court's decision and established procedures for
deciding the remaining issues on appeal that were not addressed by the Eighth
Circuit or the Supreme Court. These regulations impose added obligations on
potential competitors of the company that we would not have to comply with if we
were not classified as a CLEC. To the extent that the FCC changes these
regulations to be less burdensome, we could face added competition from these
companies in the provision of our own services that could adversely affect us.
To the extent that carriers may obtain low-priced access to CLEC and ILEC
networks, this could reduce the demand for our fiber services. Changes to these
interconnection obligations that reduce the interconnection obligations of our
competitors could also adversely affect our business.
In addition, the FCC has the responsibility under the 1996 Act to determine
what elements of an ILEC's network must be provided to competitors on an
unbundled basis. In August 1999, the FCC required fiber to be offered as an
unbundled element. In addition, the FCC had previously allowed state commissions
to establish additional unbundling requirements, and some states have required
that ILECs unbundle fiber. These decisions to unbundle fiber may decrease the
demand for our offerings.
Other Federal Communications Requirements. CLECs are also subject to other
FCC filing requirements. Compliance with these obligations, individually and in
the aggregate, may cause us to incur substantial expenses. There can be no
assurance that these expenses will not have a material adverse effect upon our
results of operations and financial condition and our ability to meet our
obligations under the notes. CLECs may, but are not required to, file tariffs
for their interstate access services and these rates are regulated as previously
described for non-dominant carriers. See "Regulation--United
States-Federal-Telecommunications Services--Tariffs and Pricing Requirements".
However, the FCC recently issued a Notice of Proposed Rulemaking asking whether
it should regulate the terminating access changes of such providers.
-75-
<PAGE>
To the extent we provide interexchange telecommunications service, we are
required to pay access charges to ILECs when we use the facilities of those
companies to originate or terminate interexchange calls. The interstate access
charges of ILECs are subject to extensive regulation by the FCC, while those of
CLECs or non-CLECs are subject to a lesser degree of FCC regulation but remain
subject to the requirement that all charges be just, reasonable, and not
unreasonably discriminatory. With limited exceptions, the current policy of the
FCC for most interstate access services dictates that ILECs charge all customers
the same price for the same service. Thus, the ILECs generally cannot lower
prices to some customers without also lowering charges for the same service to
all similarly situated customers in the same geographic area. The FCC recently,
however, modified this constraint on the ILECs when specified levels of
competition from local exchange providers occur and permitted them to offer
special rate packages to certain customers, as it has done in a few cases,
permitted other forms of rate flexibility. The rules contemplate an increasing
level of flexibility on a city-by-city basis as competitors have facilities in
place to compete for local exchange services in those markets. Once such
facilities attain 50% coverage the rules contemplate only minimal regulation of
carrier access offerings. In two orders released on December 24, 1996, and May
16, 1997, the FCC made major changes in the interstate access charge structure.
The FCC removed restrictions on ILECs' ability to lower access charges and
relaxed the regulation of new switched access services in those markets where
there are other providers of access services. The May 16th order increased the
costs that price cap LECs recover through monthly, non-traffic sensitive access
charges and decreased reliance on traffic-sensitive charges. In the May 16th
order, the FCC also announced its plan to bring interstate access rate levels
more in line with cost. The plan will include rules that may grant price cap
LECs increased pricing flexibility if the ILEC demonstrates that it faces
increased competition (or potential competition) in relevant markets. The manner
in which the FCC implements this approach to lowering access charge levels could
have a material adverse effect on our ability to compete in providing interstate
access services. On appeal, the court upheld the FCC's May 16th order in a
decision issued on August 19, 1998.
Under the 1996 Act, RBOCs are currently prohibited from providing
inter-LATA telecommunication services until they can demonstrate that they have
opened their local markets to competition. To date, no RBOC has successfully
received FCC approval to provide inter-LATA telecommunication services. However,
certain RBOCs are reported to have made substantial progress in achieving
compliance with the requirements for such approvals and one or more RBOCs may
receive inter-LATA approval in some states within the next year. Bell Atlantic
in New York has filed for and may receive such approval by the end of 1999. In
anticipation of receiving inter-LATA approval, certain RBOCs have made
investment in fiber providers that compete with us, e.g., Qwest and Williams. If
regulators grant widespread inter-LATA approvals, we could be adversely affected
through added competition because of these regulatory approvals.
Reciprocal Compensation. All ILECs and CLECs must complete calls originated
by other carriers under reciprocal compensation arrangements. That is, the LEC
terminating a local call is entitled to payment from the LEC originating a call.
Charges assessed by the ILECs for terminating calls originated on a CLEC's
network must be based on a reasonable approximation of additional cost or
through mutual exchange of traffic without explicit payment. The FCC recently
determined that Internet traffic is interstate in nature, not local, and has
initiated a proceeding to determine appropriate carrier-to-carrier compensation.
At the same time, the FCC declined to overturn a multitude of state decisions
requiring ILECs to pay CLECs compensation for delivering Internet traffic to
ISPs. The FCC's decision is on appeal, and ILECs are expected to ask states or
federal courts to reverse the existing state determinations.
Regulation of Cable
The FCC has the responsibility under the Act Relating to the Landing and
Operation of Submarine Cables in the United States, 47 U.S.C. ss.ss. 34-39
("Cable Landing Act"), to issue licenses for the landing and operation of
submarine cables in the United States. The FCC routinely grants cable landing
licenses to applicants, similar to us, from WTO Member countries subject to U.S.
State Department approval. However, applicants must disclose the extent to which
they are owned or controlled by non-U.S. entities. Although the FCC retains
-76-
<PAGE>
the right to restrict foreign ownership of cable landing licenses that raise
national security concerns, it has not yet done so. We already hold one
submarine cable landing license and believe that the FCC is unlikely to restrict
our ownership of additional cable landing licenses despite our foreign
ownership. Nevertheless, there can be no assurance that the FCC would not deny,
or condition, any application by us to provide common carrier services. No later
than 90 days prior to construction of the cable, however, applicants for cable
landing licenses must also provide ownership information with respect to the
cable landing station. The FCC may restrict non-U.S. ownership of cable landing
stations to protect the national security of the United States. The construction
of new submarine cable systems is categorically excluded from environmental
processing rules.
State
The 1996 Act prohibits state and local governments from enforcing any law,
rule or legal requirement that prohibits or has the effect of prohibiting any
entity from providing any interstate or intrastate telecommunications service.
In addition, under current FCC policies, any dedicated transmission service or
facility that is used more than 10% of the time for interstate or foreign
communication is generally subject to FCC jurisdiction rather than state
regulation.
Despite these prohibitions and limitations, telecommunications services are
subject to various state regulations. Among other things, the states may:
o require the certification of telecommunications service providers,
o regulate the rates of intrastate offerings and the terms and
conditions of both intrastate and certain interstate service
offerings, and
o adopt regulations necessary to preserve universal service, ensure the
continued quality of communications services, safeguard the rights of
consumers, and protect public safety and welfare. Accordingly, state
involvement in telecommunications services may be substantial.
In addition, state law may not recognize "private carriage" and, therefore,
even if certain of our offerings are treated as "private carriage" at the
federal level, they may be regulated as telecommunications or common carrier
services at the state level. The state regulatory environment varies
substantially from state to state. For example, our pricing flexibility for
products or services which are intrastate in nature may be limited by regulation
in some jurisdictions. In addition, in arbitrating interconnection agreements
under the 1996 Act between ILECs and their potential competitors, some state
commissions have considered whether fiber should be an unbundled network
element. The New York Public Service Commission determined that it would not
require NYNEX Corporation to provide fiber as an unbundled network element.
State commissions in Florida, Maryland, North Carolina, and Virginia have either
refused to require the ILECs to offer fiber to competitors or have stated that
the issue would be addressed at a later time. On the other hand, state
commissions in Illinois, Massachusetts, Arizona, Georgia, Minnesota, Ohio,
Oregon and Tennessee have found fiber to be a network element and required the
ILECs to offer it on an unbundled basis to CLECs. There can be no assurance that
these requirements, and the associated pricing methodologies, where applicable
will not reduce the demand for our offerings.
Local
In addition to federal and state laws, local governments exercise legal
authority that may affect our business. For example, some local governments
retain the ability to license public ROW, subject, however, to the federal
limitation that local authorities may not prohibit entities from entering the
telecommunications market. Compliance with local requirements may delay and
increase the costs of our use of public ROW. Accordingly, these requirements
could impose substantial burdens on us.
-77-
<PAGE>
Canada
Companies that own or operate transmission facilities in Canada used to
offer telecommunications services to the public for compensation, are classified
as "telecommunications common carriers" ("TCCs") under Canada's
Telecommunications Act and, with the exception of telecommunications carriers in
the Province of Saskatchewan, are subject to the regulatory authority of the
Canadian Radio-television and Telecommunications Commission ("CRTC"), Canada's
federal telecommunications regulator. Unlike the dual jurisdictional arrangement
in the United States, there is no equivalent in Canada to U.S. state regulation
of telecommunications services. Consequently, both the local and long distance
operations of Canadian facilities-based telecommunications service providers are
subject to exclusive CRTC regulatory jurisdiction.
Historically, the Canadian telecommunications industry has been
characterized by a number of regionally-based ILECs. These regional companies,
who later evolved into the Stentor alliance of telephone companies, were the
sole facilities-based providers of both local and long distance telephone
services in Canada. Each incumbent telephone company, with the exception of Bell
Canada, effectively operated in a province (with BC TEL serving most of British
Columbia, TELUS Communications Inc. ("Telus") serving Alberta, SaskTel serving
Saskatchewan, MTS Communications Inc. serving Manitoba, Bell Canada serving most
of Ontario and Quebec, Maritime Tel & Tel Limited serving Nova Scotia, The New
Brunswick Telephone Company, Limited serving New Brunswick, NewTel
Communications Inc. serving Newfoundland and The Island Telephone Company
Limited serving Prince Edward Island).
In a series of decisions beginning in 1979, the CRTC has gradually opened
each telecommunications services market in Canada to competition, including the
private line voice and data markets in 1979, the enhanced and cellular services
markets in 1984, the domestic long distance voice market in 1992, the local
telephony market in 1997, and the international long distance and local pay
telephone markets in 1998.
The CRTC has the power to forbear from regulating the services of Canadian
carriers where it finds that a telecommunications service or class of service is
or will be subject to competition sufficient to protect the interests of users.
Some Canadian carriers, such as the ILECs, are classified by the CRTC as
"dominant" because of their market power and control over the supply of local
services and certain long distance services. Carriers classified as
"non-dominant" by the CRTC are subject to less regulation than dominant carriers
and include facilities-based long distance providers such as AT&T Canada and
Call-Net Technology Services Inc. and CLECs, such as MetroNet Communications
Group Inc. (now AT&T Canada). The CRTC has forborne from regulating the long
distance services, private line services, dedicated access services and local
switched telephony services provided by carriers that are not affiliated with
the ILECs. In December 1997, the CRTC also forbore from regulating discount long
distance services and certain private line services offered by the ILECs finding
them to no longer possess significant market power in these market segments.
We intend to retain fiber assets in our network which will be available for
sale, IRU or lease. To the extent that we engage in these activities,
particularly the provision of dark or lit fiber on a leased basis, we will be
subject to the provisions of the Telecommunications Act and to regulation by the
CRTC. However, in a 1995 decision, the CRTC concluded that telecommunications
services provided by non-dominant carriers should not be subject to extensive
regulation. We believe that all of the telecommunications services that we will
provide qualify under this decision as non-dominant carrier services. As such,
we do not believe that our operations in Canada will be subject to extensive
regulation by the CRTC. However, the CRTC's view as to the need for and extent
of regulation over non-dominant carriers may change.
As a result of a September 17, 1998 application by four IXCs, the CRTC is
considering reform of the current contribution regime. The CRTC's contribution
regime was originally established in 1992 as a means of ensuring that rates for
local residential telephone service remain affordable. Under the regime,
providers of certain types of long distance voice and data services are required
to pay a subsidy or "contribution" on each
-78-
<PAGE>
minute of traffic that is originated or terminated on local switched telephone
networks or on cross-border or overseas access circuits. These contribution
payments are pooled within each ILEC territory and are paid out to ILECs and
CLECs serving residential local customers, based on the number of residential
network access services they serve and the level of the subsidy available in the
rate band being served. On March 1, 1999, the CRTC initiated a proceeding to
consider possible reforms to the current contribution mechanism. In the public
notice that initiated the proceeding, the CRTC invited interested parties to
submit proposals on other mechanisms which could be used to collect
contribution. If the CRTC decides to adopt the approach advocated in the
application filed by the four IXCs, the current contribution regime would be
converted to a revenue-based regime under which contribution would be paid on a
percentage of a telecommunications service provider's revenues (regardless of
the types of services offered by the service provider), rather than on certain
types of telecommunications traffic.
We do not believe that our activities in Canada would be subject to the
requirement to pay contribution under the current contribution regime, except
with the possible exception of fiber which we may lease on a "lit" basis.
However, given that the current contribution regime is under review by the CRTC,
there can be no assurance that we would be exempt from the requirement to pay
contribution in the future, particularly if the CRTC decides to adopt a
revenue-based regime.
Under the Canadian ownership provisions of the Telecommunications Act, a
"Canadian carrier" is not eligible to operate as a Canadian telecommunications
common carrier unless it is Canadian-owned and controlled. Furthermore, no more
than 20% of the members of the board of directors of a Canadian carrier may be
non-Canadians, and no more than 20% of the voting shares of a Canadian carrier
may be beneficially owned by non-Canadians. In addition, no more than 33 1/3% of
the voting shares of a non-operating parent corporation holding a Canadian
carrier may be beneficially owned or controlled by non-Canadians and neither the
Canadian carrier nor its parent may be otherwise controlled in fact by
non-Canadians.
To the extent that we make available the retained fiber in our network in
Canada on an IRU or lease basis, we will be subject to the Canadian ownership
provisions of the Telecommunications Act. Although we believe that we are in
compliance with the relevant legislation, there can be no assurance that a
future CRTC determination or events beyond our control will not result in us
ceasing to comply with the ownership provisions of the Telecommunications Act.
Should this occur, our ability to operate as a Canadian carrier under the
Telecommunications Act could be jeopardized and our business could be materially
adversely affected.
On October 1, 1998, the CRTC issued Telecom Decision CRTC 98-17 ("Decision
98-17") which established a framework for competition in Canada's international
telecommunications services market to coincide with the Government of Canada's
decision to terminate the monopoly of Teleglobe Canada Inc. over
telecommunications facilities linking Canada to overseas destinations. In that
decision, the CRTC determined that a party acquiring an IRU interest in an
international submarine cable would not necessarily fall within the definition
of a telecommunications common carrier. As a result, acquirors of IRUs in
international submarine cables need not be Canadian-owned and controlled. We
believe that this determination by the CRTC will create greater opportunities
for foreign owned telecommunications service providers to purchase IRUs and
other types of wholesale bandwidth capacity in the Canadian portion of our
network. However, given the fact that the CRTC's findings in Decision 98-17 were
limited to IRU interests held in international submarine cables, as well as the
fact that IRU arrangements can involve various degrees of ownership and control
over fiber facilities, there can be no assurance that holders of IRUs acquired
in domestic fiber facilities, including those constructed by us, would be exempt
from the Canadian ownership provisions contained in the Telecommunications Act.
In addition to determining the status of IRU under the Telecommunications
Act, the CRTC made a determination in Decision 98-17 to eliminate Canada's
"bypass" rules, which had prohibited the routing of Canada-Canada and
Canada-overseas traffic through the United States. Effective October 1, 1998,
telecommunications service providers and users in Canada may route basic
telecommunications traffic which either originates or
-79-
<PAGE>
terminates in Canada through the United States. Given the fact that a decision
to bypass Canadian network facilities may be based on a variety of factors,
including, but not limited to, cost, technology, traffic patterns, and the
availability of suitable facilities, there is a risk that prospective customers
for segments of the network in Canada may choose to purchase, lease or obtain
IRU in dark or lit fiber in the United States rather than in Canada. There can
be no assurance that we will be able to attract and retain a sufficient number
of customers for the Canadian portions of our network, which could have a
material adverse effect on our business, financial condition and results of
operations.
On September 18, 1998, the Stentor alliance announced that, while it will
continue to coordinate national network management for the regionally based
ILECs, it will cease other joint initiatives in national product development,
marketing and other areas. We believe that the restructuring of the Stentor
alliance, the launch by Bell Canada of its national telecommunications company,
the merger of BC TELECOM Inc. and TELUS to create BCT.Telus and the merger of
ILECs in Atlantic Canada, indicate an intention on the part of Canadian ILECs to
compete in each other's traditional serving territories, which will create
increased opportunities for us in the Canadian carrier market.
-80-
<PAGE>
DESCRIPTION OF WFI-USA AGREEMENTS
On December 31, 1998, we increased our percentage shareholding in WFI-USA
from 50% to 75% under the terms of an agreement between, among others, Ledcor,
Michels, Mi-Tech, WFI-USA and us. To facilitate the purchase of the additional
25% interest, we funded the reimbursement by WFI-USA to Mi-Tech of a note for
shareholder advances in the aggregate amount of $10,188,230. A note for similar
advances by us in the amount of $3,915,000 was surrendered in exchange for the
issuance of additional shares of WFI-USA to us. We, Ledcor, Ledcor Industries
Inc., WFI-USA, WFNI, Mi-Tech and Michels entered into a shareholders agreement
(the "Shareholders Agreement") in which WFNI hired all Mi-Tech employees and
assumed all leases for facilities, office equipment and vehicles and other
obligations and liabilities of Mi-Tech, in each case located in Denver and
associated with the operations of WFNI. WFI-USA agreed to indemnify, release and
hold Mi-Tech harmless for any costs or liabilities related to these obligations
and agreements concerning these transactions.
Commitments of Michels and Us
Each of Michels and us have committed to support and assist WFI-USA in its
strategy to become a developer of fiber optic systems in the continental United
States. We will act as prime project construction manager for all projects of
WFI-USA, except to the extent that WFI-USA identifies an alternative source of
appropriate services local to the particular ROW to be developed for that
project. Any construction services provided by Michels or us to WFI-USA shall be
provided at a cost to WFI-USA equal to the actual cost of providing these
services plus 25%. Despite this commitment to support and assist, neither
Michels nor us will be required (1) to provide any services until WFI-USA has
used its best efforts to exhaust any and all other alternatives or (2) to
suspend or otherwise delay any work on any other project for any customer in
order to provide these services. Furthermore, Michels' and our respective
obligations to provide these services will be subject to the availability of
necessary personnel, equipment and supplies.
Exclusivity; Non-Competition
The parties to the Shareholders Agreement agreed that for a period of four
years, neither they nor their affiliates would compete directly with WFI-USA in
the continental United States, except for any segment which may be constructed
on ROW currently owned by CN or its subsidiaries, including IC.
Transfer of Shares; Put Option of Mi-Tech
The Shareholders Agreement restricts both Michels and us from selling,
transferring, assigning or otherwise encumbering or divesting any interest in or
control of WFI-USA to a third party. In addition, the Shareholders Agreement
provides for "tag-along" rights to Michels in the event of a sale by us of our
shares of WFI-USA. The Shareholders Agreement further provides that (1) in the
event of certain proposed transfers which would result in a change of control of
WFI-USA or (2) after the ten-year anniversary of the Shareholders Agreement,
Michels has the option to require WFI-USA to purchase all of the shares of
WFI-USA stock owned by Mi-Tech or its affiliates at the fair market value of the
shares. If Michels exercises the option described in (2) above, we can elect to
sell all of the shares or assets of WFI-USA whereupon WFI-USA will not be
required to purchase the shares. If we decide to sell WFI-USA in these
circumstances, the Shareholders Agreement contains certain provisions relating
to the price at which shares or assets of WFI-USA may be sold.
Additional Fiber Options
The Shareholders Agreement grants WFI-USA an option to purchase from
Mi-Tech 24 strands of dark fiber along the existing Montreal to Albany fiber
optic route owned by Mi-Tech and its affiliates. The Shareholders Agreement also
grants WFI-USA an option to purchase from us 24 strands of dark fiber along the
IC fiber optic build.
-81-
<PAGE>
Other Provisions
If we commence a public offering of our common stock having an aggregate
value of at least $20 million, Mi-Tech has the option to convert all (but not
part) of its shares of WFI-USA stock into shares of our stock to be offered in
that public offering. The number of shares that Mi-Tech and its affiliates would
receive in a conversion would be the pre-offering fair market value of their
ownership interest in WFI-USA, divided by the offering price per share of stock
in that offering. The pre-offering fair market value would be determined by a
single appraiser selected by WFI-USA and Mi-Tech. If they could not agree on a
single appraiser, WFI-USA and Mi-Tech would each select an appraiser and the
pre-offering fair market value would be determined by averaging the fair market
values assigned by the two appraisers. In connection with this conversion,
Mi-Tech will be granted certain registration rights as provided in the
Shareholders Agreement.
The Shareholders Agreement provides that the Board of Directors of WFI-USA
will initially consist of up to 10 directors, three of whom will be appointed by
Mi-Tech and the balance of whom will be appointed by us.
Funding Commitments
The Shareholders Agreement provides that we, or our affiliates will provide
the capital to fund WFI-USA's operations. Mi-Tech has retained an option to
contribute additional capital to WFI-USA to fund projects outside its scope of
business.
-82-
<PAGE>
DESCRIPTION OF IC AND CN AGREEMENTS
As of May 28, 1999, we formed, jointly with IC and CN, several subsidiaries
in which IC or CN own 25% equity interests. These subsidiaries are parties to
licenses of the ROW over which IC and CN operate their rail transportation
system.
Scope and Duration of License
Beginning May 28, 1999, IC and CN have granted some of our subsidiaries the
right to construct and operate fiber optic cable telecommunications facilities
upon almost all of the railroads' ROW. The licenses terminate on the first to
occur of May 28, 2059, the discontinuance by our subsidiaries of the use of the
facilities or upon the parties' mutual agreement.
Exclusivity
Generally, these licenses are exclusive, subject to (1) legal requirements,
(2) the rights of parties having existing telecommunications systems on the ROW
and (3) construction delays not having occurred. In addition, in some cases, and
subject to our right of first refusal, if either IC or CN receive an offer from
third parties to construct fiber optic telecommunications facilities on
specified portions of the ROW, that have not been previously designated as
portions on which we intend to construct, the railroads may grant a license to
such third parties.
Consideration
As consideration for the license, our subsidiaries have agreed to pay a
license fee for each facility equal to a per mile or per kilometer rate, as
applicable, multiplied by the length of the ROW upon which such facility is
constructed. This fee is payable from the cash flow relating to each such
facility, net of marketing, operations, maintenance, financing and other costs.
As additional consideration for the grant of the license, IC and CN were granted
equity in our subsidiaries and the subsidiaries have agreed to grant (for
railroad purposes only), (1) two strands of fiber optic cable along the entire
length of the facilities to major traffic centers to IC and (2) four strands of
fiber optic cable between Quebec City and Halifax to CN. At the request and
expense of the railroads, our subsidiaries will be required to light these
fibers.
Security Interest
In order to secure the license fee for each facility, our subsidiaries will
grant to IC or CN, as applicable, a first priority lien upon and security
interest in such facility and related property. No lien on any one facility will
secure the license fee owed on another facility. Furthermore, these liens are
subordinated to any security granted for project financing if (1) the aggregate
amount of the financing does not exceed 65% of the approved budgeted cost of
constructing the facility and (2) the project financing is provided on a
stand-alone basis, is not cross-collateralized and can not accelerate other
obligations of the subsidiary by cross-default.
Sublicensing
Our subsidiaries generally have the right to sublicense, and permit its
sublicensees to sublicense, all or portions of the facilities on the ROW to
third parties for a term of up to 40 years.
Equity Interests
IC and CN, as long as they own 10% of the respective subsidiaries described
above, have the right to appoint 25% of the members of each Board of the company
in which they hold their respective interest. Fur-
-83-
<PAGE>
thermore, modifying the bylaws, settling litigation, granting of security
interests and entering into contracts not in the ordinary course for more than
$100,000 are examples of some activities which require unanimous consent of IC
or CN or their representatives. We have also agreed to provide financing for the
construction of fiber optic cable facilities along the ROW or guarantee, to the
extent necessary, any project financing with respect to such construction. These
agreements also include customary provisions regarding the termination and the
transfer of equity interests, as well as provisions which grant IC and CN the
right and obligation to exchange their interests for shares in WFI in the event
that we make an initial public offering of our common stock. The number of
shares that IC and CN would receive in a conversion would be the pre-offering
fair market value of their respective ownership interests in the subsidiaries
described above, divided by the offering price per share of stock in that
offering.
-84-
<PAGE>
DESCRIPTION OF OUR RECENTLY COMPLETED
PRIVATE EQUITY PLACEMENTS
On September 9, 1999, we completed a private placement of our convertible
preferred shares for $345 million to affiliates of Tyco International Ltd. and
to Providence Equity Partners Inc., DLJ Merchant Banking II Inc. and GS Capital
Partners III, LP (collectively, the "Private Investor Group"). We will use $300
million of the proceeds from the equity placements to provide funding for our
subsidiary which is undertaking our Hibernia project while the balance of $45
million was used to repurchase certain of our shares held by an affiliate of our
parent, Worldwide Fiber Holdings Ltd. Concurrent with the completion of the
equity placements, we also reorganized our share capital.
Share Capital Reorganization
Our share capital now consists of four classes of shares: Class A
Non-Voting Shares; Class B Subordinate Voting Shares; Class C Multiple Voting
Shares and Preferred Shares. The Preferred Shares have been further divided into
three separate series of Preferred Shares: Series A Non-Voting Preferred Shares;
Series B Subordinate Voting Preferred Shares; and Series C Redeemable Preferred
Shares. Only the Class B Subordinate Voting Preferred Shares, Class C Multiple
Voting Shares and Series B Subordinate Voting Preferred Shares carry rights to
vote in all circumstances. In addition, while the Class B Subordinate Voting
Shares and Series B Subordinate Voting Preferred Shares carry one vote per
share, the Class C Multiple Voting Shares carry voting rights of 20 votes per
share. On September 27, 1999, 4.5 million of our Class C Multiple Voting Shares
were issued to affiliates of our parent in connection with our acquisition of
certain fiber optic network assets. See "Transactions with our Parent -
Acquisition of Fiber Optic Network Assets".
The Private Investor Group purchased Series A Non-Voting Preferred Shares.
Our parent, through its affiliates, presently holds shares which provides it
with over 99% of the votes attached to our shares. However, the Private Investor
Group was provided with certain supermajority rights in the shareholders
agreement (the "Shareholders Agreement") entered into concurrently with the
closing of the private equity placements.
Attributes of the Series A Non-Voting Preferred Shares
The attributes of the Series A Non-Voting Preferred Shares purchased by the
Private Investor Group, which are found in the share rights of our Articles of
Incorporation, include:
o The Series A Non-Voting Preferred Shares are convertible at the option
of the holder into Class A Non-Voting Shares on a one-for-one basis
provided that the conversion ratio will be adjusted upward by 6% per
annum if, by September 9, 2000, we have not completed an initial
public offering of $150 million at a price of at least 300% of the
Private Investor Group purchase price (a "Qualified IPO").
o The Series A Non-Voting Preferred Shares are convertible at our option
into Class A Non-Voting Shares at the same conversion ratio if a
Qualified IPO has occurred and in certain other circumstances.
o The Series A Non-Voting Preferred Shares are also convertible on a
one-for-one basis into Series B Subordinate Voting Preferred Shares
which are, in turn, convertible into Class B Subordinate Voting Shares
on the same terms upon which our Series A Non-Voting Preferred Shares
are convertible into Class A Non-Voting Shares.
o The Series A Non-Voting Preferred Shares which have not previously
been surrendered for conversion must be redeemed by us on November 2,
2009. We must redeem the Series A Non-Voting Preferred Shares at their
market price paid in (1) cash up to a set liquidation value and (2)
Class A Non-Voting Shares for any excess of market price over
liquidation value.
-85-
<PAGE>
o The holders of our Preferred Shares have anti-dilution protection
which is customary for convertible securities.
o The holders of our Preferred Shares receive a preference over other
classes of shares upon our liquidation, dissolution or winding-up.
The ability of the Private Investor Group to convert their Preferred Shares
into our shares which vote in all circumstances is also limited by the
provisions of the Shareholders Agreement as well as the "constrained share
provisions" contained in our share rights which are designed to ensure that we
will continue to comply with the foreign ownership restrictions under the
Telecommunications Act (Canada). In addition, under the terms of the Purchase
Agreement for the Series A Non-Voting Preferred Shares, additional anti-dilution
protection was provided to the Private Investor Group which is triggered upon
the issue of options to purchase our shares as well as upon the issue of our
shares to Michels, CN or IC in exchange for the transfer of their interest in
our subsidiaries. The Series A Non-Voting Preferred Shares represent a minority
of our shares on a fully-diluted basis.
Shareholders Agreement
In connection with the private placement to the Private Investor Group, we
entered into a Shareholders Agreement with the Private Investor Group, our
parent and its affiliate and our directors. The Shareholders Agreement generally
provides for:
o prescribed board of directors composition.
o "supermajority" rights with respect to prescribed matters.
o restrictions on the issue and conversion of our shares.
o other matters including restrictions on transferability.
Board of Directors Composition
Under the Shareholders Agreement, each of the four members of the Private
Investor Group is entitled to name one person to our Board of Directors and our
Board must consist of not more than 12 directors.
Supermajority Rights of the Private Investor Group
Until we complete an initial public offering of at least $150 million, we
must not undertake certain major transactions if three of the four members of
the Private Investor Group provide us with a notice of their election to
disapprove of that major transaction. Major transactions subject to the
supermajority rights include: mergers or other similar business combinations;
acquisitions or investments having a value greater than $200 million, a
significant change in the nature of our business; a sale of our assets outside
the ordinary course of business with a value of $100 million or more;
declaration of dividends or redemption or repurchase of shares; issuing shares
with an aggregate value of greater than $100 million; certain non-arm's length
transactions; amending our corporate charter; incurring indebtedness of $100
million or more; approval of our annual financing and capital plans; issuing our
shares below a threshold price; and terminating our senior officers.
Obligations Relating to Share Issuances and Conversion
Under the Shareholder's Agreement, there are a number of provisions which
impact our ability to issue shares. We cannot issue shares on a private basis to
a person who would then own more than 1% of our shares
-86-
<PAGE>
without that person agreeing to be bound by the Shareholders Agreement. Except
for certain "grandfathered" share issuances, until the holders of the Series A
Non-Voting Preferred Shares convert their shares to a non-Preferred share class,
our share issuances are subject to pre-emptive rights in favour of the holders
of the Preferred Shares. In addition, until the Telecommunications Act (Canada)
foreign ownership restrictions are amended, we may not issue any shares which
carry a right to vote in all circumstances except for certain grandfathered
share issuances. However, the holders of the Series A Non-Voting Preferred
Shares cannot convert into our shares which carry a right to vote in all
circumstances unless the foreign ownership restrictions in the
Telecommunications Act (Canada) are eliminated or concurrently with or after an
initial public offering of shares with voting rights of at least $150 million.
Additional Provisions
The Shareholders Agreement contains a number of provisions which limit the
transfer of our shares by all shareholders. These include an absolute
prohibition, subject to certain exceptions, on the transfer of shares during a
one year lock-up period, rights of first offer, tag along rights and bring along
rights. Finally, if we have not completed a Qualified IPO by September 9, 2003,
certain of the Private Investor Group may demand an auction of the Company.
-87-
<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of Exchange Offer
We sold the old notes on July 28, 1999 to the initial purchasers, who
placed the old notes with certain institutional investors. We and the initial
purchasers entered into the registration rights agreement, concerning the
placement of the old notes, under which we agreed, for the benefit of the
holders of the old notes, that we would, at our sole cost, (1) within 90 days
following the original issuance of the old notes, file with the Securities and
Exchange Commission the exchange offer registration statement under the
Securities Act concerning an issue of a series of new notes of Worldwide Fiber
identical in all material respects to the series of old notes and (2) use our
best efforts to cause the exchange offer registration statement to become
effective under the Securities Act within 180 days following the original
issuance of the old notes. Upon the effectiveness of the exchange offer
registration statement, we will offer to the holders of the old notes the
opportunity to exchange their old notes for an equal amount of new notes, to be
issued without a restrictive legend and which may be reoffered and resold by the
holder without restrictions or limitations under the Securities Act. The term
"holder" concerning any note means any person in whose name the note is
registered on our books or any other person who has obtained a properly
completed bond power from the registered holder.
Terms of the Exchange Offer
Upon the terms and subject to the conditions described in this prospectus
and in the accompanying letter of transmittal (which together constitute the
exchange offer), we will accept for exchange old notes that are properly
tendered on or before the expiration date and not withdrawn as permitted below.
The term expiration date means 5:00 p.m., New York City time, on , 1999; but if
we, in our sole discretion, extend the period of time during which the exchange
offer is open, the term expiration date means the latest time and date to which
the exchange offer is extended. We may choose to extend the period of time
during which the exchange offer is open if we do not receive substantially all
of the old notes in the exchange offer.
As of the date of this prospectus, $500,000,000 aggregate principal amount
of old notes is outstanding. This prospectus, along with the letter of
transmittal, is first being sent on or about , 1999, to all holders of old notes
known to us. Our obligation to accept old notes for exchange under the exchange
offer is subject to certain customary conditions as described below under
"--Certain Conditions to the Exchange Offer."
We expressly reserve the right, at any time and from time to time, to
extend the period of time during which the exchange offer is open, and
therefore, to delay acceptance for exchange of any old notes, by giving oral or
written notice of an extension to the holders of the old notes as described
below. During the extension, all old notes previously tendered will remain
subject to the exchange offer and may be accepted for exchange by us. Any old
notes not accepted for exchange for any reason will be returned without expense
to the tendering holders of old notes as promptly as practicable after the
expiration or termination of the exchange offer.
-88-
<PAGE>
Old notes tendered in the exchange offer must be in denominations of $1,000
or any integral multiple of $1,000.
We expressly reserve the right to amend or terminate the exchange offer,
and not to accept for exchange any old notes not previously accepted for
exchange, upon the occurrence of any of the conditions to the exchange offer
specified below under "--Certain Conditions to the Exchange Offer." We will give
oral or written notice of any extension, amendment, non-acceptance or
termination to the holder of the old notes as promptly as practicable, the
notice in the case of any extension to be issued by a press release or other
public announcement no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
Procedures for Tendering Old Notes
If you are a registered holder of old notes you may tender your old notes
in the exchange offer. If you tender old notes to Worldwide Fiber as described
below, our acceptance of your old notes will constitute a binding agreement
between you and Worldwide Fiber upon the terms and subject to the conditions
described in this prospectus and in the accompanying letter of transmittal.
Except as described below, if you wish to tender old notes for exchange through
the exchange offer, you must transmit either (1) a properly completed and duly
executed letter of transmittal, including all other documents required by the
letter of transmittal, to HSBC Bank USA, the exchange agent, at one of the
addresses listed below under "Exchange Agent" on or before the expiration date
or (2) if you tender your old notes under the procedures for book-entry transfer
described below, you may transmit an agent's message to the exchange agent
instead of the letter of transmittal, in either case on or prior to the
expiration date. In addition, either
o certificates for the old notes must be received by the exchange agent
along with the letter of transmittal, or
o a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of the old notes, if this procedure is available, into
the exchange agent's account at the Depository Trust Company (the
"Book-Entry Transfer Facility") under the procedure for book-entry
transfer described below, along with the letter of transmittal or
agent's message, must be received by the exchange agent before the
expiration date, or
o the holder must comply with the guaranteed delivery procedures
described below.
The term "agent's message" means a message, transmitted to the Exchange
Agent, which states that the Book-Entry Transfer Facility has received an
express acknowledgment from you that you have received and agree to be bound by
the letter of transmittal and that Worldwide Fiber may enforce the letter of
transmittal against you.
The method of delivery of old notes, letters of transmittal or the agent's
message and all other required documents is at your election and risk. If you
mail these documents, we recommend that you use registered mail, properly
insured, with return receipt requested. Always allow sufficient time to assure
timely delivery. Do not send letters of transmittal or old notes to the company.
You may request your respective brokers, dealers, commercial banks, trust
companies or nominees to effect the above transactions for you.
If your old notes are registered in the name of a broker, dealer,
commercial bank, trust company, or other nominee and you wish to tender your old
notes in the exchange offer you should contact the registered holder promptly
and instruct the registered holder to tender on your behalf. If you with to
tender on your own behalf, you must, before completing and executing the letter
of transmittal and delivering the old notes, either make appropriate
arrangements to register ownership of the old notes in your name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders") must be guaranteed (see "--Guaranteed
Delivery Procedures") unless the old notes surrendered for exchange are tendered
(1) by a registered holder of the old notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the letter of transmittal or (2) for the account of an Eligible Institution (as
defined below). If signatures on a letter of transmittal or a notice of
withdrawal are required to be guaranteed, these guarantees must be by a
financial institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Program or the Stock
Exchange Medallion Program
-89-
<PAGE>
(collectively, "Eligible Institutions"). If old notes are registered in the name
of a person other than a signer of the letter of transmittal, the old notes
surrendered for exchange must be endorsed by or be accompanied by a written
instrument or instruments of transfer or exchange in satisfactory form as
determined by us in our sole discretion, duly executed by the registered holder
exactly as the name or names of the registered holder or holders appear on the
old notes with the signature on it guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of old notes tendered for exchange will be determined by
us in our discretion, which determination shall be final and binding. We reserve
the absolute right to reject any and all tenders of any particular old notes not
properly tendered or the acceptance of which might, in our judgment or in the
judgment of our counsel, be unlawful. We also reserve the absolute right to
waive any defects or irregularities or conditions of the exchange offer as to
any particular old notes either before or after the expiration date (including
the right to waiver the ineligibility of any holder who seeks to tender old
notes in the exchange offer). Our interpretation of the terms and conditions of
the exchange offer as to any particular old notes either before or after the
expiration date (including the letter of transmittal and its instructions) shall
be final and binding on all parties. Unless waivered, any defects or
irregularities in connection with tenders of old notes for exchange must be
cured within a reasonable period of time as we shall determine. None of
Worldwide Fiber, the exchange agent or any other person shall be under any duty
to notify of any defect or irregularity of any tender of old notes for exchange,
nor shall any of them have any liability for failure to notify.
By tendering old notes for exchange, you represent to us that, among other
things:
o the new notes acquired through the exchange offer are being acquired
in the ordinary course of business of the person receiving the new
notes, whether or not this person is the holder, and
o that neither the holder nor the other person has any arrangement or
understanding with any person to engage or participate in a
distribution of the new notes.
If any holder or an other person is an affiliate, as defined under Rule 405
of the Securities Act, of us or is engaged in or intends to engage in, or has an
arrangement or understanding with any person to participate in, a distribution
of the new notes to be acquired through the exchange offer, the holder or the
other person (1) may not rely on the applicable interpretation of the staff of
the Securities and Exchange Commission and (2) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction. Each broker-dealer that receives new notes for its own
account in exchange for old notes, where the old notes were acquired by the
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of the new notes. See "Plan of Distribution." The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not have admitted that it is an "underwriter" within the
meaning of the Securities Act.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all old notes properly
tendered and will issue the new notes promptly after acceptance of the old
notes. See "--Certain Conditions to the Exchange Offer" below. For purposes of
the exchange offer, we will be considered to have accepted properly tendered old
notes for exchange when we have given oral or written notice of it to the
exchange agent.
For each old note accepted for exchange you will receive a new note having
a principal amount equal to that of the surrendered old note. Accordingly,
registered holders of new notes on the relevant record date for the first
interest payment date following the consummation of the exchange offer will
receive interest accruing from the most recent date of which interest has been
paid on the old notes or, if no interest has been paid, from
-90-
<PAGE>
July 28, 1999. Old notes accepted for exchange will cease to accrue interest
from and after the date of consummation of the exchange offer. Holders whose old
notes are accepted for exchange will not receive any payment of accrued interest
on these old notes otherwise payable on any interest payment date for which the
record date occurs on or after the completion of the exchange offer. Old notes
not tendered or not accepted for exchange will continue to accrue interest from
and after the date of the completion of the exchange offer.
In all cases, issuance of new notes for old notes that are accepted for
exchange through the exchange offer will be made only after timely receipt by
the exchange agent of certificates for these old notes or a timely Book-Entry
Confirmation of these old notes into the exchange agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed letter of
transmittal and all other required documents or, in the case of a Book-Entry
Confirmation, an agent's message. If any tendered old notes are not accepted for
any reason under the terms and conditions of the exchange offer or if old notes
are submitted for a greater amount than the holder desires to exchange, those
unaccepted or non-exchanged old notes will be returned without expense to the
tendering holder of the notes or, in the case of old notes tendered by
book-entry transfer into the exchange agent's account at the Book-Entry Transfer
Facility according to the book-entry procedures described below, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of old notes by causing the
Book-Entry Transfer Facility under the Book-Entry Transfer Facility's procedures
for transfer. However, although delivery of old notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the letter of
transmittal or facsimile of it, with any required signature guarantees or an
agent's message instead of a letter of transmittal, and any other required
documents, must be transmitted to and received by exchange agent at the
addresses described below under "--Exchange Agent" on or before the expiration
date or the guaranteed delivery procedures described below must be complied
with.
Guaranteed Delivery Procedures
If a registered holder of the old notes desires to tender their old notes
and the old notes are not immediately available, or time will not permit the
holder's old notes or other required documents to reach the exchange agent
before the expiration date, or the procedures for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
o the tender is made through an Eligible Institution,
o on or before 5:00 P.M., New York City time, on the expiration date,
the exchange agent receives from the Eligible Institution a properly
completed and duly executed letter of transmittal or a facsimile of
it, and Notice of Guaranteed Delivery, substantially in the form
provided by us, by telegram, telex, facsimile transmission, mail or
hand delivery, setting forth the name and address of the holder of the
old notes and the amount of old notes tendered, stating that the
tender is being made by the delivery of the letter of transmittal and
guaranteeing that within three New York Stock Exchange 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 and any other documents
required by the letter of transmittal will be deposited by the
Eligible Institution with the exchange agent, and
o the certificates for all physically tendered old notes, in paper form
for transfer, or a Book-Entry Confirmation, and any other documents
required by the letter of transmittal will be deposited by the
Eligible Institution within three New York Stock Exchange trading days
after the date of execution of the Notice of Guaranteed Delivery.
-91-
<PAGE>
Withdrawal of Tenders
Tenders of old notes may be withdrawn at any time before 5:00 P.M., New
York City time, on the expiration date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the exchange agent at one of
the addresses described below under "--Exchange Agent." This notice of
withdrawal must specify the name of the person having tendered the old notes to
be withdrawn, identify the old notes to be withdrawn, including the principal
amount of the old notes, and, where certificates for old notes have been
transmitted, specify the name in which the old notes are registered, if
different from that of the withdrawing holder. If certificates for old notes
have been delivered or otherwise identified to the exchange agent, then before
the release of these certificates the withdrawing holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless the holder is an Eligible Institution in which case the guarantee will
not be required. If old notes have been tendered under the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn old notes and otherwise comply with the procedures
of the facility. We will determine all questions concerning the validity, form
and eligibility, including time of receipt, of the notices. This determination
will be final and binding on all parties. Any old notes so withdrawn will be
considered not to have been validly tendered for exchange and will be returned
to the holder of the old notes without cost to the holder, or, in the case of
old notes tendered by book-entry transfer into the exchange agent's account at
the Book-Entry Transfer Facility maintained with the 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 Old Notes" above at any time on or before the expiration date.
Material Conditions to the Exchange Offer
Despite any other provisions of the exchange offer, and subject to our
obligations under the registration rights agreement, we 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 the new notes for exchange, any of the following events shall occur:
(a) any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or otherwise
materially impair our ability to proceed with the exchange offer;
(b) any change, or any development involving a prospective change, in
our business or financial affairs or any or our subsidiaries has occurred
which, in our sole judgment, might materially impair our ability to proceed
with the exchange offer or materially impair the contemplated benefits of
the exchange offer to us;
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in our sole judgment, might materially impair our ability
to proceed with the exchange offer or materially impair the contemplated
benefits of the exchange offer to us;
(d) any governmental approval has not been obtained, which approval we
shall, in our sole discretion, consider necessary for the completion of the
exchange offer; or
(e) the exchange offer will violate any applicable law or any
applicable interpretation of the staff of the Securities and Exchange
Commission.
-92-
<PAGE>
The above conditions are for our sole benefit and may be asserted by us in
whole or in part at any time and from time to time in our sole discretion. Our
failure at any time to exercise any of the above rights shall not be considered
a waiver of any of these rights and these rights shall be considered ongoing
rights which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any old notes tendered, and no
new notes will be issued in exchange for any of these old notes, if at the time
any stop order is threatened by the Securities and Exchange Commission or in
effect concerning the registration statement of which this prospectus is a part
or the qualification of the indenture under the Trust Indenture Act of 1939, as
amended.
The exchange offer is not conditioned on any minimum principal amount of
old notes being tendered for exchange.
Exchange Agent
HSBC Bank USA has been appointed as the exchange agent for the exchange
offer. All executed letters of transmittal should be directed to the exchange
agent at one of the addresses listed below. Questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests or Notices of Guaranteed Delivery should be directed
to the exchange agent addressed as follows:
HSBC Bank USA,
Exchange Agent
By Registered or Certified Mail:
HSBC Bank USA
140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Department
By Hand or Overnight Courier:
HSBC Bank USA
140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Department
Confirm by Telephone:
(212) 658-6425
Delivery of the letter of transmittal to an address other than one listed
above or transmission of instructions via facsimile other than as listed above
does not constitute a valid delivery of the letter of transmittal.
Resales of the New Notes
Based on positions of the Securities and Exchange Commission described in
Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital
Holdings Corporation (available July 2, 1993) and K-III Communications
Corporation (available May 14, 1993), and similar no-action letters issued to
third parties, we believe that the new notes issued in the exchange offer to a
holder in exchange for old notes may be offered for resale, resold and otherwise
transferred by any holder of old notes, except for a holder which is an
affiliate of Worldwide Fiber within the meaning of Rule 405 under the Securities
Act, without compliance with the registration and prospectus delivery provisions
of the Securities Act, if the new notes are acquired in the ordinary
-93-
<PAGE>
course of the holder's business and the holder is not participating, does not
intend to participate and has no arrangement or understanding with any person to
participate in the distribution of the new notes. We have not requested or
obtained, and do not intend to seek, an interpretive letter from the staff of
the Securities and Exchange Commission concerning this exchange offer, and
neither we nor the holders of notes are entitled to rely on interpretive advice
provided by the staff of the Securities and Exchange Commission to other
persons, which advice was based on the facts and conditions represented in the
letters. Although there can be no assurance that the staff of the Securities and
Exchange Commission would make a similar determination relating to the exchange
offer, the exchange offer is being conducted in a manner intended to be
consistent with the facts and conditions represented in these letters. If any
holder acquires new notes in the exchange offer to distribute or participate in
a distribution of the new notes, the holder cannot rely on the position of the
staff of the Securities and Exchange Commission described in the above no-action
and interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act concerning a secondary resale
transaction, unless an exemption from registration is otherwise available.
Each broker-dealer that receives new notes for its own account through the
exchange offer must acknowledge that it will deliver a prospectus concerning any
resale of these new notes. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer concerning resales of new
notes received in exchange for old notes where the old notes were acquired by
the broker-dealer as a result of market-making activities or other trading
activities, except for old notes acquired directly from us. We have agreed that,
for a period of 180 days following the completion of the exchange offer, we will
make this prospectus available to any broker-dealer for use with any of these
resales. See "Plan of Distribution." Under the registration rights agreement, we
are required to allow the broker-dealers and other persons, if any, subject to
similar prospectus delivery requirements to use this prospectus concerning the
resale of the new notes.
Fees and Expenses
We will pay the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by
telegraph, telephone or in person by our officers and regular employees and our
affiliates.
We have not retained any dealer-manager relating to the exchange offer and
will not make any payments to brokers, dealers or others soliciting acceptances
of the exchange offer. However, we will pay the exchange agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses relating to these services.
We will pay the cash expense incurred for the exchange offer. These
expenses include fees and expenses of the exchange agent and trustee, accounting
and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of old
notes through the exchange offer. If, however, certificates representing new
notes or old notes for principal amounts not tendered or accepted for exchange
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of 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 under the exchange offer, then the amount of these
transfer taxes, whether imposed on the registered holder or any other person,
will be payable by the tendering holder. If satisfactory, evidence of payment of
these taxes or exemption from payment of these taxes is not submitted with the
letter of transmittal, the amount of the transfer taxes must accompany the
tender of old notes.
-94-
<PAGE>
Accounting Treatment
The new notes will be recorded at the same carrying value as the old notes,
which is the principal amount as reflected in our accounting records on the date
of the exchange. Accordingly, we will recognize no gain or loss for accounting
purposes. The expenses of the exchange offer and the unamortized expenses
related to the issuance of the old notes will be amortized over the term of the
new notes.
Regulatory Approvals
We do not believe that we need to obtain any material federal or state
regulatory approvals concerning the exchange offer.
Transfer Taxes
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes except that holders who instruct us to register new notes
in the name of, or request that old notes not tendered or not accepted in the
exchange offer be returned to, a person other than the registered tendering
holder will be responsible for the payment of any applicable transfer tax on the
old notes.
Other
Participation in the exchange offer is voluntary and you should carefully
consider whether to accept the terms and conditions of the exchange offer. You
are urged to consult your financial and tax advisors in making your decisions on
what action to take concerning to the exchange offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered old notes under the terms of the exchange offer, we will have
fulfilled a covenant contained in the terms of the old notes and the
registration rights agreement. If you do not tender your old notes in the
exchange offer you will continue to hold these old notes and will be entitled to
all the rights, and limitations applicable to it, under the indenture, except
for the rights under the registration rights agreement, including rights to
receive Additional Interest, which by their terms terminate or cease to have
further effect as a result of the making and completion of the exchange offer.
All untendered old notes will continue to be subject to the restrictions on
transfer contained in the indenture and we do not currently anticipate that we
will register the old notes under the Securities Act. If old notes are tendered
and accepted in the exchange offer, the trading market, if any, for any
remaining old notes could be adversely affected. See "Risk Factors--Failure to
Exchange or Comply with the Exchange Offer--This will result in continuing
transfer restrictions or result in the inability to exchange."
-95-
<PAGE>
DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description the words "we",
"us", "ours" and "Worldwide Fiber" refer only to Worldwide Fiber Inc. and not to
any of its subsidiaries.
The old notes were, and the new notes will be, issued under an indenture
between Worldwide Fiber and HSBC Bank USA, as trustee. The terms of the new
notes are identical in all material respects to the old notes, except that the
new notes have been registered under the Securities Act and, therefore, will not
bear legends restricting their transfer and will not contain certain provisions
providing for an increase in interest on them under certain circumstances
described in the registration rights agreement, the provisions of which will
terminate upon the completion of the exchange offer. The terms of the Notes
include those stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act of 1939 or the TIA.
The following description is a summary of the material provisions of the
indenture. It does not restate that agreement in its entirety. We urge you to
read the indenture and registration rights agreement because they, and not this
description, define your rights as holders of the notes. Copies of the indenture
and registration rights agreement are available as described below under
"Additional Information."
Brief Description of the Notes
The notes:
o are our general unsecured obligations;
o are effectively subordinated in right of payment to all our existing
and future secured Indebtedness to the extent of the value of the
assets securing such Indebtedness and to all liabilities, including
trade payables, of our subsidiaries;
o are equal in right of payment to all our existing and future
unsubordinated, unsecured Indebtedness; and
o will be senior in right of payment to any of our future subordinated
Indebtedness.
The indenture will permit us to assume additional Indebtedness, including
secured Indebtedness.
We conduct substantially all of our operations through our subsidiaries. As
a result, we depend upon the cash flow of our subsidiaries to meet our
obligations, including our obligations under the notes. As of the Issue Date,
all of our subsidiaries will be "Restricted Subsidiaries." However, under the
circumstances described below under the caption "Certain Covenants--Designation
of Restricted and Unrestricted Subsidiaries," we will be permitted to designate
certain of our subsidiaries as "Unrestricted Subsidiaries." Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants in the
indenture. None of our subsidiaries will guarantee the notes.
Principal, Maturity and Interest
We issued old notes with a principal amount of $500.0 million. The notes
are and will be in denominations of $1,000 and integral multiples of $1,000. The
notes will mature on August 1, 2009. Additional Senior Notes (as defined below)
may be issued from time to time, subject to the limitations described under
"Certain Incurrence of Indebtedness and Issuance of Preferred Stock."
-96-
<PAGE>
Interest on the notes will accrue at the rate of 12% per year and will be
payable semiannually in arrears on February 1 and August 1, beginning on
February 1, 2000. We will make each interest payment to the holders of record of
notes on the immediately preceding January 15 and July 15.
Interest on the notes will accrue from the date the notes were originally
issued, if interest has already been paid, from the date it was most recently
paid. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
Methods of Receiving Payments on the Notes
If a holder has given wire transfer instructions to us, we will make all
principal, premium, if any, and interest payments on those notes in accordance
with those instructions. All other payments on the notes will be made at the
office or agency of the Paying Agent and Registrar within the City and State of
New York unless we elect to make interest payments by check mailed to the
holders at their address described in the register of holders.
Paying Agent and Registrar for the Notes
The trustee will initially act as Paying Agent and Registrar. We may change
the Paying Agent or Registrar without prior notice to the holders of the notes,
and we or any of our Subsidiaries may act as Paying Agent or Registrar.
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the indenture.
The Registrar and the trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and we may require a
holder to pay any transfer taxes and similar fees required by law or permitted
by the indenture. We are not required to transfer or exchange any note selected
for redemption. Also, we are not required to transfer or exchange any note for a
period of 15 days before a selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes, other than concerning the payment of Additional Amounts (as defined
below).
Optional Redemption
Before August 1, 2002, we may on any one or more occasions redeem notes in
an amount equal up to 35% of the sum of (a) the aggregate principal amount of
notes originally issued under the indenture and (b) the total amount of
Additional Senior Notes issued under the indenture at a redemption price of 112%
of the principal amount thereof, plus accrued and unpaid interest, if any,
thereon to the redemption date, with the net cash proceeds of one or more
Qualified Equity Offerings; provided that:
(1) at least 65% of the sum of (a) the aggregate principal amount of notes
originally issued under the indenture and (b) the total amount of
Additional Senior Notes issued under the indenture remains outstanding
immediately after the occurrence of the redemption, excluding notes held by
Worldwide Fiber and our Subsidiaries; and
(2) the redemption must occur within 90 days of the date of the closing of the
Qualified Equity Offering.
Except according to the preceding paragraph or as described below under the
caption "Redemption for Changes in Canadian Withholding Taxes," the notes will
not be redeemable at our option before August 1, 2004.
-97-
<PAGE>
On or after August 1, 2004 we may redeem all or a part of the notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices,
expressed as percentages of the principal amount, described below plus accrued
and unpaid interest, if any, on the notes to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 1 of the years
indicated below:
Date Percentage
---- ----------
2004.......................................... 106.000%
2005.......................................... 104.000%
2006.......................................... 102.000%
2007 and thereafter........................... 100.000%
Redemption for Changes in Canadian Withholding Taxes
The notes will be subject to redemption, at our option, in the event we
become obligated to pay any Additional Amounts as a result of a change in the
laws or regulations of Canada or any Canadian Taxing Authority, or a change in
any official position regarding the application or interpretation of those laws
and regulations, which is publicly announced or becomes effective on or after
the Issue Date. Upon the occurrence of this kind of change, Worldwide Fiber may,
at any time, redeem all, but not part, of the notes at a price equal to 100% of
the principal amount of the notes, plus accrued and unpaid interest, if any, to
the redemption date. Worldwide Fiber will give written notice of the redemption
not less than 30 nor more than 60 days before the redemption date.
Payment of Additional Amounts
All payments made by or on behalf of Worldwide Fiber on or with respect to
the notes will be made without withholding or deduction for any Taxes imposed by
any Canadian Taxing Authority, unless required by law or the interpretation or
administration of withholding or deduction of Taxes by the relevant Taxing
Authority. If Worldwide Fiber or any other payor is required to withhold or
deduct any amount on account of Taxes from any payment made with respect to the
notes, Worldwide Fiber will:
(1) make the withholding or deduction;
(2) remit the full amount deducted or withheld to the relevant government
authority in accordance with applicable law;
(3) pay such additional amounts ("Additional Amounts") as may be necessary so
that the net amount received by each holder, including Additional Amounts,
after the withholding or deduction will not be less than the amount the
holder would have received if the Taxes had not been withheld or deducted;
(4) furnish to the holders, within 30 days after the date the payment of any
Taxes is due, certified copies of tax receipts evidencing the payment by
Worldwide Fiber;
(5) indemnify and hold harmless each holder, other than an Excluded Holder, for
the amount of (a) any Taxes paid by the holder as a result of payments made
on or with respect to the notes, (b) any liability, including penalties,
interest and expenses, arising from the notes or with respect to the notes
and (c) any Taxes imposed with respect to any reimbursement under (a) or
(b), but excluding the Taxes on the holder's net income; and
-98-
<PAGE>
(6) at least 30 days before each date on which any Additional Amounts are
payable, deliver to the trustee an Officers' Certificate stating the
amounts so payable and any other information necessary to enable the
trustee to pay the Additional Amounts to holders on the payment date.
Despite the above, no Additional Amounts will be payable to a holder for a
beneficial owner of a note (an "Excluded Holder"):
(1) with which Worldwide Fiber does not deal at arm's length (within the
meaning of the Income Tax Act (Canada)) at the time of making the payment;
or
(2) which is subject to the Taxes because of its being connected with Canada or
any province or territory of Canada otherwise than by the mere acquisition,
holding or disposition of notes or the receipt of payments under the notes.
Whenever there is a reference in the indenture to, in any context, the
payment of principal, premium, if any, redemption price, Change of Control
Payment, offer price and interest, or any other amount payable under or
concerning any note, this reference shall be considered to include a reference
of the payment of Additional Amounts to the extent that, in this context,
Additional Amounts are, were or would be payable on the note. Our obligation to
make payments of Additional Amounts shall survive any termination of the
indenture or the defeasance of any rights under the notes. For a discussion of
the exemption from Canadian withholding taxes applicable to payments under or
concerning the notes, see "Material United States and Canadian Income Tax
Considerations--Canada."
Mandatory Redemption
Except as described below under "--Repurchase at the Option of Holders,"
Worldwide Fiber is not required to make mandatory redemption or sinking fund
payments concerning the notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each holder of notes will have the right to
require Worldwide Fiber to repurchase all or any part, equal to $1,000 or an
integral multiple of $1,000, of that holder's notes through the Change of
Control Offer. In the Change of Control Offer, Worldwide Fiber will offer a
Change of Control Payment in cash equal to 101% of the aggregate principal
amount of notes repurchased plus accrued and unpaid interest, if any, on the
notes to the date of purchase. Within 30 days following any Change of Control,
Worldwide Fiber will mail a notice to each holder, with a copy to the trustee,
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase notes on the Change of Control Payment Date specified
in the notice, under the procedures required by the indenture and described in
the notice. Worldwide Fiber will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations under the
Exchange Act to the extent these laws and regulations are applicable to the
repurchase of the notes as a result of a Change of Control.
On the Change of Control Payment Date, Worldwide Fiber will, to the extent
lawful:
(1) accept for payment all notes or portions of the notes properly
tendered under the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment plus accrued and unpaid interest, if any, on the notes for all
notes or portions of notes so tendered; and
-99-
<PAGE>
(3) deliver or cause to be delivered to the trustee the notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of notes or portions of the notes being purchased by Worldwide
Fiber.
The Paying Agent will promptly mail to each holder of notes so tendered the
Change of Control Payment plus accrued and unpaid interest, if any, on the notes
for these notes, and the trustee will promptly authenticate and mail, or cause
to be transferred by book entry, to each holder a new note equal in principal
amount to any unpurchased portion of the notes surrendered, if any; provided
that each new note will be in a principal amount of $1,000 or an integral
multiple of $1,000. Worldwide Fiber will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The provisions described above that require Worldwide Fiber to make a
Change of Control Offer following a Change of Control will be applicable whether
or not any other provisions of the indenture are applicable. Except as described
above concerning a Change of Control, the indenture does not contain provisions
that permit the holders of the notes to require that Worldwide Fiber repurchase
or redeem the notes in the event of a takeover, recapitalization or similar
transaction.
Worldwide Fiber's ability to purchase notes through a Change of Control
Offer may be limited by a number of factors. If Worldwide Fiber enters into one
or more Credit Facilities, as currently anticipated, the Credit Facility is
expected to prohibit Worldwide Fiber from purchasing any notes and is expected
to provide that certain change of control events concerning Worldwide Fiber
would constitute a default under the notes. In the event a Change of Control
occurs at a time when Worldwide Fiber is prohibited from purchasing notes,
Worldwide Fiber could seek consent to the purchase of notes or could attempt to
refinance the borrowings that contain this prohibition. If Worldwide Fiber does
not obtain this consent or repay the borrowings, Worldwide Fiber will remain
prohibited from purchasing notes. In this case, Worldwide Fiber's failure to
purchase tendered notes would constitute an Event of Default under the indenture
which likely would, in turn, constitute a default under the Credit Facility and
under the terms of the 1998 Notes. In these circumstances, any security granted
for the Credit Facility could result in the holders of notes receiving less
ratably than the lenders under the Credit Facility.
Worldwide Fiber will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements described
in the indenture applicable to a Change of Control Offer made by Worldwide Fiber
and purchases all notes validly tendered and not withdrawn under the Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Worldwide Fiber and its Subsidiaries taken as a whole. Although
there is a limited body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of notes to require Worldwide Fiber to
repurchase the notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of Worldwide Fiber and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
We will comply with the requirements of Rule 14e-1 of the Exchange Act and
any other securities laws and regulations under the Exchange Act, if applicable
to the repurchase of notes concerning a Change of Control Offer.
Asset Sales
Worldwide Fiber will not, and will not permit any of its Restricted
Subsidiaries to, complete an Asset Sale unless:
-100-
<PAGE>
(1) Worldwide Fiber, or the Restricted Subsidiary, receives consideration at
the time of the Asset Sale at least equal to the fair market value of the
assets or Equity Interests issued or sold or otherwise disposed of;
(2) the fair market value is determined by Worldwide Fiber's Board of Directors
and evidenced by a resolution of the Board of Directors described in an
Officers' Certificate delivered to the trustee; and
(3) at least 75% of the consideration for the Asset Sale received by Worldwide
Fiber or the Restricted Subsidiary is in the form of cash or
Telecommunications Assets. For purposes of this provision, each of the
following shall be considered to be cash:
(a) any liabilities, as shown on Worldwide Fiber's or the Restricted
Subsidiary's most recent balance sheet, of Worldwide Fiber or any
Restricted Subsidiary, other than contingent liabilities and
liabilities that are by their terms subordinated to the notes, that
are assumed by the transferee of these assets under a customary
novation agreement that releases Worldwide Fiber or the Restricted
Subsidiary from further liability; and
(b) any securities, notes or other obligations received by Worldwide Fiber
or the Restricted Subsidiary from the transferee that are within 180
days converted by Worldwide Fiber or the Restricted Subsidiary into
cash, to the extent of the cash received in that conversion.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
Worldwide Fiber or the Restricted Subsidiary, as applicable, may apply the Net
Proceeds at its option:
(1) to permanently repay or retire
(a) secured Indebtedness of Worldwide Fiber, including Indebtedness under
Credit Facilities,
(b) Indebtedness of Worldwide Fiber that ranks equally with the notes but
has a maturity date that is before the maturity date of the notes, or
(c) Indebtedness of any Restricted Subsidiary of Worldwide Fiber, in each
case other than any Indebtedness owed to Worldwide Fiber or any
Restricted Subsidiary; or
(2) to acquire Telecommunications Assets.
Pending the final application of the Net Proceeds, Worldwide Fiber may
temporarily reduce revolving credit borrowings or otherwise invest the Net
Proceeds in any manner that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $10.0 million, Worldwide Fiber will
make an Asset Sale Offer to all holders of notes and all holders of other
Indebtedness that is pari passu with the notes containing provisions similar to
those described in the indenture concerning offers to purchase or redeem with
the proceeds of sales of assets to purchase the maximum principal amount of
notes and the other pari passu Indebtedness that may be purchased out of the
Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100%
of principal amount plus accrued and unpaid interest, if any, on the notes to
the date of purchase and will be payable in cash. If any Excess Proceeds remain
after completion of an Asset Sale Offer, Worldwide Fiber may use these Excess
Proceeds for any purpose not otherwise prohibited by the indenture. If the
aggregate principal amount of notes and other pari passu
-101-
<PAGE>
Indebtedness tendered into the Asset Sale Offer exceeds the amount of Excess
Proceeds, the trustee shall select the notes and the other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Selection and Notice
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which the notes are listed; or
(2) if the notes are not so listed, on a pro rata basis, by lot or by the
method as the trustee shall deem fair and appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the portion of the principal amount of the note
to be redeemed. A new note in principal amount equal to the unredeemed portion
of the original note will be issued in the name of the holder of the note upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on notes or portions of them called for redemption.
Material Covenants
Restricted Payments
Worldwide Fiber will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution on
account of Worldwide Fiber's or any of its Restricted Subsidiaries' Equity
Interests, including, without limitation, any payment in connection with
any merger or consolidation involving Worldwide Fiber or any of its
Restricted Subsidiaries, or to the direct or indirect holders of Worldwide
Fiber's or any of its Restricted Subsidiaries' Equity Interests in their
capacity, other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of Worldwide Fiber or to Worldwide Fiber or
a Restricted Subsidiary of Worldwide Fiber;
(2) purchase, redeem or otherwise acquire or retire for value, including,
without limitation, in connection with any merger or consolidation
involving Worldwide Fiber, any Equity Interests of Worldwide Fiber or any
direct or indirect parent of Worldwide Fiber or any Restricted Subsidiary
of Worldwide Fiber, other than the Equity Interests owned by Worldwide
Fiber or any Restricted Subsidiary of Worldwide Fiber;
(3) make any payment on or concerning, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated
to the notes, except a payment of interest or principal at the Stated
Maturity of the notes; or
(4) make any Restricted Investment (all of these payments and other actions
described in clauses (1) through (4) above being collectively referred to
as "Restricted Payments"),
-102-
<PAGE>
unless:
(1) at the time of and after giving effect to the Restricted Payment, no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence of the Restricted Payment; and
(2) Worldwide Fiber would, at the time of the Restricted Payment and after
giving pro forma effect to the Restricted Payment as if the Restricted
Payment had been made at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00 of additional
Indebtedness under clause (1) or (2) of the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(3) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by Worldwide Fiber and its Restricted Subsidiaries
after the Issue Date, excluding Restricted Payments permitted by clauses
(2), (3), (4), (6), (7), (8)(a), (9), (10), (11), (12) and (13), is less
than the sum, without duplication, of
(a) 50% of the Consolidated Net Income of Worldwide Fiber for the period
(taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the Issue Date to the end of Worldwide
Fiber's most recently ended fiscal quarter for which internal
financial statements are available at the time of the Restricted
Payment, or, if the Consolidated Net Income for the period is a
deficit, less 100% of the deficit, plus
(b) 100% of the aggregate net cash proceeds received by Worldwide Fiber
since the Issue Date as a contribution to its common equity capital or
from the issue or sale of Equity Interests of Worldwide Fiber, other
than Disqualified Stock, or from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt
securities of Worldwide Fiber that have been converted into or
exchanged for the Equity Interests, other than Equity Interests, or
Disqualified Stock or debt securities, sold to a Subsidiary of
Worldwide Fiber, plus the aggregate net cash proceeds received by
Worldwide Fiber upon the conversion or exchange, plus
(c) 100% of the net reduction in Investments on and after the Issue Date,
resulting from payments of interest on Indebtedness, dividends,
repayments of loan or advances, or other transfers of property, but
only to the extent the interest, dividends, repayments or other
transfers of property are not included in the calculation of
Consolidated Net Income, in each case to Worldwide Fiber or any of its
Restricted Subsidiaries from any Person, including, without
limitation, from Unrestricted Subsidiaries of Worldwide Fiber, or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(in each case, valued as provided in the definition of "Investments"),
not to exceed in the case of any Person the amount of Restricted
Investments previously made by Worldwide Fiber or any of its
Restricted Subsidiaries in the Unrestricted Subsidiary (after the
Issue Date) and in each case which was treated as a Restricted Payment
(other than the Restricted Payment that was made under the provisions
of paragraphs (1) through (13) below).
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date it is declared,
if at the date of declaration the payment would have complied with the
provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other acquisition of
any subordinated Indebtedness of Worldwide Fiber or of any Equity Interests
of Worldwide Fiber or any Restricted
-103-
<PAGE>
Subsidiary in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of Worldwide
Fiber) of, Equity Interests of Worldwide Fiber (other than Disqualified
Stock); provided that the amount of the net cash proceeds that are utilized
for the redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (3)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness of Worldwide Fiber with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness; provided that the amount
of the net cash proceeds that are so utilized shall be excluded from clause
(3)(b) of the preceding paragraph;
(4) Investments made out of the net cash proceeds of a substantially concurrent
issue and sale (other than to a Subsidiary of Worldwide Fiber) of Equity
Interests (other than Disqualified Stock) of Worldwide Fiber; provided that
the amount of the net cash proceeds that are utilized for the Investment
shall be excluded from clause (3)(b) of the preceding paragraph;
(5) the repurchase, redemption or other acquisition or retirement for value of
any Equity Interests of Worldwide Fiber under any management equity
subscription agreement or stock option agreement and the repurchase of
Equity Interests of Worldwide Fiber from employees, officers or directors
of Worldwide Fiber or any of its Restricted Subsidiaries or their
authorized representatives upon the death, disability or termination of
employment of the officers, directors and employees in an aggregate amount
not to exceed $1.0 million in any calendar year plus (a) the aggregate cash
proceeds from any issuance during the calendar year of Equity Interests by
Worldwide Fiber to employees, officers or directors of Worldwide Fiber and
its Restricted Subsidiaries and (b) the aggregate cash proceeds received by
Worldwide Fiber or any of its Restricted Subsidiaries from any payments on
life insurance policies in which Worldwide Fiber or any of its Restricted
Subsidiaries is the beneficiary with respect to any employees, officers or
directors of Worldwide Fiber or its Restricted Subsidiaries which proceeds
are used to purchase Equity Interests of Worldwide Fiber held by the
employees, officers or directors;
(6) Investments in Telecommunications Assets, provided that the aggregate fair
market value of the Investment, when taken together with all other
Investments made under this clause (6) (measured on the date each
Investment was made), does not exceed $15.0 million, and provided further
however, that either Worldwide Fiber or any of its Restricted Subsidiaries,
after giving effect to the Investments will own at least 20% of the Voting
Stock of the Person;
(7) Permitted Fiber Investments in Telecommunications Assets;
(8) Investments in any Unrestricted Subsidiary of Worldwide Fiber, if either
(a) the Investment is a Permitted Project Financing Investment or (b) the
aggregate fair market value of the Investment, when taken together with all
other Investments made under this subclause 8(b) (measured on the date each
Investment was made), does not exceed $20.0 million;
(9) Investments the payment for which consists exclusively of Equity Interests
(other than Disqualified Stock) of Worldwide Fiber;
(10) pro rata dividends or other distributions made by a Restricted Subsidiary
of Worldwide Fiber to minority stockholders (or owners of an equivalent
interest in the case of a Restricted Subsidiary that is not a corporation);
(11) an Investment in any Person the primary business of which is
Telecommunication Business in an amount not to exceed at any one time
outstanding 10% of the Adjusted Consolidated Cash Flow, if
-104-
<PAGE>
positive, accrued on a cumulative basis during the period (taken as one
accounting period) beginning on the first day of the first full fiscal
quarter immediately following the Issue Date and ending on the last day of
the last fiscal quarter preceding the date of such Investment;
(12) other Restricted Payments in an aggregate amount not to exceed $20.0
million; and
(13) the repurchase of Equity Interests of Worldwide Fiber considered to occur
upon the exercise of stock options if the Equity Interests represent a
portion of the exercise price of the Equity Interests;
provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (2), (3), (4), (5), (8)(b), (10),
(11) and (12) above, no Default in the payment of interest on the notes or Event
of Default exists or would occur as a consequence thereof.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by Worldwide Fiber or the Restricted
Subsidiary under the Restricted Payment. The fair market value of any assets or
securities that are required to be valued by this covenant shall be determined
by the Board of Directors whose resolution concerning the fair market value of
any assets shall be delivered to the trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $15.0 million. No opinion or appraisal shall be
required for any Restricted Payment made under clause (7) above. In any year in
which Worldwide Fiber makes one or more Restricted Payments, Worldwide Fiber
shall include in its compliance certificate to the trustee a certification
stating that all of the Restricted Payments are, or were, permitted by the
indenture and shall set forth the basis upon which the calculations required by
this "Restricted Payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
Worldwide Fiber will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to any Indebtedness (including Acquired Debt), and Worldwide Fiber
will not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; provided, however, that
Worldwide Fiber may incur Indebtedness (including Acquired Debt) and issue
Disqualified Stock and any Restricted Subsidiary may incur Acquired Debt, if
either:
(1) the Consolidated Leverage Ratio at the end of Worldwide Fiber's most
recently ended full fiscal quarter (the "Reference Period") for which a
consolidated balance sheet of Worldwide Fiber is available immediately
preceding the date on which the additional Indebtedness is incurred or the
Disqualified Stock is issued would have been less than 5.5 to 1.0,
determined on a pro forma basis, including a pro forma application of the
net proceeds therefrom, as if the additional Indebtedness had been
incurred, or the Disqualified Stock had been issued at the beginning of the
Reference Period; or
(2) the Consolidated Capital Ratio at the end of the Reference Period would
have been less than 2.0 to 1.0, determined after giving effect to the
incurrence or issuance of the Indebtedness or Disqualified Stock and, to
the extent described in the definitions used in this prospectus, on a pro
forma basis, including, to the extent described in the definitions used in
this prospectus, a pro forma application of the net proceeds therefrom.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
-105-
<PAGE>
(1) the incurrence by Worldwide Fiber or any of its Restricted Subsidiaries of
Indebtedness under Credit Facilities or Permitted Vendor Facilities;
provided that the aggregate principal amount of all Indebtedness of
Worldwide Fiber and its Restricted Subsidiaries outstanding under all
Credit Facilities or Permitted Vendor Facilities after giving effect to the
incurrence (with letters of credit being considered to have a principal
amount equal to the maximum potential liability of Worldwide Fiber
thereunder) does not exceed an amount equal to $200.0 million less the
aggregate amount of all Net Proceeds of Asset Sales applied by Worldwide
Fiber or any of its Restricted Subsidiaries since the Issue Date to
permanently repay Indebtedness under a Credit Facility under the covenant
described above under the caption "--Repurchase at the Option of
Holders--Asset Sales";
(2) the incurrence by Worldwide Fiber and its Restricted Subsidiaries of
Existing Indebtedness;
(3) the incurrence by Worldwide Fiber of Indebtedness represented by the notes
and the Series B Notes;
(4) the incurrence by Worldwide Fiber or any of its Restricted Subsidiaries of
Purchase Money Indebtedness and Vendor Financing Indebtedness provided (A)
that the amount thereof does not exceed 100% of Worldwide Fiber's and its
Restricted Subsidiaries' aggregate cost, determined in accordance with GAAP
in good faith by the Board of Directors of Worldwide Fiber, of the
construction, acquisition, development, engineering, installation and
improvement of the applicable Telecommunications Assets and (B) in the case
of the incurrence of either Purchase Money Indebtedness or Vendor Financing
Indebtedness by a Restricted Subsidiary, such Indebtedness shall be
Qualified Subsidiary Indebtedness;
(5) the incurrence by Worldwide Fiber or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace, Indebtedness (other than
intercompany Indebtedness) that was permitted by the indenture to be
incurred under the first paragraph of this covenant or clauses (2), (3),
(4), (12), (14), (15) or (16) of this paragraph;
(6) the incurrence by Worldwide Fiber or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Worldwide Fiber and any of its
Restricted Subsidiaries and the issuance of preferred stock by a Restricted
Subsidiary to Worldwide Fiber or another Restricted Subsidiary of Worldwide
Fiber; provided, however, that:
(a) if Worldwide Fiber is the obligor on the Indebtedness, the
Indebtedness must be expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the notes; and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in the Indebtedness or preferred stock being held by a Person
other than Worldwide Fiber or a Restricted Subsidiary of Worldwide
Fiber and (ii) any sale or other transfer of the Indebtedness or
preferred stock to a Person that is not either Worldwide Fiber or a
Restricted Subsidiary of Worldwide Fiber; shall be considered, in each
case, to constitute an incurrence of the Indebtedness by Worldwide
Fiber or the Restricted Subsidiary that was not permitted by this
clause (6);
(7) the incurrence by Worldwide Fiber or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for fixing or hedging interest or
foreign currency exchange rate risk with respect to any floating rate
Indebtedness or foreign currency based Indebtedness, respectively, that is
permitted by the terms of this indenture to be outstanding; provided that
the notional amount of the Hedging Obligation does not exceed the amount of
Indebtedness or other liability to which the Hedging Obligation relates;
-106-
<PAGE>
(8) the guarantee by Worldwide Fiber or any of its Restricted Subsidiaries of
Indebtedness of Worldwide Fiber or any Restricted Subsidiary of Worldwide
Fiber that was permitted to be incurred by another provision of this
covenant;
(9) the accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock, if, in each case, the amount of Disqualified Stock is
included in Fixed Charges of Worldwide Fiber as accrued;
(10) Worldwide Fiber and its Restricted Subsidiaries may incur Indebtedness
solely for bankers acceptances, letters of credit and performance bonds or
similar arrangements, all in the ordinary course of business (other than to
the extent not supporting Indebtedness); (11) the incurrence by Worldwide
Fiber or any of its Restricted Subsidiaries arising from agreements of
Worldwide Fiber or any of its Restricted Subsidiaries providing for
indemnification, adjustment of purchase price, earn out or other similar
obligation, in each case, incurred or assumed in connection with the
disposition of any business, assets or Restricted Subsidiary of Worldwide
Fiber or any of its Restricted Subsidiaries, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of the
business, assets or Restricted Subsidiary to finance the acquisition;
(12) the incurrence of Indebtedness by Foreign Subsidiaries not to exceed $10.0
million or the equivalent amount thereof, in other foreign currencies;
(13) Worldwide Fiber or any of its Restricted Subsidiaries may incur Permitted
ROW Indebtedness;
(14) the incurrence by Worldwide Fiber or any of its Restricted Subsidiaries of
Acquired Debt in an aggregate amount not to exceed $10.0 million at any
time outstanding;
(15) Indebtedness of Worldwide Fiber not to exceed, at any one time outstanding,
two times the net cash proceeds received by Worldwide Fiber after the Issue
Date from the issuance and sale of its Equity Interest (other than
Disqualified Stock) to a Person that is not a Subsidiary of Worldwide
Fiber, to the extent such net cash proceeds have not been used pursuant to
(A) clause 3(b) of the first paragraph of the "Restricted Payments"
covenant described above to or (B) clauses (2) or (4) of the second
paragraph of the "Restricted Payments" covenant described above to make a
Restricted Payment; and
(16) the incurrence by Worldwide Fiber or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding not to exceed $15.0 million.
Indebtedness or preferred stock of any Person which is outstanding at the
time the Person becomes a Restricted Subsidiary of Worldwide Fiber (including
upon designation of any Subsidiary or other Person as a Restricted Subsidiary)
or is merged with or into or consolidated with Worldwide Fiber or a Restricted
Subsidiary of Worldwide Fiber shall be considered to have been incurred at the
time the Person becomes a Restricted Subsidiary of Worldwide Fiber or is merged
with or into or consolidated with Worldwide Fiber or a Restricted Subsidiary of
Worldwide Fiber, as applicable.
Worldwide Fiber will not incur any Indebtedness (including Permitted Debt)
that is contractually subordinated in right of payment to any other Indebtedness
of Worldwide Fiber unless the Indebtedness is also contractually subordinated in
right of payment to the notes on substantially identical terms; provided,
however, that
-107-
<PAGE>
no Indebtedness of Worldwide Fiber shall be considered to be contractually
subordinated in right of payment to any other Indebtedness of Worldwide Fiber
solely by being unsecured.
Notwithstanding any other provisions of this covenant, the maximum amount
of Indebtedness that Worldwide Fiber or a Restricted Subsidiary may incur shall
not be considered to be exceeded solely as a result of fluctuations in the
exchange rates of currencies.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, if an item of proposed
Indebtedness meets the criteria of more than one of the categories of Permitted
Debt described in clauses (1) through (16) above, or is entitled to be incurred
under the first paragraph of this covenant, Worldwide Fiber will be permitted to
classify the item of Indebtedness on the date of its incurrence in any manner
that complies with this covenant.
Liens
Worldwide Fiber will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind on any asset now owned or hereafter acquired, except
Permitted Liens, without providing that the notes shall be secured equally and
ratably with the Indebtedness so secured for so long as the obligations are so
secured.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
Worldwide Fiber will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to
Worldwide Fiber or any of Worldwide Fiber's Restricted Subsidiaries, or
with respect to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to Worldwide Fiber or any of
Worldwide Fiber's Restricted Subsidiaries;
(2) make loans or advances to Worldwide Fiber or any of Worldwide Fiber's
Restricted Subsidiaries; or
(3) transfer any of its properties or assets to Worldwide Fiber or any of
Worldwide Fiber's Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or because of:
(1) Existing Indebtedness as in effect on the Issue Date and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those
contained in the Existing Indebtedness, as in effect on the Issue Date;
(2) the Credit Facilities, the indenture, the notes and the Series B Notes,
Qualified Subsidiary Indebtedness and Indebtedness ranking pari passu with
the notes, provided that with respect to Indebtedness ranking pari passu
with the Notes such provisions are no more restrictive than those set forth
in the notes;
(3) applicable law;
-108-
<PAGE>
(4) any instrument governing Indebtedness or Capital Stock of a Person acquired
by Worldwide Fiber or any of its Restricted Subsidiaries as in effect at
the time of the acquisition (except to the extent the Indebtedness was
incurred in connection with or in contemplation of the acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, if, in the case of Indebtedness, the
Indebtedness was permitted by the terms of the indenture to be incurred;
(5) customary non-assignment provisions restricting subletting or assignment in
leases or other agreements entered into in the ordinary course of business
and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary course of
business that impose restrictions on the property so acquired of the nature
described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted Subsidiary
that restricts distributions by the Restricted Subsidiary pending its sale
or other disposition, provided that the consummation of the transaction
would not result in a Default or an Event of Default, that the restriction
terminates if the transaction is not completed and that the completed or
abandonment of the transaction occurs within one year of the date the
agreement was entered into;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing the Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred under the
provisions of the covenant described above under the caption "--Liens" that
limit the right of Worldwide Fiber or any of its Restricted Subsidiaries to
dispose of the assets subject to the Lien;
(10) customary limitations on the disposition or distribution of assets or
property in joint venture agreements and other similar agreements entered
into in the ordinary course of business;
(11) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business;
(12) encumbrances and restrictions in Indebtedness incurred by Foreign
Subsidiaries in accordance with the covenant described above under the
caption "Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(13) any Indebtedness or any agreement pursuant to which such Indebtedness was
issued if (A) the encumbrance or restriction applies only upon a payment or
financial covenant default or event of default contained in such
Indebtedness or agreement 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 in good faith by the
Board of Directors of Worldwide Fiber).
Amalgamation, Merger, Consolidation, or Sale of Assets
Worldwide Fiber may not, directly or indirectly: (1) amalgamate or
consolidate or merge with or into another Person (whether or not Worldwide Fiber
is the surviving corporation); or (2) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of its properties or assets, in
one or more related transactions, to another Person; unless:
-109-
<PAGE>
(1) either: (a) Worldwide Fiber is the surviving corporation; or (b) the Person
formed by or surviving the amalgamation, consolidation or merger (if other
than Worldwide Fiber) or to which the sale, assignment, transfer,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of Canada or any province of Canada or
the United States, any state of the United States or the District of
Columbia;
(2) the Person formed by or surviving any the amalgamation, consolidation or
merger (if other than Worldwide Fiber) or the Person to which the sale,
assignment, transfer, conveyance or other disposition shall have been made
assumes all the obligations of Worldwide Fiber under the notes, the Series
B Notes, the indenture and the registration rights agreement under
agreements reasonably satisfactory to the trustee;
(3) no Default or Event of Default (or an event that, with the passing of time
or giving of notice or both, would constitute an Event of Default) shall
exist or shall occur immediately after giving effect on a pro forma basis
to the transaction;
(4) the transaction will not result in Worldwide Fiber or the Person formed by
or surviving the amalgamation, consolidation or merger (if other than
Worldwide Fiber) being required to make any deduction or withholding on
account of Taxes as described under the caption "Redemption for Changes in
Canadian Withholding Taxes" and "Payment of Additional Amounts" from any
payment under or for the notes that Worldwide Fiber would not have been
required to make had the transaction or series of related transactions not
occurred;
(5) except in the case of the amalgamation, consolidation or merger of
Worldwide Fiber with or into a Wholly-Owned Restricted Subsidiary,
Worldwide Fiber or the Person formed by or surviving any amalgamation,
consolidation or merger (if other than Worldwide Fiber) will, on the date
of the transaction after giving pro forma effect to the transaction and any
related financing transactions as if the same had occurred at the beginning
of the applicable four-quarter period, be permitted to incur at least $1.00
of additional Indebtedness under clause (1) or (2) of the first paragraph
of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(6) Worldwide Fiber shall have delivered to the trustee an Officers'
Certificate and an opinion of counsel, each stating that the amalgamation,
consolidation, merger or transfer and the supplemental indenture, if any,
comply with the indenture.
In addition, Worldwide Fiber may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Amalgamation, Merger, Consolidation, or
Sale of Assets" covenant will not apply to a sale, assignment, transfer,
conveyance or other disposition of assets between or among Worldwide Fiber and
any of its Wholly-Owned Restricted Subsidiaries.
Upon any amalgamation, consolidation or merger or any transfer of all or
substantially all of the assets of Worldwide Fiber in accordance with the above,
the successor corporation formed by the amalgamation or consolidation or into
which Worldwide Fiber is merged or to which the transfer is made shall succeed
to and (except in the case of a lease) be substituted for, and may exercise
every right and power of, Worldwide Fiber under the indenture with the same
effect as if the successor corporation had been named in the Indenture as
Worldwide Fiber, and (except in the case of a lease) Worldwide Fiber shall be
released from the obligations under the notes, and the indenture except with
respect to any obligations that arise from, or are related to, such transaction.
For purposes of the above, the transfer (by assignment, sale or otherwise)
of all or substantially all of the properties and assets of one or more
Subsidiaries, Worldwide Fiber's interest in which constitutes all or
sub-
-110-
<PAGE>
stantially all of the properties and assets of Worldwide Fiber, shall be
considered to be the transfer of all or substantially all of the properties and
assets of Worldwide Fiber.
Transactions with Affiliates
Worldwide Fiber will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties, assets or securities to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
Worldwide Fiber or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by Worldwide Fiber or such
Restricted Subsidiary with a Person that is not an Affiliate; and
(2) Worldwide Fiber delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, a resolution of the Board of Directors described in an
Officers' Certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board
of Directors and is in the best interests of Worldwide Fiber or such
Restricted Subsidiary; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items shall not be considered to be Affiliate Transactions
and, therefore, will not be subject to the provisions of the prior paragraph:
(1) reasonable fees and compensation paid to, and indemnity provided on behalf
of, our officers, directors, employees, agents or consultants or any of our
Restricted Subsidiaries as determined in good faith by the Board of
Directors or senior management of Worldwide Fiber;
(2) transactions between or among us and any of our Restricted Subsidiaries;
(3) any sale or other issuance of our Equity Interests (other than Disqualified
Stock);
(4) Restricted Payments that are permitted by the provisions of the indenture
described above under the caption "--Restricted Payments" or by clauses
(1), (3), (6), (7) or (8) of the definition of "Permitted Investments"; and
(5) any agreement or arrangement as in effect on the Issue Date or any
amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement or
arrangement thereto so long as any such amendment or replacement agreement
or arrangement is not more disadvantageous to Worldwide Fiber or its
Restricted Subsidiaries, as the case may be, in any material respect than
the original agreement as in effect on the Issue Date.
-111-
<PAGE>
Issuances of Guarantees by Restricted Subsidiaries
Worldwide Fiber will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of Worldwide Fiber which is pari passu (other than
any Indebtedness incurred under a Credit Facility) with or subordinate in right
of payment to the notes ("Guaranteed Indebtedness), unless:
o the Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the indenture providing for a guarantee (a
"Subsidiary Guarantee") of payment of the notes by the Restricted
Subsidiary and
o the 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
Worldwide Fiber or any other Restricted Subsidiary as a result of any
payment by the Restricted Subsidiary under its Subsidiary Guarantee;
provided that this paragraph shall not be applicable to any guarantee
of any Restricted Subsidiary that existed at the time the Person
became a Restricted Subsidiary and was not incurred in connection
with, or in contemplation of, the Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the
notes, then the guarantee of the Guaranteed Indebtedness shall be pari
passu with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the notes, then the guarantee of the 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 (1) any sale, exchange or transfer,
to any Person that is not an Affiliate of Worldwide Fiber, of all of Worldwide
Fiber's and each Restricted Subsidiary's Capital Stock in, or all or
substantially all of the assets of, the Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the indenture) or (2) the release or
discharge of the guarantee which resulted in the creation of the Subsidiary
Guarantee, except a discharge or release by or as a result of payment under the
guarantee.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by Worldwide Fiber and its Restricted Subsidiaries
in the Subsidiary so designated will be considered to be an Investment made as
of the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of the covenant described above
under the caption "--Restricted Payments." All such outstanding Investments will
be valued at their fair market value at the time of such designation. That
designation will only be permitted if the Restricted Payment would be permitted
at that time and if the Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary. The Board of Directors may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would
not cause a Default and such redesignation will increase the amount available
for Restricted Payments under the first paragraph of the covenant described
under the caption "--Restricted Payments" as provided in the covenant described
under the caption "--Restricted Payments" or Permitted Investments, as
applicable.
Business Activities
Worldwide Fiber will not, and will not permit any Restricted Subsidiary to,
engage to any material extent in any business other than the Telecommunications
Business.
-112-
<PAGE>
Payments for Consent
Worldwide Fiber will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any holder of notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the indenture or the notes unless
the consideration is offered to be paid and is paid to all holders of the notes
that consent, waive or agree to amend in the time frame described in the
solicitation documents relating to the consent, waiver or agreement.
Reports
For so long as any notes remain outstanding, Worldwide Fiber will furnish
to the holders the information required to be delivered under Rule 144A(d)(4)
under the Securities Act. Whether or not Worldwide Fiber is subject to Section
13(a) or 15(d) of the Exchange Act, Worldwide Fiber shall file with the
Securities and Exchange Commission and furnish to the holders and the trustee
(1) within 140 days after the end of each fiscal year, annual reports on Form
20-F or 40-F, as applicable (or any successor form), containing the information
required to be contained in the annual reports (or required in such successor
form) and (2) (a) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, reports on Form 10-Q or (b) within 60 days after
the end of each of the first three fiscal quarters of each fiscal year, reports
on Form 6-K (or any successor form) which, regardless of applicable
requirements, shall, at a minimum, contain a "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or Additional
Amounts, if any, concerning, the notes;
(2) default in payment when due of the principal of or premium, if any, on the
notes;
(3) failure by Worldwide Fiber or any of its Restricted Subsidiaries to comply
with the provisions described under the caption "--Amalgamation, Merger,
Consolidation, or Sale of Assets";
(4) failure by Worldwide Fiber or any of its Restricted Subsidiaries for 15
days after written notice thereof has been given to Worldwide Fiber by the
trustee or to Worldwide Fiber and the trustee by holders of at least 25% of
the aggregate principal amount of the notes outstanding to comply with the
provisions described under the captions "--Repurchase at the Option of
Holders--Change of Control" or "--Asset Sales;"
(5) failure by Worldwide Fiber or any of its Restricted Subsidiaries for 60
days after written notice thereof has been given to Worldwide Fiber by the
trustee or to Worldwide Fiber and the trustee by holders of at least 25% of
the aggregate principal amount of the notes outstanding to comply with any
of the other agreements in the indenture or the notes;
(6) the voluntary relinquishment by Worldwide Fiber of any of its rights under
the Non-Competition Agreement or the failure by Worldwide Fiber for 30 days
after written notice has been given to Worldwide Fiber by the trustee or to
Worldwide Fiber and the trustee by holders of at least 25% of the aggregate
principal amount of the notes outstanding to enforce any of such rights, in
each case which is materially detrimental to the interests of Worldwide
Fiber or the holders;
-113-
<PAGE>
(7) default under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any Indebtedness
for money borrowed by Worldwide Fiber or any of its Restricted Subsidiaries
(or the payment of which is guaranteed by Worldwide Fiber or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists,
or is created after the Issue Date, if that default:
(a) is caused by a failure to pay principal of or premium, if any, on such
Indebtedness before the expiration of the grace period provided in
such Indebtedness on the date of the default (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness before its express
maturity,
and, in each case, the principal amount of such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has
been a Payment Default or the maturity of which has been so accelerated,
aggregates $10.0 million or more;
(8) failure by Worldwide Fiber or any of its Restricted Subsidiaries to pay
final judgments which are non-appealable aggregating in excess of $10.0
million (net of applicable insurance coverage which is acknowledged in
writing by the insurer), which judgments are not paid, discharged or stayed
for a period of 60 days; and
(9) certain events of bankruptcy or insolvency concerning Worldwide Fiber or
any of its Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Worldwide Fiber, any Restricted
Subsidiary that is a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding notes will become due and payable immediately without further
action or notice. If any other Event of Default occurs and is continuing, the
trustee by notice to Worldwide Fiber or the holders of at least 25% in principal
amount of the then outstanding notes by notice to Worldwide Fiber and the
trustee may declare all the notes to be due and payable immediately.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a majority
in principal amount of the then outstanding notes may direct the trustee in its
exercise of any trust or power. The trustee may withhold from holders of the
notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
premium, if any, or interest on, or the principal of, the notes.
Worldwide Fiber is required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default or
Event of Default, Worldwide Fiber is required to deliver to the trustee a
statement specifying the Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Worldwide
Fiber or any of its Subsidiaries shall have any liability for any obligations of
Worldwide Fiber or its Subsidiaries under the notes, the inden-
-114-
<PAGE>
ture or for any claim based on, for, or because of, such obligations or their
creation. Each holder of notes by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the notes. The waiver may not be effective to waive liabilities under the
federal securities laws.
Legal Defeasance and Covenant Defeasance
Worldwide Fiber may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding notes ("Legal
Defeasance") except for:
(1) the rights of holders of outstanding notes to receive payments for the
principal of, premium, if any, and interest on the notes when the payments
are due from the trust referred to below;
(2) Worldwide Fiber's obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee, and
Worldwide Fiber's obligations in connection the rights, powers, trusts,
duties and immunities of the trustee;
(4) the Legal Defeasance provisions of the indenture; and
(5) Worldwide Fiber's obligation to pay Additional Amounts.
In addition, Worldwide Fiber may, at its option and at any time, elect to
have the obligations of Worldwide Fiber released concerning certain covenants
that are described in the indenture ("Covenant Defeasance") and after the
election any omission to comply with those covenants shall not constitute a
Default or Event of Default concerning the notes. In the event Covenant
Defeasance occurs, certain events, not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events, described under "Events of
Default" will no longer constitute an Event of Default concerning the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Worldwide Fiber must irrevocably deposit with the trustee, in trust, for
the benefit of the holders of the notes, cash in U.S. dollars, non-callable
Government Securities, or a combination of cash and non-callable Government
Securities, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding notes on the
stated maturity or on the applicable redemption date and Worldwide Fiber
must specify whether the notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, Worldwide Fiber shall have delivered to
the trustee an Opinion of Counsel reasonably acceptable to the trustee
confirming that (a) Worldwide Fiber has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the Issue
Date, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based on an IRS ruling or applicable
federal income tax law such opinion of counsel shall confirm that, the
holders of the outstanding notes will not recognize income, gain or loss
for United States federal income tax purposes as a result of the
-115-
<PAGE>
Legal Defeasance and will be subject to United States federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if the Legal Defeasance had not occurred and Worldwide Fiber
shall have delivered to the trustee an opinion of counsel in Canada
reasonably acceptable to the trustee confirming that the holders of the
outstanding notes will not recognize income, gain or loss for Canadian
federal income tax purposes as a result of the Legal Defeasance and will be
subject to Canadian federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if the Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Worldwide Fiber shall have delivered to
the trustee an Opinion of Counsel reasonably acceptable to the trustee
confirming that the holders of the outstanding notes will not recognize
income, gain or loss for United States federal income tax purposes as a
result of the Covenant Defeasance and will be subject to United States
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if the Covenant Defeasance had not
occurred and Worldwide Fiber shall have delivered to the trustee an opinion
of counsel in Canada reasonably acceptable to the trustee confirming that
the holders of the outstanding notes will not recognize income, gain or
loss for Canadian federal income tax purposes as a result of the Covenant
Defeasance and will be subject to Canadian federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if the Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either: (a) on the date of the deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to the
deposit); or (b) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
(5) the Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or
instrument (other than the indenture) to which Worldwide Fiber or any of
its Restricted Subsidiaries is a party or by which Worldwide Fiber or any
of its Restricted Subsidiaries is bound;
(6) Worldwide Fiber must have delivered to the trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(7) Worldwide Fiber must deliver to the trustee an Officers' Certificate
stating that the deposit was not made by Worldwide Fiber with the intent of
preferring the holders of notes over the other creditors of Worldwide Fiber
with the intent of defeating, hindering, delaying or defrauding creditors
of Worldwide Fiber or others; and
(8) Worldwide Fiber must deliver to the trustee an Officers' Certificate and an
opinion of counsel, in the case of the Officers' Certificate, stating that
all conditions precedent relating to the Legal Defeasance or the Covenant
Defeasance have been complied with and, in the case of the opinion of
counsel, that the conditions precedent in clauses (1) (concerning the
validity and perfection of the security interest), (2), (3) and (5) have
been complied with.
Indemnification for Judgment Currency Fluctuations
The obligations of Worldwide Fiber to any holder of notes shall,
notwithstanding any judgment in a currency (the "Judgment Currency") other than
U.S. dollars (the "Agreement Currency"), be discharged only to the extent that
on the day following receipt by the holder of notes or the trustee of any amount
in the Judgment Currency, the holder of notes may in accordance with normal
banking procedures purchase the Agreement Currency with the Judgment Currency.
If the amount of the Agreement Currency so purchased is less than the amount
originally to be paid to the holder of notes or the trustee in the Agreement
Currency, Worldwide Fiber will pay the difference and if the amount of the
Agreement Currency so purchased exceeds the amount originally to be paid to the
holder of notes or the trustee the holder of notes or the trustee will pay to or
for the account of Worldwide Fiber the excess, provided that the holder of notes
or the trustee shall not have any obliga-
-116-
<PAGE>
tion to pay the excess as long as a Default by Worldwide Fiber in its
obligations under the notes or the indenture has occurred and is continuing, in
which case the excess may be applied by the holder of notes to such obligations.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect as
to all notes issued thereunder, when either (a) all such notes theretofore
authenticated and delivered (except lost, stolen or destroyed notes which have
been replaced or paid and notes for whose payment money has theretofore been
deposited in trust and thereafter repaid to Worldwide Fiber) have been delivered
to the Trustee for cancellation; or (b)(i) all such Notes not theretofore
delivered to such trustee for cancellation have become due and payable by reason
of the making of a notice of redemption or otherwise or will become due and
payable within one year and we or a Subsidiary Guarantor, if any, has
irrevocably deposited or caused to be deposited with such Trustee as trust funds
in trust an amount of money sufficient to pay and discharge the entire
Indebtedness on such notes not theretofore delivered to the Trustee for
cancellation for principal, premium, if any, and accrued interest to the date of
maturity or redemption; (ii) no Default or Event of Default with respect to the
indenture or the notes shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will not
result in a breach or violation of, or constitute a default under, any other
instrument to which we or a Subsidiary Guarantor, if any, is a party or by which
we or a Subsidiary Guarantor, if any, is bound; (iii) we or a Subsidiary
Guarantor, if any, has paid or caused to be paid all sums payable by it under
the indenture; and (iv) we have delivered irrevocable instructions to the
trustee under the indenture to apply the deposited money toward the payment of
such notes at maturity or the redemption date, as the case may be.
In addition, we must deliver an Officer's Certificate and an opinion of
counsel to the trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
Amendment, Supplement and Waiver
With the consent of holders of not less than a majority in aggregate
principal amount of the notes at the time outstanding, Worldwide Fiber and the
trustee are permitted to amend or supplement the indenture or any supplemental
indenture or modify the rights of the holders; provided that without the consent
of each holder affected, no amendment, supplement, modification or waiver may
(concerning any notes held by a non-consenting holder):
(1) reduce the principal amount of notes whose holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or alter
the provisions concerning the redemption of the notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the notes (except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment default
that resulted from such acceleration);
(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to waivers of
past Defaults or the rights of holders of notes to receive payments of
principal of or premium, if any, or interest on the notes;
-117-
<PAGE>
(7) waive a redemption payment concerning any note (other than a payment
required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders");
(8) cause the notes to become subordinate in right of payment to any other
Indebtedness;
(9) make any change that would adversely affect the rights of the holders to
receive Additional Amounts;
(10) modify the obligation of Worldwide Fiber to make a Change of Control Offer
to purchase notes after the occurrence of an event which constitutes a
Change of Control; or
(11) make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any holder of notes,
Worldwide Fiber and the trustee may amend or supplement the indenture or the
notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of Worldwide Fiber's obligations to holders
of notes in the case of a merger or consolidation or sale of all or
substantially all of Worldwide Fiber's assets;
(4) to make any change that would provide any additional rights or benefits to
the holders of notes or that does not adversely affect the legal rights
under the indenture of any such holder; or
(5) to comply with requirements of the Securities and Exchange Commission to
effect or maintain the qualification of the indenture under the Trust
Indenture Act.
Concerning the Trustee
If the trustee becomes one of our creditors, the indenture limits its right
to obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The trustee will
be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate the conflict within 90 days, apply to the
Securities and Exchange Commission for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur and be continuing, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of notes, unless the holder shall have offered to the trustee security
and indemnity satisfactory to it against any loss, liability or expense.
Additional Information
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement without charge by writing to Worldwide Fiber Inc.,
#1510-1066 West Hastings Street, Vancouver, BC Canada V6E 3X1, Attention:
Stephen Stow.
-118-
<PAGE>
Governing Law
The indenture provides that it and the notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of laws to the extent that the
application of the law of another jurisdiction would be required by principles
of conflicts of laws.
Enforceability of Judgments
Because all or a substantial portion of our assets and the assets of our
directors and officers are located outside of the United States, it may not be
possible for you to effect service of process within the United States upon us
or those persons. Furthermore it may not be possible for you to enforce against
us or them in the United States, judgments obtained in U.S. courts based upon
the civil liability provisions of the U.S. Federal securities laws or other laws
of the United States, including judgments concerning the payment of principal,
premium, interest, Additional Amounts, Change of Control Payment, offer price,
redemption price or other amounts payable under the notes.
Worldwide Fiber has been informed by its Canadian counsel, Farris, Vaughan,
Wills & Murphy, that the laws of the Province of British Columbia and the
federal laws of Canada applicable in the Province of British Columbia permit an
action to be brought in a court of competent jurisdiction in the Province of
British Columbia on any final and conclusive judgment in personam of any federal
or state court located in the Borough of Manhattan in The City of New York that
is not impeachable as void or voidable under the internal laws of the State of
New York for a sum certain for the enforcement of the indenture or the notes if:
o the court rendering the judgment had jurisdiction over the judgment
debtor, as recognized by the Canadian Court (and submission by
Worldwide Fiber in the indenture to the non-exclusive jurisdiction of
the New York court will be sufficient for that purpose),
o the judgment was not obtained by fraud or in a manner contrary to
natural justice and the enforcement of the judgment would not be
inconsistent with public policy, as that term is applied by a Canadian
Court, or contrary to any order made by the Attorney General of Canada
under the Foreign Extraterritorial Measures Act (Canada),
o the enforcement of the judgment does not constitute, directly or
indirectly, the enforcement of such foreign revenue, expropriatory or
penal laws, and
o the action to enforce the judgment is commenced within the applicable
limitation period. Worldwide Fiber has been advised by Farris,
Vaughan, Wills & Murphy that it knows of no reason, based upon public
policy under the laws of the Province of British Columbia and the
federal laws of Canada applicable in the Province of British Columbia
for avoiding recognition of a judgment of a New York court to enforce
the indenture or the notes.
We are a corporation organized under the laws of Canada. A majority of
our directors and officers, as well as certain experts named in this prospectus,
reside principally in Canada. Because all or a substantial portion of our assets
and the assets of these persons are located outside the United States, it may
not be possible for you to effect service of process within the United States
upon us or those persons. Furthermore it may not be possible for you to enforce
against us or them in the United States, judgments obtained in U.S. courts based
upon the civil liability provisions of the U.S. Federal securities laws or other
laws of the United States. We have been advised by Farris, Vaughan, Wills &
Murphy, our special Canadian counsel, that there is doubt as to the
enforceability, in original actions in Canadian courts, of liabilities based
upon the U.S. Federal securities laws and as to the enforceability in Canadian
courts of judgments of U.S. courts obtained in actions based upon the
-119-
<PAGE>
civil liability provisions of the U.S. Federal securities laws. Therefore, it
may not be possible to enforce those actions against us, our directors and
officers or the experts named in this prospectus.
Consent to Jurisdiction and Service
The indenture provides that Worldwide Fiber irrevocably appoints CT
Corporation System as its agent for service of process in any suit, action, or
proceeding concerning the indenture or the notes and for actions brought under
federal or state securities laws in any federal or state court located in the
Borough of Manhattan in The City of New York, and submits to the non-exclusive
jurisdiction.
Certain Definitions
Described below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all of these terms, as well as
any other capitalized terms used in this prospectus for which no definition is
provided.
"Acquired Debt" means, concerning any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
whether or not the Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Additional Senior Notes" means any senior notes which have terms,
conditions and covenants substantially identical to the terms, conditions and
covenants of the notes and which are issued by Worldwide Fiber under the
indenture after the Issue Date.
"Adjusted Consolidated Cash Flow" means Consolidated Cash Flow minus all
non-cash items, increasing Consolidated Net Income for the applicable period to
the extent not previously deducted in computing Consolidated Cash Flow, whether
or not such non-cash items were accrued or incurred in the ordinary course of
the business or otherwise.
"Adjusted Fiber Value" means, at any time after certain Affiliates of
Ledcor Inc. have contributed 12 dark fiber strands to Worldwide Fiber under the
Undertaking Agreements, an amount equal to $72.5 million less one-twelfth (1/12)
of such amount for each of the dark fiber strands which has been sold, leased,
contributed or with respect to which an IRU has been granted to any Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be considered to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or rights
other than any sale, lease, transfer, conveyance or other disposition of
telecommunications capacity, transmission rights, or other
-120-
<PAGE>
telecommunications services provided over our network in the ordinary
course of business; provided that the sale, conveyance or other disposition
of all or substantially all of the assets of Worldwide Fiber and its
Restricted Subsidiaries taken as a whole will be governed by the provisions
of the indenture described above under the caption "--Change of Control"
and/or the provisions described above under the caption "--Merger,
Consolidation or Sale of Assets" and not by the provisions of the "Asset
Sale" covenant; and
(2) the issuance of Equity Interests by any of Worldwide Fiber's Restricted
Subsidiaries or the sale of Equity Interests in any of its Subsidiaries,
Notwithstanding the preceding, the following items shall be considered not to be
Asset Sales:
(1) any single transaction or series of related transactions that: (a) involves
assets having a fair market value of less than $1.0 million; or (b) results
in net proceeds to Worldwide Fiber and its Restricted Subsidiaries of less
than $1.0 million;
(2) a transfer of assets between or among Worldwide Fiber and its Restricted
Subsidiaries or between Restricted Subsidiaries,
(3) Permitted Telecommunication Asset Dispositions;
(4) an issuance of Equity Interests by a Restricted Subsidiary to Worldwide
Fiber or to a Wholly-Owned Restricted Subsidiary; and
(5) a Permitted Investment or a Restricted Payment that is permitted by the
covenant described above under the caption "--Restricted Payments."
"Beneficial Owner" has the meaning assigned to the term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as the term is used in Section 13(d)(3) of
the Exchange Act), the "person" shall be considered to have beneficial ownership
of all securities that such "person" has the right to acquire, whether the right
is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
"Canadian Taxing Authority" shall mean any federal, provincial, territorial
or other Canadian government or any authority or agency therein or thereof
having power to tax.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability for a capital lease that would at that
time be required to be capitalized on a balance sheet in accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock;
(3) in the case of a partnership or limited liability company, partnership or
membership interests (whether general or limited); and
-121-
<PAGE>
(4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets
of, the issuing Person.
"Cash Equivalents" means any of the following:
(1) any investment in direct obligations of the United States of America or any
agency thereof or of Canada or any province or agency thereof of
obligations guaranteed by the United States of America or any agency
thereof or Canada or any province or agency thereof, in each case with a
term of not more than one year, provided that any province of Canada must
be rated at least "R-1" by the Dominion Bond Rating Service Limited;
(2) investments in time deposit accounts, term deposit accounts, certificates
of deposit, money-market deposits, bankers acceptances and obligations
maturing within one year of the date of acquisition of the obligation
issued by a bank or trust company which is organized under the laws of the
United States of America, any state of the United States, Canada or any
province of Canada, and which bank or trust company has, or the obligations
of which bank or trust company is guaranteed by a bank or trust company
which has, capital, surplus and undivided profits aggregating in excess of
$150.0 million (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A", or the similar equivalent rating, or
higher by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act) or by
Dominion Bond Rating Service Limited or Canadian Bond Rating Service, Inc.
or any money-market fund sponsored by a registered broker dealer or mutual
fund distributor;
(3) repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (1) above entered into with a
bank meeting the qualifications described in clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days after the
date of acquisition, issued by a corporation (other than Worldwide Fiber or
an Affiliate of Worldwide Fiber) organized and in existence under the laws
of the United States of America or Canada with a rating at the time as of
which any investment the United States of American or Canada is made of
"P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard & Poor's or at least "R-1" by Dominion Bond
Rating Service Limited or Canadian Bond Rating Service (in the case of a
Canadian issuer);
(5) investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth,
territory or province of the United States of America or Canada, or by any
political subdivision or taxing authority of the United States of America
or Canada, and rated at least "R-1" by the Dominion Bond Rating Service
Limited (in the case of a Canadian issuer);
(6) investments in money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1) through
(5) of this definition.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of Worldwide Fiber and its
Subsidiaries taken as a whole to any "person" (as the term is used in
Section 13(d)(3) of the Exchange Act) other than a Permitted Holder;
-122-
<PAGE>
(2) the adoption of a plan relating to the liquidation or dissolution of
Worldwide Fiber;
(3) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than a Permitted Holder, becomes the Beneficial
Owner, directly or indirectly, of more than 50% of the Voting Stock of
Worldwide Fiber, measured by voting power rather than number of shares;
(4) the first day on which a majority of the members of the Board of Directors
of Worldwide Fiber are not Continuing Directors; or
(5) Worldwide Fiber consolidates with, or merges with or into, any Person, or
any Person consolidates with, or merges with or into, Worldwide Fiber, in
any such event pursuant to a transaction in which any of the outstanding
Voting Stock of Worldwide Fiber is converted into or exchanged for cash,
securities or other property, other than any such transaction where the
Voting Stock of Worldwide Fiber outstanding immediately before such
transaction is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such surviving
or transferee Person immediately after giving effect to such issuance.
"Consolidated Capital Ratio" means, with respect to Worldwide Fiber as of
any date, the ratio of (1) the aggregate consolidated principal amount of
Indebtedness of Worldwide Fiber and its Restricted Subsidiaries then outstanding
to (2) the Consolidated Net Worth of Worldwide Fiber and its Restricted
Subsidiaries as of such date, in each case as shown on the consolidated balance
sheet of Worldwide Fiber in accordance with GAAP.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:
(1) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing the Consolidated Net Income; plus
(2) Fixed Charges of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred for letter of credit or bankers' acceptance
financings, and net payments, if any, under Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated
Net Income; plus
(3) depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve
for cash expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income; minus
(4) non-cash items increasing the Consolidated Net Income for such period,
other than items that were accrued in the ordinary course of business, in
each case, on a consolidated basis and determined in accordance with GAAP.
-123-
<PAGE>
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Restricted Subsidiary of Worldwide Fiber shall be added to Consolidated
Net Income to compute Consolidated Cash Flow of Worldwide Fiber only to the
extent that a corresponding amount would be permitted at the date of
determination to be dividended to Worldwide Fiber by the Restricted Subsidiary
without prior approval (that has not been obtained), under the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Subsidiary or its
stockholders.
"Consolidated Leverage Ratio" means, concerning Worldwide Fiber, as of any
date, the ratio of (1) the aggregate amount of Indebtedness of Worldwide Fiber
and its Restricted Subsidiaries then outstanding (other than intercompany debt)
to (2) the Consolidated Cash Flow of Worldwide Fiber and its Restricted
Subsidiaries on a consolidated basis for the most recently ended four fiscal
quarters immediately preceding the date of determination for which consolidated
financial statements of Worldwide Fiber are available (the "Reference Period").
In addition to the foregoing, for purposes of this definition,
"Consolidated Cash Flow" shall be calculated on a pro forma basis after giving
effect to the issuance of the notes and the incurrence of the Indebtedness (and
the application of the proceeds therefrom) giving rise to the need to make such
calculation and any incurrence (and the application of the proceeds therefrom)
or repayment of Indebtedness, other than the incurrence or repayment of
Indebtedness for ordinary working capital purposes, at any time subsequent to
the beginning of the Reference Period and on or prior to the date of
determination, as if such incurrence (and the application of the proceeds
thereof), or the repayment, as the case may be, occurred on the first day of the
Reference Period.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Restricted
Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by
that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has
not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or
its stockholders, it being understood that the Net Income of such
Restricted Subsidiary for such period shall be included in Consolidated Net
Income up to the aggregate amount of cash that such Restricted Subsidiary
could have paid under the dividends or similar distributions during the
period to Worldwide Fiber or any of its Restricted Subsidiaries;
(3) the Net Income of any Person acquired in a pooling of interests transaction
for any period before the date of such acquisition shall be excluded;
(4) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the specified Person or one of its
Subsidiaries, except for purposes of the covenant described under the
caption "--Certain Covenants--Restricted Payments" and "--Incurrence of
Indebtedness and Issuance of Preferred Stock," in which case the Net Income
of any Unrestricted Subsidiary will be included to the extent it would
otherwise be included under clause (1) of this definition above; and
(5) the cumulative effect of a change in accounting principles shall be
excluded.
-124-
<PAGE>
"Consolidated Net Worth" means, with respect to Worldwide Fiber as of any
date, the sum of (1) the consolidated equity of the common stockholders of
Worldwide Fiber and its Restricted Subsidiaries that are Restricted Subsidiaries
as of such date plus (2) the respective amounts reported on Worldwide Fiber's
balance sheet as of such date with respect to any series of Preferred Stock
(other than Disqualified Stock) that by its terms is not entitled to the payment
of dividends unless such dividends may be declared and paid only out of net
earnings for the year of such declaration and payment, but only to the extent of
any cash received by Worldwide Fiber upon issuance of such Preferred Stock plus
(3) the Adjusted Fiber Value, less (x) all write-ups (other than write-ups
resulting from foreign currency translations and write-ups of tangible assets of
a going concern business made within 12 months after the acquisition of such
business) after the Issue Date in the book value of any asset owned by Worldwide
Fiber or a Restricted Subsidiary of Worldwide Fiber, (y) all outstanding net
Investments as of such date in unconsolidated Restricted Subsidiaries and in
Persons that are not Restricted Subsidiaries, and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such date, all of
the above determined in accordance with GAAP.
"Continuing Director" means, as of any date of determination, any member of
the Board of Directors of Worldwide Fiber who:
(1) was a member of the Board of Directors on the Issue Date; or
(2) was nominated for election or elected to the Board of Directors with the
approval of a majority of the Continuing Directors who were members of the
Board at the time of such nomination or election.
"Credit Facilities" means, with respect to Worldwide Fiber or any if its
Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing for
loans or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, under a sinking
fund obligation or otherwise, or redeemable at the option of the holder thereof,
in whole or in part, on or before the date that is 91 days after the date on
which the notes mature. Notwithstanding the preceding sentence, any Capital
Stock that would constitute Disqualified Stock solely because the holders
thereof have the right to require Worldwide Fiber to repurchase such Capital
Stock upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
Worldwide Fiber may not repurchase or redeem any such Capital Stock under such
provisions unless the repurchase or redemption complies with the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
"Eligible Investments" means cash or Cash Equivalents or such other
investment grade debt securities as the Board of Directors shall approve from
time to time; provided, however, that in no event shall any funds required to be
held as Eligible Investments be used, directly or indirectly, to repurchase any
notes, except as specifically provided in the Unrestricted Offer.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of Worldwide Fiber or any of its
Restricted Subsidiaries outstanding on the Issue Date (other than the Credit
Facilities).
-125-
<PAGE>
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including, without
limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments, if any, under Hedging Obligations;
plus
(2) the consolidated interest of such Person and its Restricted Subsidiaries
that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is Guaranteed
by such Person or one of its Restricted Subsidiaries or secured by a Lien
on assets of such Person or one of its Restricted Subsidiaries, whether or
not such Guarantee or Lien is called upon; plus
(4) the product of (a) all dividend payments, whether or not in cash, on any
series of preferred stock (including, without limitation, Disqualified
Stock) of such Person or any of its Restricted Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of
Worldwide Fiber (other than Disqualified Stock) or to Worldwide Fiber or a
Restricted Subsidiary of Worldwide Fiber, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the
then current combined federal, state and local statutory tax rate of such
Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Foreign Subsidiary" means any Restricted Subsidiary of Worldwide Fiber
which (1) is not organized under the laws of (x) the United States or any state
of the United States, (y) the District of Columbia or (z) Canada or any province
of Canada and (2) conducts substantially all of its business operations outside
the United States of America and Canada.
"GAAP" means generally accepted accounting principles in the United States
as described 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 have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
-126-
<PAGE>
(2) evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any property,
except such balance that constitutes an accrued expense or trade payable;
or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person, which shall be considered the lesser of the full amount of
such Indebtedness and the fair market value of the property or asset so secured)
and, to the extent not otherwise included, the Guarantee by such Person of any
indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and
(2) the principal amount thereof, together with any interest thereon that is
more than 30 days past due, in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If Worldwide Fiber or any Restricted Subsidiary of Worldwide Fiber sells or
otherwise disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of Worldwide Fiber so that, after giving effect to any such sale or
disposition, such Person is no longer a Restricted Subsidiary of Worldwide
Fiber, Worldwide Fiber shall be considered to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Restricted Payments."
"Issue Date" means the first date on which any notes were issued under the
indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person and its Restricted Subsidiaries, determined in accordance with GAAP
and before any reduction for preferred stock dividends, excluding, however:
-127-
<PAGE>
(1) any gain or loss, together with any related provision for taxes on the gain
or loss, realized in connection with: (a) any Asset Sale; or (b) the
disposition of any securities by the Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of the Person or any
of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any related provision for
taxes on the extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by Worldwide
Fiber or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case after taking into account any available tax credits
or deductions and any tax sharing arrangements and amounts required to be
applied to the repayment of Indebtedness secured by a Lien on the asset or
assets that were the subject of such Asset Sale.
"Network" means the fiber optic telecommunications network constructed or
owned from time to time by Worldwide Fiber and its Restricted Subsidiaries.
"Non-Competition Agreement" means that certain Letter to Worldwide Fiber
from Ledcor Inc., dated as of May 31, 1998, regarding Ledcor Inc.'s agreement
not to compete with Worldwide Fiber in the business of developing or
constructing fiber optic communications infrastructure.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither Worldwide Fiber nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender; and
(2) no default with respect to which, including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary, would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the notes, the 1998 Notes or the Credit
Facilities) of Worldwide Fiber or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof
to be accelerated or payable before its stated maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Parent Companies" means Ledcor Inc., an Alberta corporation, Worldwide
Fiber Holdings Ltd., an Alberta corporation, Ledcor Industries Limited, an
Alberta corporation, and Ledcom Holdings Ltd., an Alberta corporation.
"Permitted Fiber Investment" means any Investment of up to 12 fibers on any
Segment of the Network.
"Permitted Holder" means any Parent Company and its Affiliates.
"Permitted Investments" means:
(1) any Investment in Worldwide Fiber or in any Restricted Subsidiary of
Worldwide Fiber;
-128-
<PAGE>
(2) any Investment in Cash Equivalents;
(3) any Investment by Worldwide Fiber or any Restricted Subsidiary of Worldwide
Fiber in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of Worldwide Fiber; or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, Worldwide Fiber or a Restricted Subsidiary of
Worldwide Fiber;
(4) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made under and in compliance with the covenant
described above under the caption "--Repurchase at the Option of
Holders--Asset Sales";
(5) advances and loans to officers and employees of Worldwide Fiber or any
Restricted Subsidiary in an amount not exceeding $5.0 million any one time
outstanding;
(6) Investments in the form of intercompany Indebtedness to the extent
permitted under clause (6) of the second paragraph under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock";
(7) Hedging Obligations, provided that such Hedging Obligations constitute
Permitted Indebtedness permitted by clause (7) of the second paragraph
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock";
(8) Investments of Worldwide Fiber or any Restricted Subsidiary existing on the
Issue Date; and
(9) Investments in securities of trade creditors or customers received under
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers.
"Permitted Liens" means:
(1) Liens on the assets of Worldwide Fiber and any Restricted Subsidiary of
Worldwide Fiber securing Indebtedness and other Obligations under Credit
Facilities that are permitted by the terms of the indenture to be incurred;
(2) Liens in favor of Worldwide Fiber or its Restricted Subsidiaries;
(3) Liens on property of a Person existing at the time such Person becomes a
Restricted Subsidiary of Worldwide Fiber or is merged with or into or
consolidated with Worldwide Fiber or any Restricted Subsidiary of Worldwide
Fiber; provided that such Liens were in existence before the contemplation
of such Person becoming a Restricted Subsidiary of Worldwide Fiber or
merger or consolidation and do not extend to any assets other than those of
such person or the Person merged into or consolidated with Worldwide Fiber
or the Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by Worldwide
Fiber or any Restricted Subsidiary of Worldwide Fiber, provided that such
Liens were in existence before the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in
the ordinary course of business;
-129-
<PAGE>
(6) Liens to secure Purchase Money Indebtedness and Vendor Financing
Indebtedness permitted by clause (4) of the second paragraph of the
covenant entitled "Incurrence of Indebtedness and Issuance of Preferred
Stock" covering only the assets, or portion of the assets, acquired with
such Indebtedness;
(7) Liens existing on the Issue Date;
(8) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity
with GAAP shall have been made for the Liens;
(9) Liens created for the benefit of the notes;
(10) Liens imposed by law or arising by operation of law, including, without
limitation, landlords', mechanics', carriers', warehousemen's,
materialmen's, suppliers', and vendors' Liens, Liens for master's and
crew's wages and other similar maritime Liens and mechanics' Liens, in each
case which are incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have
been made with respect thereto;
(11) zoning restrictions, easements, license, covenants, reservations,
restrictions on the use of real property and defects, irregularities and
deficiencies in title to real property that do not, individually or in the
aggregate, materially affect the ability of Worldwide Fiber or any
Restricted Subsidiary to conduct its business and are incurred in the
ordinary course of business;
(12) Liens incurred or pledges and deposits made in the ordinary course of
business in connection with workers' compensation and unemployment
insurance and other types of social security;
(13) Liens to secure any extension, renewal, refinancing or refunding (or
successive extensions, renewals, refinancings or refundings), in whole or
in part, of any Indebtedness secured by Liens referred to in the above
clauses (3), (4), (6), and (7) of this definition, provided that such Liens
do not extend to any other property of Worldwide Fiber or any Restricted
Subsidiary and the principal amount of the Indebtedness secured by such
Lien is not increased;
(14) judgment Liens not giving rise to an Event of Default so long as such Lien
is adequately bonded and any appropriate legal proceedings that may have
been initiated for the review of such judgment, decree or order shall not
have been finally terminated or the period within which such proceedings
may be initiated shall not have expired;
(15) Liens securing obligations of Worldwide Fiber under Hedging Obligations
permitted to be incurred under clause (7) of the second paragraph of the
covenant entitled "Incurrence of Indebtedness and Issuance of Preferred
Stock" or any collateral for the Indebtedness to which such Hedging
Obligations relate;
(16) Liens upon specific items of inventory or other goods and proceeds of any
Person securing such Person's obligations in respect of banker's
acceptances issued or credited for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(17) Liens securing reimbursement obligations with respect to commercial letters
of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
-130-
<PAGE>
(18) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of Worldwide
Fiber or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(19) Liens arising out of consignment or similar arrangements for the sale of
goods in the ordinary course of business;
(20) any interest or title of a lessor in the Property subject to any lease
other than a Capital Lease;
(21) leases or subleases granted to others that do not materially interfere with
the ordinary course of business of Worldwide Fiber and its Restricted
Subsidiaries;
(22) Liens encumbering Property or other assets under construction arising from
progress or partial payments by a customer or us or our Restricted
Subsidiaries relating to such Property or other assets;
(23) Liens arising from filing Uniform Commercial Code financing statements
regarding leases, provided that such Liens do not extend to any property or
assets which are not leased property subject to such leases or subleases;
(24) 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;
(25) Liens securing Permitted ROW Indebtedness;
(26) Liens securing other Indebtedness not exceeding $5.0 million at any time
outstanding;
(27) Liens incurred in the ordinary course of business of Worldwide Fiber or any
Restricted Subsidiary of Worldwide Fiber with respect to obligations that
do not exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by Worldwide Fiber or such Restricted Subsidiary; and
(28) Liens securing Qualified Subsidiary Indebtedness to the extent permitted to
be incurred under the "Incurrence of Indebtedness and Issuance of Preferred
Stock" covenant.
"Permitted Project Financing Investment" means an Investment by Worldwide
Fiber or any Restricted Subsidiary in any Unrestricted Subsidiary for the
purpose of facilitating the incurrence by such Unrestricted Subsidiary of
Non-Recourse Debt for the purpose of financing a portion of the cost of
construction, engineering, acquisition, installation, development or improvement
by such Unrestricted Subsidiary of any Segment of the Network; provided,
however, that the amount of any such Investment shall not exceed 55% of the
total initial capitalization of any such Unrestricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of Worldwide
Fiber or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Worldwide Fiber or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the
-131-
<PAGE>
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date equal to
or later than the final maturity date of, and has a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded is subordinated in right of payment to the notes, such
Permitted Refinancing Indebtedness has a final maturity date equal to or
later than the final maturity date of, and is subordinated in right of
payment to, the notes on terms at least as favorable to the holders of
notes as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by Worldwide Fiber or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Permitted Vendor Facilites" shall mean Vendor Financing Indebtedness that
is permitted to include working capital facilities.
"Permitted ROW Indebtedness" means Indebtedness evidencing the deferred
obligation to the seller of any ROW on which any Segment of our Network is being
constructed to pay the purchase price for such ROW; provided, however, that in
no event shall the aggregate principal amount of such Indebtedness exceed, with
respect to any Segment of the Network, more than 50% of the total anticipated
construction cost of such Segment, as determined by the Board of Directors in
good faith.
"Permitted Stockholder" means Worldwide Fiber Holdings Ltd., an Alberta
corporation, and its Affiliates.
"Permitted Telecommunications Asset Disposition" means the transfer,
conveyance, sale, lease, grant of an IRU or other disposition (each, a
"Disposition") in the ordinary course of business of dark fiber, conduit or
associated infrastructure of the Network, (1) the proceeds of which are treated
as revenues by Worldwide Fiber in accordance with GAAP and (2) that, in the case
of the sale of dark fiber, would not result in Worldwide Fiber retaining less
than (x) 24 fibers per route mile or (y) 12 fibers and one empty conduit per
route mile, in each case, on every Segment of the Network constructed or
developed by Worldwide Fiber (other than the FOTS in which Worldwide Fiber shall
only be required to retain six fibers per route mile on each Segment), provided,
however, that any Permitted Fiber Investment that results in Worldwide Fiber
retaining a minimum of 12 fibers per route mile (in the case of clause (x)
above) or one empty conduit (in the case of clause (y) above) shall be
considered to be a Permitted Telecommunications Asset Disposition; provided
further that any subsequent Disposition of the Permitted Fiber Investment shall
be considered to be an Asset Sale.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including Capital Stock in, and other securities of, any other
Person.
"Purchase Money Indebtedness" means Indebtedness of Worldwide Fiber
(including Acquired Indebtedness and Capital Lease Obligations, mortgage
financings and purchase money obligations) incurred for the
-132-
<PAGE>
purpose of financing all or any part of the cost of construction, engineering,
acquisition, installation, development or improvement by Worldwide Fiber or any
Restricted Subsidiary of any Telecommunications Assets of Worldwide Fiber or any
Restricted Subsidiary and including any related notes, Guarantees, collateral
documents, instruments and agreements executed in connection therewith, as the
same may be amended, supplemented, modified or restated from time to time.
"Qualified Equity Offerings" means (A) any underwritten public offering
(other than on Form S-4 or S-8 or any successor forms thereto) of common stock
of Worldwide Fiber in which the gross proceeds to us are at least $100.0 million
or (B) the sale by Worldwide Fiber of its Equity Interests to any Strategic
Equity Investor, the net proceeds of which are at least $25.0 million.
"Qualified Subsidiary Indebtedness" means Indebtedness of any Restricted
Subsidiary under one or more senior credit agreements, senior secured loan
agreements or similar senior secured facilities (including any supply or similar
agreement under which the goods to be financed were obtained) entered into from
time to time, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Segment" means (x) with respect to the intercity portions of the Network,
the through-portion of the network between two local networks and (y) with
respect to a local portion of the Network, the entire through- portion of the
Network, excluding the spurs which branch off the through-portion.
"Series A Notes" means Worldwide Fiber's U.S. $500,000,000 12% Senior Notes
due 2009.
"Series B Notes" means Worldwide Fiber's U.S. $500,000,000 12% Senior Notes
due 2009 to be issued pursuant to the Exchange Offer.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
under the Act, as such Regulation is in effect on the date of this Prospectus.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal before the date
originally scheduled for the payment thereof.
"Strategic Equity Investor" means a corporation, partnership or other
entity engaged in one or more Telecommunications Businesses that has 80% or more
of the voting power of its Capital Stock owned by a Person or Persons that has
or have, as the case may be, at the time of the initial investment in Worldwide
Fiber, an equity market capitalization in excess of $1.0 billion; provided that
in no event shall any Affiliate of Worldwide Fiber (immediately prior to the
time of such investment) be eligible to be a Strategic Equity Investor.
"Subsidiary" means, with respect to any Person:
(1) any corporation a majority of whose Capital Stock with voting power, under
ordinary circumstances, to elect directors is, at the date of
determination, directly or indirectly, owned by such Person (a
-133-
<PAGE>
"subsidiary"), by one or more subsidiaries of such Person or by such Person
and one or more subsidiaries of such Person;
(2) a partnership in which such Person or a subsidiary of such Person is, at
the date of determination, a general partner of such partnership; or
(3) any partnership, limited liability company or other Person in which such
Person, a subsidiary of such Person or such Person and one or more
subsidiaries of such Person, directly or indirectly, at the date of
determination, has (x) at least a majority ownership interest or (y) the
power to elect or appoint or direct the election or appointment of the
managing partner or member of such Person or, if applicable, a majority of
the directors or other governing body of such Person.
"Tax" shall mean any tax, duty, levy, impost, assessment or other
governmental charge, including penalties, interest and any other liabilities
related thereto.
"Telecommunications Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or intended for
use in connection with a Telecommunications Business and the Equity Interests of
a Person engaged entirely or substantially entirely in a Telecommunications
Business.
"Telecommunications Business" means the business of (1) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased terrestrial or submarine transmission facilities and (2)
constructing, installing, maintaining, creating, developing or marketing
terrestrial or submarine communications related network infrastructure,
components, equipment, software and other devices for use in a
telecommunications business and any other business or opportunity that is
reasonably related or complementary the telecommunication business; provided
that the determination of what constitutes a Telecommunications Business shall
be made in good faith by the Board of Directors of Worldwide Fiber.
"Undertaking Agreements" means that certain Undertaking Agreement dated as
of May 31, 1998 between Worldwide Fiber (formerly known as Starfiber Inc.) and
786522 Alberta Ltd. pursuant to which 786522 Alberta Ltd. agreed to contribute
12 fiber strands on the FOTS to Worldwide Fiber in exchange for the issuance of
certain Capital Stock and the Agreement, dated May 28, 1999, as amended, between
Worldwide Fiber and certain affiliates of Ledcor whereby Worldwide Fiber agreed
to acquire certain fiber optic assets.
"Unrestricted Subsidiary" means any Subsidiary of Worldwide Fiber that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding with
Worldwide Fiber or any Restricted Subsidiary of Worldwide Fiber unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to Worldwide Fiber or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of
Worldwide Fiber;
(3) is a Person with respect to which neither Worldwide Fiber nor any of its
Restricted Subsidiaries has any direct or indirect obligation to maintain
or preserve the Person's financial condition or to cause the Person to
achieve any specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of Worldwide Fiber or any of its Restricted
Subsidiaries; and
-134-
<PAGE>
(5) has at least one director on its board of directors that is not a director
or executive officer of Worldwide Fiber or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director
or executive officer of Worldwide Fiber or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of Worldwide Fiber as an Unrestricted
Subsidiary shall be evidenced to the trustee by filing with the trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under the
caption "Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary
shall be considered to be incurred by a Restricted Subsidiary of Worldwide Fiber
as of such date and, if the Indebtedness is not permitted to be incurred as of
such date under the covenant described under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock," Worldwide Fiber shall be in
default of such covenant. The Board of Directors of Worldwide Fiber may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that the designation shall be considered to be an incurrence of
Indebtedness by a Restricted Subsidiary of Worldwide Fiber of any outstanding
Indebtedness of such Unrestricted Subsidiary and the designation shall only be
permitted if (1) such Indebtedness is permitted under the covenant described
under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," calculated on a pro forma basis as if the designation had
occurred at the beginning of the four-quarter reference period; and (2) no
Default or Event of Default would be in existence following such designation.
"Vendor Financing Indebtedness" means Indebtedness of Worldwide Fiber
incurred under any agreements between Worldwide Fiber and one or more vendors or
lessors (or any Affiliate of any such vendor or lessor) of Telecommunications
Assets used or intended for use in a Telecommunications Business by Worldwide
Fiber providing financing for all or any part of the cost of construction,
engineering, acquisition, installation, development or improvement by Worldwide
Fiber or any Restricted Subsidiary of any Telecommunications Assets from the
vendor or lessor (or any Affiliate of such vendor or lessor) and including any
related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time. Vendor Financing Indebtedness shall not
include any working capital facility or Indebtedness to fund interest or other
similar expenses made available by any vendor or lessor.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between the date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by the Person and/or by one or more Wholly-Owned Restricted
Subsidiaries of such Person.
-135-
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
1998 Notes
General. The 1998 Notes are senior obligations of ours, limited to $175
million in principal amount, and mature on December 15, 2005. The 1998 Notes,
which were issued pursuant to the 1998 indenture, accrue interest at a rate of
12 1/2% per annum. Interest is payable each June 15 and December 15, commencing
on June 15, 1999.
Ranking. The 1998 Notes rank senior in right of payment to any of our
future subordinated indebtedness, and pari passu in right of payment with all of
our senior indebtedness, including the Notes.
Optional Redemption. The 1998 Notes are not redeemable prior to December
31, 2003. Thereafter, the 1998 Notes will be redeemable, in whole or in part, at
our option, at the redemption prices set forth in the 1998 Indenture, plus
accrued and unpaid interest to the applicable redemption date. Specifically, if
redeemed during the 12-month period beginning on December 31 of the years set
forth below, the redemption price will be that amount, expressed as a percentage
of the principal amount of the 1998 Notes, listed below:
Year Redemption Price
2003.................................................. 106.250%
2004.................................................. 100.000%
Despite the foregoing, however, we shall not be permitted to make an optional
redemption until we consummate an offer with respect to the amount of cash
generated by us which is not used for the provision of taxes, fixed charges,
extraordinary losses or to repay secured indebtedness (the "Accumulated Excess
Cash Flow Amount") existing at December 31, 2003 as described in "Excess Cash
Flow Offer" below.
In addition, (1) prior to December 15, 2001, we may redeem up to 35% of the
originally issued principal amount of the 1998 Notes at 112.5% of their
principal amount, plus accrued and unpaid interest through the redemption date,
with the net cash proceeds of one or more public equity offerings; provided,
however, that at least 65% of the originally issued principal amount of the 1998
Notes remains outstanding after the occurrence of the redemption and (2) we may
redeem the 1998 Notes at their face value if we become obligated to pay any
additional amounts as a result of change in the laws or regulations of Canada or
any Canadian taxing authority, or a change in any official position regarding
their application or interpretation.
Change of Control. Upon the occurrence of a change of control, each holder
of 1998 Notes will have the right to require us to repurchase all or any part of
that holder's 1998 Notes at a purchase price in cash equal to 101% of their
principal amount, plus accrued and unpaid interest to the date of purchase.
Excess Cash Flow Offer. If at the end of our fiscal quarter ended December
31, 2000 or any fiscal quarter ending on June 30 or December 31 thereafter, our
Accumulated Excess Cash Flow Amount exceeds $10.0 million, we will be required
to make an offer to all holders of 1998 Notes to purchase the maximum principal
amount of 1998 Notes that may be purchased using that Accumulated Excess Cash
Flow Amount at an offer price equal to 110% of the principal amount of the 1998
Notes, plus accrued and unpaid interest to the date of purchase, subject to a
limitation that we are not obliged to repurchase more than 25% of the original
principal amount of the 1998 Notes before December 31, 2003.
Covenants. The 1998 indenture contains certain covenants that, among other
things, limit the ability of Worldwide Fiber and its restricted subsidiaries to:
o borrow money,
-136-
<PAGE>
o pay dividends on stock or repurchase stock,
o make investments,
o use assets as security in other transactions, and
o sell certain assets or merge with or into other companies.
Events of Default. The 1998 indenture contains customary events of default,
including:
o defaults in the payment of principal, premium or interest,
o defaults in the compliance with covenants contained in the 1998
indenture,
o cross defaults on more than $10 million of other indebtedness,
o failure to pay more than $10 million of judgments that have not been
stayed by appeal or otherwise, and
o the bankruptcy of Worldwide Fiber or certain of its subsidiaries.
Proposed Worldwide Fiber Inc. Credit Facility
We have accepted a commitment letter from an affiliate of Salomon Smith
Barney Inc., one of the initial purchasers of the notes, to arrange, subject to
credit approval and final documentation, a senior secured revolving credit
facility of up to $115 million with additional senior secured revolving purchase
money facilities of $35 million. We expect the facility to close in the fourth
quarter of 1999.
The indebtedness outstanding under the proposed credit facility would be
guaranteed by some of our subsidiaries and would be secured by all property and
assets owned by and all capital stock and intercompany indebtedness of us and
some of our subsidiaries.
The proposed credit facility would contain various covenants which would
restrict us and our subsidiaries with respect to, among other things, incurring
indebtedness, entering into merger or consolidation transactions, disposing of
our assets, acquiring assets, making certain restricted payments, repaying the
notes, creating any liens on our assets, making investments, and entering into
sale and leaseback transactions and transactions with affiliates. The proposed
credit facility would also require that we comply with various financial
covenants, including a fixed charge coverage ratio, maximum leverage ratios and
a limit on capital expenditures. The proposed credit facility would also contain
certain events of default, including default upon the nonpayment of principal,
interest, fees or other amounts, a cross-default with respect to other
obligations of ours and our subsidiaries, failure to comply with certain
covenants, conditions or provisions under the credit facility, the existence of
certain unstayed or undischarged judgments, the occurrence of any default under
material agreements that could result in a material adverse effect on us, the
making of materially false or misleading representations or warranties, or the
commencement of reorganization, bankruptcy, insolvency or similar proceedings or
the occurrence of certain ERISA events or a change of control. Upon occurrence
and during the continuance of an event of default under the credit facility, all
obligations under the credit facility could be declared to be immediately due
and payable.
We are likely from time to time, prior to the maturity date of the notes,
to refinance, replace, restructure, substitute for, amend or supplement the
credit facility. The actual terms of any credit facility could differ
substantially from the proposed facility outlined above.
-137-
<PAGE>
Proposed Hibernia Credit Facility
We have accepted a commitment letter from Goldman Sachs Credit Partners LP,
DLJ Capital Funding, Inc. and Credit Suisse First Boston, to arrange, subject to
certain standard conditions, including completion of definitive documentation,
up to $600 million in senior secured credit facilities consisting of two term
loan facilities aggregating $575 million and a $25 million working capital
revolving credit facility. DLJ Capital Funding, Inc. is an affiliate to
Donaldson Lufkin & Jenrette Securities Corporation, one of the initial
purchasers of the notes.
The indebtedness outstanding under the proposed credit facility would be
borrowed by one of our subsidiaries and would be secured by all property and
assets owned by that subsidiary and relating to Hibernia. The proposed facility
would be non-recourse to Worldwide Fiber Inc. The proposed credit facility would
contain various covenants which would restrict the subsidiary to the
development, design, engineering, construction and installation of Hibernia. The
actual terms of the definitive credit facility could differ substantially from
the proposed facility outlined above.
-138-
<PAGE>
BOOK-ENTRY, DELIVERY AND FORM
The old notes were offered and sold to qualified institutional buyers (as
defined in Rule 144A under the Securities Act) ("QIBs") in reliance of Rule 144A
under the Securities Act or Rule 144A notes). Rule 144A notes were initially
represented by one or more notes in registered, global form without interest
coupons. The global old notes were deposited upon issuance with the trustee, as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee for credit to the accounts of DTC's
Direct and Indirect Participants (as defined below). Except for new notes issued
in certificated form, the new notes will be represented by one or more notes in
registered, global form without interest coupons. The global new note will be
deposited upon issuance with the trustee as custodian for DTC and registered in
the name of DTC or its nominee, in each case for credit to an account of direct
or indirect participant.
Except as described below, the global new note may be transferred, in whole
but not in part, only to another nominee of DTC or to successor of DTC or its
nominee. Beneficial interests in the global new note may not be exchanged for
new notes in certificated form except in the limited circumstances described
below. See "--Exchange of the Global New Note for Certificated New Notes."
The new notes may be presented for registration of transfer and exchange at
the offices of the Registrar (as defined in the indenture).
Depositary Procedures
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the "Direct
Participants") and to facilitate the clearance and settlement of transactions in
those securities between Direct Participants through electronic book-entry
changes in accounts of Participants. The Direct Participants include securities
brokers and dealers (including the initial purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to DTC's system is
also available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a Direct Participant (collectively, the
"Indirect Participants").
DTC has also advised us that, under DTC's procedures, (1) upon deposit of
the global new note, DTC will credit the accounts of the exchanging Direct
Participants with portions of the global new note and (2) DTC will maintain
records of the ownership interests of the Direct Participants in the global new
note and the transfer of ownership interests by and between Direct Participants.
DTC will not maintain records of the ownership interests of, or the transfer of
ownership interests by and between, Indirect Participants or other owners of
beneficial interests in the global notes. Direct Participants and Indirect
Participants must maintain their own records of the ownership interests of, and
the transfer of ownership interests by and between, Indirect Participants and
other owners of beneficial interests in the global new note.
Investors in the global new note may hold their interests in the global new
note directly through DTC if they are Direct Participants in DTC or indirectly
through organizations that are Direct Participants in DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that they
own. This may limit or curtail the ability to transfer beneficial interests in a
global new note to the persons. Because DTC can act only on behalf of Direct
Participants, which in turn act on behalf of Indirect Participants and others,
the ability of a person having a beneficial interest in a global new note to
pledge the interest to persons or entities that are not Direct Participants in
DTC, or to otherwise take actions for the interests, may be affected by the lack
of physical certificates evidencing the interests. For certain other
restrictions on the transferability of the new notes see "--Exchange of the
Global New Note for Certificated New Notes."
-139-
<PAGE>
Except as described in this prospectus, owners of beneficial interests in
the global new note will not have new notes registered in their names, will not
receive physical delivery of new notes in certificated form and will not be
considered the registered owners or holders of new notes under the indenture for
any purpose.
Under the terms of the indenture, we and the trustee will treat the persons
in whose names the new notes are registered (including the global new note) as
the owners of the new notes for the purpose of receiving payments and for any
and all other purposes whatsoever. Payments for the principal, premium, and
interest on the global new note registered in the name of DTC or its nominee
will be payable by the trustee to DTC or its nominee as the registered holder
under the indenture. Consequently, neither we, the initial purchasers, the
trustee nor any agent of ours or the trustee has or will have any responsibility
or liability for (1) any aspect of DTC's records or any Direct Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the global new note or for maintaining,
supervising or reviewing any of DTC's records or any Direct Participant's or
Indirect Participant's records relating to the beneficial ownership interests in
any global new note or (2) any other matter relating to the actions and
practices of DTC or any of its Direct Participants or Indirect Participants.
DTC has advised us that its current payment practice (for payments of
principal, interest and the like) concerning securities the as the new notes is
to credit the accounts of the relevant Direct Participants with the payment on
the payment date in amounts proportionate to the Direct Participant's respective
ownership interests in the relevant security as shown on DTC's records. Payments
by Direct Participants and Indirect Participants to the beneficial owners of the
new notes will be governed by standing instructions and customary practices
between them and will not be our responsibility or the responsibility of DTC or
the trustee. Neither we nor the trustee will be liable for any delay by DTC or
its Direct Participants or Indirect Participants in identifying the beneficial
owners of the new notes, and we and the trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee as the
registered owner of the global new note for all purposes.
The global new note will trade in DTC's Same-Day Funds Settlement System
and, therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants who hold an interest through a
Direct Participant will be effected in accordance with the procedures of the
Direct Participant but generally will settle in immediately available funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of new notes only at the direction of one or more Direct Participants to
whose account interests in the global new note are credited and only for the
portion of the aggregate principal amount of the new notes to which the Direct
Participant or Direct Participants has or have given direction. However, if
there is an Event of Default under the new notes, DTC reserves the right to
exchange the global new note (without the direction of one or more of its Direct
Participants) for new notes in certificated form, and to distribute the new
notes to its Direct Participants. See "--Exchange of the Global New Note for
Certificated New Notes."
Although DTC agreed to the above procedures to facilitate transfers of
interests in the global new note among accountholders in DTC, it is under no
obligation to perform or to continue to perform the procedures, and the
procedures may be discontinued at any time. Neither we, the trustee nor any of
our or the trustee's agents will have any responsibility for the performance by
DTC or its respective participants, indirect participants or accountholders of
their respective obligations under the rules and procedures governing any of
their operations.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that we believe to be reliable, but we take no
responsibility for its accuracy.
-140-
<PAGE>
Exchange of the Global New Note for Certificated New Notes
New notes issued or transferred to institutional "accredited investors"
within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act who are not QIBs will be issued in registered certificated form.
In addition, the global new note is exchangeable for definitive new notes in
registered certificated form if (1) DTC (x) notifies us that it is unwilling or
unable to continue as depository for the global new note and we thereupon fail
to appoint a successor depository or (y) has ceased to be a clearing agency
registered under the Exchange Act, (2) we, as our option, notify the trustee in
writing that we elect to cause the issuance of the new notes in certificated
form or (3) there shall have occurred and be continuing a Default or an Event of
Default concerning the notes. In all cases, certificated new notes delivered in
exchange for the global new note or beneficial interests in the global new note
will be registered in the names, and issued in any approved denominations,
requested by or on behalf of DTC (in accordance with its customary procedures).
-141-
<PAGE>
MATERIAL UNITED STATES AND CANADIAN INCOME TAX CONSIDERATIONS
The discussion below is a general description of the material United States
and Canadian income tax consequences to beneficial owners of notes. This
discussion does not take into account the individual circumstances of any
particular investor and does not purport to discuss all of the possible tax
consequences of the purchase, ownership and disposition of the notes. Therefore,
prospective investors are urged to consult their own tax advisors concerning the
tax consequences of purchasing, holding and disposing of the notes, including
the application of state, provincial, local, foreign and other tax laws.
United States
The following is a general discussion of the material U.S. federal income
tax consequences of the exchange of old notes for new notes under the exchange
offer and the ownership and disposition of the new notes to investors who are
U.S. Holders. As used in this prospectus, "U.S. Holder" means a beneficial owner
of a note that is
o an individual who is a citizen or resident of the United States,
o a corporation or other entity taxable as a corporation, created or
organized in or under the laws of the United States or of any state of
the United States (including the District of Columbia),
o an estate the income of which is includable in gross income for U.S.
federal income tax purposes regardless of its source or
o a trust if a U.S. court is able to exercise primary supervision over
the trust's administration and one or more U.S. persons have authority
to control all substantial decisions of the trust.
This discussion is based on the Internal Revenue Code of 1986, as amended
or the Code, Treasury regulations promulgated under the Code, and administrative
and judicial interpretations of the Code, all as in effect or proposed on the
date of this prospectus and all of which are subject to change, possibly with
retroactive effect. This discussion is limited to U.S. Holders that purchase
notes at the issue price and hold notes as capital assets within the meaning of
Section 1221 of the Code. This discussion does not address federal alternative
minimum tax consequences or all aspects of U.S. federal income taxation that may
be relevant to particular purchasers in light of their personal circumstances or
to purchasers subject to special treatment under U.S. federal income tax law
(including, without limitation, dealers in securities or foreign currency,
tax-exempt entities, banks, insurance companies or other financial institutions,
persons that hold notes as part of a "straddle," "hedge" or "conversion
transaction," persons that have a "functional currency" other than the U.S.
dollar and persons that own notes through partnerships or other pass-through
entities). This discussion also does not address any tax consequences arising
out of the tax laws of any state, local or foreign jurisdiction.
Prospective purchasers are urged to consult their own tax advisors as to
the particular tax consequences to them of the exchange of old notes for new
notes and the ownership and disposition of new notes, including the
applicability of any state, local or foreign tax laws, and any changes (or
proposed changes) in applicable tax laws or their interpretations.
-142-
<PAGE>
Federal Income Tax Consequences of Tendering Old Notes for New Notes
Exchange Offer
A U.S. Holder will not recognize taxable gain or loss on the exchange of
old notes for new notes under the exchange offer, and a U.S. Holder's tax basis
and holding period for the new notes will be the same as for the old notes
immediately before the exchange.
Federal Income Tax Consequences of Owning and Disposing of New Notes
Interest on Notes
Interest paid on a note will be taxable to a U.S. Holder as ordinary
interest income, generally at the time it is received or accrued, in accordance
with the holder's regular method of accounting for United States federal income
tax purposes. If Canadian withholding taxes are imposed on the interest
payments, Worldwide Fiber will be required to pay Additional Amounts to holders
of notes (see "Description of Notes--Payment of Additional Amounts"). Worldwide
Fiber believes that the imposition of Canadian withholding taxes concerning
interest on the notes as a result of a change in Canadian tax law is a remote
and incidental contingency. Accordingly, Worldwide Fiber does not intend to
treat the notes as contingent payment debt instruments. Similarly, Worldwide
Fiber believes that the likelihood of a redemption or a repurchase as a result
of a "Change of Control" is remote and Worldwide Fiber does not intend to treat
that possibility as affecting the yield to maturity of the notes for U.S.
federal income tax purposes.
Sale, Redemption or Retirement of Notes
Upon the sale, redemption, retirement at maturity or other taxable
disposition of a note, a U.S. Holder generally will recognize gain or loss equal
to the difference between the sum of cash plus the fair market value of all
other property received on that sale, redemption, retirement or disposition
(except to the extent the cash or property is attributable to accrued but unpaid
interest that has not previously been included in the holder's income) and the
U.S. Holder's tax basis in the note (generally, its cost).
Gain or loss recognized on the sale or other taxable disposition of a note
generally will be capital gain or loss and will be long-term capital gain or
loss if, at the time of the disposition, the note has been held for more than
one year. In the case of a U.S. Holder who is an individual, long term capital
gains generally are subject to a maximum capital gains rate of 20%.
Foreign Tax Credit Considerations
Interest on the notes will constitute income from sources without the
United States for United States foreign tax credit purposes. Payment of interest
on the notes will not be subject to Canadian withholding tax. See "--Canada."
If, however, the interest payments on the notes become subject to Canadian
withholding taxes as the result of a change in Canadian tax law, U.S. Holders
will be treated for U.S. federal income tax purposes as having actually received
the amount of the taxes withheld and as having paid that amount to the Canadian
taxing authorities. As a result, the amount of interest income included in gross
income by a U.S. Holder generally will be greater than the amount of cash
actually received by the U.S. Holder from Worldwide Fiber for the interest
income. A U.S. Holder may be able, subject to generally applicable limitations,
to claim a foreign tax credit or take a deduction for Canadian withholding taxes
imposed on interest payments (including withholding taxes imposed on Additional
Amounts).
Gain or loss on the sale, redemption, retirement at maturity or other
taxable disposition of a note generally will constitute U.S. source gain or loss
for U.S. foreign tax credit purposes.
-143-
<PAGE>
Backup Withholding
Backup withholding may apply to certain payments of principal, premium, if
any, and interest on a note and to proceeds of the sale or other disposition of
a note before maturity. Worldwide Fiber, or its U.S. agent or broker, will be
required to withhold from any payment that is subject to backup withholding a
tax equal to 31% of the payment, unless the U.S. Holder furnishes its taxpayer
identification number (social security or employer identification number),
certifies that the number is correct, certifies as to no loss of exemption from
backup withholding and otherwise complies with the applicable requirements of
the backup withholding rules. Certain U.S. Holders, including corporations, are
not subject to backup withholding. Any amounts withheld under the backup
withholding rules from a payment to a U.S. Holder generally will be allowed as a
credit against the U.S. Holder's U.S. federal income tax liability and may
entitle the U.S. Holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
Canada
The following summarizes the material Canadian federal income tax
considerations as of the date of this prospectus under the Income Tax Act
(Canada) (the "Canadian Tax Act") and the published administrative practice of
Revenue Canada generally applicable to a holder of notes who acquires notes
under this prospectus.
This summary is based upon the provisions of the Canadian Tax Act and the
regulations adopted under the Canadian Tax Act (the "Regulations") in force on
the date of this prospectus, proposed amendments to the Canadian Tax Act and the
Regulations publicly announced prior to the date of this prospectus by or on
behalf of the Minister of Finance (Canada) and current published administrative
practices and assessing policies of Revenue Canada. This summary does not
otherwise take into account or anticipate any changes in law or administrative
practice, whether by legislative, governmental or judicial action, nor does it
take into account provincial or foreign income tax considerations. This summary
of Canadian federal income tax considerations does not take into account the
individual circumstances of any particular investor and does not purport to
discuss all of the possible tax consequences of an investment in the notes.
Prospective holders should consult their tax advisors for advice regarding the
income tax considerations applicable to them.
The following discussion is applicable to a holder (other than an initial
purchaser) who, for purposes of the Canadian Tax Act and any relevant tax
treaty, deals at arm's length with Worldwide Fiber, is not and is not deemed to
be a resident of Canada, does not use or hold, and is not deemed to use or hold,
the notes in the course of carrying on a business in Canada and, in the case of
a person who carries on an insurance business in Canada and elsewhere,
establishes the notes are not effectively connected with the insurance business
carried on in Canada and are not "designated insurance property" for purposes of
the Canadian Tax Act (a "Non-Resident Holder"). For purposes of the Canadian Tax
Act, related persons (as defined in the Canadian Tax Act) are deemed not to deal
at arm's length, and it is a question of fact whether persons not related to
each other deal at arm's length.
The payment by Worldwide Fiber of interest, principal or premium on the
notes to a Non-Resident Holder will be exempt from Canadian withholding tax.
No other tax on income (including taxable capital gains) will be payable by
a Non-Resident Holder under the Canadian Tax Act as a result of the acquisition,
holding, sale, redemption or other disposition of the notes, including the
receipt of interest or premium thereon.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account through the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the new notes. This prospectus, as it
-144-
<PAGE>
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of new notes received in exchange for old notes where
the old notes were acquired by the broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, starting on the
expiration date and ending on the close of business on the 180th day following
the expiration date, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with a resale.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
through 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 these methods of
resale, at market prices prevailing at the time of resale, at prices related to
prevailing market prices or at negotiated prices. The 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 the broker-dealer
and/or the purchasers of the new notes. Any broker-dealer that resells new notes
that were received by it for its own account under the exchange offer and any
broker or dealer that participates in a distribution of new notes may be
considered to be an "underwriter" within the meaning of the Act and any profit
of resale of new notes and any commissions or concessions received by any person
may be considered 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 have admitted that it is an
"underwriter" within the meaning of the Securities Act. By acceptance of the
exchange offer, each broker-dealer that receives new notes under the exchange
offer agrees to notify us before using this prospectus in connection with the
sale or transfer of new notes, and acknowledges and agrees that, upon receipt of
notice from us of the happening of any event which makes any statement in this
prospectus untrue in any material respect or which requires the making of any
changes in this prospectus to make the statements in this prospectus not
misleading, which notice we agree to deliver promptly to the broker-dealer, the
broker-dealer will suspend use of this prospectus until we have amended or
supplemented the prospectus to correct the misstatement or omission and have
furnished copies of the amended or supplemented prospectus to the broker-dealer.
For a period of 180 days after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests these documents in the letter of
transmittal. We have agreed to pay all expenses for the exchange offer
(including the expenses of any one special counsel for the holders of the notes)
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the notes participating in the exchange offer
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
The holder of each old note accepted for exchange will receive a new note
in an amount equal to the surrendered old note. Old notes accepted for exchange
will not accrue interest from the date the exchange offer is completed. Holders
of old notes accepted for exchange will not receive any payment of accrued
interest on those old notes. Old notes which are not tendered or not accepted
for exchange will continue to accrue interest.
The old notes were issued on July 28, 1999 in a transaction exempt from the
registration requirements of the Securities Act. They may not be offered or sold
in the United States unless registered or under an applicable exemption under
the Securities Act. We are offering the new notes under this prospectus to
satisfy certain of our obligations contained in the registration rights
agreement we entered into concerning the offering. Based on interpretations by
the staff of the Securities and Exchange Commission as described in no-action
letters issued to others, we believe that new notes issued through the exchange
offer in exchange for old notes may be offered for resale, resold and otherwise
transferred by any holder of notes, except a holder that is an affiliate of ours
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 these new notes are acquired in the ordinary course of the
holder's business and the holder has no arrangement or understanding with any
person to participate in a distribution of these new notes. However, we have not
sought a no-action letter concerning the exchange offer and we cannot assure you
that the staff of the Securities and Exchange Commission would make a
-145-
<PAGE>
similar determination about the exchange offer. Each holder of old notes, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage or participate in, a distribution of new notes and has no
arrangement or understanding to participate in a distribution of new notes. Each
broker-dealer that receives new notes for its own account through the exchange
offer must acknowledge that it will deliver a prospectus in connection with any
resale of new notes. The letter of transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not have admitted that it
is an "underwriter" within the meaning of the Securities Act. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer with resales of new notes received in exchange for old notes
acquired by that broker-dealer as a result of market-making activities or other
trading activities. We have agreed that, for a period ending at the close of
business on the 180th day following the expiration date, we will make this
prospectus available to any broker-dealer to use with resales. See "Plan of
Distribution."
We will not receive any proceeds from the exchange offer. We will pay all
the expenses of the exchange offer. In the event we terminate the exchange offer
and do not accept any old notes for exchange we will promptly return the old
notes to the holders of the notes. See "The Exchange Offer."
There has previously been only a limited secondary market, and no public
market, for the old notes. The old notes are eligible for trading in The Portal
Market. We have been advised by the initial purchasers that they intend to make
a market for the new notes; however, the initial purchasers are not obligated to
do so. We do not currently intend to list the new notes on any securities
exchange. Any market-making may be discontinued at any time, and there is no
assurance that an active public market for the new notes will develop or, if it
does develop, that it will continue. This prospectus may be used by the initial
purchasers in connection with offers and sales of the new notes which may be
made by them from time to time in market-making transactions at negotiated
prices relating to prevailing market prices at the time of sale. The initial
purchasers may act as principal or agent in this transaction.
The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or the acceptance of it would not comply with the securities or blue sky
laws of that jurisdiction.
You should rely only on the information contained in this document or what
we have referred you to. We have not authorized anyone to provide you with
information that is different.
The market data included in this prospectus, including information relating
to our relative position in the industry, are based on independent industry
publications, other publicly available information or our management's good
faith beliefs. Although we believe that these independent sources are reliable,
the accuracy and completeness of these independent sources has not been
independently verified.
Old notes in the aggregate principal amount of $500 million were issued
originally in global form. The global old note was deposited with The Depository
Trust Company, as initial depository. The global old note is registered in the
name of Cede & Co., as nominee of the depository. Beneficial interests in the
global old note are shown on, and transfers of the global old note are effected
only through, records maintained by the depository and its participants. The use
of the global old note to represent certain of the old notes permits the
depository's participants, and anyone holding a beneficial interest in an old
note registered in the name of that a participant, to transfer interests in the
old notes electronically in accordance with the depository's established
procedures without the need to transfer a physical certificate. The new notes
will also be issued initially as a note in global form and deposited with the
depository.
-146-
<PAGE>
LEGAL MATTERS
Certain legal matters concerning the new notes will be passed upon for
Worldwide Fiber by Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York (concerning matters of U.S. law)
and Farris, Vaughan, Wills & Murphy, Vancouver, British Columbia (concerning
matters of Canadian law).
EXPERTS
The divisional financial statements of the predecessor division as of May
31, 1998, August 31, 1997 and August 31, 1996 and for each of the periods then
ended and the divisional statements of operations and retained earnings and cash
flows for the year ended March 31, 1996, included in this prospectus, have been
audited by Deloitte & Touche LLP, Edmonton, Alberta, as stated in their report
contained in this prospectus. Deloitte & Touche LLP have been auditors of Ledcor
for 51 years.
Our consolidated financial statements dated December 31, 1998, included in
this prospectus, have been audited by PricewaterhouseCoopers LLP, Vancouver,
British Columbia, as stated in their report contained in this prospectus.
PricewaterhouseCoopers LLP are Worldwide Fiber's auditors.
-147-
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS
We are a corporation organized under the laws of Canada. A majority of our
directors and officers, as well as certain experts named in this prospectus,
reside principally in Canada. Because all or a substantial portion of our assets
and the assets of these persons are located outside the United States, it may
not be possible for you to effect service of process within the United States
upon us or those persons. Furthermore it may not be possible for you to enforce
against us or them in the United States, judgments obtained in U.S. courts based
upon the civil liability provisions of the U.S. Federal securities laws or other
laws of the United States. We have been advised by Farris, Vaughan, Wills &
Murphy, our Canadian counsel, that there is doubt as to the enforceability, in
original actions in Canadian courts, of liabilities based upon the U.S. Federal
securities laws and as to the enforceability in Canadian courts of judgments of
U.S. courts obtained in actions based upon the civil liability provisions of the
U.S. Federal securities laws. Therefore, it may not be possible to enforce those
actions against us, our directors and officers or the experts named in this
prospectus.
CURRENCY TRANSLATION
We report our financial statements in U.S. dollars, while the currency of
measurement for our operations varies depending upon location. Unless otherwise
indicated, references to "dollars" or "$" are to U.S. dollars and references to
"Cdn. $" are to Canadian dollars.
The following table lists, for each period indicated, the high and low
exchange rates for Canadian dollars expressed in U.S. dollars, based on the
inverse of the noon buying rate in New York City for cable transfers in foreign
currencies, as certified for customs purposes by the Federal Reserve Bank of New
York, the average of these exchange rates on the last day of each month during
this period, and the exchange rate at the end of this period:
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended
June 30,
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
High..................... 0.7632 0.7527 0.7513 0.7487 0.7105 0.6894
Low...................... 0.7103 0.7023 0.7235 0.6945 0.6341 0.6537
Average (1).............. 0.7300 0.7305 0.7329 0.7198 0.6714 0.6725
Rate at period end....... 0.7128 0.7323 0.7301 0.6999 0.6504 0.6835
</TABLE>
- --------------------
(1) The average of the exchange rate on the last day of each month during the
applicable period.
On October 18, 1999, the inverse of the noon buying rate was Cdn. $1.00 =
$0.6689. There are currently no Canadian restrictions on currency exchanges or
the repatriation of dividends or capital gains.
-148-
<PAGE>
<TABLE>
<CAPTION>
GLOSSARY
Asynchronous Transfer Mode
<S> <C>
(ATM)......................... A cell-based connection-oriented technology that provides a protocol for
transmitting multiple traffic types over high-speed networks.
Available Bit Rate (ABR)...... A class of service in which the ATM Network makes its "best effort" to meet
traffic bit rate requirements.
Band.......................... A range of frequencies between two defined limits
bandwidth..................... The relative range of analog frequencies or digital signals that can be
passed through a transmission medium, such as glass fibers, without
distortion. The greater the bandwidth, the greater the information carrying
capacity. Bandwidth is measured in hertz (analog) or bits per second
(digital).
Bit........................... A binary unit of information that can have either of two values, 0 or 1.
carrier....................... A provider of communications transmission services by fiber, wire or radio.
carrier's carrier............. A provider of communications transmission services that specializes in the
wholesale provision of telecommunications bandwidth and services to other
carriers and service providers.
Cell.......................... For ATM, an information package consisting of 53 bytes, or octets, of data.
Of these, the first 5 constitute the header: 48 carry the payload.
Cell Relay.................... Network transmission format that uses small packets of the same size, called
cells. The cells are fixed-length and can be transmitted and processed by
hardware at very high rates. Cell relay acts as a basis for ATM.
Cell Relay Service............ A carrier service that supports the receipt and transmission of ATM cells
between end users in compliance with ATM standards and implementation
specifications.
Circuit Emulation Service
(CES)......................... ATM Forum-defined service that provides a virtual circuit connection that
emulates the characteristics of a real, constant-bit-rate,
dedicated-bandwidth circuit.
city ring..................... A facility of conduit and fiber optic cable encircling a metropolitan area.
CLEC.......................... Competitive local exchange carrier. A company that competes with LECs in
the local services market.
Constant Bite Rate (CBR)...... Delay intensive applications such as video and voice that must be digitized
and represented by a continuous bit stream. CBR traffic requires guaranteed
levels of service and throughput.
CRTC.......................... Canadian Radio-television and Telecommunications Commission.
customer premises equipment
edge.......................... ATM access equipment located on a customer site.
dark fiber.................... Fiber that lacks the requisite optical transmission equipment necessary to
use the fiber for transmission.
digital....................... Describes a method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary digits 0 and 1. Digital transmission/switching technologies employ a
sequence of discrete, distinct pulses to represent information, as opposed
to the continuously variable analog signal. This gives operators
significant capacity increases over analog.
DWDM.......................... Dense Wavelength Division Multiplexing. High speed version of WDM, which is
a means of increasing the capacity of SONET fiber-optic transmission systems
through the multiplexing of multiple wavelengths of light. A technique for
transmitting more than one light wave frequency on a single fiber to
increase the information carrying capacity.
A-1
<PAGE>
FCC........................... Federal Communications Commission.
fiber miles................... The number of route miles installed along a telecommunications path
multiplied by the number of fibers along the path. See the definition of
"route miles" below.
fiber optics.................. Fiber optic technology involves sending laser light pulses across glass
strands in order to transmit digital information. Fiber optic cable is the
medium of choice for the telecommunications and cable industries.
frame relay................... A high-speed, data-packet switching service used to transmit data between
computers. Frame Relay supports data units of variable lengths at access
speeds ranging from 56 kilobits per second to 1.5 megabits per seconds.
This service is well-suited for connecting local area networks, but is not
presently well suited for voice and video applications due to the variable
delays which can occur. Frame Relay was designed to operate at high speeds
on modern fiber optic networks.
ILEC.......................... Incumbent local exchange carrier.
IP............................ Internet protocol.
ISP........................... Internet service provider. A company that provides businesses and consumers
with access to the Internet.
IRU........................... Indefeasible right of use. A long-term lease of approximately 10 or 20
years with option periods thereafter to renew at lower rates, at the option
of the lessee.
IXC........................... Interexchange carrier. In the United States, a company providing inter-LATA
or long distance services between LATAs on an intrastate or interstate
basis. In Canada, a company that provides long distance services between
local telephone exchanges on an intraprovincial or interprovincial basis.
jetting....................... The process of blowing fiber through a conduit.
LAN........................... Local area network.
LATA.......................... Local access and transport area. The approximately 200 geographic areas in
the United States that define the areas between which the RBOCs currently
are prohibited from providing long distance services.
LEC........................... Local exchange carrier.
lit fiber..................... Fiber activated or equipped with the requisite optical transmission
equipment necessary to use the fiber for transmission.
MSP........................... Multi service platform.
multiplexing.................. An electronic or optical process that combines a large number of lower speed
transmission lines into one high speed line by splitting the total available
bandwidth into narrower bands (frequency division), or by allotting a common
channel to several different transmitting devices, one at a time in sequence
(time division).
Multiprotocol Encapsulation
over ATM...................... The process for enabling an ATM device or application to add a standard
protocol identifier to the LAN data which allows higher-layer protocols,
such as IP, to be routed over ATM.
NNI links..................... Network to network interface links.
NOC........................... Network Operations Center.
OC-192........................ OC is a measure of SONET transmission optical carrier level, which is equal
to the corresponding number of DS-3s (e.g., OC-3 is equal to 3 DS-3s (DS-3
service has a bit rate of 45 megabits per second and typically transmits 672
simultaneous voice conversations) and OC-48 is equal to 48 DS-3s).
Optical Add/Drop.............. Optical equipment where an individual wavelength is added or dropped.
Optical Carrier (OCx)......... Fundamental unit of measurement used in SONET (Synchronous Optical
A-2
<PAGE>
Network) hierarchy. OC indicates an optical carrier signal and x represents
increments of 51.84Mb/s. OC-1, OC-3, and OC-12 represent rates of 51, 155,
622Mb/s.
Optical Line Amplifier........ A device used to boost the strength of an optical signal, which is weakened
(attenuated) as it passes through the transport network.
Optical Terminal.............. A group of optoelectric circuits that converts an electrical signal to an
optical signal and an optical signal to an electrical signal.
Permanent Virtual Circuit
(PVC)......................... A defined virtual link with fixed end-points that are set-up by the network
manager. A single virtual path may support multiple PVC's.
POP........................... Points-of-presence. Locations where a carrier has installed transmission
equipment in a service area that serves as, or relays calls to, a network
switching center of the carrier, or locations in customer buildings where a
carrier has installed electronics and/or facilities.
PNN........................... Private Network--Network Interface.
Protocol...................... A formal description of a set of rules and conventions that govern how
devices on a network exchange information. These rules consist of syntax
(header structure), semantics (actions and reactions that are supposed to
occur), and timing (relative ordering and direction of states and events).
Quality of Service (QoS)...... The set of parameters and their values that quantify the performance of a
given virtual circuit.
RBOC.......................... Regional Bell Operating Companies. The seven local telephone companies
established as a result of the court-ordered breakup in 1984 of AT&T.
Regeneration Shelter.......... A self-contained, pre-constructed building that houses environmental and
electrical support for optoelectric circuitry.
reseller...................... A carrier that does not own transmission facilities, but obtains
communications services from another carrier on a wholesale basis for resale
to the public.
route miles................... The number of miles of the telecommunications path in which fiber optic
cables are installed.
ROW........................... Rights-of-way, licenses and permits (creating a contractual interest and not
an interest in land) from third party landowners and governmental
authorities which permit the holder to install conduit and fiber.
SONET Ring.................... Synchronous Optical Network Technology Ring. An electronics and network
architecture for variable-bandwidth products which enables transmission of
voice, data and video (multimedia) at very high speeds in the event of a
fiber cut by automatically rerouting traffic in the opposite direction
around the ring.
switch........................ A sophisticated computer that accepts instructions from a caller in the form
of a telephone number. Like an address on an envelope, the numbers tell the
switch where to route the call. The switch opens or closes circuits or
selects the paths or circuits to be used for transmission of information.
Switching is a process of interconnecting circuits to form a transmission
path between users. Switches allow local telecommunications service
providers to connect calls directly to their destination, while providing
advanced features and recording connection information for future billing.
Switched Virtual Circuit
(SVC)......................... A virtual link, with variable end-points, established through an ATM network. With an
SVC, the user defines the end-points when the call is initiated that are subsequently
terminated at the end of the call.
A-3
<PAGE>
Synchronous Optical Network
(SONET)....................... A Consultative Committee for International Telegraph and Telephony standard
for synchronous transmission up to multi-gigabit speeds.
Unspecified Bit Rate (UBR).... An ATM service type in which the ATM network makes a "best effort" to meet the
transmitter's bandwidth requirements; essentially a "send and pray" service like
that available from today's networks.
User Network Interface (UNI).. The protocol to define connections between ATM end-stations and the ATM switch
including signaling, cell structure, addressing, traffic management, and
adaptation layers.
Variable Bit Rate (VBR)....... Applications, which produce traffic of varying bit rates, like common LAN
applications, that produce varying throughput rates.
Variable Bit Rate/non-real
time (VBR/nrt)................ One of five ATM Forum-defined service types. Supports variable bit rate
traffic which requires strict timing control, such as packetized voice or
video, with average, and peak traffic parameters.
Variable Bit Rate/real time
(VBR/rt)...................... One of five ATM Forum-defined service types. Supports variable bit rate
traffic which requires strict timing control, such as packetized voice or
video, with average, and peak traffic parameters.
Virtual Channel Connection
(VCC)......................... Virtual channels in two or more sequential physical circuits can be
concatenated to create an end-to-end connection called a VCC. A VCC is a
specific instance of a SVC or PVC. A VCC may traverse one end-to-end VPC or
several sequential VPCs.
Virtual Circuit (VC).......... Logical channel established as a result of the call initiation procedure to
a network address that exists for a period of time.
Virtual Path.................. A group of virtual channels, which can support multiple virtual circuits.
Virtual Path
Identifier/Virtual Channel
Identifier (VPI/VCI).......... Combined, these fields identify a connection in the ATM network.
xDSL.......................... A term referring to a variety of new Digital Subscriber Line technologies.
Some of these varieties are asymmetric with
different data rates in the downstream and
upstream directions. Others are symmetric.
Downstream speeds range from 384 kbps, or
SDSL, to 1.5-8 Mbps, or ADSL.
</TABLE>
A-4
<PAGE>
================================================================================
, 1999
WORLDWIDE FIBER
[OBJECT OMITTED]
Worldwide Fiber Inc.
$500,000,000
12% senior notes due 2009
--------------
PROSPECTUS
-------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this Prospectus or to make representations as to
matters not stated in this Prospectus. You must not rely on unauthorized
information. This Prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this Prospectus nor any
sales made hereunder after the date of this Prospectus shall create an
implication that the information contained herein or the affairs of the Company
have not changed since the date hereof.
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
Worldwide Fiber Inc.
Index to Pro Forma Financial Information
Page
----
Nature and Purpose of Pro Forma Financial Information.................... PF-2
Pro Forma Consolidated Balance Sheet as at June 30, 1999................. PF-3
Pro Forma Consolidated Income Statement for the six month
period ended June 30, 1999............................................. PF-4
Pro Forma Consolidated Income Statement for the year ended
December 31, 1998...................................................... PF-5
Notes to Pro Forma Financial Information................................. PF-6
PF-1
<PAGE>
Worldwide Fiber Inc.
Nature and Purpose of Pro Forma Financial Information
(Unaudited)
The accompanying pro forma consolidated balance sheet of Worldwide
Fiber Inc. (the "Company") as at June 30, 1999 assumes the following
transactions occurred on June 30, 1999: (i) the issuance on July 28, 1999 of the
$500,000,000 12% senior notes ("the Notes"), (ii) the issuance on August 31,
1999 of 150,000 Class B Subordinate Voting Shares for $3,000,000 of cash, (iii)
the reorganization of share capital of the Company on September 9, 1999
including stock dividend of 5,000,000 Series C Redeemable Preferred Shares and
redemption of 45,000,000 Series C Redeemable Preferred Shares for $45,000,000 of
cash (iv) the issuance on September 9, 1999 of 8,866,808 Series A Non-Voting
Preferred Shares for $345,000,000 of cash and (v) the acquisition on September
27, 1999 from affiliates of Ledcor Inc. ("Ledcor") of certain fiber optic
network assets in exchange for 4,500,000 Class C Multiple Voting Shares of the
Company.
The accompanying pro forma consolidated income statement of the Company
for the six month period ended June 30, 1999 gives effect to the interest
expense, including amortization of deferred financing costs, relating to the
Notes assuming the Notes were issued on January 1, 1998.
The accompanying pro forma consolidated income statement of the Company
for the year ended December 31, 1998 assumes that the following transactions
occurred on January 1, 1998: (i) the transfer on May 31, 1998 of certain of the
operations of the Telecommunications Division ("Division") of Ledcor, the
Construction Services, Management Services and Employee Services Agreements
between the Company and affiliates of Ledcor, (ii) the consolidation of
Worldwide Fiber (USA), Inc. ("WFI USA"), (formerly Pacific Fiber Link, Inc.) as
a result of the Company's agreement to increase its interest in WFI USA from 50%
to 75% on December 31, 1998, and (iii) the effect of the interest expense,
including amortization of deferred financing costs, relating to the Notes and
$175,000,000 12 1/2% senior notes (the "1998 Notes").
The unaudited pro forma consolidated balance sheet and income statement
as of and for the six month period ended June 30, 1999 is based on the
historical unaudited consolidated financial statements for the six month period
ended June 30, 1999.
The unaudited pro forma consolidated income statement for the year
ended December 31, 1998 is presented on the basis of the fiscal year end of
December 31, 1998 adopted by the Company and is based on the historical
consolidated income statement of the Company for the seven-month period ended
December 31, 1998, and the operations of the Division for the five months ended
May 31, 1998 derived from the historical statement of operations for the
Division for the nine months ended May 31, 1998.
The unaudited pro forma consolidated financial statements are not
necessarily indicative of the results that actually would have been achieved if
the transactions reflected therein had been completed on the dates indicated or
the results which may be obtained in the future. The unaudited pro forma
consolidated financial state-
PF-2
<PAGE>
Worldwide Fiber Inc.
Nature and Purpose of Pro-Forma Financial Information
(Unaudited)
ments should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the consolidated financial
statements of the Company, financial statements of the Division and consolidated
income statement of WFI USA, including the respective notes thereto, included
elsewhere herein.
PF-3
<PAGE>
Worldwide Fiber Inc.
Pro Forma Consolidated Balance Sheet
(Unaudited)
Worldwide Fiber Inc.
June 30, 1999
(tabular amounts expressed in thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Pro forma
Worldwide Pro forma Consolidated
Fiber Inc. Adjustments Balance Sheet
$ $ $
---------- ----------- -------------
Assets
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents...................... 86,812 4(i) 484,000 873,812
4(iii) (45,000)
4(v) 345,000
4(v) 3,000
Accounts receivable............................ 19,656 -- 19,656
Unbilled revenue............................... 72,534 -- 72,534
Inventory...................................... 86,502 -- 86,502
Other current assets........................... 30,814 -- 30,814
---------------- ------------------ ---------------
296,318 787,000 1,083,318
Fixed Assets................................... 57,790 4(ii) 26,000 83,790
Deferred income taxes.......................... 4,408 4(ii) 12,000 16,408
Deferred financing costs....................... 6,509 4(i) 16,000 22,509
---------------- ------------------ ---------------
365,025 841,000 1,206,025
================ ================== ===============
Liabilities
Current liabilities
Accounts payable and accrued liabilities....... 81,551 4(ii) 30,000 113,751
4(vi) 2,200
Advances on contracts.......................... 26,470 -- 26,470
Income taxes payable........................... 16,733 -- 16,733
Other liabilities.............................. 5,323 -- 5,323
---------------- ------------------ ---------------
130,077 32,200 162,277
Senior Notes................................... 175,000 4(i) 500,000 675,000
---------------- ------------------ ---------------
305,077 532,200 837,277
Minority interest.............................. 4,438 -- 4,438
Redeemable Preferred Stock..................... -- 4(iv) 345,000 345,000
4(iii) 5,000
4(iii) (5,000)
Shareholder's Equity
Common Stock................................... 32,419 4(ii) 8,000 43,419
4(v) 3,000
Contributed surplus............................ 2,242 -- 2,242
Retained earnings (deficit).................... 21,413 (iii) (5,000) (25,787)
4(iii) (40,000)
4(vi) (2,200)
Accumulated other comprehensive
income.................................... (564) -- (564)
55,510 (36,200) 19,310
---------------- ------------------ ---------------
365,025 841,000 1,206,025
================ ================== ===============
</TABLE>
PF-4
<PAGE>
Worldwide Fiber Inc.
Pro Forma Consolidated Income Statement
(Unaudited)
For the six month period ended June 30, 1999
(tabular amounts expressed in thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Pro forma
Worldwide Pro forma Consolidated Income
Fiber Inc. Adjustments Statement
$ $ $
---------- ----------- ---------
<S> <C> <C> <C>
Revenue........................................ 123,884 -- 123,884
Costs.......................................... 85,614 -- 85,614
------- ------ -------
Gross Profit................................... 38,270 -- 38,270
------- ------ -------
Expenses
General and administrative..................... 5,837 5(iii) 1,250 7,087
Depreciation................................... 453 -- 453
------- ------ -------
6,290 1,250 7,540
------- ----- -------
31,980 1,250 30,730
Interest expense............................... 7,970 5(i) 31,200 39,170
Interest Income................................ 2,299 -- 2,299
------- ------ -------
Income (loss) before income taxes and
minority interest............................ 26,309 (32,450) (6,141)
Provision for (recovery of) income taxes....... 10,921 5(iii) 950 (1,574)
5(iii) (13,445)
Income (loss) before minority interest......... 15,388 (19,955) (4,567)
Income attributable to minority
interest..................................... 2,995 -- 2,995
------- ------ -------
Net income (loss) for the period 12,393 (19,955) (7,562)
======== ========= ========
</TABLE>
PF-5
<PAGE>
Worldwide Fiber Inc.
Pro Forma Consolidated Income Statement
(Unaudited)
For the year ended December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Ledcor
Industries Worldwide
Worldwide Limited Fiber
Fiber Inc. Tele-communications (USA), Inc. Pro forma
(June 1 to Division (formerly Consolidated
December 31, (January 1 to Pacific Fiber Pro forma Income
1998) May 31, 1998) Link, Inc.) Subtotal Adjustments Statement
$ $ $ $ $ $
----- ------------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue..................... 164,319 20,537 21,071 205,927 6(i) 1,111 207,038
Costs....................... 147,621 11,398 16,533 175,552 6(i) 6,966 182,518
-------- ------- ------- ------- ------- --------
Gross profit................ 16,698 9,139 4,538 30,375 (5,855) 24,520
-------- ------- ------- ------- -------- --------
Expenses
General and administrative.. 2,274 1,289 1,683 5,246 6(ii) 394 8,140
6(v) 2,500
Depreciation................ 464 175 -- 639 -- 639
-------- ------- ------- ------- ------- --------
2,738 1,464 1,683 5,885 2,894 8,779
-------- ------- ------- ------- ------- -----
13,960 7,675 2,855 24,490 (8,749) 15,741
Interest expense............ 492 -- 72 564 6(vi) (72) 85,600
6(iii) 85,108
Interest income............. 267 -- 53 320 6(vi) (72) 248
-------- ------- ------- ------- -------- -------
Income (loss) before equity
income, income taxes and
minority interest......... 13,735 7,675 2,836 24,246 (93,857) (69,611)
Equity income............... 928 -- -- 928 6(vi) (928) --
-------- ------- ------- ------- -------- -------
Income (loss) before income
taxes and minority
interest.................. 14,663 7,675 2,836 25,174 (94,785) (69,611)
Provision for (recovery of) 6(v) 1,900
income taxes.............. -----
5,643 3,323 980 9,946 6(iv) (38,556) (26,710)
------- ------- ------- ------- -------- --------
Income (loss) before
minority interest........... 9,020 4,352 1,856 15,228 (58,129) (42,901)
Income attributable to
minority interest......... -- -- -- -- 6(vi) 464 464
------- ------- ------- ------- ------- -------
Net income (loss) for the
year...................... 9,020 4,352 1,856 15,228 (58,593) (43,365)
======= ======= ======= ======= ======== ========
</TABLE>
PF-6
<PAGE>
Worldwide Fiber Inc.
Notes to Pro Forma Financial Information
(Unaudited)
For the six month period ended June 30, 1999
and the year ended December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
1. Pro forma transactions
The unaudited pro forma consolidated balance sheet and income statements of
the Company have been prepared to reflect the effects of the following completed
or proposed transactions.
Effective May 31, 1998, the operations of the Telecommunications Division
("Division") of Ledcor Industries Ltd. ("Ledcor") were transferred to the
Company. The transfer was pursuant to a series of agreements as follows:
o The Company obtained certain equipment, fiber optic network assets and
other assets;
o Ledcor retained all construction contracts entered into prior to the
transfer of the business and entered into two Construction Services
Agreements whereby the Company would provide services to Ledcor to
complete the contracts in exchange for a fee;
o The Company and Ledcor entered into a Management Services Agreement
whereby Ledcor would provide the Company with management staff,
administrative and other support services. The Company reimburses
Ledcor for direct costs paid on the Company's behalf and pays Cdn.
$200,000 per month for the Company's share of corporate overhead;
o The Company and Ledcor entered into Employee Services Agreements
whereby Ledcor provides personnel for designing, engineering,
construction and installation services on a cost reimbursement basis
to the Company;
o The Company and Ledcor entered into an undertaking whereby the Company
would provide services to complete the Canadian Fiber Optic
Transmission System and, upon completion, a portion of the network
would be transferred from Ledcor to the Company in exchange for a
fixed number of common shares of the Company as described in the
following point;
o As described in Note 1 to the consolidated financial statements of the
Company, on March 31, 1999, the Company issued 19,999,700 Class A
common shares to its parent Ledcor in exchange for certain fiber optic
assets. A pro forma balance sheet has not been presented to reflect
the effect of this transaction on the historical consolidated balance
sheet of the Company as of December 31, 1998. The transaction was
accounted for as a transaction between a parent and a wholly owned
subsidiary and accordingly, fixed assets acquired by the Company were
recorded at the carrying amount of the assets in the accounts of
Ledcor. If this transaction had occurred at December 31, 1998,
PF-7
<PAGE>
Worldwide Fiber Inc.
Notes to Pro Forma Financial Information
(Unaudited)
For the six month period ended June 30, 1999
and the year ended December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
o the fixed assets would have increased by $21,883,000, the cost of the
assets in the accounts of Ledcor as at December 31, 1998, deferred
income taxes would have increased by $3,136,000 as a result of a
higher tax cost versus accounting cost of fixed assets and the stated
amount of the Company's common stock would have increased by
$25,019,000;
These agreements are summarized in the consolidated financial statements of
the Company for the period ended December 31, 1998.
As described in the notes to the unaudited interim consolidated financial
statements for the six month period ended June 30, 1999 and audited consolidated
financial statements for the period ended December 31, 1998, the Company entered
into a series of agreements with affiliates of Ledcor whereby the Company
acquired certain fiber optic network assets. Closing occurred on September 27,
1999. As consideration, upon closing, the Company issued to affiliates of Ledcor
4,500,000 Class C Multiple Voting Shares. In addition, the Company has assumed
certain rights and obligations of the affiliates under their build agreements
with a third party including obligations relating to the completion of those
builds and certain support structure, maintenance, license and access, and
underlying rights obligations.
On December 23, 1998, the Company issued $175,000,000 12-1/2% Senior notes
due 2005 (the "1998 Notes") and on July 28, 1999, the Company issued
$500,000,000 12% Senior notes due 2009 (the "Notes").
On December 31, 1998, the Company increased its interest in Worldwide Fiber
(USA), Inc. ("WFI USA") (formerly Pacific Fiber Link, Inc.) from 50% to 75% in
exchange for the conversion of a note amounting to $3,915,000.
Pursuant to a reorganization of the Company's share capital, on September
9, 1999, the Company amended its share capital by redesignating all Class A
Voting Shares to Class B Subordinate Voting Shares, cancelling the remaining
classes of shares and creating Class A Non-Voting shares, Class C Multiple
Voting shares, Series A and B Preferred Shares, and Series C Redeemable
Preferred Shares.
On August 31, 1999, the Company issued 150,000 Class B Subordinate Voting
Shares (redesignated from Class A Voting Shares) for $3,000,000 of cash.
Subsequently, the Company declared a stock dividend of 5,000,000 Series C
Redeemable Preferred Shares. Concurrently, the Company repurchased the
25,000,000 outstanding Class B Subordinate Voting Shares from its parent in
exchange for the issuance of 23,043,500 Class
PF-8
<PAGE>
Worldwide Fiber Inc.
Notes to Pro Forma Financial Information
(Unaudited)
For the six month period ended June 30, 1999
and the year ended December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
B Subordinate Voting Shares and 40,000,000 Series C Redeemable Preferred Shares.
The Company then redeemed the 45,000,000 outstanding Series C Redeemable
Preferred Shares for $45,000,000 of cash.
On September 9, 1999, the Company issued 8,866,808 Series A Non-Voting
Preferred Shares for $345,000,000 of cash.
2. Basis of presentation
The unaudited pro forma balance sheet and consolidated income statements
have been prepared by management in accordance with generally accepted
accounting principles in the United States and the pro forma assumptions and
adjustments described in notes 1, 4, 5 and 6.
The unaudited pro forma consolidated balance sheet and income statement as
of and for the six month period ended June 30, 1999 is based on the unaudited
historical consolidated financial statements of the Company for the six month
period ended June 30, 1999.
The unaudited pro forma consolidated income statement for the year ended
December 31, 1998 is presented on the basis of the fiscal year end of December
31 adopted by the Company. The pro forma consolidated income statement for the
year ended December 31, 1998 is based on the historical consolidated income
statement of the Company for the seven-month period ended December 31, 1998, and
the operations of the Division for the five months ended May 31, 1998 derived
from the historical statement of operations for the Division for the nine months
ended May 31, 1998.
The unaudited pro forma consolidated financial statements are not
necessarily indicative of the results that actually would have resulted if the
transactions reflected herein had been completed on the dates indicated or the
results which may be obtained in the future. The unaudited pro forma
consolidated financial statements should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements of the Company, financial
statements of the Division, and consolidated income statement of WFI USA,
including the respective notes thereto, included elsewhere herein.
3. Significant accounting policies
The significant accounting policies used in the preparation of the pro
forma consolidated balance sheet and income statements include those disclosed
in the audited financial statements of the Company.
PF-9
<PAGE>
Worldwide Fiber Inc.
Notes to Pro Forma Financial Information
(Unaudited)
For the six month period ended June 30, 1999
and the year ended December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
4. Pro forma consolidated balance sheet assumptions and adjustments as at
June 30, 1999
The following assumptions and adjustments have been made in the pro forma
consolidated balance sheet as at June 30, 1999.
(i) Notes
This adjustment records the Notes assuming they had been issued on June
30, 1999.
(ii) Acquisition of fiber optic network assets
This adjustment records the acquisition by the Company of certain fiber
optic network assets from Ledcor in exchange for 4,500,000 Class C Multiple
Voting shares in accordance with the May 28, 1999 and September 27, 1999 share
purchase agreements. This transaction closed on September 27, 1999. If this
transaction had occurred at June 30, 1999 management estimates that fixed assets
would have increased by approximately $26,000,000, the cost of the assets in the
accounts of Ledcor, deferred income taxes would have increased by approximately
$12,000,000, as a result of a higher tax cost versus accounting cost of fixed
assets, accounts payable would have increased by approximately $30,000,000, the
liability recorded in the accounts of Ledcor, and the stated amount of the
Company's common stock would have increased by approximately $8,000,000.
(iii) Share reorganization
This adjustment records the stock dividend of 5,000,000 Series C
Redeemable Preferred Shares with an estimated fair value of $5,000,000 and
subsequent redemption of 45,000,000 Series C Redeemable Preferred Shares for
$45,000,000 of cash.
(iv) Issuance of Series A Non-Voting Preferred Shares
This adjustment records the issuance of 8,866,808 Series A Non-Voting
Preferred Shares for $345,000,000 of cash.
(v) Issuance of Class B subordinate voting shares
This adjustment records the issuance of 150,000 Class B Subordinate
Voting Shares (redesignated from Class A Voting Shares) for $3,000,000 of cash.
(vi) Capital taxes
PF-10
<PAGE>
Worldwide Fiber Inc.
Notes to Pro Forma Financial Information
(Unaudited)
For the six month period ended June 30, 1999
and the year ended December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
This adjustment records estimated additional BC Corporation Capital and
Federal Large Corporation taxes payable of $2,200,000 for the six month period
ended June 30, 1999 resulting from the issuance of the Notes and Series A
Non-Voting preferred shares.
5. Pro Forma Consolidated Income Statement assumptions and adjustments for the
six month period ended June 30, 1999
The following assumptions and adjustments have been made in the pro forma
consolidated income statement to reflect the effect of the additional interest
expense, including amortization of deferred financing costs, related to the
Notes.
(i) Interest expense
This adjustment records the interest expense, including amortization of
deferred financing costs, related to the Notes assuming the Notes were issued on
January 1, 1998. Amortization of the deferred financing costs was computed based
on the effective interest method. The Company would have capitalized a portion
of interest expense related to the Notes to the cost of the fiber optic network
assets constructed during the six month period ended June 30, 1999, which is not
reflected in this pro forma statement.
(ii) Income taxes
This adjustment records an income tax recovery of $2,524,000 for the six
month period ended June 30, 1999 using an effective tax rate of 41.1%.
(iii) Capital taxes
This adjustment records estimated additional BC Corporation Capital taxes
of $1,250,000 and Federal Large Corporation taxes of $950,000 for the six month
period ended June 30, 1999 resulting from the issuance of the Notes and Series A
Non-Voting Preferred Shares.
6. Pro forma consolidated income statement assumptions and adjustments for the
year ended December 31, 1998
Pursuant to the transactions with Ledcor, the Company has not assumed
certain construction contracts that are the responsibility of Ledcor. The
Company provides construction services to Ledcor for such contracts in
accordance with the Construction Services Agreements. In addition, the Company
reimburses Ledcor for general and administrative, and other costs, paid by
Ledcor on the Company's behalf, in accordance with the Management and Employee
Services Agreements.
PF-11
<PAGE>
Worldwide Fiber Inc.
Notes to Pro Forma Financial Information
(Unaudited)
For the six month period ended June 30, 1999
and the year ended December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
The following assumptions and adjustments have been made in the pro forma
consolidated income statement for the year ended December 31, 1998 to reflect
the retention of various contracts by Ledcor, the provision of general and
administrative services, the consolidation of WFI USA in respect of the
acquisition of an additional interest in WFI USA bringing the Company's interest
to 75% on December 31, 1998, and the effect of the additional interest expense,
including amortization of deferred financing costs, related to the Notes and
1998 Notes.
(i) Revenue and costs
Under the Construction Services Agreements with Ledcor, the Company is
reimbursed for all costs incurred plus a fee of 15%. Contract costs have been
adjusted to reflect costs incurred by the Division that are included in
inventory which would have been reimbursed if the Construction Services
Agreements had been in place. Revenues have been adjusted to reflect the costs
incurred plus the 15% fee for the five-month period ended May 31, 1998.
(ii) General and administrative costs
In accordance with the Management Services Agreement, Ledcor provides the
Company with management staff, administrative and other support services. The
Company reimburses Ledcor for direct costs and pays Cdn. $200,000 per month for
the Company's share of corporate overheads.
This adjustment eliminates the general corporate overhead costs allocated
to the Division of $299,546 and records $693,575 in accordance with the
Management Services Agreement for the five-month period ended May 31, 1998.
(iii) Interest expense
This adjustment records the interest expense, including amortization of
deferred financing costs, related to the Notes and the 1998 Notes assuming the
Notes and the 1998 Notes were issued on January 1, 1998. Amortization of the
deferred financing costs was computed based on the effective interest rate
method. The Company would have capitalized a portion of the interest expense
related to the Notes and 1998 Notes to the cost of the fiber optic network
assets constructed during the year ended December 31, 1998, which is not
reflected in this pro forma income statement.
(iv) Income taxes
This adjustment records an income tax recovery of $27,593,000 for the year
ended December 31, 1998 using an effective tax rate of 41.1% related to the
recognition of a deferred tax asset from the tax loss carryforward created for
the year ended December 31, 1998. Management believes that,
PF-12
<PAGE>
Worldwide Fiber Inc.
Notes to Pro Forma Financial Information
(Unaudited)
For the six month period ended June 30, 1999
and the year ended December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
based on a number of factors, it is more likely than not that the deferred tax
asset will be fully realized, such that no valuation allowance would be
recorded.
(v) Capital taxes
This adjustment records estimated additional BC Corporation Capital taxes
of $2,500,000 and Federal Large Corporation tax of $1,900,000 for the year ended
December 31, 1998 resulting from the issuance of the Notes and Series A
Non-Voting preferred shares.
(vi) Acquisition of additional interest in WFI USA
It has been assumed that the Company's acquisition of the additional 25%
interest in WFI USA occurred on February 11, 1998, the date WFI USA commenced
operations.
Depreciation expense has not been adjusted for the acquisition of the
additional interest in WFI USA as the fiber optic network assets of WFI USA were
under construction at the date of acquisition and are not yet available for use.
Accordingly, if the acquisition had occurred on February 11, 1998, the
transaction would have been reflected as an issuance of shares for cash. No
interest income has been recognized on this transaction.
This adjustment eliminates the Company's equity in the earnings of WFI USA,
records the net income attributed to the minority interest as a result of the
consolidation of the net income of WFI USA, and eliminates intercompany interest
charged.
PF-13
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
WORLDWIDE FIBER INC. UNAUDITED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999
Unaudited Consolidated Balance Sheets..................................... F-2
Unaudited Consolidated Income Statements.................................. F-4
Unaudited Consolidated Statement of Changes in Shareholder's Equity....... F-5
Unaudited Consolidated Statements of Cash Flows........................... F-6
Notes to Unaudited Consolidated Financial Statements...................... F-7
WORLDWIDE FIBER INC. AUDITED FINANCIAL STATEMENTS FOR THE
PERIOD ENDED DECEMBER 31, 1998
Auditors' Report.......................................................... F-13
Consolidated Balance Sheet................................................ F-14
Consolidated Income Statement............................................. F-16
Consolidated Statement of Changes in Shareholder's Equity................. F-17
Consolidated Statement of Cash Flows...................................... F-18
Notes to Consolidated Financial Statements................................ F-19
WORLDWIDE FIBER (USA), INC. AUDITED FINANCIAL STATEMENTS FOR
THE PERIOD ENDED DECEMBER 31, 1998
Report of Independent Accountants......................................... F-34
Consolidated Income Statement............................................. F-35
Consolidated Statement of Changes in Shareholders' Equity................. F-36
Consolidated Statement of Cash Flows...................................... F-37
Notes to Consolidated Financial Statements................................ F-38
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Auditors' Report.......................................................... F-44
Divisional Balance Sheets................................................. F-45
Divisional Statements of Operations and Retained Earnings................. F-46
Divisional Statements of Cash Flows....................................... F-47
Notes to the Divisional Financial Statements.............................. F-48
F-1
<PAGE>
WORLDWIDE FIBER INC.
Consolidated Balance Sheets
(tabular amounts expressed in thousands of U.S. dollars)
(Unaudited)
June 30, 1999 December 31, 1998
------------- -----------------
Assets
Current Assets
Cash and cash equivalents $ 86,812 $ 156,366
Accounts receivable 19,656 3,272
Unbilled revenue 72,534 10,582
Inventory 86,502 25,300
Other current assets 30,814 17,342
------------ ------------
296,318 212,862
Fixed Assets 57,790 15,475
Deferred income taxes 4,408 1,273
Deferred financing costs 6,509 6,650
------------ ------------
$ 365,025 $ 236,260
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
<PAGE>
WORLDWIDE FIBER INC.
Consolidated Balance Sheets
(tabular amounts expressed in thousands of U.S. dollars)
(unaudited)
June 30, 1999 December 31, 1998
------------- -----------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 81,551 $ 20,296
Advances on contracts 26,470 13,651
Income taxes payable 16,733 7,609
Other liabilities 5,323 --
------------ -----------
130,077 41,556
Senior Notes 175,000 175,000
------------ -----------
305,077 216,556
Minority interest 4,438 1,443
Shareholder's equity
Common stock
Authorized:
Unlimited number of Class A voting,
Class B voting and Class C non-voting
shares, no par value
Issued and outstanding:
25,000,000 Class A shares
(December 31, 1998-- 5,000,300) 32,419 7,400
Contributed surplus 2,242 2,242
Retained earnings 21,413 9,020
Accumulated other comprehensive income (564) (401)
------------ -----------
55,510 18,261
------------ -----------
$ 365,025 $ 236,260
============ ===========
Subsequent Events (Note 8)
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
WORLDWIDE FIBER INC.
Consolidated Income Statements
For the periods ended June 30, 1999 and 1998
(tabular amounts expressed in thousands of U.S. dollars)
(unaudited)
For the period from February 5,
1998 (date of incorporation)
to June 30, 1998
Six months ended (operations commenced
June 30, 1999 June 1, 1998)
------------- -------------
Revenue $ 123,884 $ 12,280
Costs 85,614 10,621
Gross profit ---------- ---------
$ 38,270 $ 1,659
Expenses:
General & administrative 5,837 403
Depreciation 453 49
---------- ---------
6,290 452
---------- ---------
31,980 1,207
Interest expense 7,970 --
Interest income 2,299 --
---------- ---------
Income before income taxes,
equity income &minority 26,309 1,207
interest
Equity income -- 2
---------- ---------
Income before income taxes
& minority interest 26,309 1,209
Provision for income taxes
Current 10,088 526
Deferred 833 --
---------- ---------
10,921 526
---------- ---------
Income before minority 15,388 683
interest
Minority interest 2,995 --
---------- ---------
Net income for the period ========== =========
$ 12,393 $ 683
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
WORLDWIDE FIBER INC.
Consolidated Statement of Changes in Shareholder's Equity
For the six month period ended June 30, 1999
(tabular amounts expressed in thousands of U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Common stock other Total
Class A Contributed Retained comprehensive Shareholder's
Shares Amount surplus earnings income equity
------ ------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance -- beginning of
period 5,000,300 $ 7,400 $ 2,242 $ 9,020 $ (401) $ 18,261
Issuance of shares for certain
Ledcor assets with deferred
tax assets 19,999,700 25,019 25,019
Comprehensive income
Net income for the period -- -- -- 12,393 -- 12,393
Accumulated other
comprehensive income --
foreign currency translation -- -- -- -- (163) (163)
---------- ----------- ----------- ----------- ------------ ------------
Total comprehensive income -- -- -- -- -- --
---------- ----------- ----------- ----------- ------------ ------------
Balance-- end of period 25,000,000 $ 32,419 $ 2,242 $ 21,413 $ (564) $ 55,510
========== =========== =========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
WORLDWIDE FIBER INC.
Consolidated Statements of Cash Flows
For the periods ended June 30, 1999 and 1998
(tabular amounts expressed in thousands of U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
For the period from February 5,
1998 (date of incorporation)
to June 30, 1998
Six months ended (operations commenced
June 30, 1999 June 1, 1998)
<S> <C> <C>
Cash flows (used in) provided from operating
activities $ (49,824) $ 681
----------- --------
Cash flows used in investing activities
Fixed asset additions (19,215) --
----------- --------
Cash flows used in financing activities (352) (681)
----------- --------
Effect of exchange rate changes on cash (163) --
----------- --------
Net (decrease) increase in cash and cash
equivalents (69,554) --
----------- --------
Cash and cash equivalents, beginning
of period 156,366 20
----------- --------
Cash and cash equivalents, end of period $ 86,812 $ 20
=========== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE>
WORLDWIDE FIBER INC.
Notes to Consolidated Financial Statements (Continued)
June 30, 1999
(tabular amounts expressed in thousands of U.S. dollars)1999
(unaudited)
1. The Company
Worldwide Fiber Inc. (the "Company") is indirectly a wholly-owned
subsidiary of Ledcor Inc. (Ledcor). The Company's operations consist of
designing, engineering, constructing and installing terrestrial and marine fiber
optic systems for sale or lease to third parties or for its own use.
These financial statements should be read in conjunction with the
consolidated financial statements of the Company for the period ended December
31, 1998.
Transactions with Ledcor
On March 31, 1999 the Company completed a series of transactions whereby
certain fiber optic network assets were transferred to the Company by Ledcor in
exchange for 19,999,700 Class A common shares. The cost of the assets acquired
at March 31, 1999 amounted to $21,884,000. As a result of the transaction, the
Company also received a deferred tax benefit of $3,136,000 which is reflected as
a deferred tax asset.
Basis of Presentation
These unaudited interim consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented and include all
adjustments of a normal recurring nature.
Significant accounting policies
Revenue recognition
Revenue for services provided to Ledcor for construction projects is
recognized in the period the construction services are performed based on the
costs incurred.
Revenue and income from construction contracts to develop fiber optic
network assets are determined on the percentage-of-completion basis using the
cost-to-cost method. Provision is made for all anticipated losses as soon as
they become evident. Claims for additional contract compensation are not
recognized until resolved.
F-7
<PAGE>
WORLDWIDE FIBER INC.
Notes to Consolidated Financial Statements (Continued)
June 30, 1999
(tabular amounts expressed in thousands of U.S. dollars)1999
(unaudited)
Revenue from agreements to construct fiber optic network assets in
connection with sales-type leases are recognized on the percentage-of-completion
basis when the risk of construction is transferred to the lessee.
Stock Option Plan
The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and, accordingly, recognizes compensation expense for stock option
grants to the extent that the estimated fair value of the stock exceeds the
exercise price of the option at the measurement date. The compensation expense
is charged against operations ratably over the vesting period of the options.
2. Supplemental cash flow information
<TABLE>
<CAPTION>
Six months ended Period ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash paid for income taxes $ 1,130 $ --
Cash paid for interest 10,451 --
Issuance of common shares for certain Ledcor assets
with deferred tax asset of $3,136,000 25,019 --
3. Balance Sheet components
June 30, 1999 December 31, 1998
------------- -----------------
Unbilled revenue
Revenue earned on uncompleted contracts $ 149,334 $ 22,236
Less: Billings to date 76,800 11,654
---------- -----------
$ 72,534 $ 10,582
========== ===========
</TABLE>
F-8
<PAGE>
WORLDWIDE FIBER INC.
Notes to Consolidated Financial Statements (Continued)
June 30, 1999
(tabular amounts expressed in thousands of U.S. dollars)1999
(unaudited)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Inventory
Fiber optic network assets $ 85,948 $ 24,155
Construction supplies and small tools 554 1,145
---------- -----------
$ 86,502 $ 25,300
========== ===========
Other current assets
Deposits on future contracts (note 7) $ 30,000 $ --
Prepaid expenses and other 814 3,930
Due from Parent -- 13,412
---------- -----------
$ 30,814 $ 17,342
========== ===========
Fixed assets
Fiber optic network assets $ 51,361 $ 11,461
Construction equipment 7,331 4,249
Other 27 229
---------- -----------
58,719 15,939
Less: Accumulated depreciation 929 464
---------- -----------
Fixed assets - net $ 57,790 $ 15,475
========== ===========
</TABLE>
The Company has not provided for any depreciation on fiber optic network
assets for the period ended June 30, 1999 as these assets were under
construction.
F-9
<PAGE>
WORLDWIDE FIBER INC.
Notes to Consolidated Financial Statements (Continued)
June 30, 1999
(tabular amounts expressed in thousands of U.S. dollars)1999
(unaudited)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Accounts payable and accrued liabilities
Subcontractor and supplier costs $ 70,423 $ 13,468
Subcontractor holdbacks payable 10,083 4,843
Other 12 1,493
Interest payable 1,033 492
----------- -----------
$ 81,551 $ 20,296
=========== ===========
</TABLE>
4. Income taxes
Income before income taxes and minority interest
The components of income before income taxes and minority interest are as
follows:
Six months ended Period ended
June 30, 1999 June 30, 1998
------------- -------------
Canadian $ 5,774 $ 721
U.S. 20,535 488
----------- -------
$ 26,309 $ 1,209
=========== =======
F-10
<PAGE>
WORLDWIDE FIBER INC.
Notes to Consolidated Financial Statements (Continued)
June 30, 1999
(tabular amounts expressed in thousands of U.S. dollars)1999
(unaudited)
Current income taxes
The provision for current income taxes attributable to net earnings
consists of the following:
Six months ended Period ended
June 30, 1999 June 30, 1998
------------- -------------
Canadian $ 2,126 $ 331
U.S. federal 6,450 146
U.S. state and local 1,512 49
---------- ------
$ 10,088 $ 526
========== ======
Deferred income taxes
The provision for deferred income taxes attributable to net earnings
consists of the following:
Six months ended Period ended
June 30, 1999 June 30, 1998
------------- -------------
Canadian $ 2,626 $ --
U.S. federal (1,793) --
U.S. state and local -- --
---------- -----
$ 833 $ --
========== =====
F-11
<PAGE>
WORLDWIDE FIBER INC.
Notes to Consolidated Financial Statements (Continued)
June 30, 1999
(tabular amounts expressed in thousands of U.S. dollars)1999
(unaudited)
Significant components of the Company's deferred tax assets are as follows:
June 30, 1999 December 31, 1998
------------- -----------------
Fixed assets $ 4,224 $ 1,088
Other 184 185
Valuation allowance -- --
--------- ---------
Net deferred tax assets $ 4,408 $ 1,273
========= =========
Management believes that, based on a number of factors, it is more likely
than not that the deferred tax assets will be fully utilized, therefore, no
valuation allowance has been recorded.
5. Segmented information
The Company operates within a single operating segment being the
construction and installation of fiber optic network assets. These fiber optic
network assets are being constructed in Canada and the United States.
Revenues, fixed assets, and deferred financing costs are located as follows:
<TABLE>
<CAPTION>
Revenues Fixed Assets Deferred Financing Costs
-------- ------------ ------------------------
Six months ended Period ended June 30, December 31, June 30, December 31,
June 30, 1999 June 30, 1998 1999 1998 1999 1998
------------- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Canada $30,423 $8,085 $28,810 $8,218 $6,509 --
U.S. 93,461 4,195 28,980 7,257 -- --
------- ------ ------- ------ ----- --------
$123,884 $12,280 $57,790 $15,475 $6,509 $ --
======== ======= ======= ======= ====== =======
</TABLE>
The revenues are based on the location of the construction activities.
F-12
<PAGE>
WORLDWIDE FIBER INC.
Notes to Consolidated Financial Statements (Continued)
June 30, 1999
(tabular amounts expressed in thousands of U.S. dollars)1999
(unaudited)
6. Common stock
During the six months ended June 30, 1999, the Company granted stock
options to employees and officers to purchase an aggregate of 2,578,060 shares
of class A common stock of the Company at exercise prices between $10 and $20
per share. The stock options have terms expiring on or before June 30, 2009. See
Note 8.
7. Commitments
Supply Agreements
On June 18, 1999, a subsidiary of the Company entered into a supply
agreement with Tyco Submarine Systems Ltd. ("Tyco") whereby Tyco will serve as
the primary contractor for the Company's transatlantic cable project. The
initial contract price is approximately $607 million. The company has paid $30
million in advance payments during the six month period ended June 30, 1999, and
has made an additional payment of $30.7 million in August 1999.
The Company has placed purchase orders of approximately $47,600,000 with
Nortel Networks.
IC/CN Agreements
On May 28, 1999, the Company entered into agreements with Canadian National
Railway Company ("CN") and Illinois Central Railroad Company ("IC") to license
rights-of-way ("ROW") along certain of their respective rail transportation
systems (the "Routes"). The Company will pay a license fee, based on the length
of the ROWs, and payable pursuant to a formula based on cash flow generated from
projects developed on the Routes. The Company will also provide a certain number
of fibers as consideration for the license of the ROWs. In connection with these
license agreements, the Company has formed subsidiary companies with CN and IC
(the Company having a 75% interest and CN or IC having the remaining 25%
interest) for the purpose of licensing the ROWs from CN and IC and developing
the projects along the Routes.
8. Subsequent events
Senior Notes
On July 28, 1999 the Company issued Senior notes (the "Notes") with a face
value of $500,000,000. The Notes are unsecured obligations of the Company
bearing interest at 12% payable semi-annually. The Notes are due August 1, 2009
and may be redeemed by the Company on or after August 1, 2000 at certain
specified redemption prices. Up to 35% of the Notes may be redeemed by the
F-13
<PAGE>
WORLDWIDE FIBER INC.
Notes to Consolidated Financial Statements (Continued)
June 30, 1999
(tabular amounts expressed in thousands of U.S. dollars)1999
(unaudited)
Company prior to August 1, 2002 with the net proceeds from certain sales of the
Company's common stock.
The Notes contain certain covenants that restrict the ability of the
Company and its subsidiaries to incur additional indebtedness, issue certain
preferred stock, pay dividends or make other distributions, repurchase equity
interests or subordinated indebtedness, engage in sale and leaseback
transactions, create certain liens, enter into certain transactions with
affiliates, sell assets of the Company or its subsidiaries, issue or sell equity
interests of the Company's subsidiaries or enter into certain mergers and
consolidations.
The interest rate on the Notes is subject to increase if the Company does
not file a registration statement with the Securities and Exchange Commission
within certain time periods specified in the Notes Indenture.
Agreement with Ledcor
On May 28, 1999, the Company entered into an agreement with affiliates of
Ledcor, whereby the Company would acquire certain fiber optic network assets.
Closing occurred on September 27, 1999. As consideration, upon closing, the
Company issued to affiliates of Ledcor 4,500,000 Class C Multiple Voting shares.
In addition, the Company assumed certain rights and obligations of the
affiliates under their build agreements with a third party including obligations
relating to the completion of those builds and certain support structure,
maintenance, license and access and underlying rights obligations. Management
estimates that based on information available to date, fixed assets will
increase by approximately $26,000,000, the cost of the assets in the accounts of
Ledcor, deferred income taxes will increase by approximately $12,000,000, as a
result of a higher tax cost versus accounting cost of fixed assets, accounts
payable will increase by approximately $30,000,000, the liability recorded in
the accounts of Ledcor, and the stated amount of the Company's common stock will
increase by approximately $8,000,000.
Share Reorganization
Pursuant to a reorganization of the Company's share capital, on September
9, 1999, the Company amended its share capital by redesignating all Class A
Voting Shares to Class B Subordinate Voting Shares, cancelling the remaining
classes of shares and creating Class A Non-Voting Shares, Class C Multiple
Voting Shares, Series A and B Preferred Shares, and Series C Redeemable
Preferred Shares. Subsequently, the Company declared a stock dividend of
5,000,000 Series C Redeemable Preferred Shares. Concurrently, the Company
repurchased the 25,000,000 outstanding Class B Subordinate Voting Shares from
its parent in exchange for the issuance of 23,043,500 Class B Subordinate Voting
Shares and 40,000,000 Series C Redeemable Preferred Shares. The Company then
redeemed the 45,000,000 outstanding Series C Redeemable Preferred Shares for
$45,000,000 of cash.
F-14
<PAGE>
WORLDWIDE FIBER INC.
Notes to Consolidated Financial Statements (Continued)
June 30, 1999
(tabular amounts expressed in thousands of U.S. dollars)1999
(unaudited)
Issuance of Shares
On August 31, 1999 the Company issued 150,000 Class B Subordinate Voting
Shares (redesignated from Class A Voting Shares) for $3,000,000 of cash and on
September 9, 1999, the Company issued 8,866,808 Series A Non-Voting Preferred
Shares for $345,000,000 of cash.
Credit Facility
On July 6, 1999, the Company entered into a commitment letter with certain
lenders pursuant to which the lenders would provide a three-year secured
revolving credit facility totalling US$150,000,000. The execution and delivery
of the definitive documentation is in progress.
F-15
<PAGE>
AUDITORS' REPORT
To the Directors and Shareholder of
Worldwide Fiber Inc.
We have audited the consolidated balance sheet of Worldwide Fiber Inc.
as at December 31, 1998 and the consolidated income statement and statements of
changes in shareholder's equity and cash flows for the period from February 5,
1998 (date of incorporation) 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. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Company as at December
31, 1998 and the results of its operations and its cash flows for the period
from February 5, 1998 (date of incorporation) to December 31, 1998 in accordance
with generally accepted accounting principles in the United States.
PricewaterhouseCoopers LLP
Vancouver, Canada
March 12, 1999, except for notes 1(i) and 14
which are as of September 27, 1999
F-16
<PAGE>
Worldwide Fiber Inc.
Consolidated Balance Sheet
As at December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
Assets
Current assets
Cash and cash equivalents.................................... $156,366
Accounts receivable (note 4)................................. 3,272
Unbilled revenue (note 4).................................... 10,582
Deposit (note 4)............................................. 3,930
Inventory (note 4)........................................... 25,300
Due from parent/net (note 6)................................. 13,412
--------
212,862
Fixed assets (note 4)........................................ 15,475
Deferred income taxes (note 10).............................. 1,273
Deferred financing costs..................................... 6,650
--------
$236,260
========
The accompanying notes are an integral part of these
consolidated financial statements.
F-17
<PAGE>
Worldwide Fiber Inc.
Consolidated Balance Sheet
As at December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
Liabilities
Current liabilities
Accounts payable (note 4)....................................... $ 20,296
Advances on contracts........................................... 13,651
Income taxes payable............................................ 7,609
--------
41,556
Senior notes (note 7)........................................... 175,000
-------
216,556
Minority interest............................................... 1,443
Shareholder's Equity
Common stock
Authorized
Unlimited number of Class A voting, Class B voting and Class C non-
voting shares, no par value................................
Issued and outstanding
5,000,300 Class A shares (note 9)..................... 7,400
Contributed surplus (notes 1 and 5)............................ 2,242
Retained earnings.............................................. 9,020
Accumulated other comprehensive income......................... (401)
-------
18,261
--------
$236,260
========
Commitments (notes 1 and 13)
Subsequent events (note 14)
The accompanying notes are an integral part of these
consolidated financial statements.
F-18
<PAGE>
Worldwide Fiber Inc.
Consolidated Income Statement
For the period from February 5, 1998 (date of incorporation)
to December 31, 1998.
(The Company's operations commenced on June 1, 1998)
(tabular amounts expressed in thousands of U.S. dollars)
Revenue............................................................ $164,319
Costs.............................................................. 147,621
--------
Gross profit....................................................... 16,698
--------
Expenses
General and administrative...................................... 2,274
Depreciation.................................................... 464
-------
2,738
-------
13,960
Interest expense................................................... 492
Interest income.................................................... 267
-------
Income before equity income and income taxes....................... 13,735
Equity income (note 5)............................................. 928
-------
Income before income taxes......................................... 14,663
Provision for income taxes (note 10)............................... 5,643
-------
Net income for the period.......................................... $ 9,020
=======
The accompanying notes are an integral part of these
consolidated financial statements.
F-19
<PAGE>
Worldwide Fiber Inc.
Consolidated Statement of Changes in Shareholder's Equity
For the period from February 5, 1998 (date of incorporation)
to December 31, 1998.
(The Company's operations commenced on June 1, 1998)
(tabular amounts expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Common stock
Class A
-------
Accumulated
other Total
Contributed Retained comprehensive shareholder's
Shares Amount surplus earnings income equity
------ ------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance--beginning of period
Incorporation shares issued,
February 5, 1998............ 100 $ -- $ -- $ -- $ -- $ --
Issuance of shares for certain
Ledcor assets with deferred
tax asset (note 5).......... 200 7,400 1,088 -- -- 8,488
Issuance of shares for
investments (note 5)........ 5,000,000 -- -- -- -- --
Excess of proceeds over cost on
fiber optic strands to be
reacquired from parent company
(note 1).................... -- -- 1,154 -- -- 1,154
Comprehensive income
Net income for the period.. -- -- -- 9,020 -- 9,020
Accumulated other
comprehensive
income-foreign currency -- -- -- -- (401) (401)
--------- ------ ------ ------ ------ -------
translation.............
Total comprehensive income..... -- -- -- -- -- 8,619
--------- ------ ------ ------ ----- -------
Balance--end of period.......... 5,000,300 $7,400 $2,242 $9,020 $(401) $18,261
========= ====== ====== ====== ====== =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-20
<PAGE>
Worldwide Fiber Inc.
Consolidated Statement of Cash Flows
For the period from February 5, 1998 (date of incorporation)
to December 31, 1998.
(The Company's operations commenced on June 1, 1998)
(tabular amounts expressed in thousands of U.S. dollars)
Cash flows used in operating activities
Net income for the period............................................... $9,020
Adjustments to reconcile net income to net cash used for operating
activities
Depreciation.......................................................... 464
Equity income......................................................... (928)
Changes in non-cash working capital items
Accounts receivable............................................... (196)
Unbilled revenue.................................................. (992)
Deposit........................................................... (3,949)
Inventory......................................................... (1,568)
Due from parent................................................... 16,230)
Accounts payable.................................................. 2,904
Advances on contracts............................................. 13,708
Income taxes payable.............................................. 6,491
Advances to WFI USA...............................................(21,783)
-------
(13,059)
Cash flows from (used in) investing activities
Fixed asset additions.................................................. (1,065)
Cash acquired on acquisition of WFI USA................................ 2,242
-------
1,177
-------
Cash flows from (used in) financing activities
Proceeds from issuance of common stock.......................... ..... --
Senior notes..................................................... ..... 175,000
Deferred financing costs.......................................... ... (6,650)
--------
168,350
Effect of exchange rate changes on cash................................ (102)
--------
Net increase in cash and cash equivalents, being cash and
cash equivalents at end of period....................................$156,366
========
The accompanying notes are an integral part of these
consolidated financial statements.
F-21
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
1. The Company
Worldwide Fiber Inc. (the "Company") was incorporated on February 5, 1998
and is indirectly a wholly-owned subsidiary of Ledcor Inc. On May 31, 1998 the
Company began its operations after certain assets of the Telecommunications
Division ("Division") of Ledcor Industries Limited ("Ledcor"), a Ledcor Inc.
subsidiary were transferred to the Company. Prior to June 1, 1998, the
operations were carried out by the Division.
The Company's operations consist of designing, engineering, constructing
and installing terrestrial and marine fiber optic systems for sale or lease to
third parties or for its own use. For the period to December 31, 1998,
$162,455,000 of the Company's revenues related to Construction Services
Agreements with Ledcor (see Note 1(ii)).
Transactions with Ledcor
On May 31, 1998, the Company entered into several agreements with Ledcor as
follows:
(i) Undertaking agreement whereby certain fiber optic network assets,
located in Canada and the U.S. would be transferred to the Company by
Ledcor in exchange for 19,999,700 Class A common shares. The Company
constructed these assets for Ledcor under the Construction Services
Agreements noted below. Construction of the assets was substantially
complete at December 31, 1998 and the Company completed the exchange on
March 31, 1999. This transaction will be accounted for using the carrying
values reported in the accounts of Ledcor as a transaction between a parent
and a wholly owned subsidiary and accordingly, the fixed assets acquired by
the Company will be recorded at the carrying amount of the assets in the
accounts of Ledcor. The cost of fixed assets acquired at March 31, 1999
amounted to $21,883,000. As a result of the transaction, the Company also
received a deferred tax benefit of $3,136,000 which will be reflected as a
deferred tax asset.
(ii) Construction Services Agreements to provide construction services
to Ledcor to complete various projects including completion of the fiber
optic network assets to be transferred to the Company. As the Company is
required to obtain the fiber optic network assets from Ledcor, the revenues
and costs associated with this portion of the agreement have not been
reflected in these consolidated financial statements. The costs to
construct the network will be reflected when the construction is completed
and the shares have been issued. As at December 31, 1998, the Company has
billed Ledcor $18,138,000 for the services related to construction of the
fiber optic network assets which exceeds their costs by $2,099,000. This
excess, net of income taxes of
F-22
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
$945,000, has been excluded from the consolidated income statement and has
been reported as contributed surplus.
(iii) Management Services Agreement whereby Ledcor provides the
Company with management staff, administrative and other support services.
The Company reimburses Ledcor for direct costs and pays Cdn. $200,000 per
month for the Company's share of corporate overheads. In accordance with
this agreement, substantially all costs and expenses incurred by the
Company were paid by Ledcor and charged to the Company through an
intercompany account.
(iv) Employee Services Agreements whereby the Company obtains the
services of certain employees from Ledcor on a cost reimbursement basis.
2. Summary of significant accounting policies
Basis of presentation
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States and include
the accounts of the Company, its wholly owned subsidiaries and its 75% interest
in Worldwide Fiber (USA), Inc. ("WFI USA"). All significant intercompany
transactions and balances have been eliminated on consolidation. For investments
where the Company exercises significant influence, the investment is accounted
for using the equity method.
On December 31, 1998, the Company increased its interest in WFI USA from
50% to 75% (note 5). The consolidated income statement and statement of cash
flows account for the Company's initial 50% interest in WFI USA using the equity
method for the period May 31, 1998 to December 31, 1998. The Company's
consolidated balance sheet includes WFI USA's assets and liabilities, and
minority interest therein, as at December 31, 1998.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions which affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses for the period reported. Actual results
could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents consists of cash on deposit and highly liquid
short-term interest bearing securities with maturity at the date of purchase of
three months or less.
F-23
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
Fixed assets
Fiber optic network assets constructed for the Company's own use are
recorded as fixed assets. Fiber optic network assets, construction equipment and
other assets are recorded at cost. Fixed assets are depreciated using the
following rates and methods:
o Fiber optic network assets--straight-line method over the estimated
useful lives of the assets.
o Construction equipment--hourly usage rates, estimated to depreciate
the equipment over the estimated useful lives of the equipment.
o Other assets--straight-line method, over the estimated useful lives of
the assets.
Inventory
Inventory consists of fiber optic network assets to be sold or leased under
sales-type leases, construction supplies and small tools.
Fiber optic network assets are recorded at the lower of cost and market.
Cost includes direct materials and subcontractor charges, labour, and interest
(see "capitalization of interest").
Construction supplies and small tools inventory are recorded at the lower
of cost and replacement value.
Revenue recognition
Revenue for services provided to Ledcor for construction projects is
recognized in the period the construction services are performed based on the
costs incurred.
Revenue and income from construction contracts to develop fiber optic
network assets are determined on the percentage-of-completion basis using the
cost-to-cost method. Provision is made for all anticipated losses as soon as
they become evident. Claims for additional contract compensation are not
recognized until resolved.
Unbilled revenue
Revenue recognized using the percentage-of-completion basis (see "Revenue
recognition") less billings to date is recorded as unbilled revenue.
F-24
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
Capitalization of interest
Interest is capitalized as part of the cost of constructing fiber optic
network assets. Interest capitalized during the construction period is computed
by determining the average accumulated expenditures for each interim
capitalization period and applying the interest rate related to the specific
borrowings associated with each construction project. The total interest
capitalized for the period ended December 31, 1998 was $nil.
Deferred financing costs
Costs incurred in connection with obtaining the Senior notes financing are
deferred and amortized, using the effective interest method, to interest expense
over the term of the Senior notes.
Advances on contracts
Cash received from customers pursuant to contracts where construction has
not commenced is recorded as advances on contracts.
Foreign currency transactions
The Company's functional currency is the Canadian dollar. The consolidated
financial statements are translated to United States dollars using the
period-end exchange rate for assets and liabilities and weighted-average
exchange rates for the period for revenues and expenses. Translation losses are
deferred and accumulated as a component of other comprehensive income in
shareholder's equity. Net gains and losses resulting from foreign exchange
transactions are included in the consolidated income statement.
Income taxes
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current period
and deferred tax liabilities and assets for future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
The measurement of current and deferred tax liabilities and assets are based on
provisions of enacted tax laws; the effects of future changes in tax laws or
rates are not anticipated. The measurement of deferred tax assets is reduced, if
necessary, by a valuation allowance, where, based on available evidence, the
probability of realization of the deferred tax asset does not meet a more likely
than not criteria.
Fair value of financial instruments
The fair value of the Company's financial instruments, consisting of cash
and cash equivalents, accounts receivable, unbilled revenue, deposit, due from
parent, accounts payable, advances on contracts, and income taxes payable
approximate their carrying values due to their short-term nature. The Senior
F-25
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
notes were issued at period end and accordingly fair value does not vary
significantly from carrying value at December 31, 1998.
Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. The Company does not expect the adoption of SFAS No. 133 to
have a material impact on its consolidated financial statements.
<TABLE>
<CAPTION>
3. Supplemental cash flow information
<S> <C>
Cash paid for income taxes......................................................... $--
Cash paid for interest............................................................. --
Supplemental non-cash investing and financing activities Issuance of
common shares for:
Certain Ledcor assets with deferred tax asset of $1,088,000.................. 8,488
Investment in Ledcom Holdings Ltd. .......................................... --
Initial 50% investment in WFI USA............................................ --
Additional 25% investment in WFI USA in exchange for surrender of note
receivable................................................................ 3,915
4. Balance Sheet components
Accounts receivable
Trade accounts receivable................................................... $3,107
Interest receivable......................................................... 165
=========
$3,272
=========
Unbilled revenue
Revenue earned on uncompleted contracts..................................... $22,236
Less: Billings to date..................................................... $11,654
=========
$10,582
=========
Unbilled revenue relates primarily to WFI USA contracts. Each contract
specifies individual billing arrangements as specified in the contract.
Deposit
Deposit for right of way access.............................................. $ 3,930
=======
</TABLE>
F-26
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
The cost of right of way accesses is included in the cost of fiber
optic network assets when construction commences.
<TABLE>
<CAPTION>
Inventory
<S> <C>
Fiber optic network assets.................................................... $24,155
Construction supplies and small tools......................................... 1,145
-------
$25,300
Fixed assets
Fiber optic network assets.................................................... $11,461
Construction equipment........................................................ 4,249
Other......................................................................... 229
-------
15,939
Less: Accumulated depreciation............................................... (464)
--------
Fixed asset/net.................................................................... $15,475
=======
The Company has not provided for any depreciation on fiber optic
network assets for the period ended December 31, 1998 as these assets were under
construction.
Accounts payable
Subcontractor and supplier costs............................................ $13,468
Subcontractor holdbacks payable............................................. 4,843
Other....................................................................... 1,493
Interest payable............................................................ 492
-------
$20,296
</TABLE>
5. Acquisitions
Telecommunications Division assets
Effective May 31, 1998, the Company entered into a series of agreements
whereby equipment, fiber optic network assets and other assets related to the
business of the Telecommunications Division of Ledcor were transferred to the
Company. In addition, the Company was granted a license to use Ledcor's patented
rail plow technology. This license agreement was for an initial term of ten
years, renewable annually upon completion of the initial term. As part of this
transaction, Ledcor retained all existing construction contracts related to the
business. This transaction was between entities under common control and has
been accounted for using the carrying amounts recorded in Ledcor's accounts. The
tax basis of substantially all the Canadian assets transferred to the Company
were Ledcor's carrying values whereas the tax basis of the U.S. assets
transferred was their fair value. The deferred tax balances were adjusted for
the
F-27
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
change in the tax basis of the U.S. assets with the adjustment being
reflected as contributed surplus. As consideration for the transaction, the
Company issued 200 Class A shares to Ledcor.
The assets transferred and consideration given, in connection with this
transaction, were as follows:
Assets
Construction equipment..................................... $2,830
Fiber optic network assets................................. 4,424
Deferred income taxes...................................... 1,088
Other...................................................... 146
------
$8,488
======
Consideration given
Class A common shares and contributed surplus.............. $8,488
======
Ledcom Holdings Ltd.
On December 1, 1998 the Company acquired 50 Class A common shares
representing a 50% interest of Ledcom Holdings Ltd. ("Ledcom") from Worldwide
Fiber Holdings Ltd. ("WFHL"), the Company's parent. As consideration, the
Company issued 2,000,000 Class A common shares. Ledcom holds the patent to
Ledcor's rail plow technology, and in conjunction with this acquisition Ledcor
has committed to grant to the Company a worldwide exclusive license for the use
of the rail plow technology. The license will become non-exclusive six months
after a change of control of the Company. This transaction was between entities
under common control and has been accounted for using the carrying value of the
investment recorded in WFHL's accounts which was $nil.
Investment in WFI USA
On August 31, 1998, the Company purchased Ledcor's 50% interest in, and a
promissory note of $3,915,000 from WFI USA, in exchange for 3,000,000 Class A
common shares of the Company and the issuance of a promissory note by the
Company. WFI USA was a joint venture with Mi-Tech Communications LLC ("Mi-Tech")
which held the remaining 50% interest in WFI USA. WFI USA's operations consist
primarily of developing fiber optic network assets in the United States.
As this transaction was between entities under common control, it was
accounted for in a manner similar to a pooling of interests. These financial
statements reflect the equity interest in the income of WFI USA from May 31,
1998 to December 31, 1998 in the amount of $928,000. Prior to May 31, 1998, the
equity interest was reported as part of the Division of Ledcor.
F-28
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
On December 31, 1998 the Company increased its interest in WFI USA to 75%
by surrendering its note receivable from WFI USA of $3,915,000 for 100
non-voting common shares and 100 Class A voting preferred shares of WFI USA. The
acquisition has been accounted for using the purchase method effective December
31, 1998. The purchase price of the additional 25% has been allocated to assets
and liabilities based on their fair values. As a result, the net assets acquired
were as follows:
Current assets........................................... $3,742
Inventory................................................ 6,048
Fixed assets............................................. 1,795
Current liabilities...................................... 10,052
On December 31, 1998, the Company entered into a Shareholders' Agreement
("Agreement") with Ledcor, Mi-Tech and Michels Pipeline Construction, Inc.
("Michels") (an affiliate of Mi-Tech). Pursuant to this agreement, Mi-Tech will
have the option to convert all of its 25% interest in WFI USA into shares of the
Company should the Company complete a public offering of shares with an
aggregate value of at least $20,000,000 or there is a change of control of WFI
USA. In connection with the conversion, Mi-Tech will be granted certain
registration rights in accordance with the Agreement. In addition, after the
tenth anniversary of this agreement, Mi-Tech has the option to require WFI USA
to purchase all of the shares owned by Mi-Tech and its affiliates at fair market
value. If Mi-Tech exercises this option, the Company can elect to sell all the
shares or assets of WFI USA in which case it will not be required to purchase
Mi-Tech's shares in WFI USA. In the event of a proposed sale of the shares of
WFI USA held by the Company, Mi-Tech will have certain tag-along rights.
Also as part of the Agreement the Company:
o Agreed not to participate in any projects or business nor provide
advice or assistance to any business which undertakes projects within
WFI USA's scope of business, as defined in the Agreement, for a period
of four years from the date of the Agreement.
o Is restricted from selling, transferring, encumbering or divesting its
ownership or control of WFI USA.
o WFI USA has an option to purchase from Mi-Tech 24 fiber optic strands
along certain existing routes owned by Mi-Tech and its affiliates at
fair market value.
F-29
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
6. Due from parent
The components of the amount due from parent consist of the following:
Contract amounts billed to parent....................... $180,593
Costs charged by parent
Material........................................... 91,937
Subcontracts....................................... 33,613
Labor.............................................. 27,435
Other.............................................. 10,729
General and administrative......................... 2,816
Deferred financing costs........................... 268
-------
166,798
-------
13,795
Net advance received............................... (383)
--------
$ 13,412
========
The amounts due from Ledcor and advances received from Ledcor are
non-interest bearing, have no stated terms of repayment and are due on demand.
Contract amounts billed to parent and costs charged by parent exceed revenues
and costs as reported in the income statement due to fiber optic network assets
to be transferred to the Company as described in note 1(ii).
7. Senior notes
The Senior notes (the "Notes") are unsecured obligations of the Company
bearing interest at 12.5% payable semi-annually. The Notes are due December 15,
2005 and may be redeemed by the Company on or after December 31, 2003 at certain
specified redemption prices ranging up to 106.25% of the principal amount. Up to
35% of the Notes may be redeemed by the Company prior to December 15, 2001, at a
redemption price of 112.5% of the principal amount with the net proceeds from
certain sales of the company's common equity to the public. If a change of
control occurs, as defined in the Notes Indenture, the holders of the Notes can
require the Company to repurchase all or part of the Notes at 101% of the
principal amount. If at the end of December 31, 2000 and semi-annually
thereafter, the Company's Accumulated Excess Cash Flow, as defined in the Notes
Indenture, exceeds $10,000,000, the Company is required to make an offer to
repurchase the maximum principal amounts of Notes that may be purchased by such
Accumulated Excess Cash Flow Amount at an offer price equal to 110% of the
principal amount of the Notes. Under this Excess Cash Flow provision, the
Company is not required to repurchase more than 25% of the original principal
amount of the Notes prior to December 31, 2003.
The Notes contain certain covenants that restrict the ability of the
Company and its subsidiaries to incur additional indebtedness and issue certain
preferred stock, pay dividends or make other distributions,
F-30
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
repurchase equity interests or subordinated indebtedness, engage in sale and
leaseback transactions, create certain liens, enter into certain transactions
with affiliates, sell assets of the Company or its subsidiaries, issue or sell
equity interests of the Company's subsidiaries or enter into certain mergers and
consolidations.
The interest rate on the Notes is subject to increase if the Company does
not file a registration statement with the Securities and Exchange Commission
within certain time periods specified in the Notes Indenture.
8. Preferred stock
Authorized
The Company is authorized to issue an unlimited number of Class I, II and
III preferred shares (collectively "preferred shares"). As at December 31, 1998,
there were no issued and outstanding preferred shares.
Voting
The holders of Class I preferred shares are entitled to attend shareholder
meetings and to one vote for each share held. The holders of Class II and III
preferred shares are not entitled to vote or attend shareholder meetings.
Dividends
The holders of preferred shares are entitled to receive a dividend when
declared by the Board of Directors. The holders of preferred shares have no
preference or priority as to the declaration of dividends, and dividends may be
declared and paid on any other class of shares of the Company to the exclusion
of a dividend being declared and paid on the preferred shares. Dividends may be
declared and paid on the preferred shares individually to the exclusion of a
dividend being declared and paid on another class of preferred shares. No
dividends can be declared on such other shares if it impairs the ability of the
Company to redeem the outstanding preferred shares.
Return of capital
In the event the Company is liquidated, dissolved or wound up, the holders
of preferred shares have priority as to payment of the redemption price and for
all declared and unpaid dividends over all other shares.
F-31
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
Redemption and retraction
The Company may redeem or purchase preferred shares together with all
declared and unpaid dividends. In addition, the holders of preferred shares are
entitled to have the Company redeem or purchase all or any part of the preferred
shares held by a shareholder.
9. Common stock
Authorized
The Company is authorized to issue an unlimited number of Class A, B and C
common shares (collectively "common shares").
Voting
The holders of Class A and B common shares are entitled to one vote for
each share held. The holders of Class C common shares are not entitled to vote.
Dividends
The holders of common shares are entitled to receive a dividend when
declared by the directors of the Company. Dividends may be declared and paid on
the common shares without declaring dividends on any other class or classes of
shares of the Company. However, no dividends can be declared on the common
shares if to do so would impair the ability of the Company to redeem any
outstanding preferred shares.
Return of capital
In the event the Company is liquidated, dissolved or wound up or the
Company distributes the assets of the Company among shareholders for the purpose
of winding up its affairs, the holders of common shares rank equally with one
another to receive any remaining balance of the assets of the Company after
payment for a return of capital and any declared but unpaid dividends to the
holders of preferred shares.
F-32
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
10. Income taxes
Income before equity income and income taxes.
The components of income before equity income and income taxes are as
follows:
Canadian.................................................... $5,683
U.S......................................................... 8,052
=========
$13,735
=========
Current income taxes
The provision for current income taxes consists of the following:
Canadian.................................................... $2,599
U.S. federal................................................ 2,563
U.S. state and local........................................ 481
---------
$5,643
=========
The Company's statutory rate of 45.6% varies from its effective rate of
41.1% due primarily to federal and state taxes on U.S. income at a rate of 38%.
Deferred income taxes
Significant components of the Company's deferred tax assets and liabilities
are as follows:
Fixed assets (note 5)...................................... $1,088
Other...................................................... 185
Valuation allowance........................................ --
Net deferred tax assets.................................... $1,273
======
Management believes that, based on a number of factors, it is more likely
than not that the deferred tax assets will be fully utilized, such that no
valuation allowance has been recorded.
F-33
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
11. Concentration of credit risk
Financial instruments that potentially subject the Company to a significant
concentration of credit risk consist primarily of cash and cash equivalents,
accounts receivable, unbilled revenue and due from parent which are not
collateralized. The Company limits its exposure to credit loss by placing its
cash and cash equivalents with high credit quality financial institutions.
Concentrations of credit risk with respect to accounts receivable and unbilled
revenue are considered to be limited due to the credit quality of the customers
comprising the Company's customer base.
The Company performs ongoing credit evaluations of its customers' financial
condition to determine the need for an allowance for doubtful accounts. The
Company has not experienced significant credit losses to date. At December 31,
1998 twelve customers accounted for the entire accounts receivable and unbilled
revenue balances.
The concentration of credit risk relating to the amount due from the parent
is considered limited due to the credit quality of the Company's parent. As
described in Note 1, substantially all of the Company's revenues during the
period ended December 31, 1998 were earned from construction services provided
to Ledcor.
12. Segmented information
The Company operates within a single operating segment being the
construction and installation of fiber optic network assets. These fiber optic
network assets are being constructed in Canada and the United States.
Revenues, fixed assets, and deferred financing costs are located as follows:
<TABLE>
<CAPTION>
Deferred
financing
Revenues Fixed assets costs
-------- ------------ -----
<S> <C> <C> <C>
Canada.............................................. $84,534 $ 8,218 $6,650
U.S................................................. 79,785 7,257 --
-------- ------- -----
$164,319 $15,475 $6,650
======== ======= ======
</TABLE>
The revenues are based on the location of the construction activities.
13. Commitments
Network developments
The Company has, in the normal course of business, entered into agreements
to provide construction services and fiber optic network assets to third parties
in Canada and the United States.
F-34
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
Right of way access agreements
The Company has entered into various agreements during the year to secure
the rights of ways along its network routes. In general, most agreements have an
option renewal clause stating that grantors cannot unjustly withhold their
acceptance of a renewal.
Operating leases
The Company leases certain facilities and equipment used in its operations
under operating leases. Future minimum lease payments under these lease
agreements at December 31, 1998 are as follows:
1999............................................................... $339
2000............................................................... $288
2001............................................................... $240
2002............................................................... $188
2003 and thereafter................................................ $ 46
14. Subsequent events
(i) Senior Notes
On July 28, 1999 the Company issued Senior notes (the "12% Notes") with a
face value of $500,000,000. The 12% Notes are unsecured obligations of the
Company bearing interest at 12% payable semi-annually. The 12% Notes are due
August 1, 2009 and may be redeemed by the Company on or after August 1, 2000 at
certain specified redemption prices. Up to 35% of the 12% Notes may be redeemed
by the Company prior to August 1, 2002 with the net proceeds from certain sales
of the Company's common stock.
The 12% Notes contain certain covenants that restrict the ability of the
Company and its subsidiaries to incur additional indebtedness, issue certain
preferred stock, pay dividends or make other distributions, repurchase equity
interests or subordinated indebtedness, engage in sale and leaseback
transactions, create certain liens, enter into certain transactions with
affiliates, sell assets of the Company or its subsidiaries, issue or sell equity
interests of the Company's subsidiaries or enter into certain mergers and
consolidations.
The interest rate on the 12% Notes is subject to increase if the Company
does not file a registration statement with the Securities and Exchange
Commission within certain time periods specified in the 12% Notes Indenture.
F-35
<PAGE>
Worldwide Fiber Inc.
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
(ii) Agreement with Tyco Submarine Systems Ltd.
On June 18, 1999, a subsidiary of the Company entered into a supply
agreement, with Tyco Submarine Systems Ltd. ("Tyco") whereby Tyco will serve as
the primary contractor for the Company's transatlantic cable project called
"Hibernia". The initial contract price is approximately $607 million. The
Company has paid $60.7 million in advance payments to Tyco.
(iii) Common stock
In April 1999, the Company granted stock options to employees and officers
to purchase an aggregate of 2,045,160 shares of class A common stock of the
Company at a price of $10 per share. The stock options have terms expiring on
or before June 30, 2009.
(iv) IC/CN Agreements
On May 28, 1999, the Company entered into agreements with Canadian National
Railway Company ("CN") and Illinois Central Railroad Company ("IC") to license
rights-of-way ("ROW") along certain of their respective rail transportation
systems (the "Routes"). The Company will pay a license fee, based on the length
of the ROWs, and payable pursuant to a formula based on cash flow generated from
projects developed on the Routes. The Company will also provide a certain number
of fibers as consideration for the license of the ROWs. In connection with these
license agreements, the Company has formed subsidiary companies with CN and IC
(the Company having a 75% interest and CN or IC having the remaining 25%
interest) for the purpose of licensing the ROWs from CN and IC and developing
the projects along the Routes.
(v) Agreement with Ledcor (unaudited)
On May 28, 1999, the Company entered into an agreement with affiliates of
Ledcor, whereby the Company would acquire certain fiber optic network assets.
Closing occurred on September 27, 1999. As consideration, upon closing, the
Company issued to affiliates of Ledcor 4,500,000 Class C Multiple Voting shares.
In addition, the Company assumed certain rights and obligations of the
affiliates under their build agreements with a third party including obligations
relating to the completion of those builds and certain support structure,
maintenance, license and access, and underlying rights obligations. Management
estimates that based on information available to date, fixed assets will
increase by approximately $26,000,000, the cost of the assets in the accounts of
Ledcor, deferred income taxes will increase by approximately $12,000,000, as a
result of a higher tax cost versus accounting cost of fixed assets, accounts
payable will increase by approximately $30,000,000, the liability recorded in
the accounts of Ledcor, and the stated amount of the Company's common stock will
increase by approximately $8,000,000.
F-36
<PAGE>
(vi) Share Reorganization
Pursuant to a reorganization of the Company's share capital, on September
9, 1999, the Company amended its share capital by redesignating all Class A
Voting Shares to Class B Subordinate Voting Shares, cancelling the remaining
classes of shares and creating Class A Non-Voting Shares, Class C Multiple
Voting Shares, and Series A and B Preferred Shares and Series C Redeemable
Preferred Shares. Subsequently, the Company declared a stock dividend of
5,000,000 Series C Redeemable Preferred Shares. Concurrently, the Company
repurchased the 25,000,000 outstanding Class B Subordinate Voting Shares from
its parent in exchange for the issuance of 23,043,500 Class B Subordinate Voting
Shares and 40,000,000 Series C Redeemable Preferred Shares. The Company then
redeemed the 45,000,000 outstanding Series C Redeemable Preferred Shares for
$45,000,000 of cash.
(vii) Issuance of Shares
On August 31, 1999 the Company issued 150,000 Class B Subordinate Voting
Shares (redesignated from Class A Voting Shares) for $3,000,000 of cash and on
September 9, 1999, the Company issued 8,866,808 Series A Non-Voting Preferred
Shares for $345,000,000 of cash.
(viii) Credit Facility
On July 6, 1999, the Company entered into a commitment letter with certain
lenders pursuant to which the lenders would provide a three-year secured
revolving credit facility totalling US$150,000,000. The execution and delivery
of the definitive documentation is in progress.
F-37
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Worldwide Fiber (USA), Inc.
(formerly, Pacific Fiber Link, Inc.)
In our opinion, the accompanying consolidated income statement and
statements of changes in shareholders' equity and of cash flows present fairly,
in all material respects, the results of operations of Worldwide Fiber (USA),
Inc. (formerly Pacific Fiber Link, Inc.) and its subsidiaries and their cash
flows for the period from February 11, 1998 to December 31, 1998, in conformity
with generally accepted accounting principles in the United States. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Vancouver, Canada
March 12, 1999
F-38
<PAGE>
Worldwide Fiber (USA), Inc.
(formerly Pacific Fiber Link, Inc.)
Consolidated Income Statement
For the period from February 11, 1998 to December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
Revenue.................................................... $21,071
Costs...................................................... 16,533
-------
Gross profit............................................... 4,538
Expenses
General and administrative............................ 1,683
-------
2,855
Interest expense........................................... 72
Interest income............................................ 53
-------
Income before income taxes................................. 2,836
Provision for income taxes................................. 980
-------
Net income for the period.................................. $ 1,856
=======
Commitments (note 10)
The accompanying notes are an integral part of these consolidated
financial statements.
F-39
<PAGE>
Worldwide Fiber (USA), Inc.
(formerly Pacific Fiber Link, Inc.)
Consolidated Statement of Changes in Shareholders' Equity
For the period from February 11, 1998 to December 31, 1998.
(tabular amounts expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Class A
voting Nonvoting
preferred common
shares shares Retained
Number Number Amount earnings Total
------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C>
Balance--beginning of period........................
Issuance of shares to acquire Worldwide
Fiber Networks, Inc. (note 1)................... 100 100 -- -- --
Issuance of shares for extinguishment of note
payable (note 1)................................ 100 100 3,915 -- 3,915
Net income for the period.......................... -- -- -- 1,856 1,856
--- --- ------ ------ ------
Balance--end of period.............................. 200 200 $3,915 $1,856 $5,771
=== === ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-40
<PAGE>
Worldwide Fiber (USA), Inc.
(formerly Pacific Fiber Link, Inc.)
Consolidated Statement of Cash Flows
For the period from February 11, 1998 to December 31, 1998.
(tabular amounts expressed in thousands of U.S. dollars)
Cash flows from operating activities
Net income for the period............................................. $1,856
Changes in non-cash working capital items
Accounts receivable.............................................. (3,090)
Unbilled revenue................................................. (9,634)
Inventory........................................................ (23,835)
Accounts payable................................................. 17,445
Income taxes payable............................................. 980
Due to parent.................................................... 21,783
-------
5,505
Cash flows used in investing activities
Fixed asset additions................................................. (7,178)
--------
Cash flows from financing activities
Due to parent......................................................... 3,915
-------
Net increase in cash and cash equivalents, being cash and cash
equivalents at end of period.......................................... $ 2,242
=======
The accompanying notes are an integral part of these
consolidated financial statements.
F-41
<PAGE>
Worldwide Fiber (USA), Inc.
(formerly Pacific Fiber Link, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
1. The Company
Worldwide Fiber (USA), Inc. (the "Company"), formerly known as Pacific
Fiber Link, Inc., was incorporated on August 7, 1998. The Company was inactive
until August 31, 1998. On August 31, 1998, the Company acquired 100% of the
ownership interest of Worldwide Fiber Networks, Inc. ("WFNI") (formerly Pacific
Fiber Link, LLC) from its two members, Ledcor Industries Limited ("Ledcor") and
Mi-Tech Communications, LLC ("Mi-Tech"), in exchange for 100 non-voting common
shares and 100 Class A voting preferred shares of the Company. The acquisition
was accounted for in a manner similar to a pooling of interests on the basis
that the ownership interests before and after the acquisition remained the same.
Accordingly, the financial statements presented include the results of
operations of the Company and WFNI from February 11, 1998, the date that WFNI
was organized.
On December 31, 1998, the Company issued 100 shares of non-voting common
shares and 100 Class A voting preferred shares as consideration for the
settlement of indebtedness owed to Worldwide Fiber Inc. ("WFI" or "parent") of
$3,915,000 increasing WFI's interest from 50% to 75%.
The Company has entered into a shareholders' agreement among WFI, Ledcor,
Mi-Tech and Michels Pipeline Construction Inc. (an affiliate of Mi-Tech)
whereby:
(i) Any sale, transfer, assignment or encumbrance or divestment of any
interest in or control of the Company to a third party is restricted.
In the event of a proposed sale of the shares of the Company held by
WFI, Mi-Tech will have certain tag-along rights. If there is a change
of control of the Company, Mi-Tech has the option to require the
Company to purchase all of the shares owned by Mi-Tech or its
affiliates at the fair market value of such shares. In addition, after
the tenth anniversary of this agreement Mi-Tech has the option to
require the Company to purchase all of the shares owned by Mi-Tech and
its affiliates at fair market value. If Mi-Tech exercises this option,
WFI can elect to sell all of the shares or assets of the Company to a
third party in which case WFI will not be required to purchase
Mi-Tech's shares.
(ii) The Company has an option to purchase from Mi-Tech, 24 fiber optic
strands along certain existing routes owned by Mi-Tech and its
affiliates at fair value. The Company also has an option to purchase
from WFI and its affiliates indefeasible rights of use for 24 fiber
optic strands from its Chicago-New Orleans route if and when built, at
fair value. These options expire one year after the strands are
available.
F-42
<PAGE>
Worldwide Fiber (USA), Inc.
(formerly Pacific Fiber Link, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
(iii) If WFI were to issue shares in a public offering having an aggregate
value of at least $20,000,000, Mi-Tech has the option to convert all
of the shares of the Company held by Mi-Tech and its affiliates into
the class and series of shares being offered to the public.
The Company's operations consist of developing, engineering, constructing,
installing and maintaining fiber optic network assets. The Company's primary
customers are telecommunications carriers and fiber optic systems developers
located in the U.S.
2. Summary of significant accounting policies
Basis of presentation
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States and include
the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated on consolidation.
The Company's financial statements have been prepared for inclusion within
the Offering Memorandum prepared by WFI for the offer of Senior Notes in the
amount of $250,000,000. The consolidated balance sheet of the Company as at
December 31, 1998 has been excluded as WFI's most recent audited consolidated
balance sheet includes the assets and liabilities of the Company.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions which affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses for the period reported. Actual results
could differ from those estimates.
Income taxes
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current period
and deferred tax liabilities and assets for future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
The measurement of current and deferred tax liabilities and assets are based on
provisions of enacted tax laws; the effects of future changes in tax laws or
rates are not anticipated. The measurement of deferred tax assets is reduced, if
necessary, by a valuation allowance, where, based on available evidence, the
probability of realization of the deferred tax asset, does not meet a more
likely than not criteria.
F-43
<PAGE>
Revenue recognition
Revenue and income from construction contracts to develop fiber optic
network assets, are determined on the percentage-of-completion basis using the
cost-to-cost method. Provision is made for all anticipated losses as soon as
they become evident. Claims for additional contract compensation are not
recognized until resolved.
Foreign currency transactions
The Company uses the U.S. dollar as its functional currency. Gains or
losses from foreign currency transactions are included in the consolidated
income statement.
3. Supplemental cash flow information
Cash paid for income taxes........................................ $--
Cash paid for interest............................................ --
Supplemental noncash investing and financing activities
Issuance of shares:
To acquire Worldwide Fiber Networks Inc...................... --
In exchange for surrender of note payable to WFI............. 3,915
4. Share capital
a) Preferred shares Authorized
The Company is authorized to issue 125,000 preferred shares without par
value; 25,000 Class A voting preferred shares, and 100,000 Class B non-voting
preferred shares. As of December 31, 1998 there were 200 Class A voting
preferred shares issued.
Voting
The holders of Class A preferred shares are entitled to attend shareholder
meetings and to one vote for each share held. The holders of Class A preferred
shares have no other rights, preferences or privileges. The holders of Class B
preferred shares are not entitled to vote or attend shareholder meetings.
Dividends
The holders of Class B preferred shares are entitled to receive a dividend
when declared by the Board of Directors, payable in preference to the dividends
payable on any other class of shares.
F-44
<PAGE>
Worldwide Fiber (USA), Inc.
(formerly Pacific Fiber Link, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
Return of capital
In the event the Company is liquidated, dissolved or wound up, the holders
of Class B preferred shares shall be entitled to such rights as expressed in the
resolution for the issue of such Class B shares, adopted by the Board of
Directors.
Redemption and retraction
The Company may redeem or purchase Class B preferred shares at such time
and such price, as expressed in the resolution for the issue of Class B
preferred shares adopted by the Board of Directors.
b) Common shares
The Company is authorized to issue 25,000 non-voting common shares, without
par value. As at December 31, 1998, there were 200 non-voting common shares
issued.
5. Provision for income taxes
The provision for current income taxes attributable to net income consists
of the following:
U.S. federal................................................. $953
U.S. state and local......................................... 27
======
$980
======
The Company's statutory rate of 34% is not materially different to its
effective rate of 34.6%.
6. Concentration of credit risk
Financial instruments that potentially subject the Company to a significant
concentration of credit risk consist primarily of cash and cash equivalents,
accounts receivable and unbilled revenue. Accounts receivable are not
collateralized. The Company limits its exposure to credit loss by placing its
cash and cash equivalents with high credit quality financial institutions.
Concentrations of credit risk with respect to accounts receivable and unbilled
revenue are considered to be limited due to the credit quality of the customers
comprising the Company's customer base.
The Company performs ongoing credit evaluations of its customers' financial
condition to determine the need for an allowance for doubtful accounts. The
Company has not experienced significant credit losses to date. At December 31,
1998 seven customers accounted for the entire accounts receivable and unbilled
revenue balances.
F-45
<PAGE>
Worldwide Fiber (USA), Inc.
(formerly Pacific Fiber Link, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
7. Revenue and significant customers
During the period ended December 31, 1998, the Company's revenue from its
three largest customers represented individually 35%, 30% and 13% of total
revenue.
8. Related party transactions
The Company reimburses Ledcor and Mi-Tech for expenses incurred on the
Company's behalf. For the period ended December 31, 1998 the amount of these
transactions with Ledcor and Mi-Tech was $1,469,000 and $1,401,000 respectively.
As at December 31, 1998 accounts payable includes $478,000 owed to Ledcor and
$524,000 owed to Mi-Tech.
9. Segmented information
The Company operates within a single operating segment being the
construction and installation of fiber optic network assets in the United
States. All revenues are earned from U.S. sources and all long-lived assets are
located in the U.S.
10. Commitments
Network developments
The Company has, in the normal course of business, entered into agreements
to provide construction services and fiber optic network assets to third parties
in Canada and the United States.
Right of way access agreements
The Company has entered into various agreements during the year to secure
the rights of ways along its network routes. In general, most agreements have an
option renewal clause stating that grantors cannot unjustly withhold their
acceptance of a renewal.
F-46
<PAGE>
Worldwide Fiber (USA), Inc.
(formerly Pacific Fiber Link, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1998
(tabular amounts expressed in thousands of U.S. dollars)
Operating leases
The Company leases certain facilities and equipment used in its operations
under operating leases. Future minimum lease payments under these lease
agreements at December 31, 1998 are as follows:
1999......................................................... $205
2000......................................................... 83
2001......................................................... 50
2002......................................................... 34
2003 and thereafter.......................................... -
F-47
<PAGE>
AUDITORS' REPORT
To the Directors of
Ledcor Industries Limited
We have audited the divisional balance sheets of Ledcor Industries
Limited--Telecommunications Division as at May 31, 1998, August 31, 1997 and
August 31, 1996 and the divisional statements of operations and retained
earnings and cash flows for the nine months ended May 31, 1998, year ended
August 31, 1997, five months ended August 31, 1996 and year ended March 31,
1996. These financial statements are the responsibility of the Division's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these divisional financial statements present fairly,
in all material respects, the financial position of the Division as at May 31,
1998, August 31, 1997 and August 31, 1996 and the results of its operations and
cash flows for the periods ended May 31, 1998, August 31, 1997, August 31, 1996
and March 31, 1996 in accordance with generally accepted accounting principles
in the United States.
Deloitte & Touche LLP
Edmonton, Canada
November 30, 1998
F-48
<PAGE>
LEDCOR INDUSTRIES LIMITED--
TELECOMMUNICATIONS DIVISION
Divisional Balance Sheets
(All figures are in U.S. dollars)
<TABLE>
<CAPTION>
August 31, August 31,
May 31, 1998 1997 1996
------------ ------------ ------------
ASSETS
CURRENT
<S> <C> <C> <C> <C>
Trade accounts receivable (Note 4)................... $5,538,543 $18,501,710 $845,173
Accounts receivable holdbacks (Note 4)............... 4,474,731 3,446,571 153,652
Unbilled revenue (Note 5)............................ 5,842,845 3,608,010 5,013,428
Inventory............................................ 15,710,561 5,240,252 --
----------- ----------- --------
31,566,680 30,796,543 6,012,253
FIXED ASSETS (Note 6).................................... 7,982,103 1,471,043 463,651
----------- ----------- ----------
$39,548,783 $32,267,586 $6,475,904
=========== =========== ==========
LIABILITIES
CURRENT
Trade accounts payable............................... $3,148,456 $12,855,863 $1,719,591
Accrued payroll...................................... 3,431,709 1,008,791 --
Accrued liabilities.................................. 587,750 954,362 --
Accounts payable holdbacks........................... 4,412,221 86,262 --
Income taxes payable................................. 5,509,000 338,000 5,000
----------- ---------- ---------
17,089,136 15,243,278 1,724,591
DEFERRED TAX LIABILITIES (Note 7)........................ 2,657,000 4,426,000 1,212,000
INTER-DIVISIONAL ACCOUNT (Note 8)........................ 10,932,703 6,773,709 2,066,663
----------- ---------- ---------
30,678,839 26,442,987 5,003,254
----------- ---------- ---------
COMMITMENTS (Note 9)
DIVISIONAL EQUITY
Cumulative foreign exchange (loss) gain.............. (1,641,049) 6,688 (5,967)
Divisional retained earnings......................... 10,510,993 5,817,911 1,478,617
----------- ----------- ----------
8,869,944 5,824,599 1,472,650
----------- ----------- ----------
$39,548,783 $32,267,586 $6,475,904
=========== =========== ==========
</TABLE>
See accompanying notes to the divisional financial statements.
F-49
<PAGE>
LEDCOR INDUSTRIES LIMITED
TELECOMMUNICATIONS DIVISION
Divisional Statements of
Operations and Retained Earnings
(All figures are in U.S. dollars)
<TABLE>
<CAPTION>
Nine Months Five Months
ended Year ended ended Year ended
May 31, August 31, August 31, March 31,
1998 1997 1996 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue generated from contracts............ $54,633,888 $58,007,652 $7,372,942 $3,823,790
Contract costs.............................. 45,321,566 49,184,985 5,768,543 3,463,514
----------- ---------- ---------- ----------
Gross margin................................ 9,312,322 8,822,667 1,604,399 360,276
General and administrative expenses......... 710,240 863,373 90,993 57,357
----------- ---------- ---------- ----------
Net divisional income for the period,
before taxes............................. 8,602,082 7,959,294 1,513,406 302,919
Income tax expense (recovery)
Current..................................... 5,509,000 338,000 5,000 3,000
Deferred.................................... (1,600,000) 3,282,000 681,000 136,000
------------ ----------- ---------- ----------
Net divisional income for the period........ 4,693,082 4,339,294 827,406 163,919
DIVISIONAL RETAINED EARNINGS, BEGINNING OF
PERIOD................................... 5,817,911 1,478,617 651,211 487,292
DIVISIONAL RETAINED EARNINGS, END OF PERIOD.
$10,510,993 $5,817,911 $1,478,617 $ 651,211
=========== ========== ========== ==========
</TABLE>
See accompanying notes to the divisional financial statements.
F-50
<PAGE>
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Divisional Statements of Cash Flow
(All figures are in U.S. dollars)
<TABLE>
<CAPTION>
Five months
Nine months Year ended ended Year ended
ended May 31, August 31, August 31, March 31,
1998 1997 1997 1996
---- ---- ---- ----
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net divisional income for the period........... $4,693,082 $4,339,294 $827,406 $163,919
Adjustments to reconcile net divisional income
to net cash provided by operating
activities
Depreciation and amortization.............. 316,597 111,791 15,376 23,754
Deferred taxes............................. (1,600,000) 3,282,000 681,000 136,000
Foreign exchange (gain) loss............... (169,000) (68,000) (5,000) 9,000
Changes in assets and liabilities
Decrease (increase) in accounts receivable. 12,963,167 (17,656,537) (467,268) (331,199)
Increase in accounts receivable holdbacks.. (1,028,160) (3,292,919) (77,684) (75,969)
Decrease (increase) in unbilled revenue.... (2,234,835) 1,405,418 (5,599,836) 590,114
Increase in inventory...................... (10,470,309) (5,240,252) - -
Increase (decrease) in accounts payable.... (9,707,407) 11,136,272 1,551,305 142,886
Increase in accrued payroll................ 2,422,918 1,008,791 - -
(Decrease) increase in accrued liabilities. (366,612) 954,362 - -
Increase in accounts payable holdbacks..... 4,325,959 86,262 - -
Change in cumulative foreign exchange (loss) (1,647,737) 12,655 (3,205) 7,926
gain........................................... ------------ ------------ ----------- ---------
Net cash provided (used) by operating (2,502,337) (3,920,863) (3,077,906) 666,431
activities................................. ------------ ------------ ----------- ---------
INVESTING ACTIVITIES
Purchase of construction equipment and other... (2,403,827) (1,119,183) (180,923) (71,706)
Fiber optic strands under construction......... (4,423,830) -- -- --
------------ ---------- ---------- --------
Net cash used by investing activities.......... (6,827,657) (1,119,183) (180,923) (71,706)
------------ ------------ ------------ ---------
FINANCING ACTIVITIES
Increase in income taxes payable............... 5,171,000 333,000 5,000 -
Net advances to (from) the division............ 4,158,994 4,707,046 3,253,829 (594,725)
----------- ---------- ----------- -----------
Net cash provided (used) by financing 9,329,994 5,040,046 3,258,829 (594,725)
activities.................................. ----------- ---------- ----------- -----------
NET CHANGE IN CASH, END OF PERIOD.............. $ -- $ -- $ -- $ --
=========== ========== ========== =========
Additional amounts paid by the Company and
allocated to the Division
Interest....................................... $ 115,311 $ 677,715 $ 14,496 $ --
Rent........................................... 1,198,360 497,265 55,953 38,670
Income taxes................................... 338,000 5,000 3,000 --
---------- ----------- ---------- ---------
$ 1,651,671 $1,179,980 $ 73,449 $ 38,670
=========== ========== ========== =========
</TABLE>
See accompanying notes to the divisional financial statements.
F-51
<PAGE>
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Notes to the Divisional Financial Statements
(All figures are in U.S. dollars)
1. DESCRIPTION OF BUSINESS
The Telecommunications Division (the "Division") is a division of Ledcor
Industries Limited ("LIL") which, in turn, is a wholly-owned subsidiary of
Ledcor Inc. The Division is in the business of providing long-haul fiber optic
systems, including planning, design, construction and maintenance to
telecommunications clients. The Division headquarters are in Vancouver, Canada
and its principal geographic areas of operation for these fiber optic systems
are Canada and the United States.
The accompanying divisional financial statements include the assets,
liabilities, revenues and expenses of the Division. Since the Division has been
operating as a fully integrated part of the Company, all construction equipment
owned by LIL, but used in the Division's operations, was identified by LIL's
management and allocated to the Division. In addition, certain assets,
liabilities, revenues and expenses have been recorded by the Division using
management's best estimates (Note 3).
The divisional financial statements have been prepared from the divisional
records maintained by LIL and may not necessarily be indicative of the
conditions that would have existed or the results of operations if the Division
had been operated as a stand-alone company.
The Division does not hold any cash or cash equivalents. LIL uses central
bank accounts to deposit receipts and make payments on behalf of the Division.
These transactions are reflected in the inter-divisional account (Note 8).
On May 31, 1998, LIL transferred the net assets (at book value) and the
operations of the Division to Worldwide Fiber Inc. (indirectly a wholly-owned
subsidiary of Ledcor Inc.).
2. ACCOUNTING POLICIES
a) Basis of accounting
These divisional financial statements have been prepared in accordance
with accounting principles generally accepted in the United States,
which differ in some respects from those in Canada. The impact of any
differences in accounting policies on the financial statements is not
significant and therefore has not been discussed.
b) Accounting for contracts
Revenue and income from construction contracts to develop fiber optic
systems are determined on the percentage of completion basis using the
cost-to-cost method. Due to the risks inherent in these contracts,
management makes a provision for risk using their best estimate. This
method is used because management considers costs incurred to be the
best available measure of progress on
F-52
<PAGE>
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Notes to the Divisional Financial Statements
(All figures are in U.S. dollars)
these contracts. Provision is made for all anticipated losses as soon
as they become evident. Claims for additional contract compensation
are not recognized until resolved.
c) Unbilled revenue
Unbilled revenue comprises costs incurred and margin in excess of
billings and advance deposits, representing unperformed work, on
uncompleted contracts.
d) Inventory
Inventory consists of fiber optic strands under construction and is
valued at the lower of cost or market. Cost is determined using the
full absorption method whereby the fiber optic strands have been
allocated their proportionate share of materials, labour and overhead
incurred.
e) Fixed assets
Construction equipment, fiber optic strands and other assets are
recorded at cost. Fixed assets are depreciated using the following
rates and methods:
o Construction equipment--hourly usage rates, estimated to
depreciate the equipment, over estimated useful lives, ranging
from three to five years.
o Fiber optic strands, under construction--depreciation, at
appropriate rates, will be provided for when the related fiber
optic systems are in use.
o Other assets-straight--line method over the estimated useful
lives of the assets, ranging from three to five years.
f) Income taxes
These are the financial statements of a Division, and not of a taxable
legal entity. However, these financial statements present income taxes
as if the Division was a stand-alone taxable legal entity. Current and
deferred income taxes have been determined by applying the asset and
liability method.
The asset and liability method of accounting for income taxes
recognizes deferred tax assets and liabilities for the future tax
consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled.
F-53
<PAGE>
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Notes to the Divisional Financial Statements
(All figures are in U.S. dollars)
g) Translation of foreign currency
The functional currency of the Division is the Canadian dollar. The
financial statements are translated into United States dollars using
the period end exchange rate for assets and liabilities and weighted
average exchange rates for the period for revenues and expenses.
Translation gains and losses are deferred and included in divisional
equity. Net gains and losses resulting from foreign exchange
transactions are included in the statement of operations.
3. USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
dates of the divisional financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
Unbilled revenue, inventory, fiber optic strands capitalized, and revenue
have all been calculated using management's best estimates. Total estimated
costs is a component of the percentage of completion calculation which
determines revenue recognized, unbilled revenue, inventory and fiber optic
strands capitalized. However, there may be unforeseen conditions which could
include weather patterns, the continuing deterioration of the Canadian dollar,
and the outcome of ongoing negotiations. Such conditions could substantially
change the values of the above mentioned items reflected in these financial
statements. The impact of these unforeseen conditions cannot be estimated by
management as at May 31, 1998.
Corporate expenses are allocated from LIL to the Division based on a
percentage of the Division's revenue. Management is of the opinion that this
allocation percentage is reasonable since all divisions fully absorb LIL's
corporate expenses. Management regularly reviews this allocation basis and
considers the amounts allocated to fairly represent actual corporate expenses
incurred, on behalf of the Division, for the periods reported on. Because the
Division is fully integrated, management is unable to estimate the actual
corporate expenses that would have been incurred if the Division had operated on
a stand-alone basis.
Interest is allocated from LIL by charging a floating rate of prime plus 1%
on the net cash position of the Division's projects at the end of each month.
Statement of Financial Accounting Standards No. 34, "Capitalization of Interest
Cost", requires that interest be capitalized as part of the historical cost of
constructing assets held for sale or lease. Management has capitalized interest
by capitalizing the portion of interest costs incurred to date which relates to
inventory and capital assets.
The Division has no additional debt accruing interest which should be
capitalized. In addition, LIL has no additional debt which would result in
significant interest being allocated and capitalized.
F-54
<PAGE>
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Notes to the Divisional Financial Statements
(All figures are in U.S. dollars)
4. TRADE ACCOUNTS RECEIVABLE AND ACCOUNTS RECEIVABLE HOLDBACKS
Trade accounts receivable are presented net of the allowance for doubtful
accounts (which was nil for all years reported on since the Division has not
experienced any bad debts).
Accounts receivable holdbacks represent amounts billed but not yet paid
under retainage provisions in the project contracts. These provisions state that
holdbacks will be collected upon substantial completion of the projects.
5. UNBILLED REVENUE
Costs and billings on uncompleted contracts included in the divisional
financial statements are as follows:
<TABLE>
<CAPTION>
May 31, August 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Costs incurred on uncompleted contracts..................... $45,321,566 $49,184,985 $5,768,543
Margin...................................................... 9,312,322 8,822,667 1,604,399
Customer advance deposits applied against contracts......... (25,259,100) (7,646,685) --
Less billings to date....................................... (23,531,943) (46,752,957) (2,359,514)
------------- ------------ -----------
$ 5,842,845 $ 3,608,010 $5,013,428
------------ ----------- ----------
6. FIXED ASSETS
May 31, August 31,
1998 1997 1996
---- ---- ----
Construction equipment...................................... $3,796,102 $1,869,048 $802,548
Fiber optic strands, under construction..................... 4,423,830 -- --
Other....................................................... 529,456 52,683 --
---------- ---------- --------
............................................................ 8,749,388 1,921,731 802,548
Less accumulated depreciation............................... 767,285 450,688 338,897
---------- ---------- --------
............................................................ $7,982,103 $1,471,043 $463,651
========== ========== ========
</TABLE>
F-55
<PAGE>
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Notes to the Divisional Financial Statements
(All figures are in U.S. dollars)
7. DEFERRED TAX LIABILITIES
The components of the deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
May 31, August 31,
1998 1997 1996
---- ---- ----
Deferred tax assets
<S> <C> <C> <C>
Accounts payable holdback................................ $ 1,986,000 $ 39,000 $ --
Loss carryforward........................................ $ -- $ -- 1,113,000
---------- -------- ----------
Gross deferred tax assets................................ 1,986,000 39,000 1,113,000
----------- --------- ----------
Deferred tax liabilities
Accounts receivable holdback............................. 2,014,000 1,551,000 69,000
Unbilled revenue......................................... 2,629,000 1,623,000 2,256,000
Inter-divisional account loss carryforward............... -- 1,291,000 --
--------- ---------- ---------
Gross deferred tax liabilities........................... 4,643,000 4,465,000 2,325,000
---------- ---------- ----------
............................................................ $2,657,000 $4,426,000 $1,212,000
========== ========== ==========
Reconciliation of deferred tax liabilities:
May 31, August 31,
1998 1997 1996
---- ---- ----
Deferred tax liabilities, beginning of period............... $4,426,000 $1,212,000 $ 536,000
Deferred tax (recovery) expense............................. (1,600,000) 3,282,000 681,000
Foreign exchange gain....................................... (169,000) (68,000) (5,000)
----------- ----------- -----------
Deferred tax liabilities, end of period..................... $2,657,000 $4,426,000 $1,212,000
---------- ---------- ----------
</TABLE>
The Division's provision for deferred taxes approximates the amounts
computed by applying the Canadian and United States statutory rates to income
before taxes. There are no permanent differences or other reconciling items that
would result in an effective tax rate which is different from the statutory
rates applied.
F-56
<PAGE>
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Notes to the Divisional Financial Statements
(All figures are in U.S. dollars)
8. INTERDIVISIONAL ACCOUNT
This account comprises the balance due to other divisions in connection
with working capital advances. The balance due has no repayment terms and
interest is allocated, from LIL, on the basis as described in Note 3.
9. COMMITMENTS
a) Fiber Optic Construction Project
In 1996, the Division commenced construction of a Canadian-U.S. fiber
optic telecommunications system (the Canadian FOTS) that is scheduled
for completion in early 1999.
b) fONOROLA Contract
In a variety of contracts, commencing in April, 1997, the Division
sold fiber optic strands of the Canadian FOTS. The Division has a
commitment to complete construction of the fiber optic strands.
c) Bell Canada Contract
In February, 1998, the Division sold fiber optic strands of the
Canadian FOTS. The Division has a commitment to complete construction
of the fiber optic strands.
d) MetroNet Contract
Subsequent to period end (September, 1998), the Division sold fiber
optic strands of the Canadian FOTS. The Division has a commitment to
complete construction of the fiber optic strands.
e) Lease Commitments
The Division is committed under non-cancellable leases for equipment
for the period ending April, 1999 in the amount of $826,271. The
Division has an option to withdraw from all leases in April, 1999 and
therefore has no commitments beyond that date. Lease expenses were the
following:
Nine months ending May 31, 1998 $1,198,360
Year ended August 31, 1997 497,265
Five months ended August 31, 1996 55,953
Year ended March 31, 1996 38,670
F-57
<PAGE>
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Notes to the Divisional Financial Statements
(All figures are in U.S. dollars)
10. SIGNIFICANT CONCENTRATION OF CREDIT AND SUPPLY RISK
The following customers/supplier have accounted individually for 10% or
more of the Division's total revenues/contract costs in one or more periods, as
follows:
<TABLE>
<CAPTION>
Nine months ended Year ended Five months ended Year ended
May 31, 1998 August 31 1997 August 31, 1996 March 31, 1996
------------ -------------- --------------- --------------
Customers
<S> <C> <C> <C> <C>
fONOROLA................... 62% 64% 51% 91%
Bell Canada................ 28% - - -
Alaska Filter Star......... - 25% - -
Sprint Canada.............. - - 24% -
AT&T Canada................ - - 24% -
Supplier
Pirelli Cables............. 13% 27% 79% -
The Division also had significant accounts receivable from fONOROLA which
accounted for the following percentages of trade accounts receivable:
May 31, 1998 August 31, 1997 August 31, 1996
------------ --------------- ---------------
fONOROLA.............................................. 39% 52% 94%
</TABLE>
The Division is receiving cash from this customer on a consistent basis and
management expects to collect on all other accounts receivables. Therefore no
provision for bad debts has been recorded for the reported periods. Based on
this significant customer's creditworthiness, the Division has not required it
to provide collateral against these receivables.
There were no significant accounts payable to significant suppliers at the
balance sheet dates. However, since significant purchases are made from Pirelli
Cables, should this supplier fail to honor its contract and the Division was not
able to find a substitute supplier, the Division would not be able to meet its
commitments to complete the construction of the Canadian FOTS, as noted in 9(a).
11. FINANCIAL INSTRUMENTS
Financial instruments consist of recorded accounts receivables (and other
like accounts) which will result in future cash receipts, as well as accounts
payables, (and other like accounts) that will result in future cash outlays.
F-58
<PAGE>
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Notes to the Divisional Financial Statements
(All figures are in U.S. dollars)
The carrying values of the financial instruments of the Division as at May
31, 1998, August 31, 1997 and August 31, 1996 were approximately equal to their
estimated fair market values at these dates, due to the short-term nature of
these instruments. Subjective judgment and uncertainties arise in the
determination of estimated fair market values. Accordingly, the aggregate fair
value should not be interpreted as being realizable in an immediate settlement
of the instruments.
12. INDUSTRY AND GEOGRAPHIC AREA SEGMENT INFORMATION
The Division currently operates in one industry segment (fiber optic
installations) and in two geographic segments (the Canadian FOTS is being
constructed in Canada and the U.S.). Revenue and total identifiable assets for
these geographic segments is as follows:
<TABLE>
<CAPTION>
Canada U.S.
------ ----
Revenue Amount Percentage of Total Amount Percentage of Total
<S> <C> <C> <C> <C> <C> <C>
May 31, 1998.................... $ 35,826,795 66% $ 18,807,093 34%
August 31, 1997................. $ 42,611,672 73% $ 15,395,980 27%
August 31, 1996................. $ 7,372,942 100% $ -- --
March 31, 1996.................. $ 3,823,790 100% $ -- --
Canada U.S.
------ ----
Total Identifiable
Assets Amount Percentage of Total Amount Percentage of Total
May 31, 1998..................... $ 29,204,452 71% $ 11,928,580 29%
August 31, 1997.................. $ 25,464,071 79% $ 6,803,515 21%
August 31, 1996.................. $ 6,475,904 100% $ -- --
</TABLE>
13. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or
after, January 1, 2000 and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems failure
which could affect the Division's ability to conduct normal business operations.
It is not possible to be certain
F-59
<PAGE>
LEDCOR INDUSTRIES LIMITED--TELECOMMUNICATIONS DIVISION
Notes to the Divisional Financial Statements
(All figures are in U.S. dollars)
that all aspects of the Year 2000 Issue affecting the Division, including those
related to the efforts of customers, suppliers, or other third parties, will be
fully resolved.
14. SUBSEQUENT EVENTS
a) Agreements with WFI
Effective May 31 1998, LIL entered into a series of agreements to sell
the equipment, fiber optic strands and certain other assets related to
the business of Worldwide Fiber Inc. (an indirect wholly-owned
subsidiary of Ledcor Inc.) ("WFI"). In addition, WFI was granted a
licence by LIL to use certain processes related to the business. This
licence agreement is for an initial term of ten years and will be
renewable annually upon completion of the initial term. As part of
this transaction, LIL retained all existing construction contracts
related to the business. This transaction was between entities under
common control and has been accounted for using the carrying amounts
recorded in LIL's accounts. As consideration for the transaction, LIL
was issued 200 Class A shares by WFI.
b) Disposition of fiber assets
As part of these agreements WFI undertook to purchase from LIL certain
fiber optic system assets, located in both Canada and the U.S., which
were not completed at May 31, 1998. These assets will be purchased by
WFI upon their completion, which is estimated to be late 1998 or early
1999. As consideration, WFI will issue a total of 19,999,700 Class A
common shares to LIL. These transactions are between entities under
common control and, will be accounted for at their original
construction costs.
c) Construction services
WFI has agreed to provide construction services to LIL to complete
certain construction contracts for fiber optic strands and related
facilities to third party customers.
F-60
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the By-laws of the Company, as amended, subject to Section 124
of the Canada Business Corporations Act (the "Act"), a director or officer of
the Company, a former director or officer of the Company or a person who acts or
acted at the Company's request as a director or officer of a body corporate of
which the Company is or was a shareholder or creditor, and his or her heirs and
legal representatives:
1. may be indemnified by the Company against all costs, charges and expenses,
including an amount paid to settle an action or satisfy a judgment,
reasonably incurred by him or her in respect of any civil, criminal or
administrative action or proceeding to which he or she is made a party by
reason of being or having been a director or officer of such Company or
body corporate.
2. may be indemnified by the Company, with the approval of a court, against
all costs, charges and expenses reasonably incurred by him or her in
connection with an action by or on behalf of the Company or body corporate
to procure a judgment in its favor, to which he or she is made a party by
reason of being or having been a director or an officer of the Company or
body corporate; and
3. is entitled to indemnity from the Company in respect of all costs, charges
and expenses reasonably incurred by him or her in connection with the
defense of any civil, criminal or administrative action or proceeding to
which he or she is made a party by reason of being or having been a
director or officer of the Company or body corporate, if the person seeking
indemnity was substantially successful on the merits in his or her defense
of the actions or proceeding:
provided, in all cases, such person fulfills the conditions that (a) he or she
acted honestly and in good faith with a view to the best interests of the
Company, and (b) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he or she had reasonable
grounds for believing that his or her conduct was lawful.
As contemplated by Section 124 of the Canada Business Corporations Act, the
Company has purchased insurance against potential claims against the directors
and officers of the registrant and against loss for which the registrant may be
required or permitted by law to indemnify such directors and officers.
<PAGE>
Item 21. EXHIBITS.
The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description
1 Purchase Agreement between Worldwide Fiber Inc. and the Initial
Purchasers dated July 23, 1999.
3.1 Articles of Continuance of Worldwide Fiber Inc.
3.2 Articles of Amendment of Worldwide Fiber Inc.
3.3 By-Laws of Worldwide Fiber Inc., as Amended
4.1* Indenture between Worldwide Fiber Inc. and HSBC Bank USA (formerly
Marine Midland Bank) dated December 23, 1998
4.2* Form of 12 1/2% Series A Senior Notes due 2005
4.3* Form of 12 1/2% Series B Senior Notes due 2005
4.4* Registration Rights Agreement between Worldwide Fiber Inc., Donaldson,
Lufkin & Jenrette Securities Corporation and TD Securities (USA) Inc.
dated December 23, 1998
4.5 Indenture between Worldwide Fiber Inc. and HSBC Bank USA (formerly
Marine Midland Bank) dated July 28, 1999.
4.6 Form of 12% Series A Senior Notes due 2009 (included in exhibit 4.5
hereto).
4.7 Form of 12% Series B Senior Notes due 2009 (included in exhibit 4.5
hereto).
4.8 Registration Rights Agreement between Worldwide Fiber Inc. and the
Initial Purchasers dated July 28, 1999.
5.1** Opinion of Farris, Vaughan, Wills & Murphy regarding the legality of
the securities being registered.
5.2** Opinion of Cahill Gordon & Reindel regarding the legality of the
securities being registered.
II-2
<PAGE>
10.1* Shareholders Agreement between Worldwide Fiber Inc., Worldwide Fiber
Networks Ltd., Ledcor Communications Ltd., Ledcor Industries, Inc.,
Worldwide Fiber (USA), Inc. (formerly Pacific Fiber Link, Inc.),
MI-Tech Communications, LLC, Ledcor Inc., and Michels Pipeline
Construction, Inc.
10.2* Railplow License Agreement between Ledcor Industries Limited and
Worldwide Fiber Communications Ltd. (formerly 786520 Alberta Ltd.)
dated May 31, 1998.
10.3* Non-exclusive Railplow License Agreement between Ledcor Industries
Limited and Ledcom Holdings Ltd. (formerly Starfiber Communications
Ltd.) dated May 31, 1998.
10.4* Letter from Ledcor, Inc. committing Ledcom Holdings Ltd. to grant an
exclusive Railplow license to Worldwide Fiber Communications Ltd.
dated December 1, 1998.
10.5* Management Services Agreement between Ledcor Industries Limited and
Worldwide Fiber Inc. (formerly Worldwide Fiberlink Ltd.) dated May 31,
1998.
10.6* Employment Agreement between Ledcor Industries Limited and Ledcor
Communications Ltd., a wholly-owned subsidiary of the Worldwide Fiber
Inc. dated May 31, 1998.
10.7* Employment Agreement between Ledcor Industries Inc. and Ledcor
Communications Inc., a subsidiary of Worldwide Fiber Inc. dated May
31, 1998.
10.8* Construction Services Agreement between Ledcor Industries Limited and
Ledcor Communications Ltd., a wholly-owned subsidiary of the Worldwide
Fiber Inc. dated May 31, 1998.
10.9* Construction Services Agreement between Ledcor Industries Inc. and
Ledcor Communications Ltd. (formerly Ledcor Communications Inc.) dated
May 31, 1998.
10.10* Non-Competition Agreement between Worldwide Fiber Inc. (formerly
Starfiber Inc.) and Ledcor, Inc., dated May 31, 1998.
10.11* Roll-over Agreement between Ledcor Industries Limited and Ledcom
Holdings Ltd. (formerly Starfiber Communications Ltd.) dated May 31,
1998 transferring certain technology of Ledcor Industries Limited.
10.12* Roll-over Agreement between Ledcor Industries Limited, Worldwide Fiber
(USA), Inc. (formerly Pacific Fiber Link, Inc.) and Ledcor Industries
Inc. dated August 31, 1998 transferring assets of Ledcor Inc.'s
telecommunications division.
II-3
<PAGE>
10.13* Roll-over Agreement between Mi-Tech Communications, LLC, Worldwide
Fiber (USA), Inc. (formerly Pacific Fiber Link, Inc.) dated August 31,
1998 transferring assets of Ledcor Inc.'s telecommunications division.
10.14* Roll-over Agreement between Ledcor Industries Limited and Worldwide
Fiber Holdings Ltd. (formerly Worldwide Fiberlink Holdings Ltd.) dated
August 31, 1998 transferring assets of Ledcor Inc.'s
telecommunications division.
10.15* Roll-over Agreement between Worldwide Fiber Holdings Ltd. (formerly
Worldwide Fiberlink Holdings Ltd.) and Worldwide Fiber Inc. (formerly
Worldwide Fiberlink Ltd.) dated August 31, 1998 transferring assets of
Ledcor Inc.'s telecommunications division.
10.16* Roll-over Agreement between Worldwide Fiber Inc. (formerly Worldwide
Fiberlink Ltd.) and Worldwide Fiber Networks Ltd. (formerly Worldwide
Fiber Ltd.) dated August 31, 1998 transferring assets of Ledcor Inc.'s
telecommunications division.
10.17* Roll-over Agreement between Ledcor Inc. and Worldwide Fiber Holdings
Ltd. dated December 1, 1998 transferring assets of Ledcor Inc.'s
telecommunications division.
10.18* Roll-over Agreement between Worldwide Fiber Holdings Ltd. and
Worldwide Fiber Inc. dated December 1, 1998 transferring assets of
Ledcor Inc.'s telecommunications division.
10.19* Roll-over Agreement between Worldwide Fiber Inc. and Worldwide Fiber
Communications Ltd. dated December 1, 1998 transferring assets of
Ledcor Inc.'s telecommunications division.
10.20* License Agreement among WFI-CN Fiber Inc., Worldwide Fiber Inc. and
Canadian National Railway Company, dated May 28, 1999.
10.21* Unanimous Shareholders Agreement among Worldwide Fiber Networks Ltd.,
Canadian National Railway Company and WFI-CN Fiber Inc. dated May 28,
1999.
10.22* Limited Liability Company Agreement of Worldwide Fiber IC LLC between
Worldwide Fiber IC Holdings, Inc., and IC Fiber Holding Inc., dated
May 28, 1999.
10.23* Form of License Agreement among Worldwide Fiber Inc., Illinois Central
Railroad Company and each of IC Fiber Alabama LLC, IC Fiber Illinois
LLC, IC Fiber Iowa LLC, IC Fiber Kentucky LLC, IC Fiber Louisiana LLC,
IC Fiber Mississippi LLC and IC Fiber Tennessee LLC, dated as of May
28, 1999.
II-4
<PAGE>
10.24* Amended and Restated Share Purchase Agreement by and between Ledcor
Industries Limited, Ledcor Industries Inc. and Worldwide Fiber Inc.
dated May 28, 1999.
10.25* Supply contract for Hibernia Undersea Cable System between Worldwide
Telecom (Bermuda) Ltd. and Tyco Submarine Systems Ltd. dated June 18,
1999.
10.26# Preferred Share Purchase Agreement by and among Worldwide Fiber Inc.,
DWF SRL, GSCP3 WWF (Barbados) SRL, WWF (Barbados) SRL, Providence
Equity Fiber L.P., and Tyco Group S.A.R.L. dated as of September 7,
1999.
10.27# Shareholders Agreement by and among Worldwide Fiber Inc., DWF SRL, GS
Capital Partners III, L.P., GSCP3 WWF (Barbados) SRL, Providence
Equity Fiber, L.P., Tyco Group S.a.r.l., Worldwide Fiber Holdings
Ltd., Ledcor Inc. and the Several Shareholders named in Schedule 1.15
thereto dated as of September 9, 1999
10.28 Registration Rights Agreement by and among Worldwide Fiber Inc., DWF
SRL, GSCP3 WWF (Barbados) SRL, WWF (Barbados) SRL, Providence Equity
Fiber, L.P., and Tyco Group S.a.r.l. dated as of September 9, 1999
10.29 Amended and Restated Share Purchase Agreement between Ledcor
Industries Limited, Ledcor Industries Inc. and Worldwide Fiber Inc.
dated September 7, 1999
10.30 Letter Agreement between Ledcor Industries Limited, Ledcor Industries
Inc., Worldwide Fiber Inc. and Worldwide Fiber (F.O.T.S.) No. 3, Ltd.
dated September 27, 1999
21 Subsidiaries of Worldwide Fiber Inc.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
23.2 Consent of Deloitte & Touche LLP, Independent Auditors.
23.3** Consent of Cahill Gordon & Reindel (included in Exhibit 5.2).
23.4** Consent of Farris, Vaughan, Wills & Murphy (included in Exhibit 5.1).
24.1 Powers of Attorney authorizing execution of Registration Statement on
Form F-4 on behalf of certain directors of Registrant (included on
signature pages to this Registration Statement).
24.2 Power of Attorney authorizing execution of Registration Statement on
Form F-4 on behalf of Worldwide Fiber (USA), Inc.
II-5
<PAGE>
25 Statement of eligibility of Trustee on Form T-1.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
- ----------
* Previously filed with the Company's Registration Statement on Form F-4
which was declared effective on July 21, 1999 (Registration No. 333-10254).
** To be filed by amendment.
# Confidential treatment requested as to certain portions which have been
omitted from this filing and filed separately with the Securities and
Exchange Commission pursuant to Rule 406.
II-6
<PAGE>
Item 22. UNDERTAKINGS.
(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of 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 Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(2) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement; (iii) to include any material information with respect
to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(3) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(4) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(5) To file a post-effective amendment to the registration statement to
include any financial statements required by ss.210.3-19 of this chapter at the
start of any delayed offering or throughout a continuous offering.
(6) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the infor-
II-7
<PAGE>
mation called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(7) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415 (ss.230.415 of this chapter), will
be filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(8) The undersigned registrant hereby undertakes: (i) to respond to
requests for information that is incorporated by reference into this prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form F-4, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means; and (ii) to arrange or provide for a
facility in the U.S. for the purpose of responding to such requests. The
undertaking in subparagraph (i) above includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(9) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(10) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act ("Act") in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the undersigned
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Vancouver BC, Canada on
October 26, 1999.
WORLDWIDE FIBER INC.
By: /s/ DAVID LEDE
----------------------------------------
Name: David Lede
Title: Chairman of the Board and
Chief Executive Officer
II-9
<PAGE>
POWER OF ATTORNEY
Each of the undersigned hereby constitutes and appoints David Lede and
Larry Olsen and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact, with power of substitution and resubstitution,
in his name, place and stand, in any and all capacities, to sign any and all
amendments (including post-effective amendments) and supplements to this
Registration Statement and to file the same, with exhibits thereto and other
documents in connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ DAVID LEDE Chairman of the Board October 26, 1999
- ------------------------------------------ (Principal Executive
David Lede Officer)
/s/ CLIFFORD LEDE Vice Chairman October 26, 1999
- ------------------------------------------
Clifford Lede
- ------------------------------------------ Vice Chairman October 26, 1999
/s/ LARRY OLSEN (Principal Financial and
- ------------------------------------------ Accounting
Larry Olsen Officer)
/s/ RON STEVENSON Director October 26, 1999
- ------------------------------------------
Ron Stevenson
/s/ STEPHEN STOW Director October 26, 1999
- ------------------------------------------
Stephen Stow
/s/ JIM VOELKER Director October 26, 1999
- ------------------------------------------
Jim Voelker
II-10
<PAGE>
/s/ WILLIAM RAMSEY Director October 26, 1999
- ------------------------------------------
William Ramsey
/s/ ANDREW RUSH Director October 26, 1999
- ------------------------------------------
Andrew Rush
/s/ ROBERT GHEEWALLA Director October 26, 1999
- ------------------------------------------
Robert Gheewalla
/s/ GLENN CREAMER Director October 26, 1999
- ------------------------------------------
Glenn Creamer
/s/ NEIL GARVEY Director October 26, 1999
- ------------------------------------------
Neil Garvey
Worldwide Fiber (USA), Inc. Worldwide Fiber (USA), October 26, 1999
Inc.
(Authorized U.S.
By: /s/ LARRY OLSEN Representative)
-------------------------------------
Larry Olsen, Authorized Signatory
</TABLE>
II-11
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
1 Purchase Agreement between Worldwide Fiber Inc. and the Initial
Purchasers dated July 23, 1999.
3.1 Articles of Continuance of Worldwide Fiber Inc.
3.2 Articles of Amendment of Worldwide Fiber Inc.
3.3 By-Laws of Worldwide Fiber Inc., as Amended
4.1* Indenture between Worldwide Fiber Inc. and HSBC Bank USA (formerly
Marine Midland Bank) dated December 23, 1998
4.2* Form of 12 1/2% Series A Senior Notes due 2005
4.3* Form of 12 1/2% Series B Senior Notes due 2005
4.4* Registration Rights Agreement between Worldwide Fiber Inc., Donaldson,
Lufkin & Jenrette Securities Corporation and TD Securities (USA) Inc.
dated December 23, 1998
4.5 Indenture between Worldwide Fiber Inc. and HSBC Bank USA (formerly
Marine Midland Bank) dated July 28, 1999.
4.6 Form of 12% Series A Senior Notes due 2009 (included in exhibit 4.5
hereto).
4.7 Form of 12% Series B Senior Notes due 2009 (included in exhibit 4.5
hereto).
4.8 Registration Rights Agreement between Worldwide Fiber Inc. and the
Initial Purchasers dated July 28, 1999.
5.1** Opinion of Farris, Vaughan, Wills & Murphy regarding the legality of
the securities being registered.
5.2** Opinion of Cahill Gordon & Reindel regarding the legality of the
securities being registered.
10.1* Shareholders Agreement between Worldwide Fiber Inc., Worldwide Fiber
Networks Ltd., Ledcor Communications Ltd., Ledcor Industries, Inc.,
Worldwide Fiber (USA), Inc. (formerly Pacific Fiber Link, Inc.),
MI-Tech Communications, LLC, Ledcor Inc., and Michels Pipeline
Construction, Inc.
II-12
<PAGE>
10.2* Railplow License Agreement between Ledcor Industries Limited and
Worldwide Fiber Communications Ltd. (formerly 786520 Alberta Ltd.)
dated May 31, 1998.
10.3* Non-exclusive Railplow License Agreement between Ledcor Industries
Limited and Ledcom Holdings Ltd. (formerly Starfiber Communications
Ltd.) dated May 31, 1998.
10.4* Letter from Ledcor, Inc. committing Ledcom Holdings Ltd. to grant an
exclusive Railplow license to Worldwide Fiber Communications Ltd.
dated December 1, 1998.
10.5* Management Services Agreement between Ledcor Industries Limited and
Worldwide Fiber Inc. (formerly Worldwide Fiberlink Ltd.) dated May 31,
1998.
10.6* Employment Agreement between Ledcor Industries Limited and Ledcor
Communications Ltd., a wholly-owned subsidiary of the Worldwide Fiber
Inc. dated May 31, 1998.
10.7* Employment Agreement between Ledcor Industries Inc. and Ledcor
Communications Inc., a subsidiary of Worldwide Fiber Inc. dated May
31, 1998.
10.8* Construction Services Agreement between Ledcor Industries Limited and
Ledcor Communications Ltd., a wholly-owned subsidiary of the Worldwide
Fiber Inc. dated May 31, 1998.
10.9* Construction Services Agreement between Ledcor Industries Inc. and
Ledcor Communications Ltd. (formerly Ledcor Communications Inc.) dated
May 31, 1998.
10.10* Non-Competition Agreement between Worldwide Fiber Inc. (formerly
Starfiber Inc.) and Ledcor, Inc., dated May 31, 1998.
10.11* Roll-over Agreement between Ledcor Industries Limited and Ledcom
Holdings Ltd. (formerly Starfiber Communications Ltd.) dated May 31,
1998 transferring certain technology of Ledcor Industries Limited.
10.12* Roll-over Agreement between Ledcor Industries Limited, Worldwide Fiber
(USA), Inc. (formerly Pacific Fiber Link, Inc.) and Ledcor Industries
Inc. dated August 31, 1998 transferring assets of Ledcor Inc.'s
telecommunications division.
10.13* Roll-over Agreement between Mi-Tech Communications, LLC, Worldwide
Fiber (USA), Inc. (formerly Pacific Fiber Link, Inc.) dated August 31,
1998 transferring assets of Ledcor Inc.'s telecommunications division.
II-13
<PAGE>
10.14* Roll-over Agreement between Ledcor Industries Limited and Worldwide
Fiber Holdings Ltd. (formerly Worldwide Fiberlink Holdings Ltd.) dated
August 31, 1998 transferring assets of Ledcor Inc.'s
telecommunications division.
10.15* Roll-over Agreement between Worldwide Fiber Holdings Ltd. (formerly
Worldwide Fiberlink Holdings Ltd.) and Worldwide Fiber Inc. (formerly
Worldwide Fiberlink Ltd.) dated August 31, 1998 transferring assets of
Ledcor Inc.'s telecommunications division.
10.16* Roll-over Agreement between Worldwide Fiber Inc. (formerly Worldwide
Fiberlink Ltd.) and Worldwide Fiber Networks Ltd. (formerly Worldwide
Fiber Ltd.) dated August 31, 1998 transferring assets of Ledcor Inc.'s
telecommunications division.
10.17* Roll-over Agreement between Ledcor Inc. and Worldwide Fiber Holdings
Ltd. dated December 1, 1998 transferring assets of Ledcor Inc.'s
telecommunications division.
10.18* Roll-over Agreement between Worldwide Fiber Holdings Ltd. and
Worldwide Fiber Inc. dated December 1, 1998 transferring assets of
Ledcor Inc.'s telecommunications division.
10.19* Roll-over Agreement between Worldwide Fiber Inc. and Worldwide Fiber
Communications Ltd. dated December 1, 1998 transferring assets of
Ledcor Inc.'s telecommunications division.
10.20* License Agreement among WFI-CN Fiber Inc., Worldwide Fiber Inc. and
Canadian National Railway Company, dated May 28, 1999.
10.21* Unanimous Shareholders Agreement among Worldwide Fiber Networks Ltd.,
Canadian National Railway Company and WFI-CN Fiber Inc. dated May 28,
1999.
10.22* Limited Liability Company Agreement of Worldwide Fiber IC LLC between
Worldwide Fiber IC Holdings, Inc., and IC Fiber Holding Inc., dated
May 28, 1999.
10.23* Form of License Agreement among Worldwide Fiber Inc., Illinois Central
Railroad Company and each of IC Fiber Alabama LLC, IC Fiber Illinois
LLC, IC Fiber Iowa LLC, IC Fiber Kentucky LLC, IC Fiber Louisiana LLC,
IC Fiber Mississippi LLC and IC Fiber Tennessee LLC, dated as of May
28, 1999.
10.24* Amended and Restated Share Purchase Agreement by and between Ledcor
Industries Limited, Ledcor Industries Inc. and Worldwide Fiber Inc.
dated May 28, 1999.
II-14
<PAGE>
10.25* Supply contract for Hibernia Undersea Cable System between Worldwide
Telecom (Bermuda) Ltd. and Tyco Submarine Systems Ltd. dated June 18,
1999.
10.26# Preferred Share Purchase Agreement by and among Worldwide Fiber Inc.,
DWF SRL, GSCP3 WWF (Barbados) SRL, WWF (Barbados) SRL, Providence
Equity Fiber L.P., and Tyco Group S.A.R.L. dated as of September 7,
1999.
10.27# Shareholders Agreement by and among Worldwide Fiber Inc., DWF SRL, GS
Capital Partners III, L.P., GSCP3 WWF (Barbados) SRL, Providence
Equity Fiber, L.P., Tyco Group S.a.r.l., Worldwide Fiber Holdings
Ltd., Ledcor Inc. and the Several Shareholders named in Schedule 1.15
thereto dated as of September 9, 1999
10.28 Registration Rights Agreement by and among Worldwide Fiber Inc., DWF
SRL, GSCP3 WWF (Barbados) SRL, WWF (Barbados) SRL, Providence Equity
Fiber, L.P., and Tyco Group S.a.r.l. dated as of September 9, 1999
10.29 Amended and Restated Share Purchase Agreement between Ledcor
Industries Limited, Ledcor Industries Inc. and Worldwide Fiber Inc.
dated September 7, 1999
10.30 Letter Agreement between Ledcor Industries Limited, Ledcor Industries
Inc., Worldwide Fiber Inc. and Worldwide Fiber (F.O.T.S.) No. 3, Ltd.
dated September 27, 1999
21 Subsidiaries of Worldwide Fiber Inc.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
23.2 Consent of Deloitte & Touche LLP, Independent Auditors.
23.3** Consent of Cahill Gordon & Reindel (included in Exhibit 5.2).
23.4** Consent of Farris, Vaughan, Wills & Murphy (included in Exhibit 5.1).
24.1 Powers of Attorney authorizing execution of Registration Statement on
Form F-4 on behalf of certain directors of Registrant (included on
signature pages to this Registration Statement).
24.2 Power of Attorney authorizing execution of Registration Statement on
Form F-4 on behalf of Worldwide Fiber (USA), Inc.
25 Statement of eligibility of Trustee on Form T-1.
99.1 Form of Letter of Transmittal.
II-15
<PAGE>
99.2 Form of Notice of Guaranteed Delivery.
- ----------
* Previously filed with the Company's Registration Statement on Form F-4
which was declared effective on July 21, 1999 (Registration No. 333-10254).
** To be filed by amendment.
# Confidential treatment requested as to certain portions which have been
omitted from this filing and filed separately with the Securities and
Exchange Commission pursuant to Rule 406.
II-16
Worldwide Fiber Inc.
U.S. $500,000,000
12% Series A Senior Notes due 2009
Purchase Agreement
July 23, 1999
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
TD Securities (USA) Inc.
<PAGE>
U.S. $500,000,000
12% Series A Senior Notes due 2009
of WORLDWIDE FIBER INC.
PURCHASE AGREEMENT
July 23, 1999
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
TD Securities (USA) Inc.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Worldwide Fiber Inc., a corporation incorporated under the laws of Alberta
(the "Company"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation, Morgan Stanley & Co. Incorporated, Salomon Smith Barney
Inc. and TD Securities (USA) Inc. (each, an "Initial Purchaser" and, together,
the "Initial Purchasers") an aggregate of U.S. $500,000,000 in principal amount
of its 12% Series A Senior Notes due 2009 (the "Series A Notes"), subject to the
terms and conditions set forth herein. The Series A Notes are to be issued
pursuant to the provisions of an indenture (the "Indenture"), to be dated as of
the Closing Date (as defined below), between the Company and HSBC Bank USA, as
trustee (the "Trustee"). The Series A Notes and the Series B Notes (as defined
below) issuable in exchange therefor are collectively referred to herein as the
"Notes." Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Indenture.
1. Offering Memorandum. The Series A Notes will be offered and sold to the
Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). The
Company has prepared a preliminary offering memorandum, dated July 1, 1999 (the
"Preliminary Offering Memorandum"), a preliminary Canadian addendum, dated July
1, 1999 (the "Preliminary Wrap"), a final offering memorandum, dated July 23,
1999 (the "Offering Memorandum"), and a final Canadian addendum, dated July 23,
1999 (the "Final Wrap"), in each case, relating to the Series A Notes. The
Issuer hereby confirms that it has authorized the use of the Preliminary
Offering Memorandum, the Preliminary Wrap, the Offering Memorandum and the Final
<PAGE>
-2-
Wrap, and any amendment or supplement thereto, in connection with the offer and
sale of the Series A Notes by the Initial Purchasers. Unless stated to the
contrary, all references herein (i) to the "Preliminary Canadian Memorandum" are
to the Preliminary Offering Memorandum as supplemented by the Preliminary Wrap;
and (ii) to the "Final Canadian Memorandum" are to the Offering Memorandum as
supplemented by the Final Wrap.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE ACT)(A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, OR (C) 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 "IAI"), (2) AGREES
THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904
OF THE ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE
OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION
<PAGE>
-3-
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED, A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER
THE ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
2. Agreements to Sell and Purchase. On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to the terms
and conditions contained herein, the Company agrees to issue and sell to the
Initial Purchasers, and each Initial Purchaser agrees, severally and not
jointly, to purchase from the Company, the principal amounts of Series A Notes
set forth opposite the name of such Initial Purchaser on Schedule A hereto at a
purchase price equal to 97.0% of the principal amount thereof (the "Purchase
Price").
3. Terms of Offering. The Initial Purchasers have advised the Company that
the Initial Purchasers will make offers (the "Exempt Resales") of the Series A
Notes purchased hereunder on the terms set forth in the Offering Memorandum, as
amended or supplemented, solely to (i) persons whom the Initial Purchasers
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBs"), and (ii) persons permitted to purchase the Series A
Notes in offshore transactions in reliance upon Regulation S under the Act
(each, a "Regulation S Purchaser") (such persons specified in clauses (i) and
(ii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchasers will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 100% of the principal amount thereof. Such price may be changed
at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will have
the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Series A Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the "Commission")
under the circumstances set forth therein, (i) a registration statement under
the Act (the
<PAGE>
-4-
"Exchange Offer Registration Statement") relating to the Company's 12% Series B
Senior Notes due 2009 (the "Series B Notes"), to be offered in exchange for the
Series A Notes (such offer to exchange being referred to as the "Exchange
Offer") and (ii) a shelf registration statement pursuant to Rule 415 under the
Act (the "Shelf Registration Statement" and, together with the Exchange Offer
Registration Statement, the "Registration Statements") relating to the resale by
certain holders of the Series A Notes and to use its reasonable best efforts to
cause such Registration Statements to be declared and remain effective and
usable for the periods specified in the Registration Rights Agreement and to
consummate the Exchange Offer. This Agreement, the Indenture, the Notes, and the
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the "Operative Documents."
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for, the Series A Notes
shall be made at the offices of Cahill Gordon & Reindel, 80 Pine Street, New
York, New York 10005, or such other location as may be mutually acceptable. Such
delivery and payment shall be made at 9:00 a.m. New York City time, on July 28,
1999 or at such other time on the same date or such other date as shall be
agreed upon by the Initial Purchasers and the Company. The time and date of such
delivery and the payment for the Series A Notes are herein called the "Closing
Date."
(b) One or more of the Series A Notes in definitive global form, registered
in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"),
having an aggregate principal amount corresponding to the aggregate principal
amount of the Series A Notes (collectively, the "Global Note"), shall be
delivered by the Company to the Initial Purchasers (or as the Initial Purchasers
direct) in each case with any transfer taxes thereon duly paid by the Company
against payment by the Initial Purchasers of the Purchase Price thereof by wire
transfer in same day funds to the order of the Company. The Global Note shall be
made available to the Initial Purchasers for inspection not later than 10:00
a.m., New York City time, on the business day immediately preceding the Closing
Date.
5. Agreements of the Company. The Company hereby agrees with the Initial
Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by the
Initial Purchasers, confirm such advice in writing, (i) of the issuance by any
state securities commission or any securities commission of a Relevant Province
(as defined below) of any stop order suspending the qualification or exemption
from qualification of any Series A Notes for offering or sale in any
jurisdiction designated by the Initial Purchasers pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal, state or provincial regulatory authority for such purpose
and (ii) of the happening of any
<PAGE>
-5-
event during the period referred to in Section 5(c) below that makes any
statement of a material fact made in the Preliminary Offering Memorandum,
Preliminary Canadian Memorandum, the Offering Memorandum, or the Final Canadian
Memorandum untrue or that requires any additions to or changes in the
Preliminary Offering Memorandum, the Preliminary Canadian Memorandum, the
Offering Memorandum, or the Final Canadian Memorandum in order to make the
statements therein not misleading. The Company shall use its best efforts to
prevent the issuance of any stop order or order suspending the qualification or
exemption of any Series A Notes under any state securities or Blue Sky laws or
Canadian Securities Laws (as defined below) and, if at any time any state
securities commission or other federal or state regulatory authority shall issue
an order suspending the qualification or exemption of any Series A Notes under
any state securities or Blue Sky laws or Canadian Securities Laws (as defined
below), the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified by the
Initial Purchasers to the Company as many copies of the Preliminary Offering
Memorandum, the Preliminary Canadian Memorandum, the Offering Memorandum and the
Final Canadian Memorandum, and any amendments or supplements thereto, as the
Initial Purchasers may reasonably request for the time period specified in
Section 5(c). Subject to the Initial Purchasers' compliance with its
representations and warranties and agreements set forth in Section 7 hereof, the
Company consents to the use of the Preliminary Offering Memorandum, the
Preliminary Canadian Memorandum, the Offering Memorandum and the Final Canadian
Memorandum, and any amendments and supplements thereto required pursuant hereto,
by the Initial Purchasers in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the Initial
Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers, (i) not to make any
amendment or supplement to the Offering Memorandum or the Final Canadian
Memorandum of which the Initial Purchasers shall not previously have been
advised or to which the Initial Purchasers shall reasonably object after being
so advised and (ii) to prepare promptly upon the Initial Purchasers' reasonable
request, any amendment or supplement to the Offering Memorandum or the Final
Canadian Memorandum which may be necessary or advisable in connection with such
Exempt Resales.
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchasers, it becomes necessary to amend or supplement
the Offering Memorandum or the Final Canadian Memorandum in order to make the
statements therein, in the light of the circumstances when such Offering
Memorandum or the Final Canadian Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchasers, it is necessary to amend or supplement the Offering Memorandum or
the Final Canadian
<PAGE>
-6-
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum or Final
Canadian Memorandum so that the statements therein, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that such Offering Memorandum or Final Canadian
Memorandum will comply with applicable law, and to furnish to the Initial
Purchasers and such other persons as the Initial Purchasers may designate such
number of copies thereof as the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt Resales as
contemplated hereby, to cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the registration or qualification of the
Series A Notes for offer and sale to the Initial Purchasers and pursuant to
Exempt Resales under the securities or Blue Sky laws of such jurisdictions or
the Canadian Securities Laws as the Initial Purchasers may request and to
continue such registration or qualification in effect so long as required for
Exempt Resales and to file such consents to service of process or other
documents as may be necessary in order to effect such registration or
qualification; provided, however, that the Company shall not be required in
connection therewith to qualify as a foreign corporation in any jurisdiction in
which it is not now so qualified or to take any action that would subject it to
general consent to service of process or taxation other than as to matters and
transactions relating to the Preliminary Offering Memorandum, the Offering
Memorandum or Exempt Resales, in any jurisdiction in which it is not now so
subject.
(f) So long as the Notes are outstanding, whether or not the Company is
subject to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company shall file with the Commission and
furnish to the holders of the Notes and the Trustee (i) within 140 days after
the end of each fiscal year, annual reports on Form 20-F or 40-F, as applicable
(or any successor form), containing the information required to be contained
therein (or required in such successor form) and (ii) (x) within 45 days after
the end of each of the first three fiscal quarters of each fiscal year, reports
on Form 10-Q or (y) within 60 days after the end of each of the first three
fiscal quarters of each fiscal year, reports on Form 6-K (or any successor form)
which, regardless of applicable requirements, shall, at a minimum, contain a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(g) So long as the Notes are outstanding, to furnish to the Initial
Purchasers as soon as available copies of all reports or other communications
furnished by the Company to its security holders or furnished to or filed with
the Commission, any securities commission of a Relevant Province or any national
securities exchange on which any class of securities of the Company is listed
and such other publicly available information concerning the Company and/or its
subsidiaries as the Initial Purchasers may reasonably request.
<PAGE>
-7-
(h) So long as the Notes are outstanding, the Company will furnish to the
holders of Notes the information ("Rule 144A Information") required to be
delivered pursuant to Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company under
this Agreement, including: (i) the fees, disbursements and expenses of counsel
to the Company and accountants of the Company in connection with the sale and
delivery of the Series A Notes to the Initial Purchasers and pursuant to Exempt
Resales, and all other fees and expenses in connection with the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum, the
Preliminary Canadian Memorandum, the Offering Memorandum, the Final Canadian
Memorandum, and all amendments and supplements to any of the foregoing
(including financial statements), including the mailing and delivering of copies
thereof to the Initial Purchasers and persons designated by them in the
quantities specified herein, (ii) all costs and expenses related to the transfer
and delivery of the Series A Notes to the Initial Purchasers and pursuant to
Exempt Resales, including any transfer or other taxes payable thereon, (iii) all
expenses in connection with the registration or qualification of the Series A
Notes for offer and sale under the securities or Blue Sky laws of the several
states and the Canadian Securities Laws (as defined below) and all costs of
printing or producing any preliminary and supplemental Blue Sky memoranda in
connection therewith (including the filing fees and fees and disbursements of
counsel for the Initial Purchasers in connection with such registration or
qualification and memoranda relating thereto), (iv) the cost of printing
certificates representing the Series A Notes, (v) all expenses and listing fees
in connection with the application for quotation of the Series A Notes in the
National Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System PORTAL ("PORTAL"), (vi) the fees and expenses of the Trustee and the
Trustee's counsel in connection with the Indenture, and the Notes, (vii) the
costs and charges of any transfer agent, registrar and/or depository (including
DTC), (viii) any fees charged by rating agencies for the rating of the Notes,
(ix) all costs and expenses of the Exchange Offer and any Registration
Statement, as set forth in the Registration Rights Agreement, and (x) and all
other costs and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this Section.
(j) To use its reasonable best efforts to effect the inclusion of the
Series A Notes in PORTAL and to maintain the listing of the Series A Notes on
PORTAL for so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of the Notes,
and to comply with all of its agreements set forth in the representation letters
of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
<PAGE>
-8-
(l) During the period beginning on the date hereof and continuing to and
including the Closing Date, not to offer, sell, contract to sell or otherwise
transfer or dispose of any debt securities of the Company or any subsidiary of
the Company or any warrants, rights or options to purchase or otherwise acquire
debt securities of the Company or any subsidiary of the Company substantially
similar to the Notes (other than (i) the Notes and (ii) commercial paper issued
in the ordinary course of business), without the prior written consent of the
Initial Purchasers.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Notes under the Act.
(n) Not to voluntarily claim, and to actively resist any attempts to claim,
the benefit of any usury laws against the holders of any Notes.
(o) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes to be offered in exchange for the Series A Notes and to
comply with all applicable federal, state, and provincial securities laws in
connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the Registration
Rights Agreement.
(q) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Series A Notes.
6. Representations, Warranties and Agreements of the Company. As of the
date hereof, the Company represents and warrants to, and agrees with, the
Initial Purchasers that:
(a) The Preliminary Offering Memorandum, the Preliminary Canadian
Memorandum, the Offering Memorandum and the Final Canadian Memorandum, do not,
and any supplement or amendment to them will not, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum, the
Preliminary Canadian Memorandum, the Offering Memorandum and the Final Canadian
Memorandum (or any supplement or amendment thereto) based upon information
relating to the Initial Purchasers furnished to the Company in writing by the
Initial Purchasers expressly for use therein. No stop order preventing the use
of the Preliminary Offering Memorandum, the Pre-
<PAGE>
-9-
liminary Canadian Memorandum, the Offering Memorandum or the Final Canadian
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) Each of the Company and its subsidiaries has been duly organized, is
validly existing as a corporation or limited liability company, as applicable,
in good standing under the laws of its jurisdiction of incorporation,
organization, amalgamation or continuance and has the requisite, corporate or
other, power and authority to carry on its business as described in the
Preliminary Offering Memorandum, the Preliminary Canadian Memorandum, the
Offering Memorandum and the Final Canadian Memorandum, and to own, lease and
operate its properties, and each is duly qualified and is in good standing as a
foreign corporation or limited liability company, as applicable, authorized to
do business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole (a "Material Adverse Effect").
(c) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid, non-assessable and not subject
to any preemptive or similar rights, and are owned by Ledcor Inc., an Alberta
corporation ("Ledcor"), directly or indirectly through two wholly-owned
subsidiaries, free and clear of any security interest, claim, lien, encumbrance
or adverse interest of any nature (each, a "Lien"), except for security
interests and pledges in favor of The Toronto-Dominion Bank granted pursuant to
the Fiber Optic Network Financing Credit Agreement, dated as of October 14, 1998
(the "Fiber Optic Network Financing Credit Agreement"), by and between Ledcor
Industries Limited and The Toronto-Dominion Bank.
(d) The entities listed on Schedule B hereto are the only subsidiaries,
direct or indirect, of the Company (collectively, the "Subsidiaries"). The only
Subsidiaries that are material for purposes of this Agreement (the "Material
Subsidiaries") are listed on Schedule C attached hereto. Each of Ledcor
Engineering Inc., Pacific Fiber Link SEA-POR, Inc. and Pacific Fiber Link
MON-ALB, Inc. carries on no active business. All of the outstanding shares of
capital stock of each of the Company's Material Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable, and, except
for Worldwide Fiber (USA), Inc., WFI-CN Fiber Inc., Worldwide Fiber IC LLC,
Worldwide Fiber Networks, Inc., IC Fiber Alabama LLC, IC Fiber Illinois LLC, IC
Fiber Iowa LLC, IC Fiber Kentucky LLC, IC Fiber Louisiana LLC, IC Fiber
Mississippi LLC, IC Fiber Tennessee LLC, and Ledcom Holdings Ltd., are owned by
the Company, directly or indirectly through one or more subsidiaries, free and
clear of any Lien. Worldwide Fiber (USA), Inc. is owned 75% by the Company and
25% by Michels Pipeline Construction Inc., in each case, directly or indi-
<PAGE>
-10-
rectly through one or more subsidiaries, free and clear of any Lien. Worldwide
Fiber Networks, Inc. is a wholly-owned subsidiary of Worldwide Fiber (USA), Inc.
Ledcom Holdings Ltd. is owned 50% by the Company and 50% by Ledcor Inc., in the
case of the Company, directly or indirectly, through one or more subsidiaries,
free and clear of any Lien except for the security interest granted to Ledcor
Inc. pursuant to the Unanimous Shareholders Agreement, dated as of December 1,
1998, by and among Worldwide Fiber Communications Ltd. Ledcor Inc., Ledcor
Industries Limited and Ledcor Holdings Ltd. WFI-CN Inc. is owned 75% by the
Company and 25% by the Canadian National Railway Company ("CN"), in the case of
the Company, directly or indirectly through one or more subsidiaries, free and
clear of any Lien. Worldwide Fiber IC LLC is owned 75% by the Company and 25% by
IC Fiber Holdings Inc., a subsidiary of the Illinois Central Railroad Company
("IC"), in the case of the Company, directly or indirectly through one or more
subsidiaries, free and clear of any Lien. Each of IC Fiber Alabama LLC, IC Fiber
Illinois LLC, IC Fiber Iowa LLC, IC Fiber Kentucky LLC, IC Fiber Louisiana LLC,
IC Fiber Mississippi LLC and IC Fiber Tennessee LLC are owned by Worldwide Fiber
IC LLC, free and clear of any Lien.
(e) There are no restrictions on the corporate power and capacity of the
Company to enter into this Agreement or any other Operative Document, to execute
and sell the Series A Notes or to carry out its obligations hereunder and
thereunder, in each case, except as would not have a Material Adverse Effect.
(f) This Agreement has been duly authorized, executed and delivered by the
Company.
(g) The Indenture has been duly authorized by the Company and, on the
Closing Date, will have been validly executed and delivered by the Company. When
the Indenture has been duly executed and delivered by the Company, the Indenture
will be a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms except as the enforceability thereof may be
limited by (i) bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law). On the Closing Date, the Indenture will conform in all material respects
to the requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or
"Trust Indenture Act"), the rules and regulations of the Commission applicable
to an indenture which is qualified thereunder.
(h) The Series A Notes have been duly authorized and, on the Closing Date,
will have been validly executed and delivered by the Company. When the Series A
Notes have been issued, executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will
<PAGE>
-11-
be valid and binding obligations of the Company, enforceable in accordance with
their terms except as the enforceability thereof may be limited by (i)
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors' rights generally and (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law). On the
Closing Date, the Series A Notes will conform as to legal matters to the
description thereof contained in the Offering Memorandum.
(i) On the Closing Date, the Series B Notes will have been duly authorized
by the Company. When the Series B Notes are issued, executed and authenticated
in accordance with the terms of the Exchange Offer and the Indenture, the Series
B Notes will be entitled to the benefits of the Indenture and will be the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforceability thereof may be limited
by (i) bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors' rights generally and (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
(j) The Registration Rights Agreement has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company. When the Registration Rights Agreement has been duly executed and
delivered, the Registration Rights Agreement will be a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms except as the enforceability thereof may be limited by (i) bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors' rights
generally, (ii) general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law) and (iii) the enforcement of
indemnification and contribution provisions thereof may be limited by federal
and state securities laws and public policy considerations underlying such laws.
On the Closing Date, the Registration Rights Agreement will conform as to legal
matters to the description thereof in the Offering Memorandum.
(k) Neither the Company nor any of its Material Subsidiaries is in
violation of its respective articles or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound.
(l) The execution, delivery and performance of this Agreement and the other
Operative Documents by the Company, compliance by the Company with all
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required or previously
ob-
<PAGE>
-12-
tained under the securities or Blue Sky laws of the various states or the
Canadian Securities Laws), (ii) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the articles or by-laws of the
Company or any of its Material Subsidiaries or any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to the Company
and its subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any court
or any governmental body or agency having jurisdiction over the Company, any of
its Material Subsidiaries or their respective property, (iv) result in the
imposition or creation of (or the obligation to create or impose) a Lien under,
any agreement or instrument to which the Company or any of its Material
Subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound except as would not have a Material Adverse
Effect, or (v) result in the termination, suspension or revocation of any
Authorization (as defined below) of the Company or any of its Material
Subsidiaries or result in any other impairment of the rights of the holder of
any such Authorization except such terminations, suspensions, revocations or
impairments as would not have a Material Adverse Effect.
(m) There are no legal or governmental proceedings pending or, to the best
of the Company's knowledge, threatened to which the Company or any of its
Material Subsidiaries is or could be a party or to which any of their respective
property is or could be subject, which might result, singly or in the aggregate,
in a Material Adverse Effect or materially and adversely affect the ability of
the Company, or any of its subsidiaries to perform its obligations under this
Agreement or any of the other Operative Documents, or to consummate the
transactions contemplated hereby or thereby.
(n) Except as disclosed in the Offering Memorandum and the Final Canadian
Memorandum, neither the Company nor any of its subsidiaries is a party or
subject to the provision of any injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other governmental body except
as would not have a Material Adverse Effect.
(o) The Company and each of its Material Subsidiaries is in compliance with
all applicable statutes, laws, ordinances, administrative or governmental rules
and regulations of the jurisdictions in which it is conducting its business
except where a failure to be in such compliance would not have a Material
Adverse Effect.
(p) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state, provincial or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), any
provisions of the Employee Retirement Income
<PAGE>
-13-
Security Act of 1974, as amended ("ERISA") and provisions of any federal or
provincial pension standards legislation (or rules, regulations and
administration policies thereunder) in Canada, or any provisions of the Foreign
Corrupt Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not have a
Material Adverse Effect.
(q) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up (including, without limitation, to remediate any substance which
exceeds decommissioning, remediation or similar guidelines, standards or
criteria under Environmental Laws or applied by governmental authorities acting
under Environmental Laws), closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties or as a result of
government action) which would, singly or in the aggregate, have a Material
Adverse Effect.
(r) Except as disclosed in the Offering Memorandum and the Final Canadian
Memorandum, each of the Company and its Material Subsidiaries has all permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a Material Adverse Effect. Except as disclosed
in the Offering Memorandum and the Final Canadian Memorandum, each such
Authorization is valid and in full force and effect and each of the Company and
its Material Subsidiaries is in compliance with all the terms and conditions
thereof and with the rules and regulations of the authorities and governing
bodies having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or both, would
allow, revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any other
impairment of the rights of the holder of any such Authorization; and such
Authorizations contain no restrictions that are burdensome to the Company or any
of its Material Subsidiaries except as would not, singly or in the aggregate,
have a Material Adverse Effect.
(s) The accountants, PriceWaterhouseCoopers and Deloitte & Touche, that
have certified the financial statements and supporting schedules included in the
Preliminary Offering Memorandum, the Preliminary Canadian Memorandum, the
Offering Memorandum and the Final Canadian Memorandum are independent public
accountants with respect to the Company, as required by the Act and the Exchange
Act. To the best knowledge of the Com-
<PAGE>
-14-
pany, the historical financial statements, together with related schedules and
notes, set forth in the Preliminary Offering Memorandum, the Preliminary
Canadian Memorandum, the Offering Memorandum and the Final Canadian Memorandum
comply as to form in all material respects with the requirements applicable to
registration statements on Form F-4 under the Act.
(t) The historical financial statements, together with related schedules
and notes forming part of the Offering Memorandum and the Final Canadian
Memorandum (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company and its subsidiaries and the former telecommunications
division of Ledcor on the basis stated in the Offering Memorandum and the Final
Canadian Memorandum at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles in the
United States consistently applied throughout the periods involved, except as
disclosed therein; and the other financial and statistical information and data
set forth in the Offering Memorandum and the Final Canadian Memorandum (and any
amendment or supplement thereto) are, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company and its subsidiaries.
(u) The pro forma financial statements and statistical data included in the
Preliminary Offering Memorandum, the Preliminary Canadian Memorandum, the
Offering Memorandum and the Final Canadian Memorandum have been prepared on a
basis consistent with the historical financial statements and statistical data
of the Company and its subsidiaries and give effect to assumptions used in the
preparation thereof on a reasonable basis and in good faith and present fairly
the historical and proposed transactions contemplated by the Preliminary
Offering Memorandum, the Preliminary Canadian Memorandum, the Offering
Memorandum and the Final Canadian Memorandum. The other pro forma financial and
statistical information and data included in the Offering Memorandum and the
Final Canadian Memorandum are, in all material respects, accurately presented
and prepared on a basis consistent with the pro forma financial statements.
(v) The Company is not and, after giving effect to the offering and sale of
the Series A Notes and the application of the net proceeds thereof as described
in the Offering Memorandum, will not be, an "investment company," as such term
is defined in the Investment Company Act of 1940, as amended.
(w) Except as disclosed in the Offering Memorandum and the Final Canadian
Memorandum, there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company or to require the
<PAGE>
-15-
Company to include such securities with the Notes registered pursuant to any
Registration Statement.
(x) Neither the Company nor any of its subsidiaries nor any agent thereof
acting on the behalf of them has taken, and none of them will take, any action
that might cause this Agreement or the issuance or sale of the Series A Notes to
violate Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System.
(y) No "nationally recognized statistical rating organization" as such term
is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or has
informed the Company that it is considering imposing) any condition (financial
or otherwise) on the Company's retaining any rating assigned to the Company, any
securities of the Company or (ii) has indicated to the Company that it is
considering (a) the downgrading, suspension, or withdrawal of, or any review for
a possible change that does not indicate the direction of the possible change
in, any rating so assigned or (b) any change in the outlook for any rating of
the Company, or any securities of the Company.
(z) Since the respective dates as of which information is given in the
Offering Memorandum and the Final Canadian Memorandum other than as set forth in
the Offering Memorandum and the Final Canadian Memorandum, respectively,
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company and its subsidiaries, taken as a whole, (ii) there has not been any
material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of the Company or
any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent.
(aa) Each of the Offering Memorandum and the Final Canadian Memorandum, as
of its date, contains all the information specified in, and meeting the
requirements of, Rule 144A(d)(4) under the Act.
(bb) When the Series A Notes are issued and delivered pursuant to this
Agreement, the Series A Notes will not be of the same class (within the meaning
of Rule 144A under the Act) as any security of the Company that is listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated inter-dealer quotation system.
(cc) No form of general solicitation or general advertising (as defined in
Regulation D under the Act) was used by the Company, or any of their respective
representa-
<PAGE>
-16-
tives (other than the Initial Purchasers, as to whom the Company makes no
representation) in connection with the offer and sale of the Series A Notes
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Series A Notes have been issued and sold by
the Company within the six-month period immediately prior to the date hereof.
(dd) Neither the Company, nor any person acting on its behalf, has,
directly or indirectly, (i) made offers or sales of any security, or solicited
offers to buy any security, under circumstances that would require the
distribution of the Series A Notes in the Provinces of Ontario and British
Columbia (the "Relevant Provinces") to be qualified by a prospectus filed in
accordance with the securities laws, and the regulations thereunder, of, and the
applicable published rules, policy statements, blanket orders and notices of the
securities regulatory authorities in, the Relevant Provinces (the "Canadian
Securities Laws") or (ii) has engaged in any advertisement of the Series A Notes
in any printed media of general and regular paid circulation, radio or
television or any other form of advertising in connection with the offer and
sale of the Series A Notes in the Relevant Provinces; provided that no
representation is made as to the Initial Purchasers or any person acting on
their behalf.
(ee) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA, and except for such
determinations and approvals which have already been obtained, no filing with or
authorization, approval, consent, license, order, registration, qualification or
decree of any court or governmental authority or agency in Canada (including any
provincial securities commission or securities regulatory authority) is
necessary to permit the issue, sale and delivery of the Series A Notes by the
Company or the consummation on the Closing Date by the Company of its
obligations under this Agreement, the other Operative Documents, the Offering
Memorandum and the Final Canadian Memorandum.
(ff) None of the Company or any of its affiliates, nor any person acting on
its or their behalf (other than the Initial Purchasers, as to whom the Company
makes no representation) has engaged or will engage in any directed selling
efforts within the meaning of Regulation S under the Act ("Regulation S") with
respect to the Series A Notes.
(gg) The Series A Notes offered and sold in reliance on Regulation S have
been and will be offered and sold only in offshore transactions.
(hh) The sale of the Series A Notes pursuant to Regulation S is not part of
a plan or scheme to evade the registration provisions of the Act.
<PAGE>
-17-
(ii) Except for the Company's 12 1/2% Senior Notes due December 15, 2005,
there is no substantial U.S. market interest (as defined in Rule 902(n) under
the Act) in any debt security of the Company.
(jj) The Company is a "foreign issuer" as defined in Rule 902 under the
Act.
(kk) No registration under the Act of the Series A Notes is required for
the sale of the Series A Notes to the Initial Purchasers as contemplated hereby
or for the Exempt Resales assuming the accuracy of the Initial Purchasers'
representations and warranties and agreements set forth in Section 7 hereof.
(ll) Assuming (i) that the representations and warranties of the Initial
Purchasers in Section 7 hereof are true and (ii) compliance by the Initial
Purchasers with the covenants set forth in Section 7 hereof, it is not necessary
in connection with the offer, sale and delivery of the Series A Notes in the
manner contemplated by this Agreement, the other Operative Documents and the
Final Canadian Memorandum to file a prospectus in accordance with the Canadian
Securities Laws to qualify the distribution of the Series A Notes in the
Relevant Provinces.
(mm) Each certificate signed by any officer of the Company and delivered to
the Initial Purchasers or counsel for the Initial Purchasers shall be deemed to
be a representation and warranty by the Company to the Initial Purchasers as to
the matters covered thereby.
(nn) The Company and its Material Subsidiaries have good and marketable
title to all real property and good title to all personal property owned by them
which is material to the business of the Company and its Material Subsidiaries,
in each case free and clear of all Liens and defects, except such as are
described in the Offering Memorandum and the Final Canadian Memorandum or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and its
Material Subsidiaries; and any real property and buildings held under lease by
the Company and its Material Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries, in each case except as described
in the Offering Memorandum and the Final Canadian Memorandum.
(oo) The Company and each of its Canadian affiliates as set forth in
Schedule D (collectively, the "Canadian Companies") and Ledcor Industries
Limited hold all Canadian Radio-television and Telecommunications Commission
("CRTC") and Industry Canada licenses or authorizations and possess adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now oper-
<PAGE>
-18-
ated by them, other than those the absence of which could not reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect
and have not received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely, could reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect.
(pp) (i) Each of Ledcor Industries Limited and Worldwide Fiber (F.O.T.S.)
Ltd. is eligible to operate as a telecommunications common carrier in Canada, as
defined under and in accordance with the Telecommunications Act (Canada) (the
"Telecommunications Act") and the Canadian Telecommunications Common Carrier
Ownership and Control Regulations (the "Ownership Regulations"); (ii) neither
Ledcor Industries Limited nor Worldwide Fiber (F.O.T.S.) Ltd. violates the
prohibition contained in subsection 16(4) of the Telecommunications Act against
operating in Canada as a telecommunications common carrier when ineligible to do
so; (iii) control of each of Ledcor Industries Limited and Worldwide Fiber
(F.O.T.S.) Ltd. is not exercised by any person(s) that is (are) not Canadian, in
accordance with the meanings ascribed to the term "control" under the
Telecommunications Act and the term "Canadian" under the Ownership Regulations;
and (iv) the Canadian Companies are not in violation of any judgment, decree,
order, writ, law, statute, rule or regulation rendered or enacted in Canada
respecting telecommunications and the regulation within Canada of
telecommunications common carriers, as defined in the Telecommunications Act,
applicable to the Canadian Companies, or any interpretation or policy relating
thereto known to be applicable by and to them.
(qq) (i) Not less than eighty percent of the members of the board of
directors of each of Ledcor Industries Limited and Worldwide Fiber (F.O.T.S.)
Ltd. are individual Canadians, as defined under the Ownership Regulations; (ii)
Canadians, as defined under the Ownership Regulations, beneficially own,
directly or indirectly, in the aggregate and otherwise than by way of security
only, not less than eighty percent of the issued and outstanding voting shares,
as defined under the Ownership Regulations, of each of Ledcor Industries Limited
and Worldwide Fiber (F.O.T.S.) Ltd.; (iii) Ledcor Inc., in respect of its
ownership of and control over Ledcor Industries Limited, and Worldwide Fiber
Networks Ltd., in respect of its ownership and control over Worldwide Fiber
(F.O.T.S.) Ltd., is a carrier holding corporation, as defined under the
Ownership Regulations; and (iv) each of Ledcor Inc. and Worldwide Fiber Networks
Ltd. is a carrier holding corporation that is a qualified corporation, as
defined under the Ownership Regulations.
(rr) With the exception of Ledcor Industries Limited and Worldwide Fiber
(F.O.T.S.) Ltd., no other Canadian Company or subsidiary of Ledcor Inc. operates
in Canada as a telecommunications common carrier as that term is defined in the
Telecommunications Act.
<PAGE>
-19-
(ss) Except as disclosed in the Offering Memorandum and the Final Canadian
Memorandum, neither the Company nor its subsidiaries is currently, nor will the
conduct of its business as described in the Offering Memorandum cause it to be
in the future, subject to the provisions of the Communications Act of 1934, as
amended by the Telecommunications Act of 1996 (the "Communications Act") or to
any rules, regulations and policies of the Federal Communications Commission
(the "FCC") related hereto.
(tt) The Company and its subsidiaries are in compliance with all federal,
state and local telecommunications laws, rules, regulations and policies in the
United States to which they are subject, including the Communications Act and
the related rules, regulations and policies of the FCC except as would not have
a Material Adverse Effect.
(uu) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, all patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names ("intellectual property") currently employed by
them in connection with the business now operated by them except where the
failure to own or possess or otherwise be able to acquire such intellectual
property would not, singly or in the aggregate, have a Material Adverse Effect;
and neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of such intellectual property which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a Material Adverse
Effect.
(vv) Except as disclosed in the Offering Memorandum and the Final Canadian
Memorandum, no relationship, direct or indirect, exists between or among the
Company or any of its subsidiaries or affiliates on the one hand, and the
directors, officers, stockholders, customers or suppliers of the Company or any
of its subsidiaries or affiliates on the other hand, which would be required by
the Act to be described in the Offering Memorandum if the Offering Memorandum
were a prospectus included in a registration statement on Form F-4 filed with
the Commission.
(ww) There is no (i) significant unfair labor practice complaint, grievance
or arbitration proceeding pending or threatened against the Company or any of
its subsidiaries before the National Labor Relations Board, Canada Labor
Relations Board or any state, provincial, or local labor relations board, (ii)
strike, labor dispute, slowdown or stoppage pending or threatened against the
Company or any of its subsidiaries or (iii) union representation question
existing with respect to the employees of the Company or any of its
subsidiaries, except in the case of clauses (i), (ii) and (iii) for such actions
which, singly or in the aggregate, would not have a Material Adverse Effect. To
the best knowledge of the Company, no col-
<PAGE>
-20-
lective bargaining organizing activities are taking place with respect to the
Company or any of its subsidiaries.
(xx) The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with the United States
generally accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(yy) All material tax returns required to be filed by the Company and each
of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or otherwise or pursuant to any assessment received
by the Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
(zz) The indebtedness represented by the Series A Notes is being incurred
for proper purposes and in good faith and the Company will be on the Closing
Date (after giving effect to the application of the proceeds from the issuance
of the Series A Notes) solvent, and will have on the Closing Date (after giving
effect to the application of the proceeds from the issuance of the Series A
Notes) sufficient capital for carrying on its respective business and will be on
the Closing Date (after giving effect to the application of the proceeds from
the issuance of the Series A Notes) able to pay its debts as they mature.
(aaa) No action has been taken and no law, statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency or body
which prevents the execution, delivery and performance of any of the Operative
Documents or, the issuance of the Series A Notes, or suspends the sale of the
Series A Notes in any jurisdiction referred to in Section 5(e); and no
injunction, restraining order or other order or relief of any nature by a
federal or state court or other tribunal of competent jurisdiction has been
issued with respect to the Company or any of its subsidiaries which would
prevent or suspend the issuance or sale of the Series A Notes in any
jurisdiction referred to in Section 5(e), including the Relevant Provinces.
(bbb) Except as set forth in the Offering Memorandum and the Final Canadian
Memorandum, there have been no transactions, agreements, arrangements or
understandings between the Company or any of its Subsidiaries that would be
required to be disclosed under Item 404 of Regulation S-K under the Securities
Act, if the Offering Memoran-
<PAGE>
-21-
dum were a prospectus included in a registration statement on Form F-4 filed
with the Commission.
(ccc) The Company has delivered to the Initial Purchasers true and complete
copies of all agreements between the Company or any of its directors, officers
or employees on one hand and Ledcor, CN, IC or Michels Pipeline Construction
Inc. or any of their respective directors, officers or employees on the other
hand.
(ddd) Neither the Company nor any of its subsidiaries has, nor is any of
its or their respective property or assets subject to, any obligation
(including, without limitation, any mortgage, assignment, pledge, charge or
other security interest) under the Fiber Optic Network Financing Credit
Agreement.
The Company acknowledges that the Initial Purchasers and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
7. Initial Purchasers' Representations and Warranties. Each of the Initial
Purchasers, severally and not jointly, represents and warrants to the Company,
and agrees that:
(a) Such Initial Purchaser is either a QIB or an Accredited Institution, in
either case, with such knowledge and experience in financial and business
matters as is necessary in order to evaluate the merits and risks of an
investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A Notes with a
view to any distribution thereof or with any present intention of offering or
selling any of the Series A Notes in a transaction that would violate the Act or
the securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Series A Notes only to
(x) QIBs in reliance on the exemption from the registration requirements of the
Act provided by Rule 144A and (y) in offshore transactions in reliance upon
Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general solicitation or
general advertising (within the meaning of Regulation D under the Act) has been
or will be used by such Initial Purchaser or any of its representatives in
connection with the offer and sale of the Series A Notes pursuant hereto,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
<PAGE>
-22-
(d) Such Initial Purchaser agrees that, in connection with Exempt Resales,
such Initial Purchaser will solicit offers to buy the Series A Notes only from,
and will offer to sell the Series A Notes only to, Eligible Purchasers. Each
Initial Purchaser further agrees that it will offer to sell the Series A Notes
only to, and will solicit offers to buy the Series A Notes only from (A)
Eligible Purchasers that the Initial Purchaser reasonably believes are QIBs, (B)
Regulation S Purchasers, in each case, that agree that (x) the Series A Notes
purchased by them may be resold, pledged or otherwise transferred within the
time period referred to under Rule 144(k) (taking into account the provisions of
Rule 144(d) under the Act, if applicable) under the Act, as in effect on the
date of the transfer of such Series A Notes, only (I) to the Company or any of
its subsidiaries, (II) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Act, (III) in an offshore
transaction (as defined in Rule 902 under the Act) meeting the requirements of
Rule 904 of the Act, (IV) in a transaction meeting the requirements of Rule 144
under the Act, (V) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel acceptable to the
Company) or (VI) pursuant to an effective registration statement and, in each
case, in accordance with the applicable securities laws of any state of the
United States or any other applicable jurisdiction and (y) they will deliver to
each person to whom such Series A Notes or an interest therein is transferred a
notice substantially to the effect of the foregoing.
(e) Such Initial Purchaser and its affiliates or any person acting on its
or their behalf have not engaged or will not engage in any directed selling
efforts within the meaning of Regulation S with respect to the Series A Notes.
(f) The Series A Notes offered and sold by such Initial Purchaser pursuant
hereto in reliance on Regulation S have been and will be offered and sold only
in offshore transactions.
(g) The sale of the Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Act.
(h) Neither such Initial Purchaser nor its affiliates or any person acting
on its or its affiliates' behalf has made or will make offers or sales of the
Series A Notes in the Relevant Provinces by means of any printed media of
general and regular paid circulation, radio or television or any other forms of
advertising.
(i) The Series A Notes have only been offered and will only be sold in
Canada to purchasers resident in the Relevant Provinces.
(j) Such Initial Purchaser acknowledges that no prospectus has been filed
in accordance with the Canadian Securities Laws qualifying the distribution of
the Series A
<PAGE>
-23-
Notes in the Relevant Provinces and that the Series A Notes may not be offered
or sold in the Relevant Provinces except pursuant to an applicable exemption
from the prospectus requirements of the applicable Canadian Securities Laws and
from a dealer appropriately registered under the applicable Canadian Securities
Laws or, other than in Ontario, in accordance with an exemption from the
registration requirements of such laws.
(k) Assuming the purchasers' representations, covenants and resale
restrictions set forth in the Final Canadian Memorandum are true as to each
purchaser of Series A Notes in Canada, such Initial Purchaser will not offer,
sell or deliver any of the Series A Notes, directly or indirectly, in Canada or
to or for the benefit of any person who such Initial Purchaser knows is a
resident thereof in violation of the Canadian Securities Laws.
(l) Such Initial Purchaser will provide the Company with information
regarding the sale of the Series A Notes to purchasers in the Relevant Provinces
required to be disclosed under applicable Canadian Securities Laws and will
cooperate with the Company in ensuring that such disclosures are made within the
time periods specified under such laws.
Such Initial Purchaser acknowledges that the Company and, for purposes of
the opinions to be delivered to each Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and each such
Initial Purchaser hereby consents to such reliance.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Initial
Purchasers, their respective directors and officers and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any legal or
other expenses incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Final Canadian Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum, the
Preliminary Canadian Memorandum or any Rule 144A Information provided by the
Company to any holder or prospective purchaser of Series A Notes pursuant to
Section 5(h) 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, in light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information furnished in writing to the Company
by such Initial Purchasers expressly for use in the Preliminary Offering
Memorandum, the Preliminary Canadian Memorandum, the Offering Memo-
<PAGE>
-24-
randum or the Final Canadian Memorandum; provided, however, that the foregoing
indemnity agreement with respect to any Preliminary Offering Memorandum or
Preliminary Canadian Memorandum, as the case may be, shall not inure to the
benefit of any Initial Purchaser who failed to deliver an Offering Memorandum or
Final Canadian Memorandum, as then amended or supplemented, (so long as the
Offering Memorandum or Final Canadian Memorandum and any amendment or supplement
thereto was provided by the Company to the Initial Purchasers in the requisite
quantity and on a timely basis to permit proper delivery on or prior to the
Closing Date) to the person asserting any losses, claims, damages, liabilities
or judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or Preliminary
Canadian Memorandum, as the case may be, 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, if such material
misstatement or omission or alleged material misstatement or omission was cured
in the Offering Memorandum or the Final Canadian Memorandum, as so amended or
supplemented.
(b) The Initial Purchasers agree severally, not jointly, to indemnify and
hold harmless the Company, its directors and officers and each person, if any,
who controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, to the same extent as the foregoing indemnity from
the Company to the Initial Purchasers but only with reference to information
furnished in writing to the Company by the Initial Purchaser expressly for use
in the Preliminary Offering Memorandum, the Preliminary Canadian Memorandum, the
Offering Memorandum or the Final Canadian Memorandum, as applicable.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Initial Purchasers shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Initial Purchasers). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the
<PAGE>
-25-
indemnifying party, and the indemnified party shall have been advised by such
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying party (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys with respect to matters of
U.S. law and one separate firm of attorneys with respect to matters of Canadian
law (in each case, in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firms shall be designated in writing by Donaldson, Lufkin & Jenrette Securities
Corporation, in the case of the parties indemnified pursuant to Section 8(a),
and by the Company, in the case of parties indemnified pursuant to Section 8(b).
The indemnifying party shall indemnify and hold harmless the indemnified party
from and against any and all losses, claims, damages, liabilities and judgments
by reason of any settlement of any action (i) effected with its written consent
or (ii) effected without its written consent if the settlement is entered into
more than twenty business days after the indemnifying party shall have received
a request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action 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 the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchasers on the other hand from the
offering of the Series A Notes or (ii) if the allocation provided by clause
8(d)(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company, on the one hand, and
the Initial Purchasers, on the other hand, in connection with the statements or
omissions which resulted in
<PAGE>
-26-
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand and the Initial Purchasers, on the other hand, shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Series A Notes (after underwriting discounts and commissions, but before
deducting expenses) received by the Company, and the total discounts and
commissions received by the Initial Purchasers bear to the total price to
investors of the Series A Notes, in each case as set forth in the table on the
cover page of the Offering Memorandum. The relative fault of the Company, on the
one hand, and the Initial Purchasers, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, on the one hand, or the Initial
Purchasers, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company, and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, the Initial
Purchasers shall not be required to contribute any amount in excess of the
amount by which the total discounts and commissions received by such Initial
Purchasers exceeds the amount of any damages which the Initial Purchaser 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 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligation to contribute pursuant to
this Section 8(d) are several and in proportion to the respective principal
amount of Series A Notes purchased by each of the Initial Purchasers hereunder
and not joint.
(e) The remedies provided for in this Section 8 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(f) For purposes of this Section 8, the Company and the Initial Purchasers
agree that the only information furnished in writing to the Company by the
Initial Purchasers expressly for use in the Preliminary Offering Memorandum, the
Preliminary Canadian Memo-
<PAGE>
-27-
randum, the Offering Memorandum or the Final Canadian Memorandum is set forth in
the third, fourth, fifth, sixth (excluding the first three sentences), seventh,
eighth and ninth paragraphs under the heading "Plan of Distribution."
9. Conditions of Initial Purchasers' Obligations. The obligations of the
Initial Purchasers to purchase the Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in this
Agreement that are qualified as to materiality shall be true and correct on the
Closing Date and all the representations and warranties of the Company contained
in this Agreement that are not qualified as to materiality shall be true and
correct in all material respects on the Closing Date, in each case with the same
force and effect as if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any potential or intended downgrading, suspension or withdrawal of, or of any
review (or of any potential or intended review) for a possible change that does
not indicate the direction of the possible change in, any rating of the Company
or any securities of the Company (including, without limitation, the placing of
any of the foregoing ratings on credit watch with negative or developing
implications or under review with an uncertain direction) by any "nationally
recognized statistical rating organization" as such term is defined for purposes
of Rule 436(g)(2) under the Act, (ii) there shall not have occurred any change,
nor shall any notice have been given of any potential or intended change, in the
outlook for any rating of the Company or any securities of the Company by any
such rating organization and (iii) no such rating organization shall have given
notice that it has assigned (or is considering assigning) a lower rating to the
Notes than that on which the Notes were marketed.
(c) Since the respective dates as of which information is given in the
Offering Memorandum and the Final Canadian Memorandum other than as set forth in
the Offering Memorandum and the Final Canadian Memorandum (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken as
a whole, (ii) there shall not have been any change or any development involving
a prospective change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 9(c)(i),
9(c)(ii) or 9(c)(iii), in your judgment, is material and adverse and,
<PAGE>
-28-
in your judgment, makes it impracticable to market the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum and the Final
Canadian Memorandum.
(d) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by the President and the Chief Financial Officer of the
Company, confirming the matters set forth in Sections 6(z), 9(a) and 9(b) and
stating that the Company has complied with all the agreements and satisfied all
of the conditions herein contained and required to be complied with or satisfied
on or prior to the Closing Date.
(e) You shall have received on the Closing Date an opinion (satisfactory to
you and counsel for the Initial Purchasers), dated the Closing Date, of Cahill
Gordon and Reindel, special U.S. counsel for the Company, to the effect that:
(i) assuming due authorization of the Series A Notes by the Company,
the Series A Notes, when executed and delivered in accordance with the
provisions of the Indenture (assuming the due authorization, execution and
delivery of the Indenture by the Trustee and the due authentication and
delivery of the Series A Notes by the Trustee in accordance with the
Indenture) and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company enforceable
against the Company in accordance with their terms (A) except as the
enforceability thereof may be limited (i) by (x) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
now or hereafter in effect relating to or affecting creditors' rights
generally and (y) general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity) and (ii) with
respect to Section 6.12 of the Indenture to the extent it provides for the
Company's indemnity against loss in connection with a court judgment in
another currency and (B) that such firm need express no opinion as to the
enforceability of the waiver of rights or defenses contained in Section
4.06 of the Indenture;
(ii) assuming the due authorization of the Indenture by the Company,
the Indenture has been duly executed and delivered by the Company, to the
extent execution and delivery are governed by New York laws, and, assuming
the due authorization, execution and delivery thereof by the Trustee,
constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms (A) except as the
enforceability thereof may be limited (i) by (x) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
now or hereafter in effect relating to or affecting creditors' rights
generally and (y) general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity) and (ii) with
respect to Section 6.12 of the Indenture to the extent it provides for the
Company's indemnity against loss in connection with a court
<PAGE>
-29-
judgment in another currency and (B) that such firm need express no opinion
as to the enforceability of the waiver of rights or defenses contained in
Section 4.06 of the Indenture;
(iii) assuming due authorization by the Company, this Agreement has
been duly executed and delivered by the Company, to the extent that
execution and delivery are governed by New York law;
(iv) assuming the due authorization of the Registration Rights
Agreement by the Company and the due authorization, execution and delivery
thereof by the Initial Purchasers, the Registration Rights Agreement has
been duly executed and delivered by the Company, to the extent that
execution and delivery are governed by New York laws, and constitutes a
valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except as the enforceability thereof may be
limited by (x) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, (y) general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity) and (z) any rights to indemnity or
contribution thereunder may be limited by federal and state securities laws
and public policy considerations;
(v) the statements under the captions "Description of Notes,"
"Description of Other Indebtedness -- 1998 Notes," "Description of IC and
CN Agreements" and "Description of WFI-USA Agreements" in the Offering
Memorandum, insofar as such statements constitute a summary of the
documents referred to therein, fairly summarize in all material respects
such documents;
(vi) the statements in the Offering Memorandum under the caption
"Certain United States and Canadian Income Tax Considerations," to the
extent they constitute matters of United States law or legal conclusions
with respect thereto, have been prepared or reviewed by us and are correct
in all material respects and fairly summarize the matters set forth
therein;
(vii) the execution, delivery and performance by the Company of this
Agreement, the Indenture, the Series A Notes and the Registration Rights
Agreement, the compliance by the Company with all provisions hereof and
thereof and the consummation of the transactions contemplated hereby and
thereby: (i) do not conflict with or violate any federal statute of the
United States of America or any statute of the State of New York or any
rule or regulation thereunder (provided that no opinion is expressed in
this paragraph as to compliance with the Act, any state securities or blue
sky laws or the Telecommunications Act of 1996, as amended, and the rules
and regulations thereunder); or (ii) conflict with or constitute a breach
of any of the terms
<PAGE>
-30-
or provisions of, or a default under the Governing Agreement, dated as of
August 31, 1998, by and among Worldwide Fiber Ltd., Mi-Tech Communications,
LLC, Ledcor Inc., Michels Pipeline Construction, Inc., Ledcor Industries
Inc. and Worldwide Fiber (USA), Inc. or the limited liability company
agreement of Worldwide Fiber IC LLC, dated as of May 28, 1999, between
Worldwide Fiber IC Holdings Inc. and IC Fiber Holdings Inc.;
(viii) the Company is not and, after giving effect to the offering and
sale of the Series A Notes and the application of the net proceeds thereof
as described in the Offering Memorandum, will not be, an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended;
(ix) the Indenture complies as to form in all material respects with
the requirements of the TIA, as amended, and as in effect on the date
hereof, and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder;
(x) assuming that (i) each Initial Purchaser is a QIB or a Regulation
S Purchaser, (ii) the accuracy of, and compliance with, the Initial
Purchasers' representations and agreements contained in Section 7 of this
Agreement and (iii) the accuracy of the representations of the Company set
forth in Sections 6(bb), (cc), (ff), (gg),(hh), (ii) and (jj) of this
Agreement, (A) no registration under the Act of the Series A Notes is
required for the sale of the Series A Notes to the Initial Purchasers as
contemplated by this Agreement or for the Exempt Resales, (B) it is not
necessary in connection with the offer, sale and delivery of the Series A
Notes to the Initial Purchasers in the manner contemplated by this
Agreement or in connection with the Exempt Resales to qualify the Indenture
under the TIA, and (C) no consent, approval, authorization or other order
of, or qualification with, any court or governmental body or agency (except
such as may be required under the securities or Blue Sky laws of the
various states) is required for the valid authorization, issuance, sale and
delivery of the Series A Notes;
(xi) assuming the due authorization, execution and delivery of this
Agreement, the Indenture and the Registration Rights Agreement by each
party thereto, the Company has validly and irrevocably submitted to the
jurisdiction of any United States or state court in the State of New York,
County of New York, has expressly accepted the non-exclusive jurisdiction
of any such court and has validly and irrevocably appointed CT Corporation
System as its authorized agent in any suit or proceeding against them
instituted by the Initial Purchasers based on or arising under the
Indenture, the Purchase Agreement or the Registration Rights Agreement;
(xii) each of Worldwide Fiber IC LLC, IC Fiber Alabama LLC, IC Fiber
Illinois LLC, IC Fiber Iowa LLC, IC Fiber Kentucky LLC, IC Fiber Louisiana
LLC, IC
<PAGE>
-31-
Fiber Mississippi LLC and IC Fiber Tennessee LLC (collectively, the
"Delaware Companies") has been duly organized as a Delaware limited
liability company, and is validly existing and in good standing under the
laws of Delaware; there are no restrictions on the power and capacity of
each of the Delaware Companies to own and lease property and assets and to
carry on business.
The opinion of Cahill Gordon and Reindel described in Section 9(e) above
shall be rendered to you at the request of the Company and shall so state
therein. In addition, such counsel shall state that it has participated in
conferences, by person or by telephone, with officers and other representatives
of the Company, with representatives of the chartered accountants for the
Company and with representatives of the Initial Purchasers and their counsel. At
such meetings the contents of the Offering Memorandum and related matters were
discussed among the parties present at such meetings. Although such counsel will
not be passing upon and will not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Offering Memorandum
except as set forth in paragraphs (v) and (vi) above, such counsel shall advise
the Initial Purchasers that on the basis of the foregoing (relying as to
materiality to a the extent we deem appropriate upon the opinions of officers
and other authorized representatives of the Company) no facts have come to its
attention which lead it to believe that the Offering Memorandum, as of its date
or on the date of such opinion, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such counsel has not been asked to, and will not, comment on the financial
statements, including the notes thereto, or any other financial or statistical
data contained in or omitted from the Offering Memorandum).
(f) You shall have received on the Closing Date an opinion (satisfactory to
you and counsel for the Initial Purchasers), dated the Closing Date, of Farris,
Vaughan, Wills & Murphy, Canadian counsel for the Company, to the effect that:
(i) each of the Canadian Companies is a corporation duly incorporated
and validly existing under the laws of its jurisdiction of incorporation;
each of the Canadian Companies has the corporate power and capacity to own
and lease property and assets and to carry on business;
(ii) each of the Canadian Companies is qualified or registered to
carry on business as an extra-provincial corporation in each jurisdiction
in which it carries on business;
(iii) the outstanding shares of capital stock of each of the Canadian
Companies have been duly authorized and validly issued and are outstanding
as fully paid and non-assessable;
<PAGE>
-32-
(iv) all of the outstanding shares of capital stock of the Company are
registered in the name of Worldwide Fiber Holdings Ltd. All of the
outstanding shares of capital stock of Worldwide Fiber Communications Ltd.
and Worldwide Fiber Networks Ltd. are registered in the name of the
Company. All of the outstanding shares of capital stock of Ledcor
Communications Ltd. are registered in the name of Worldwide Fiber
Communications Ltd. All of the shares of capital stock of Worldwide Fiber
(F.O.T.S.) Ltd. are registered in the name of Worldwide Fiber Networks
Ltd.;
(v) the execution, issuance and sale of the Series A Notes and the
Series B Notes have been duly authorized by all necessary corporate action
on the part of the Company;
(vi) the execution, delivery and performance of the Operative
Documents, and the execution, issuance and sale of the Series A Notes, by
the Company, will not result in any violation, contravention or breach of
the articles or by-laws of the Company;
(vii) the execution, delivery and performance of the amended and
restated share purchase agreement dated as of the 28th day of June, 1999
between Ledcor Industries Limited and Ledcor Industries Inc. and the
Company (the "Additional Fiber Agreement"), the Non-Competition Agreement
and the Rail Plough License Agreement, dated as of May 31, 1998, by and
between Ledcor Industries Limited and Worldwide Fiber Communications Ltd.,
as assigned by Ledcor Industries Limited to Ledcom Holdings Ltd. and then
assigned by Worldwide Fiber Communications Ltd. to Ledcor Communications
Ltd. (collectively, the "Ledcor Agreements") will not result in any
violation, contravention or breach of the articles or by-laws of Ledcor
Industries Limited, Ledcor Inc. or Worldwide Fiber Holdings Ltd.
(collectively, the "Ledcor Companies") or any one or more of the Canadian
Companies which are parties to the Ledcor Agreements;
(viii) each of the Operative Documents and the Series A Notes has been
duly authorized, executed and delivered by the Company;
(ix) the Company has the corporate power and capacity to enter into
each of the Operative Documents and to carry out its obligations under each
of the Operative Documents; the execution and delivery of each of the
Operative Documents and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate
action on the part of the Company;
(x) each of the Ledcor Companies and the Canadian Companies has the
corporate power and capacity to enter into each of the Ledcor Agreements to
which it is a party and to carry out its obligations thereunder; the
execution and delivery of each
<PAGE>
-33-
of the Ledcor Agreements and the consummation of the transactions
contemplated thereby have been duly authorized by all necessary corporate
action on the part of each of the Ledcor Companies and the Canadian
Companies which is a party to the Ledcor Agreements;
(xi) each of the Company and WFI-CN Fiber Inc. has the corporate power
and capacity to enter into the License Agreement dated May 28, 1999 among
CN, the Company and WFI-CN Fiber Inc. (the "CN License"); the execution and
delivery of the CN License and the consummation of the transactions
contemplated thereby have been duly authorized by all necessary corporate
action on the part of each of the Company and WFI-CN Fiber Inc.;
(xii) the Company has the corporate power and capacity to enter into
the License Agreements dated May 28, 1999 among IC, the Company and each of
the Delaware Companies (the "IC Licenses"); the execution and delivery of
the IC Licenses and the consummation of the transactions contemplated
thereby have been duly authorized by all necessary corporate action on the
part of the Company;
(xiii) each of the Ledcor Agreements, the CN License and IC Licenses
has been duly executed and delivered by each of the Ledcor Companies and
the Canadian Companies which are parties to such agreements, and the
Additional Fiber Agreement constitutes a legal, valid and binding
obligation of the parties thereto, enforceable against each party thereto
in accordance with its terms, subject, however, to limitations with respect
to enforcement imposed by law in connection with bankruptcy or similar
proceedings and to the extent that equitable remedies such as specific
performance and injunction are in the discretion of the court from which
they are sought;
(xiv) the form of certificate for the Series A Notes has been duly
approved and adopted by the Company and complies with the provisions of the
Business Corporations Act (Alberta);
(xv) the statements contained in the Offering Memorandum under the
caption "Material United States and Canadian Income Tax
Considerations--Canada" and in the Final Wrap under the caption "Certain
Canadian Federal Income Tax Considerations" fairly and accurately describe
the principal Canadian federal income tax consequences under the Income Tax
Act (Canada) to a purchaser described therein;
(xvi) the disclosure contained in the Offering Memorandum under the
captions "Transactions With Our Parent--Description of Reorganization and
Related Agreements" and "--Other Agreements with Ledcor,"
"Regulation--Canada" and "Risk Factors--Extensive Regulation--Canada" in
each case, insofar as such disclo-
<PAGE>
-34-
sure describes or summarizes matters of Canadian law or constitutes
conclusions of Canadian law, fairly summarizes such matters of law or
conclusions of law;
(xvii) no filing, license, consent, permission, approval,
authorization, or order of any court or governmental agency or body in
Canada is required to be obtained by the Canadian Companies under the laws
of the Provinces of British Columbia and Alberta, or the federal laws of
Canada applicable therein, to permit the issue, delivery and sale by the
Company of the Notes, except such filings, licenses, consents, permissions,
approvals, authorizations or orders that have been obtained;
(xviii) the Alberta Securities Commission has determined that the
issue of the Notes is not a distribution to the public pursuant to the
Business Corporations Act (Alberta). As a consequence of the foregoing
determination by the Alberta Securities Commission, the Indenture is not
subject to the provisions of Part 7, Division 1, of the Business
Corporations Act (Alberta);
(xix) none of the issue and sale of the Series A Notes to the Initial
Purchasers, the execution and delivery by the Company of this Agreement,
the Indenture and the Registration Rights Agreement or the consummation of
the transactions herein or therein contemplated, will conflict with, result
in a material breach or violation of, or constitute a material default
under any material indenture or other material agreement or instrument
known to such counsel and to which the Canadian Companies are a party or
bound;
(xx) the offering, sale and delivery of the Series A Notes pursuant to
the Final Canadian Memorandum are exempt from the prospectus requirements
of the securities laws of the Relevant Provinces in which sales of Series A
Notes have been effected by the Initial Purchasers and no prospectus is
required nor are there any documents required to be filed, proceedings
taken or approvals, permits, consents, or authorizations obtained under the
securities laws of such provinces in respect of the offering, sale and
delivery of the Series A Notes to the Purchasers in such Relevant
Provinces, except for such proceedings which have been taken and approvals,
permits, consents or authorizations which have been obtained and except for
the filing, together with the appropriate fee, within prescribed time
periods after the Closing Date, of a report of the trade and, if
applicable, copies of the offering document, with the securities
commissions of the Relevant Provinces;
(xxi) the statements in the Final Canadian Memorandum under the
heading "Rights of Action" are correct insofar as such statements are, or
refer to, statements of law or legal conclusions relating to the laws of
the Relevant Provinces;
<PAGE>
-35-
(xxii) except for filings, registrations and recordings which have
been made, no registration, filing or recording of the Indenture under the
laws of Canada or the Provinces of Alberta and British Columbia is
necessary in order to preserve or protect the validity or enforceability of
the Indenture or the Notes issued thereunder;
(xxiii) to the knowledge of such counsel, there is no pending or
threatened action or suit or judicial, arbitral or other administrative
proceeding to which the Canadian Companies are subject that, singly or in
the aggregate, (A) questions the validity of any of the Operative Documents
or any action taken or to be taken pursuant thereto, or (B) if determined
adversely to the Canadian Companies, is reasonably likely to have a
Material Adverse Effect;
(xxiv) the choice of law provisions set forth in Section 11 hereof, in
the Indenture, the Registration Rights Agreement and the Notes are legal,
valid and binding under the laws of the Province of British Columbia and
the federal laws of Canada applicable therein, provided that such choice of
law is bona fide (in the sense that it was not made with a view to avoiding
the consequences of the laws of any other jurisdiction) and provided that
such choice of law is not contrary to public policy, as that term is
applied by the courts in the Province of British Columbia ("Public
Policy"); such counsel knows of no Public Policy reason why the courts in
the Province of British Columbia (a "Canadian Court") would not give effect
to the choice of New York law as the proper law of this Agreement, the
Indenture, the Registration Rights Agreement and the Notes and if the
Indenture, this Agreement, the Registration Rights Agreement or the Notes
are sought to be enforced in the Province of British Columbia in accordance
with the laws applicable thereto as chosen by the parties, namely New York
law, a Canadian Court would, subject to the foregoing, recognize the choice
of New York law, and, upon appropriate evidence as to such law being
adduced, apply such law; provided that none of the provisions of this
Agreement, the Indenture, the Notes or the Registration Rights Agreement,
or of applicable New York law, are contrary to Public Policy or foreign
revenue, expropriation or penal laws; provided, however, that, in matters
of procedure, the laws of the Province of British Columbia will be applied
and a Canadian Court will retain discretion to decline to hear such action
if it is contrary to Public Policy for it to do so, or if it is not the
proper forum to hear such an action, or if concurrent proceedings are being
brought elsewhere;
(xxv) there are no reasons, to such counsel's knowledge, under the
laws of the Province of British Columbia or the federal laws of Canada
applicable therein or with respect to the application of New York law by a
Canadian Court, why enforcement of the Indenture or the Notes would be
avoided on the grounds of Public Policy;
<PAGE>
-36-
(xxvi) The Company has the legal capacity to sue and be sued in its
own name under the laws of the Province of British Columbia and the federal
laws of Canada applicable therein; the Company has the power to submit, and
has irrevocably submitted, to the non-exclusive jurisdiction of the federal
or state courts located in the Borough of Manhattan in The City of New York
(a "New York Court") and has validly and irrevocably appointed CT
Corporation System as its authorized agent for the purpose described in
Section 11 hereof; the Company has the power to submit, and has irrevocably
submitted, to the non-exclusive jurisdiction of the New York Court and has
validly and irrevocably appointed CT Corporation System as its authorized
agent for the purpose described in the Indenture, the Notes and the
Registration Rights Agreement under the laws of the Province of British
Columbia and the federal laws of Canada applicable therein; the irrevocable
submission of the Company to the non-exclusive jurisdiction of the New York
Court and the waivers by it of any immunity and any objection to the venue
of the proceeding in a New York Court herein is legal, valid and binding
under the laws of the Province of British Columbia and the federal laws of
Canada applicable therein, and such counsel knows of no reason why a
Canadian Court would not give effect to such submission and waivers; the
irrevocable submission of the Company to the non-exclusive jurisdiction of
the New York Court and the waivers by the Company of any immunity and any
objection to the venue of the proceeding in a New York Court in the
Indenture, the Notes and the Registration Rights Agreement is legal, valid
and binding under the laws of the Province of British Columbia and the
federal laws of Canada applicable therein, and such counsel knows of no
reason why a Canadian Court would not give effect to such submission and
waivers;
(xxvii) service of process in the manner set forth in Section 11
hereof will be effective to confer valid personal jurisdiction over the
Company under the laws of the Province of British Columbia and the federal
laws of Canada applicable therein; service of process in the manner set
forth in the Indenture, the Notes and the Registration Rights Agreement
will be effective to confer valid personal jurisdiction over the Company
under the laws of the Province of British Columbia and the federal laws of
Canada applicable therein;
(xxviii) a Canadian Court will recognize as valid and final, and will
enforce, any final and conclusive judgment in personam, of any New York
Court that is not impeachable as void or voidable under the internal laws
of the State of New York for a sum certain in respect of the enforcement of
the obligations of the Company under this Agreement, the Indenture, the
Notes and the Registration Rights Agreement, if (i) the court rendering
such judgment had jurisdiction over the judgment debtor, as recognized by
the Canadian Court (and submission by the Company in this Agreement, the
Indenture, the Notes and the Registration Rights Agreement to the
jurisdiction of the
<PAGE>
-37-
New York Court, will be sufficient for this purpose), (ii) such judgment
was not obtained by fraud or in a manner contrary to natural justice and
the enforcement thereof would not be inconsistent with Public Policy, or
contrary to any order made by the Attorney General of Canada under the
Foreign Extraterritorial Measures Act (Canada), (iii) the enforcement of
such judgment does not constitute, directly or indirectly, the enforcement
of foreign revenue, expropriatory or penal laws, (iv) the action to enforce
such judgment is commenced within the applicable limitation period and (v)
such counsel knows of no Public Policy reason for avoiding the recognition
of judgments of a New York Court under this Agreement, the Indenture, the
Notes and the Registration Rights Agreement under the laws of the Province
of British Columbia and the federal laws of Canada applicable therein;
(xxix) no withholding tax imposed under the federal laws of Canada or
the laws of the Province of British Columbia will be payable in respect of
the payment or crediting of any discount, commission or fee as contemplated
by this Agreement to an Initial Purchaser that is not resident in Canada,
but resident in the United States or if a partnership, all the members of
which are not resident in Canada but resident in the United States, in each
case, for purposes of the Income Tax Act (Canada) and the Canada-U.S.
Income Tax Convention, 1980 (a "U.S. Initial Purchaser") or on any interest
or deemed interest on the resale of Series A Notes by a U.S. Initial
Purchaser to U.S. residents, provided that such U.S. Initial Purchaser
deals at arm's length with the Company and that any such discount,
commission or fee is payable in respect of services rendered by such U.S.
Initial Purchaser outside of Canada that are performed by such U.S. Initial
Purchaser in the ordinary course of business carried on by it that includes
the performance of such services for a fee and any such amount is
reasonable in the circumstances.
(xxx) no goods and services tax imposed under the federal laws of
Canada will be collectible by a U.S. Initial Purchaser in respect of the
payment or crediting of any discount, commission or fee as contemplated by
this Agreement to any U.S. Initial Purchaser, provided that any such
discount, commission or fee is payable in respect of services performed by
such Initial Purchaser wholly outside of Canada.
(xxxi) no stamp duty, registration or documentary taxes, duties or
similar charges are payable under the federal laws of Canada or the laws of
the Province of British Columbia in connection with the creation, issuance,
sale and delivery to a U.S. Initial Purchaser of the Series A Notes or the
authorization, execution and delivery and performance of this Agreement,
any pricing agreement, or the Indenture or the resale of Series A Notes by
a U.S. Initial Purchaser to U.S. residents.
<PAGE>
-38-
(xxxii) after giving effect to the performance by the Company of its
obligations under this Agreement on the Closing Date; (a) each of Ledcor
Industries Limited and Worldwide Fiber (F.O.T.S.) Ltd. is eligible to
operate as a telecommunications common carrier in Canada, as defined under
and in accordance with the Telecommunications Act (Canada) (the
"Telecommunications Act") and the Canadian Telecommunications Common
Carrier Ownership and Control Regulations (the "Ownership Regulations");
(b) neither Ledcor Industries Limited nor Worldwide Fiber (F.O.T.S.) Ltd.
violates the prohibition contained in subsection 16(4) of the
Telecommunications Act against operating in Canada as a telecommunications
common carrier when ineligible to do so; (c) control of each of Ledcor
Industries Limited and Worldwide Fiber (F.O.T.S.) Ltd. is not exercised by
any person(s) that is (are) not Canadian, in accordance with the meanings
ascribed to the term "control" under the Telecommunications Act and the
term "Canadian" under the Ownership Regulations; and (d) none of the
Canadian Companies is in violation of any judgment, decree, order, writ,
law, statute, rule or regulation rendered or enacted in Canada respecting
telecommunications and the regulation within Canada of telecommunications
common carriers, as defined in the Telecommunications Act, applicable to
any of the Canadian Companies or the Ledcor Companies, or any
interpretation or policy relating thereto known to such counsel to be
applicable to them;
(xxxiii) after giving effect to the performance by the Company of its
obligations under this Agreement on the Closing Date:
(xxxiv) not less than eighty percent of the members of the board of
directors of each of Ledcor Industries Limited and Worldwide Fiber
(F.O.T.S.) Ltd. are individual Canadians, as defined under the Ownership
Regulations;
(xxxv) Canadians, as defined under the Ownership Regulations
beneficially own, directly or indirectly, in the aggregate and otherwise
than by way of security only, all of the issued and outstanding voting
shares, as defined under the Ownership Regulations of each of the Canadian
Companies and Ledcor Industries Limited;
(xxxvi) each of Ledcor Inc., in respect of its ownership of and
control over Ledcor Industries Limited, and Worldwide Fiber Networks Ltd.,
in respect of its ownership and control over Worldwide Fiber (F.O.T.S.)
Ltd., is a carrier holding corporation, as defined under the Ownership
Regulations;
(xxxvii) each of Ledcor Inc. and Worldwide Fiber Networks Ltd. is a
carrier holding corporation that is a qualified corporation, as defined
under the Ownership Regulations;
<PAGE>
-39-
(xxxviii) no notices, reports or other filings are required to be made
by any of the Canadian Companies or the Ledcor Companies, either prior to
or immediately after giving effect to the performance by the Company of its
obligations under this Agreement on the Closing Date, with, nor are any
consents, registrations, applications, approvals, permits, licenses or
authorizations required to be obtained by any of the Canadian Companies or
the Ledcor Companies, from any court or governmental agency or other
regulatory body or tribunal or similar entity pursuant to Canadian
telecommunications law in connection with the performance by the Company of
its obligations under this Agreement on the Closing Date;
(xxxix) to the knowledge of such counsel, and except as described in
the Offering Memorandum, no litigation, regulatory proceeding or
investigation is pending against the Canadian Companies or the Ledcor
Companies in connection with the requirements of Canadian
telecommunications law existing on the Closing Date; and
(xl) with the exception of Ledcor Industries Limited and Worldwide
Fiber (F.O.T.S.) Ltd., no other Canadian Company or Ledcor Company operates
in Canada as a telecommunications common carrier as that term is defined in
the Telecommunications Act.
Such counsel shall also confirm that at the date of the Offering Memorandum
and on the Closing Date that no facts have come to their attention in the course
of their review that lead them to believe that the Offering Memorandum contained
or contains any untrue statement of a material fact, or omitted or omits to
state a material fact necessary to make a statement therein not misleading in
light of the circumstances under which it was made, within the meaning of the
Securities Act (British Columbia).
The opinion of Farris, Vaughan, Wills & Murphy described in Section 9(f)
above (i) shall be rendered to you at the request of the Company and shall so
state therein, (ii) as to matters of Alberta law, will rely upon the opinion of
the Company's Alberta Counsel, McLennan Ross, and (iii) as to matters of law in
the Relevant Provinces, other than British Columbia, will rely upon counsel
acceptable to you.
(g) You shall have received on the Closing Date an opinion (satisfactory to
you and counsel for the Initial Purchasers), dated the Closing Date, of Beckley,
Singleton, Jemison, Cobeaga & List, Chtd., special Nevada counsel for the
Company, to the effect that:
(i) each of PFL Holdings, Inc., Worldwide Fiber (USA), Inc., Ledcor
Communications, Inc., Worldwide Fiber IC Holdings, Inc. (fka Worldwide
Fiberlink, Inc.), Worldwide Fiber Networks, Inc. (fka Pacific Fiber Link
POR-SAC, Inc.) and Worldwide Fiber (FOTS), Inc. (collectively, the "Nevada
Subsidiaries") has been duly incorporated, is validly existing as a
corporation in good standing under the laws
<PAGE>
-40-
of the State of Nevada and has the corporate power and authority to carry
on its business as described in the Offering Memorandum and to own, lease
and operate its properties;
(ii) each of the Nevada Subsidiaries is duly qualified and is in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified would not have a Material Adverse Effect;
(iii) all of the outstanding shares of capital stock of each of the
Nevada Subsidiaries has been duly authorized and validly issued and is
fully paid and non-assessable, and are owned by the Company, free and clear
of any Lien;
(iv) the execution, delivery, and performance of this agreement and
the other Operative Documents will not conflict with or constitute a breach
of any of the terms or provisions of, or a default under, the Articles or
Bylaws of each of the Nevada Subsidiaries, or any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is
material to the Nevada Subsidiaries, taken as a whole, to which any of the
Nevada Subsidiaries is a party or by which any of the Nevada Subsidiaries
is bound; violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body
or agency having jurisdiction over any of the Nevada Subsidiaries or their
respective property; result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any agreement or instrument
to which any of the Nevada Subsidiaries or their respective property is
bound; or result in the termination, suspension or revocation of any
Authorization of any of the Nevada Subsidiaries or result in any other
impairment of the rights of the holder of such Authorization; and
(v) there are no known legal or governmental proceedings pending or
threatened to which any of the Nevada Subsidiaries is or could be a party
or to which any of their property is or could be subject, which might
result, singly or in the aggregate, in a Material Adverse Effect.
The opinion of Beckley, Singleton, Jemison, Cobeaga & List, Chtd. described
in Section 9(g) above shall be rendered to you at the request of the Company and
shall so state therein.
(h) You shall have received on the Closing Date an opinion (satisfactory to
you and counsel for the Initial Purchasers), dated the Closing Date, of Wiley
Rein & Fielding, special regulatory counsel for the Company, to the effect that
the statements, with respect to federal communications law, under the captions
"Regulation--United States," and "Risk
<PAGE>
-41-
Factors--Extensive Regulation--United States" in the Offering Memorandum,
insofar as such statements as a whole constitute a summary of the legal matters,
documents and proceedings referred to therein, fairly present in all material
respects such legal matters, documents and proceedings. The opinion of Wiley
Rein & Fielding described in this Section 9(h) shall be rendered to you at the
request of the Company and shall so state therein.
(i) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of each of Latham & Watkins and Osler, Hoskin &
Harcourt, counsel for the Initial Purchasers, in form and substance reasonably
satisfactory to the Initial Purchasers.
(j) The Initial Purchasers shall have received, at the time this Agreement
is executed and at the Closing Date, letters dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchasers from PricewaterhouseCoopers and Deloitte & Touche independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' "comfort letters" to the Initial Purchasers
with respect to the financial statements and certain financial information
contained in the Offering Memorandum.
(k) The Series A Notes shall have been approved by the NASD for trading and
duly listed in PORTAL.
(l) The Initial Purchasers shall have received a counterpart, conformed as
executed, of the Indenture which shall have been entered into by the Company,
and the Trustee.
(m) The Company shall have executed the Registration Rights Agreement and
the Initial Purchasers shall have received an original copy thereof, duly
executed by the Company.
(n) The Company shall not have failed at or prior to the Closing Date to
perform or comply in any material respect with any of the agreements herein
contained and required to be performed or complied with by the Company, as the
case may be, at or prior to the Closing Date.
10. Effectiveness of Agreement and Termination. This Agreement shall become
effective upon the execution and delivery of this Agreement by the parties
hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchasers by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or
<PAGE>
-42-
elsewhere that, in the Initial Purchasers' judgment, is material and adverse
and, in the Initial Purchasers' judgment, makes it impracticable to market the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum, (ii) the suspension or material limitation of trading in securities
or other instruments on the New York Stock Exchange, the Toronto Stock Exchange,
the American Stock Exchange or the Nasdaq National Market or limitation on
prices for securities or other instruments on any such exchange or the Nasdaq
National Market, (iii) the suspension of trading of any securities of the
Company on any exchange or in the over-the-counter market, (iv) the enactment,
publication, decree or other promulgation of any federal, state, provincial or
municipal statute, regulation, rule or order of any court or other governmental
authority which in your opinion materially and adversely affects, or will
materially and adversely affect, the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole, (v)
the declaration of a banking moratorium by either federal or New York State
authorities or authorities in Canada or any province thereof, (vi) the taking of
any action by any federal, state, provincial, municipal or local government or
agency in respect of its monetary or fiscal affairs which in your opinion has a
material adverse effect on the financial markets in the United States or Canada.
If on the Closing Date any one or more of the Initial Purchasers shall fail
or refuse to purchase the Series A Notes which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of the Series
A Notes which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase is not more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased on such
date by all Initial Purchasers, each non-defaulting Initial Purchaser shall be
obligated severally, in the proportion which the principal amount of the Series
A Notes set forth opposite its name in Schedule A bears to the aggregate
principal amount of the Series A Notes which all the non-defaulting Initial
Purchasers, as the case may be, have agreed to purchase, or in such other
proportion as you may specify, to purchase the Series A Notes which such
defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed
but failed or refused to purchase on such date; provided that in no event shall
the aggregate principal amount of the Series A Notes which any Initial Purchaser
has agreed to purchase pursuant to Section 2 hereof be increased pursuant to
this Section 10 by an amount in excess of one-ninth of such principal amount of
the Series A Notes without the written consent of such Initial Purchaser. If on
the Closing Date any Initial Purchaser or Initial Purchasers shall fail or
refuse to purchase the Series A Notes and the aggregate principal amount of the
Series A Notes with respect to which such default occurs is more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased by all
Initial Purchasers and arrangements satisfactory to the Initial Purchasers and
the Company for purchase of such the Series A Notes are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser and the Company. In any such case which
does not result in termination of this Agreement, either you or the Company
shall have the right to
<PAGE>
-43-
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Offering Memorandum or any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Initial Purchaser from liability in respect of
any default of any such Initial Purchaser under this Agreement.
11. Jurisdiction. The Company and its subsidiaries agree that any suit,
action or proceeding against them brought by any Initial Purchaser, the
directors, officers, employees and agents of any Initial Purchaser, or by any
person who controls any Initial Purchaser, arising out of or based upon this
Agreement or the transactions contemplated hereby, may be instituted in any
State or Federal court in The City of New York, and waive any objection which
they may now or hereafter have to the laying of venue of any such proceeding,
and irrevocably submit to the non-exclusive jurisdiction of such courts in any
suit, action or proceeding. The Company has appointed CT Corporation System as
its authorized agent (the "Authorized Agent") upon whom process may be served in
any suit, action or proceeding arising out of or based upon this Agreement or
the transactions contemplated herein that may be instituted in any State or
Federal court in The City of New York, by any Initial Purchaser, the directors,
officers, employees and agents of any Initial Purchaser, or by any person, if
any, who controls any Initial Purchaser, and expressly accept the non-exclusive
jurisdiction of any such court in respect of any such suit, action or
proceeding. The Company hereby represents and warrants that the Authorized Agent
has accepted such appointment and has agreed to act as said agent for service of
process, and the Company agrees to take any and all action, including the filing
of any and all documents that may be necessary to continue such appointment in
full force and effect as aforesaid. Service of process upon the Authorized Agent
shall be deemed, in every respect, effective service of process upon the
Company. Notwithstanding the foregoing, any action arising out of or based upon
this Agreement may be instituted by any Initial Purchaser, the directors,
officers, employees and agents of any Initial Purchaser, or by any person who
controls any Initial Purchaser, in any court of competent jurisdiction in
Canada.
12. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to Worldwide
Fiber Inc., attention: Stephen Stow, 1510, 1066 West Hastings Street, Vancouver,
British Columbia, Canada V6E 3X1 and (ii) if to the Initial Purchasers,
Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York,
New York 10172, Attention: Syndicate Department, or in any case to such other
address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, and the Initial Purchasers set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive
<PAGE>
-44-
delivery of and payment for the Series A Notes, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Initial Purchasers, the officers or directors of the Initial Purchasers, any
person controlling the Initial Purchasers, the Company, the officers or
directors of the Company, or any person controlling the Company and (ii)
acceptance of the Series A Notes and payment for them hereunder. The respective
agreements, covenants and indemnities set forth in Sections 5(i) and 8 hereof
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
If for any reason the Series A Notes are not delivered by or on behalf of
the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company agrees to reimburse the
Initial Purchasers for all reasonable out-of-pocket expenses (including the fees
and disbursements of counsel) incurred by them. Notwithstanding any termination
of this Agreement, the Company shall be liable for all expenses which it has
agreed to pay pursuant to Section 5(i) hereof. The Company also agrees to
reimburse the Initial Purchasers and its officers, directors and each person, if
any, who controls such Initial Purchaser within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act for any and all fees and expenses
(including without limitation the fees and expenses of counsel) incurred by them
in connection with enforcing their rights under this Agreement (including
without limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Initial
Purchasers, the Initial Purchasers' directors and officers, any controlling
persons referred to herein, the directors of the Company and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Series A Notes from the Initial Purchasers merely because of such
purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
<PAGE>
-45-
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchasers.
Very truly yours,
Worldwide Fiber Inc.
By:
----------------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
By:______________________________
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
By:______________________________
Name:
Title:
SALOMON SMITH BARNEY INC.
By:______________________________
Name:
Title:
TD SECURITIES (USA) INC.
By:______________________________
Name:
Title:
<PAGE>
SCHEDULE A
Principal Amount
Initial Purchasers of Notes
Donaldson, Lufkin & Jenrette Securities Corporation..... $272,500,000
Morgan Stanley & Co. Incorporated....................... 91,000,000
Salomon Smith Barney Inc................................ 91,000,000
45,500,000
------------
TD Securities (USA) Inc.................................
Total.............................................. $500,000,000
============
<PAGE>
SCHEDULE B
Subsidiaries
Worldwide Fiber Communications Ltd.
Ledcor Communications Ltd.
Ledcor Cayer Inc.
Worldwide Fiber Networks Ltd.
Worldwide Fiber (F.O.T.S.) Ltd.
Worldwide Fiber (F.O.T.S.) Inc.
Worldwide Fiber F.O.T.S. No. 2, Inc.
PFL Holdings, Inc.
Worldwide Fiber (USA), Inc.
Pacific Fiber Link SEA-POR, Inc.
Pacific Fiber Link MON-ALB, Inc.
Ledcor Communications, Inc.
Ledcom Holdings Ltd.
WFI-CN Fiber Inc.
Worldwide Fiber IC Holdings, Inc.
Worldwide Fiber IC LLC
IC Fiber Alabama LLC
IC Fiber Illinois LLC
IC Fiber Iowa LLC
IC Fiber Kentucky LLC
IC Fiber Louisiana LLC
IC Fiber Mississippi LLC
IC Fiber Tennessee LLC
Worldwide Fiber Finance Ltd.
Worldwide Fiber Networks, Inc.
WFI Liquidity Management Hungary Limited
<PAGE>
SCHEDULE C
Material Subsidiaries
Worldwide Fiber Communications Ltd.
Ledcor Communications Ltd.
Ledcor Cayer Inc.
Worldwide Fiber Networks Ltd.
Worldwide Fiber (F.O.T.S.) Ltd.
Worldwide Fiber (F.O.T.S.) Inc.
Worldwide Fiber F.O.T.S. No. 2, Inc.
Worldwide Fiber (USA), Inc.
Ledcor Communications, Inc.
Ledcom Holdings Ltd.
WFI-CN Fiber Inc.
Worldwide Fiber IC Holdings, Inc.
Worldwide Fiber IC LLC
IC Fiber Alabama LLC
IC Fiber Illinois LLC
IC Fiber Iowa LLC
IC Fiber Kentucky LLC
IC Fiber Louisiana LLC
IC Fiber Mississippi LLC
IC Fiber Tennessee LLC
Worldwide Fiber Finance Ltd.
Worldwide Fiber Networks, Inc.
WFI Liquidity Management Hungary Limited
<PAGE>
SCHEDULE D
Canadian Affiliates
Worldwide Fiber Communications Ltd.
Worldwide Fiber Networks Ltd.
Ledcor Communications Ltd.
Worldwide Fiber (F.O.T.S.) Ltd.
Ledcor Cayer Inc.
Ledcom Holdings Ltd.
WFI-CN Fiber Inc.
Worldwide Fiber (FOTS) No. 2, Inc.
Worldwide Fiber Finance Ltd.
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
CANADA BUSINESS CORPORATIONS ACT
FORM 11
(Section 187)
ARTICLES OF CONTINUANCE
- --------------------------------------------------------------------------------
1.
Name of Corporation:
WORLDWIDE FIBER INC.
- --------------------------------------------------------------------------------
2.
The place in Canada where the registered office is to be situated:
Vancouver, British Columbia
- --------------------------------------------------------------------------------
3.
The classes and any maximum number of shares that the corporation is
authorized to issue:
The annexed Schedule I is incorporated in this form.
- --------------------------------------------------------------------------------
4.
Restrictions, if any, on share transfers:
There are no restrictions on the transfer of shares.
- --------------------------------------------------------------------------------
5.
Number (or minimum and maximum number) of directors:
minimum 3 - maximum 15
- --------------------------------------------------------------------------------
6.
Restrictions, if any, on business the corporation may carry on:
None
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
7. (1) If change of name effected, previous name:
N/A
(2) Details of Incorporation:
The Corporation was incorporated in the Province of Alberta on
February 5, 1998 under the name Ledcom Inc. On April 20, 1998 its
name was changed to Starfiber Inc. and on July 27, 1998 it changed
its name to Worldwide Fiberlink Ltd. On August 15, 1998 it changed
its name to Worldwide Fiber Inc.
- --------------------------------------------------------------------------------
8. Other provisions, if any:
The annexed Schedule II is incorporated in this form.
- --------------------------------------------------------------------------------
Date: Signature: Description of Office:
- --------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY
Filed
Corporation No.
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE I
AUTHORIZED CAPITAL
3. The Corporation is authorized to issue:
(a) an unlimited number of Class "A" Common Voting Shares;
(b) an unlimited number of Class "B" Common Voting Shares;
(c) an unlimited number of Class "C" Common Non-Voting Shares;
(d) an unlimited number of Class "I" Preferred Voting Shares;
(e) an unlimited number of Class "II" Preferred Non-Voting Shares;
(f) an unlimited number of Class "III" Preferred Non-Voting Shares; and
all with the rights, restrictions, conditions and limitations set out as
follows:
THE CLASS "A" COMMON SHARES, THE CLASS "B" COMMON SHARES AND CLASS "C" COMMON
SHARES SHALL CARRY AND BE SUBJECT TO THE FOLLOWING RIGHTS, RESTRICTIONS,
CONDITIONS AND LIMITATIONS:
1. VOTING
1.1. The holders of the Class "A" Common Shares and Class "B" Common Shares in
the Corporation shall be entitled to notice of and to attend at meetings of
the Shareholders of the Corporation, and shall be entitled to one (1) vote
in respect of each such share so held and the holder shall also be entitled
to consent to and sign a resolution in writing to be signed by the
Shareholders of the Corporation.
1.2. Except as provided in the Canada Business Corporations Act (the "CBCA"), as
amended from time to time, the holders of the Class "C" Common Shares shall
not, as such, be entitled to vote at, nor to receive notice of or attend
Shareholders meetings nor shall the holders be entitled to consent to or
sign a resolution in writing to be signed by the Shareholders of the
Corporation.
2. DIVIDENDS
2.1. The holders of the Class "A" Common Shares, the Class "B" Common Shares or
Class "C" Common Shares shall be entitled to receive a dividend when, as,
and if declared
<PAGE>
by the Directors of the Corporation on the Class "A" Common Shares, the
Class "B" Common Shares or Class "C" Common Shares, as the case may be.
Dividends may be declared and paid on the Class "A" Common Shares, the
Class "B" Common Shares or the Class "C" Common Shares to the complete
exclusion of dividends being declared and paid on any other class or
classes of shares of the Corporation. Provided however, no dividends shall
be declared and such shares if to do so would impair the ability of the
Corporation to redeem the then outstanding Preferred Shares in the capital
stock of the Corporation.
3. RETURN OF CAPITAL
3.1. In the event of liquidation, dissolution or winding up of the Corporation
or other distribution of the assets of the Corporation among Shareholders
for the purpose of winding up its affairs, the holders of the Class "A"
Common Shares, the Class "B" Common Shares and Class "C" Common Shares
shall rank pari passu with one another to receive any remaining balance of
the assets and properties of the Corporation after payment of return of
capital on any declared but unpaid dividends to the holders of the
Preferred Shares herein referred to.
THE CLASS "I" PREFERRED SHARES, THE CLASS "II" PREFERRED SHARES AND THE CLASS
"III" PREFERRED SHARES SHALL CARRY AND BE SUBJECT TO THE FOLLOWING RIGHTS,
RESTRICTIONS, CONDITIONS AND LIMITATIONS:
1. VOTING
1.1. The holders of the Class "I" Preferred Shares in the Corporation shall be
entitled to notice of and to attend at meetings of the Shareholders of the
Corporation, and shall be entitled to one (1) vote in respect of each such
share so held and the holder shall also be entitled to consent to and sign
a resolution in writing to be signed by the Shareholders of the
Corporation.
1.2. Except as provided in the CBCA, as amended from time to time, the holders
of the Class "II" Preferred Shares and Class "III" Preferred Shares shall
not, as such, be entitled to vote at, nor to receive notice of or attend
Shareholders' meetings nor shall the holders be entitled to consent to or
sign a resolution in writing to be signed by the Shareholders of the
Corporation.
2. DIVIDENDS
2.1. The holders of the Class "I" Preferred Shares, the Class "II" Preferred
Shares or Class "III" Preferred Shares shall be entitled to receive, when,.
as and if declared by
<PAGE>
the Board of Directors of the Corporation. out of the net profits and
surplus of the Corporation properly applicable to the payment of dividends,
a dividend at the rate or rates as the Directors of the Corporation may
from time to time determine on the redemption price thereof (as hereinafter
provided); the Directors of the Corporation shall further determine the
amount or method or methods of calculation of dividends on the Class "I"
Preferred Shares, the Class "II" Preferred Shares and Class "III" Preferred
Shares, the time and place of payment of dividends, whether cumulative or
non-cumulative or partially cumulative and whether such rate, amount or
method of calculation shall be subject to change or adjustment in the
future. For greater certainty, the holders of the Class "I" Preferred
Shares, the Class "II" Preferred Shares and Class "III" Preferred Shares
shall have no preference or priority as to the declaration of dividends,
and dividends may be declared and paid on any other class of shares of the
Corporation to the exclusion of a dividend being declared and paid on the
Class "I" Preferred Shares, the Class "II" Preferred Shares or Class "III"
Preferred Shares, Dividends may be declared and paid on the Class "I"
Preferred Shares, the Class "II" Preferred Shares or the Class "III"
Preferred Shares to the exclusion of a dividend being declared and paid on
the other of them. Provided however, no dividends shall be declared on such
other shares if to do so would impair the ability of the Corporation to
redeem the then outstanding Class "I" Preferred Shares, Class "II"
Preferred Shares and Class "III" Preferred Shares in the capital stock of
the Corporation.
3. RETURN OF CAPITAL
3.1. In the event of liquidation, dissolution or winding-up of the Corporation,
the holders of the Class "I" Preferred Shares the Class "II" Preferred
Shares and Class "III" Preferred Shares shall rank pari passu with one
another and shall have priority as to payment of the redemption price, as
hereinafter provided, and priority for all declared and unpaid dividends up
to the commencement of the winding-up, over all other shares in the capital
for the time being of the Corporation; but shall not have any right to
participate in the assets of the Corporation beyond the redemption price as
hereinafter provided, and all declared and unpaid dividends whether in a
winding-up or on the reduction, redemption or purchase by the Corporation
of the capital stock.
4. REDEMPTION AT CORPORATION'S OPTION
4.1. The Corporation may by resolution of the Directors, and upon giving notice
as hereinafter provided, from time to time redeem or purchase the whole or
any part of the Class "I" Preferred Shares, the Class "II" Preferred Shares
or Class "III" Preferred Shares on payment for each share to be redeemed or
purchased of the redemption price as hereinafter provided together with all
declared and unpaid dividends. In case a part only of the then outstanding
Class "I" Preferred Shares, Class "II" Preferred Shares and Class "III"
Preferred Shares is at any time to be redeemed or purchased the redemption
or purchase shall be pro rata disregarding fractions amongst all the
holders of the then outstanding Class "I"
<PAGE>
Preferred Shares, Class "II" Preferred Shares and Class "III" Preferred
Shares, unless the Corporation and all of the holders of the then
outstanding Class "I" Preferred Shares, Class "II" Preferred Shares and
Class "III" Preferred Shares otherwise agree in writing. Unless the holders
of the Class "I" Preferred Shares, Class "II" Preferred Shares and Class
"III" Preferred Shares otherwise agree in writing, not less than ten days'
notice in writing of such redemption or purchase shall be given by mailing
to the registered holder of the shares to be redeemed or purchased a notice
specifying the date and place of redemption or purchase, which may be a
chartered bank.
4.2. If notice of any such redemption or purchase be given by the Corporation in
the manner aforesaid and an amount sufficient to redeem or purchase the
shares to be redeemed or purchased be deposited with the chartered bank
specified in the notice on or before the date fixed for redemption or
purchase, dividends on the Class "I" Preferred Shares, Class "II" Preferred
Shares and Class "III" Preferred Shares to be redeemed or purchased shall
cease to accrue after the date so fixed for the redemption or purchase and
the holders thereof shall thereafter have no rights against the Corporation
in respect thereof except upon surrender of certificates for such shares to
receive payment thereof of the redemption price.
5. RETRACTION AT SHAREHOLDER'S OPTION
5.1. Every holder of record of Class "I" Preferred Shares, Class "II" Preferred
Shares and Class "III" Preferred Shares shall, subject as hereinafter
provided, be entitled to require the Corporation to redeem or to purchase
all or any part of the Class "I" Preferred Shares, the Class "II" Preferred
Shares or Class "III" Preferred Shares held by such holder by surrendering
on a business day the certificate or certificates representing such Class
"I" Preferred Shares, Class "II" Preferred Shares and Class "III" Preferred
Shares, properly endorsed in blank for transfer or accompanied by an
appropriate form of transfer properly executed in blank, at the registered
office of the Corporation or at the office of any transfer agent of the
Corporation or at such other place or places as the Directors of the
Corporation may from time to time designate, such certificate or
certificates so surrendered to be accompanied by a notice in writing
(hereinafter called a "redemption notice") signed by such holder or by his
duly authorized attorney requiring the Corporation to redeem or to purchase
all or a specified number of the Class "I" Preferred Shares, Class "II"
Preferred Shares and Class "III" Preferred Shares represented thereby. If
the redemption notice is signed by an attorney, it shall be accompanied by
evidence of the authority of such attorney satisfactory to the Corporation
or a transfer agent of the Corporation.
5.2. A redemption notice shall be deemed to have been given when actually
received at the registered office of the Corporation or at the office of
any transfer agent of the Corporation or at such other place or places as
the Directors of the Corporation may from
<PAGE>
time to time designate and when so given shall, subject as herein after
provided in 5.5, be irrevocable.
5.3. Payment of the redemption price for the Class "I" Preferred Shares, Class
"II" Preferred Shares or Class "III" Preferred Shares surrendered for
redemption or for sale shall be made by or on behalf of the Corporation to
the holders of record thereof not later than the seventh day following the
date upon which the redemption notice is given as aforesaid.
5.4. Payment for Class "I" Preferred Shares, Class "II" Preferred Shares or
Class "III" Preferred Shares surrendered for redemption or for sale shall
be made in such manner as may be agreed between the Corporation and the
holder(s) thereof or by cheque payable at par in Canadian funds at any
branch of the Corporation's bankers and delivered to the holders of record
of Class "I" Preferred Shares, Class "II" Preferred Shares Class "III"
Preferred Shares so surrendered or at the option of the Corporation such
cheque shall be forwarded by registered mail, postage prepaid, to the
holders of record of the Class "I" Preferred Shares, Class "II" Preferred
Shares or Class "III" Preferred Shares so surrendered at their addresses as
the same appear in the records of the Corporation. In the case of each
cheque so mailed, delivery thereof shall be deemed to have been made to the
registered holder concerned as soon as the letter containing the same has
been mailed.
5.5. In the event that the redemption or purchase of all those outstanding Class
"I" Preferred Shares, Class "II" Preferred Shares or Class "III" Preferred
Shares in respect of which the Corporation has received redemption notices
at any given time would cause the Corporation to be in contravention of the
provisions of the CBCA, the Corporation shall at that time redeem or
purchase, on a pro rata basis, disregarding fractions, only such number of
Class "I" Preferred Shares, Class "II" Preferred Shares or Class "III"
Preferred Shares as can be redeemed or purchased without causing such
contravention and the Corporation shall redeem or purchase the balance of
the outstanding Class "I" Preferred Shares, Class "II" Preferred Shares or
Class "III" Preferred Shares in respect of which the Corporation has
received redemption notices on a pro rata basis, disregarding fractions, at
such time or times as such redemption or purchase can be made without
causing the Corporation to be in contravention of the provisions of the
CBCA.
6. REDEMPTION OR PURCHASE PRICE
Class "I" Preferred Shares
6.1. The redemption price or the purchase price for the Class "I" Preferred
Share surrendered for redemption or for sale shall be such amount as may be
determined by the Directors of the Corporation at the time such Class "I"
Preferred Share is issued together with any declared and unpaid dividends
thereon.
<PAGE>
Class "II" Preferred Shares
6.2. The redemption price or the purchase price for the Class "II" Preferred
Shares, surrendered for redemption or for sale shall be such amount as may
be determined by the Directors of the Corporation at the time such Class
"II" Preferred Share is issued together with any declared and unpaid
dividends thereon.
Class "III" Preferred Shares
6.3. The price or consideration payable entirely in lawful money of Canada at
which the Class "III" Preferred Shares shall be redeemed (the "Class "III"
Redemption Amount") shall be the amount of consideration received therefor
as determined by the Directors of the Corporation and adjusted by the
Directors at any time or time so as to ensure that the Class "III"
Redemption Amount of such Class "III" Preferred Shares issued as partial or
total consideration for the purchase by the Corporation of any assets or
the conversion or exchange of any shares (the Class "III" Purchased
Assets") shall equal the difference between the fair market value of the
Class "III" Purchased Assets as at the date of purchase, conversion or
exchange by the Corporation and the aggregate value of non-share
consideration, if any, issued by the Corporation as partial or total
consideration for the Class "III" Purchased Assets.
For greater certainty, such fair market value shall be determined by the
Directors of the Corporation upon such expert advice as they deem
necessary. Should, however, any competent taxing authority at any time
issue or propose to issue any assessment or assessments that impose or
would impose any liability for tax on the basis that the fair market value
of the Class "III" Purchased Assets is other than the amount approved by
the Directors and if the Directors or a competent Court or tribunal agree
with such revaluation and all appeal rights have been exhausted or all
times for appeal have expired without appeals having been taken or should
the Directors of the Corporation otherwise determine that the fair market
value of the Class "III" Purchased Assets is other than the amount
previously approved by the Directors, then the Class "III" Redemption
Amount of the Class "III" Purchased Shares shall be adjusted nunc pro tunc
pursuant to the provisions of this paragraph to reflect the agreed upon
fair market value and all necessary adjustments, payments and repayments as
may be required shall forthwith be made between the proper parties.
7. LIQUIDITY
7.1. Notwithstanding anything to the contrary herein contained, no dividends or
other payment or distribution shall be made to the holders, as such, of
shares in the capital stock of the Corporation other than Class "I"
Preferred Shares, Class "II" Preferred Shares and Class "III" Preferred
Shares if the payment thereof would result in the fair market value of the
Corporation's assets, net of liabilities owed by the Corporation, being
less than the aggregate of the redemption or purchase price of all Class
"I" Preferred Shares, Class "II" Preferred Shares and Class "III" Preferred
Shares then outstanding.
<PAGE>
SCHEDULE II
1. The Corporation may invite the public to subscribe for its securities
subject to the rules and regulations of the Securities Act (British
Columbia) or any other applicable Securities Act.
2. Without in any way limiting the powers conferred upon the Corporation and
its directors by the Canada Business Corporations Act, the directors may,
from time to time, in such amounts and on such terms as they deem
expedient, charge, mortgage, hypothecate, pledge, or grant any form of
security interest in, all or any of the currently owned or subsequently
acquired property of the Corporation, real or personal, moveable or
immovable, including its undertaking, book debts, rights, powers and
franchises, to secure any debt obligation or any money borrowed or other
debt or liability of the Corporation.
3. The Articles of the Corporation may be amended by special resolution
pursuant to Section 173 of the Canada Business Corporations Act (the "Act")
to:
(i) increase or decrease any maximum number of authorized shares of any
class, or increase any maximum number of authorized shares of a class
having rights or privileges equal or superior to the shares of another
class;
(ii) effect an exchange, reclassification or cancellation of all or any
part of the shares of any class; or
(iii) create a new class of shares equal or superior to the shares of
another class;
and no separate class or series vote shall be required under Section 176 of the
Act in respect to the amendment except that the holders of any class of
preferred shares shall be entitled to vote separately as a class or series on
such amendment to the extent provided in the Act and in the Articles.
4. The directors may, within the maximum number permitted by the Articles,
appoint one or more directors, who shall hold office for a term expiring
not later than the close of the next annual meeting of the shareholders,
but the total number of directors so appointed may not exceed one-third of
the number of directors elected at the previous annual meeting of
shareholders.
<PAGE>
WORLDWIDE FIBER INC.
LIST OF PROVINCES IN WHICH THE COMPANY IS REGISTERED
British Columbia
Ontario
Saskatchewan
CANADA BUSINESS COPORATIONS ACT
FORM 4
ARTICLES OF AMENDMENT
(SECTION 27 OR 177)
- --------------------------------------------------------------------------------
1. Name of corporation: WORLDWIDE FIBER INC.
- --------------------------------------------------------------------------------
2. Corporation No.: 365115-1
- --------------------------------------------------------------------------------
3. The Articles of the above-named Corporation are amended as follows:
I. Article 3. To change the authorized capital by:
a. changing the designation of the existing Class "A" Common Voting Shares
in the capital of the Corporation both issued and unissued to Class B
Subordinate Voting Shares;
b. cancelling:
i.the Class "B" Common Voting Shares, none of which are issued;
ii. "C" Common Non-Voting Shares, none of which are issued;
iii. Class "I" Preferred Voting Shares, none of which are issued;
iv. Class "II" Preferred Non-Voting Shares, none of which are issued; and
v. Class "III" Preferred Non-Voting Shares, none of which are issued;
<PAGE>
c. deleting in their entirety the rights, privileges, restrictions and
conditions attaching to the Class "A" Common Voting Shares (redesignated the
Class B Subordinate Voting Shares), the Class "B" Common Voting Shares, the
Class "C" Common Non-Voting Shares, the Class "I" Preferred Voting Shares, the
Class "II" Preferred Non-Voting Shares and the Class "III" Preferred Non-Voting
Shares;
d. creating:
i. an unlimited number of Class A Non-Voting Shares;
ii. an unlimited number of Class C Multiple Voting Shares;
iii. an unlimited number of Preferred Shares, issuable in not more than
three series;
e. attaching to the Class A Non-Voting Shares, the Class B Subordinate
Voting Shares, the Class C Multiple Voting Shares and the Preferred Shares the
rights, privileges, restrictions and conditions set forth in Schedule I hereto.
IA. Article 4. To attach a restriction on the transfer of shares, Article 4
to read as follows:
The annexed Schedule II is incorporated herein.
II. Immediately upon the filing of these Articles of Amendment, the
Articles of the Corporation be amended, pursuant to section 27 of the Canada
Business Corporations act by designating:
i. 100,000,000,000 of the Preferred Shares as Series A Non-Voting Preferred
Shares;
ii. 100,000,000,000 of the Preferred Shares as Series B Subordinate Voting
Preferred Shares; and
iii. 45,000,000 of the Preferred Shares as Series C Redeemable Preferred
Shares;
having attached thereto the rights, privileges, restrictions and
conditions set forth in Schedule I attached hereto.
-2-
<PAGE>
III. After giving effect to the foregoing, Article 3 shall read as follows:
Article 3. - The classes and any maximum number of shares that the
corporation is authorized to issue:
an unlimited number of Class A Non-Voting Shares,
an unlimited number of Class B Subordinate Voting Shares,
an unlimited number of Class C Multiple Voting Shares,
an unlimited number of Preferred Shares, of which the first series shall
consist of 100,000,000,000 Series A Non-Voting Preferred Shares, the second
series shall consist of 100,000,000,000 Series B Subordinate Voting
Preferred Shares and the third series shall consist of 45,000,000 Series C
Redeemable Preferred Shares.
The shares shall have attached thereto the rights, privileges, restrictions
and conditions set forth in Schedule I attached hereto.
IV. Article 5. To change the minimum and maximum number of directors,
Article 5 therefore to read follows:
Number (or minimum and maximum number) of directors: Minimum 4 -
Maximum 12
V. Article 8. To delete the wording in the existing Schedule II attached
to and forming part of the Articles of Continuance and substituting
therefore the wording set out in the annexed Schedule II, Article 8
therefore to read as follows:
Other provisions, if any: The annexed Schedule II is incorporated
herein.
Date Signature Title
- --------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY
Filed:
- --------------------------------------------------------------------------------
-3-
<PAGE>
SCHEDULE I
The rights, privileges, restrictions and conditions attaching to each class
of shares and each existing series of shares of the Corporation are as follows:
D. CLASS A NON-VOTING SHARES, CLASS B SUBORDINATE VOTING SHARES AND CLASS C
MULTIPLE VOTING SHARES
The Class A Non-Voting Shares, Class B Subordinate Voting Shares and Class
C Multiple Voting Shares shall have attached thereto the following rights,
privileges, restrictions and conditions:
1. DIVIDENDS
4.1 Subject to any preference or priority as to the payment of dividends
upon shares of any class or series ranking in priority to the Class A Non-Voting
Shares, Class B Subordinate Voting Shares or Class C Multiple Voting Shares in
respect of the payment of dividends, the holders of Class A Non-Voting Shares,
Class B Subordinate Voting Shares and Class C Multiple Voting Shares shall,
except as otherwise hereinafter provided, be entitled to participate equally
with each other, share for share, as to dividends and the Corporation shall pay
dividends thereon, as and when declared by the Board of Directors of the
Corporation out of moneys properly applicable to the payment of dividends, in
equal amounts per share and at the same time on each Class A Non-Voting Share,
Class B Subordinate Voting Share and Class C Multiple Voting Share outstanding
as at the respective record dates for the payment of such dividends.
2. DISSOLUTION
2.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or other distribution of assets of the Corporation among
shareholders for the purpose of winding up its affairs, all of the property and
assets of the Corporation which remain, after payment of all amounts attributed
and properly payable to the holders of any shares ranking in priority to the
Class A Non-Voting Shares, Class B Subordinate Voting Shares and Class C
Multiple Voting Shares in respect of payment upon liquidation, dissolution or
winding-up of the Corporation or other distribution of assets of the Corporation
among shareholders for the purpose of winding up its affairs, shall be paid or
distributed equally, share for share, to the holders of the Class A Non-Voting
Shares, Class B Subordinate Voting Shares and Class C Multiple Voting Shares,
without preference or distinction outstanding as at the respective record dates
for such payment.
<PAGE>
3. SUBDIVISION OR CONSOLIDATION
3.1 None of the Class A Non-Voting Shares, Class B Subordinate Voting
Shares or Class C Multiple Voting Shares shall be subdivided, consolidated,
reclassified or otherwise changed unless contemporaneously therewith the shares
of each other such class is subdivided, consolidated, reclassified or otherwise
changed equally, share for share, in the same proportion and in the same manner.
4. VOTING RIGHTS
4.1 Except as provided in the Canada Business Corporations Act, the holders
of the Class A Non-Voting Shares shall not be entitled to vote at any meeting of
the shareholders of the Corporation. The holders of the Class A Non-Voting
Shares shall be entitled to receive notice of and to attend (in person or by
proxy) and be heard at all meetings of the shareholders of the Corporation
(other than separate meetings of the holders of the shares of any other class of
shares of the Corporation or of the shares of any series of shares of any other
class of shares of the Corporation).
4.2 The holders of the Class B Subordinate Voting Shares shall be entitled,
as such, to receive notice of and to attend (in person or by proxy) and be heard
at all meetings of the shareholders of the Corporation (other than separate
meetings of the holders of shares of any other class of shares of the
Corporation or of shares of any series of shares of any other class of shares of
the Corporation) and to vote at all such meetings and each holder of Class B
Subordinate Voting Shares shall be entitled at any such meeting to one vote per
Class B Subordinate Voting Share held by such holder as at the record date for
such meeting, provided that if the Corporation proposes to (i) sell, lease or
exchange all or substantially all of its property and assets to or with a person
or persons other than one or more wholly owned subsidiaries of the Corporation,
or (ii) liquidate, dissolve, wind up or distribute its assets among the
shareholders of the Corporation for the purpose of winding up its affairs, each
holder of Class B Subordinate Voting Shares shall be entitled to twenty votes
per Class B Subordinate Voting Share held in respect of any such matter.
4.3 The holders of the Class C Multiple Voting Shares shall be entitled, as
such, to receive notice of and attend (in person or by proxy) and be heard at
all meetings of the shareholders of the Corporation (other than separate
meetings of the holders of shares of any other class of shares of the
Corporation or any series of shares of such other class of shares of the
Corporation) and to vote at all such meetings and each holder of Class C
Multiple Voting Shares shall be entitled at any such meeting to twenty votes per
Class C Multiple Voting Share held by such holder as at the record date for such
meeting.
-2-
<PAGE>
5. CONVERSION OF CLASS A NON-VOTING SHARES INTO CLASS B SUBORDINATE
VOTING SHARES
5.1 Subject to compliance with the provisions of Section 5.2 of this
Article A, each holder of Class A Non-Voting Shares shall be entitled at any
time and from time to time to have all or any part of the Class A Non-Voting
Shares held by such holder converted into fully paid and non-assessable Class B
Subordinate Voting Shares upon the basis of one Class B Subordinate Voting Share
for each Class A Non-Voting Share in respect of which the conversion right is
exercised.
5.2 Before any holder of Class A Non-Voting Shares shall be entitled to
convert the same into Class B Subordinate Voting Shares, such holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Class A Non-Voting Shares,
together with a written notice to the Corporation stating therein: the name or
names in which the certificate or certificates for Class B Subordinate Voting
Shares are to be issued; the number of Class A Non-Voting Shares to be
converted; and notice of such holder's election to convert such Class A
Non-Voting Shares. After giving such notice in writing, the election of the
holder of Class A Non-Voting Shares shall be irrevocable. The Corporation shall,
within three (3) days of such written notice, issue and deliver at such office
to such holder of Class A Non-Voting Shares, or to the nominee or nominees of
such holder, a certificate or certificates for the number of Class B Subordinate
Voting Shares to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Class A Non-Voting
Shares to be converted, and the person or persons entitled to receive the shares
of Class B Subordinate Voting Shares issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Class B
Subordinate Voting Shares as of such date. The issuance of certificates for
Class B Subordinate Voting Shares, upon conversion of the Class A Non-Voting
Shares, shall be made without charge to the holder but the holder shall pay any
stamp, documentary or similar tax imposed on or in respect of such conversion.
If less than all of the Class A Non-Voting Shares represented by any certificate
are to be converted, the holder shall be entitled to receive a new certificate
representing the number of Class A Non-Voting Shares represented by the original
certificate which are not to be converted.
5.3 The Corporation shall at no time close its transfer books against the
transfer of any Class A Non-Voting Shares, or of any Class B Subordinate Voting
Shares issuable upon the conversion of any Class A Non-Voting Shares, in any
manner which interferes with the timely conversion of such Class A Non-Voting
Shares, except as may be otherwise be required to comply with applicable laws or
the provisions of Schedule II to these Articles.
-3-
<PAGE>
6. CONVERSION OF CLASS B SUBORDINATE VOTING SHARES INTO CLASS A
NON-VOTING SHARES
6.1 Subject to compliance with the provisions of Section 6.2 of this
Article A, each holder of Class B Subordinate Voting Shares shall be entitled at
any time and from time to time to have all or any part of the Class B
Subordinate Voting Shares held by such holder converted into fully paid and
non-assessable Class A Non-Voting Shares upon the basis of one Class A
Non-Voting Share for each Class B Subordinate Voting Share in respect of which
the conversion right is exercised.
6.2 Before any holder of Class B Subordinate Voting Shares shall be
entitled to convert the same into Class A Non-Voting Shares, such holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Class B Subordinate Voting
Shares, together with a written notice to the Corporation stating therein: the
name or names in which the certificate or certificates for Class A Non-Voting
Shares are to be issued; the number of Class B Subordinate Voting Shares to be
converted; and notice of such holder's election to convert such Class B
Subordinate Voting Shares. After giving such notice in writing, the election of
the holder of Class B Subordinate Voting Shares shall be irrevocable. The
Corporation shall, within three (3) days of such written notice, issue and
deliver at such office to such holder of Class B Subordinate Voting Shares, or
to the nominee or nominees of such holder, a certificate or certificates for the
number of Class A Non-Voting Shares to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of Class B
Subordinate Voting Shares to be converted, and the person or persons entitled to
receive the shares of Class A Non-Voting Shares issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such Class
A Non-Voting Shares as of such date. The issuance of certificates for Class A
Non-Voting Shares, upon conversion of the Class B Subordinate Voting Shares,
shall be made without charge to the holder but the holder shall pay any stamp,
documentary or similar tax imposed on or in respect of such conversion. If less
than all of the Class B Subordinate Voting Shares represented by any certificate
are to be converted, the holder shall be entitled to receive a new certificate
representing the number of Class B Subordinate Voting Shares represented by the
original certificate which are not to be converted.
6.3 The Corporation shall at no time close its transfer books against the
transfer of any Class B Subordinate Voting Shares, or of any Class A Non-Voting
Shares issuable upon the conversion of any Class B Subordinate Voting Shares, in
any manner which interferes with the timely conversion of such Class B
Subordinate Voting Shares, except as may be otherwise be required to comply with
applicable laws or the provisions of Schedule II to these Articles.
-4-
<PAGE>
7. CONVERSION OF CLASS B SUBORDINATE VOTING SHARES INTO SERIES A
NON-VOTING PREFERRED SHARES
7.1 Subject to compliance with the provisions of Section 7.2 of this
Article A, at any time prior to September 9, 2000, each holder of Class B
Subordinate Voting Shares shall be entitled at any time and from time to time to
have all or any part of the Class B Subordinate Voting Shares held by such
holder converted into fully paid and non-assessable Series A Non-Voting
Preferred Shares. Upon conversion, each Class B Subordinate Voting Share in
respect of which the conversion right is exercised pursuant to this Section 7.1
will be converted into a number of Series A Preferred Shares equal to the Class
B Conversion Ratio. For the purposes of this Section 7.1, "Class B Conversion
Ratio" shall initially equal one and shall automatically adjust so that it is
always equal to the inverse of the Conversion Ratio as defined in Section 1.13
of Article C.
7.2 Before any holder of Class B Subordinate Voting Shares shall be
entitled to convert the same into Series A Non-Voting Preferred Shares, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Class B
Subordinate Voting Shares, together with a written notice to the Corporation
stating therein: the name or names in which the certificate or certificates for
Series A Non-Voting Preferred Shares are to be issued; the number of Class B
Subordinate Voting Shares to be converted; and notice of such holder's election
to convert such Class B Subordinate Voting Shares. After giving such notice in
writing, the election of the holder of Class B Subordinate Voting Shares shall
be irrevocable. The Corporation shall, within three (3) days of such written
notice, issue and deliver at such office to such holder of Class B Subordinate
Voting Shares, or to the nominee or nominees of such holder, a certificate or
certificates for the number of Series A Non-Voting Preferred Shares to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Class B Subordinate Voting Shares to be converted,
and the person or persons entitled to receive the shares of Series A Non-Voting
Preferred Shares issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such Series A Non-Voting Preferred Shares as
of such date. The issuance of certificates for Series A Non-Voting Preferred
Shares, upon conversion of the Class B Subordinate Voting Shares, shall be made
without charge to the holder but the holder shall pay any stamp, documentary or
similar tax imposed on or in respect of such conversion. If less than all of the
Class B Subordinate Voting Shares represented by any certificate are to be
converted, the holder shall be entitled to receive a new certificate
representing the number of Class B Subordinate Voting Shares represented by the
original certificate which are not to be converted.
-5-
<PAGE>
7.3 The Corporation will at no time close its transfer books against the
transfer of any Class B Subordinate Voting Shares, or of any Series A Non-Voting
Preferred Shares issued or issuable upon the conversion of any Class B
Subordinate Voting Shares, in any manner which interferes with the timely
conversion of such Class B Subordinate Voting Shares, except as may otherwise be
required to comply with applicable laws or the provisions of Schedule II to
these Articles.
7.4 No fractional shares shall be issued upon the conversion of the Class B
Subordinate Voting Shares and the number of Series A Non-Voting Preferred Shares
to be issued shall be rounded down to the nearest whole share. No payment shall
be made in respect of any unissued or rounded fraction. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Class B Subordinate Voting Shares the
holder is at the time converting into Series A Non-Voting Preferred Shares and
the number of Series A Non-Voting Preferred Shares issuable upon such aggregate
conversion.
8. CONVERSION OF CLASS C MULTIPLE VOTING SHARES INTO CLASS A NON-VOTING
SHARES AND/OR CLASS B SUBORDINATE VOTING SHARES
8.1 Subject to compliance with the provisions of Section 8.2 of this
Article A, each holder of Class C Multiple Voting Shares shall be entitled at
any time and from time to time to have all or any part of the Class C Multiple
Voting Shares held by such holder converted into fully paid and non-assessable
Class A Non-Voting Shares or Class B Subordinate Voting Shares upon the basis of
one Class A Non-Voting Share or one Class B Subordinate Voting Share for each
Class C Multiple Voting Share for which the conversion right provided for in
this Section 8.1 is exercised, as specified by the holder of the Class C
Multiple Voting Shares in the notice in writing given to the Corporation or any
transfer agent in exercise of such conversion right.
8.2 Before any holder of Class C Multiple Voting Shares shall be entitled
to convert the same into Class A Non-Voting Shares and/or Class B Subordinate
Voting Shares, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Class C Multiple Voting Shares, together with a written notice to
the Corporation stating therein: the name or names in which the certificate or
certificates for Class A Non-Voting Shares and/or Class B Subordinate Voting
Shares are to be issued; the number of Class C Multiple Voting Shares to be
converted; notice of such holder's election to convert such Class C Multiple
Voting Shares; and the number of Class A Non-Voting Shares and/or Subordinate
Voting Shares into which the Class C Multiple Voting Shares are to be converted.
After giving such notice in writing, the election of the
-6-
<PAGE>
holder of Class C Multiple Voting Shares shall be irrevocable. The Corporation
shall, within three (3) days of such written notice, issue and deliver at such
office to such holder of Class C Multiple Voting Shares, or to the nominee or
nominees of such holder, a certificate or certificates for the number of Class A
Non-Voting Shares and/or Class B Subordinate Voting Shares, as the case may be,
to which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Class C Multiple Voting Shares, to be
converted, and the person or persons entitled to receive the shares of Class A
Non-Voting Shares and/or Class B Subordinate Voting Shares issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Class A Non-Voting Shares and/or Class B Subordinate Voting Shares, as the
case may be, as of such date. The issuance of certificates for Class A
Non-Voting Shares and/or Class B Subordinate Voting Shares, upon conversion of
the Class C Multiple Voting Shares shall be made without charge to the holder
but the holder shall pay any stamp, documentary or similar tax imposed on or in
respect of such conversion. If less than all of the Class C Multiple Voting
Shares represented by any certificate are to be converted, the holder shall be
entitled to receive a new certificate representing the number of Class C
Multiple Voting Shares represented by the original certificate which are not to
be converted.
8.3 The Corporation will at no time close its transfer books against the
transfer of any Class C Multiple Voting Shares, or of any Class B Subordinate
Voting Shares or Class A Non-Voting Shares issuable upon the conversion of any
Class C Multiple Voting Shares, in any manner which interferes with the timely
conversion of such Class C Multiple Voting Shares, except as may otherwise be
required to comply with applicable laws.
E. PREFERRED SHARES
The rights, privileges, restrictions and conditions attaching to the
Preferred Shares, as a class, are as follows:
1. DIRECTORS' AUTHORITY TO ISSUE ONE OR MORE SERIES
1.1 The Board of Directors of the Corporation may issue the Preferred
Shares at any time and from time to time in not more than three series. Before
the first shares of a particular series are issued, the Board of Directors of
the Corporation shall fix the number of shares in such series and shall
determine, subject to the limitations set out in the Articles, the designation,
rights, privileges, restrictions and conditions to attach to the shares of such
series including, without limiting the generality of the foregoing, the rate or
rates, amount or method or methods of calculation of preferential dividends,
whether cumulative or
-7-
<PAGE>
non-cumulative or partially cumulative, and whether such rate(s), amount or
method(s) of calculation shall be subject to change or adjustment in the future,
the currency or currencies of payment, the date or dates and place or places of
payment thereof and the date or dates from which such preferential dividends
shall accrue, the redemption price and terms and conditions of redemption (if
any), the rights of retraction (if any), and the prices and other terms and
conditions of any rights of retraction and whether any additional rights of
retraction may be vested in such holders in the future, voting rights and
conversion or exchange rights (if any) and any sinking fund, purchase fund or
other provisions attaching thereto. Before the issue of the first shares of a
series, the Board of Directors of the Corporation shall send to the Director (as
defined in the Canada Business Corporations Act) articles of amendment in the
prescribed form containing a description of such series including the
designation, rights, privileges, restrictions and conditions determined by the
directors.
2. RANKING OF PREFERRED SHARES
2.1 No rights, privileges, restrictions or conditions attaching to a series
of Preferred Shares shall confer upon a series a priority in respect of
dividends or return of capital over any other series of Preferred Shares then
outstanding. The Preferred Shares of each series shall rank on a parity with the
Preferred Shares of every other series with respect to priority in the payment
of dividends and the return of capital and the distribution of assets of the
Corporation in the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of the
assets of the Corporation among its shareholders for the purpose of winding up
its affairs.
2.2 The Preferred Shares shall be entitled to priority over the Common
Shares (as defined in Article C) of the Corporation and over any other shares of
any other class of the Corporation ranking junior to the Preferred Shares with
respect to priority in the payment of dividends and the return of capital and
the distribution of assets in the event of the liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, or any other
distribution of the assets of the Corporation among its shareholders for the
purpose of winding up its affairs.
2.3 The Preferred Shares of any series may also be given such other
preferences, not inconsistent with the provisions hereof, over the Common Shares
and over any other shares ranking junior to the Preferred Shares as may be
determined in the case of such series of Preferred Shares.
3. VOTING RIGHTS
3.1 Except as otherwise provided by law or in accordance with any voting
rights which may from time to time be attached to any series of Preferred
Shares, the holders
-8-
<PAGE>
of the Preferred Shares as a class shall not be entitled as such to receive
notice of, to attend or to vote at any meeting of the shareholders of the
Corporation.
F. SERIES A NON-VOTING PREFERRED SHARES
1. SERIES RIGHTS
1.1 Designation and Number
The first series of Preferred Shares shall consist of 100,000,000,000
Preferred Shares, which shares shall be designated as Series A Non-Voting
Preferred Shares (the "Series A Non-Voting Preferred Shares") and which, in
addition to the rights, privileges, restrictions and conditions attached to the
Preferred Shares as a class, shall have attached thereto the rights, privileges,
restrictions and conditions as set forth herein. The Corporation shall only
issue Series A Non-Voting Preferred Shares pursuant to the Purchase Agreement or
upon the conversion of Series B Subordinate Voting Preferred Shares or upon the
conversion of the Class B Subordinate Voting Shares in compliance with the terms
of the Shareholders Agreement.
1.2 Dividends
The holders of Series A Non-Voting Preferred Shares shall be entitled to
receive dividends equivalent on a per share basis to any dividends declared,
paid, issued or distributed with respect to shares of Common Shares into which
such share of Series A Non-Voting Preferred Shares could be converted pursuant
to the provisions of Section 1.6 of this Article C, on the record date for the
determination of holders of Common Shares entitled to such dividends. The Board
of Directors may not declare, and the Corporation shall not pay, issue or
distribute, any dividend on any Common Shares unless simultaneously the Board of
Directors declares, and the Corporation pays, issues or distributes the dividend
on the Series A Non-Voting Preferred Shares specified in the first sentence of
this Section 1.2. The holders of Series A Non-Voting Preferred Shares shall not
be entitled to any dividend other than, or in excess of, the dividends as
hereinbefore provided.
1.3 Voting Rights
Except as required by law or otherwise provided for in this Article C, the
holders of the Series A Non-Voting Preferred Shares shall not be entitled to
vote at any meeting of the shareholders of the Corporation. The holders of the
Series A Non-Voting Preferred Shares shall be entitled to receive notice of and
to attend (in person or by proxy) and be heard at all
-9-
<PAGE>
meetings of the shareholders of the Corporation (other than separate meetings of
the holders of the shares of any other class of shares of the Corporation or of
the shares of any series of shares of any other class of shares of the
Corporation).
1.4 Retired Shares
Any Series A Non-Voting Preferred Shares converted, purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. None of such Series A
Non-Voting Preferred Shares shall be reissued by the Corporation.
1.5 Liquidation, Dissolution or Winding Up
(1) Upon (i) any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, (ii) a sale of all or substantially all of the
assets of the Corporation or (iii) a reorganization of the Corporation required
by any court or administrative body in order to comply with any provision of law
(each of the events referred to in clauses (i), (ii) and (iii) being referred to
as a "Liquidation"), the holders of Series A Non-Voting Preferred Shares shall
be entitled to receive and to be paid out of assets of the Corporation available
for distribution to its shareholders, before any payment or distribution shall
be made on any Junior Shares, the greater of (i) the Series A Non-Voting
Liquidation Value with respect to each such outstanding Series A Non-Voting
Preferred Share, and (ii) the amount which would have been paid in such
Liquidation, based upon the number of Class A Non-Voting Shares into which a
Series A Non-Voting Preferred Share could be converted pursuant to the
provisions of Section 1.6 of this Article C. If, upon any Liquidation of the
Corporation, the assets of the Corporation available for distribution shall be
insufficient to pay in full the Series A Non-Voting Liquidation Value with
respect to each outstanding Series A Non-Voting Preferred Share, then such
assets shall be distributed among the holders of Series A Non-Voting Preferred
Shares ratably in accordance with the respective amounts that would be payable
on such Series A Non-Voting Preferred Shares if such assets were sufficient to
permit payment in full of all amounts payable thereon.
(2) After the payment to the holders of Series A Non-Voting Preferred
Shares of the full amount of the liquidating distribution to which they are
entitled under this Section 1.5, the holders of the Series A Non-Voting
Preferred Shares as such shall have no right or claim to any of the remaining
assets of the Corporation and shall not be entitled to share in any further
distribution of assets of the Corporation.
(3) Any consolidation, merger or other business combination of the
Corporation with or into any other Person (as defined in Section 1.13 of this
Article C) or Persons shall be deemed to be a Liquidation for purposes of this
Section 1.5, except for any
-10-
<PAGE>
such merger, consolidation or other business combination where, after the
completion of such transaction, the holders of voting shares in the capital of
the Corporation immediately prior to such merger, consolidation or other
business combination will beneficially own a majority of the voting shares in
the capital of the surviving or acquiring entity. Notwithstanding the foregoing,
no consolidation, merger or other business combination of the Corporation with
or into any other Person shall be deemed to be a Liquidation for the purposes of
this Section 1.5 if the holders of not less than 85% of the issued and
outstanding Series A Non-Voting Preferred Shares waive in writing the provisions
of this Section 1.5 with respect to such event.
(4) "Series A Non-Voting Liquidation Value" determined as of any date shall
mean, in respect of each Series A Non-Voting Preferred Share, the sum of (A) an
amount equal to the Initial Purchase Price plus an amount equal to six percent
(6%) of the Initial Purchase Price, compounded annually on each anniversary of
the Initial Issue Date prior to the date of determination and (B) all declared
but unpaid dividends per Series A Non-Voting Preferred Shares, if any. The
Series A Non-Voting Liquidation Value shall also be subject to adjustment as
provided in Section 1.5(6) of this Article C.
(5) Notwithstanding the foregoing, (i) the rate of six percent (6%)
referred to in Clause (A) of Section 1.5(4) of this Article C shall be read as
eight percent (8%) from such time and as long as an Event of Default shall have
occurred and be continuing and (ii) no amount shall be added to the Initial
Purchase Price pursuant to clause (A) of Section 1.5(4) of this Article C if the
Corporation shall consummate a Qualified IPO prior to the first anniversary of
the Initial Issue Date.
(6) The Series A Non-Voting Liquidation Value shall be multiplied by a
factor equal to the sum of (x) 1.00 and (y) the Additional Issuance Ratio if and
for so long as the Corporation is in default in the performance of or compliance
with Section 1.4(a), 1.4(b) or 1.4(c) of the Purchase Agreement.
1.6 Conversion
(1) If a Conversion Event occurs, each Series A Non-Voting Preferred Share
may, at the option of the Corporation, and in compliance with the provisions of
Section 1.6(4) of this Article C, be converted into a number of Class A
Non-Voting Shares equal to the Conversion Ratio. In addition, at the option of
the holder of any Series A Non-Voting Preferred Shares, such holder shall have
the right, at any time and from time to time, by written notice to the
Corporation, to convert each Series A Non-Voting Preferred Share owned by such
holder into (a) a number of Class A Non-Voting Shares equal in the aggregate to
the Conversion Ratio or (b) Series B Subordinate Voting Preferred Shares on a
one for one basis, in each case without payment of any additional consideration.
-11-
<PAGE>
(2) The Conversion Ratio, determined at any time, shall equal one (1.00)
plus an adjustment equal to six percent (6%) of the Conversion Ratio, compounded
annually on each anniversary of the Initial Issue Date prior to the date of
determination but, from such time and as long as an Event of Default shall have
occurred and be continuing, the rate of six percent (6%) referred to above in
this Section 1.6(2) shall be read as eight percent (8%); provided, however, that
if the Corporation consummates a Qualified IPO prior to the first anniversary of
the Initial Issue Date then no adjustment shall be made pursuant to this
sentence. The Conversion Ratio shall also be adjusted as provided below in this
Section 1.6(2). The Conversion Ratio shall be multiplied by a factor equal to
the sum of (x) 1.00 and (y) the Additional Issuance Ratio if and for so long as
the Corporation is in default in the performance of or compliance with Section
1.4(a), 1.4(b) or 1.4(c) of the Purchase Agreement. The Conversion Ratio shall
also be subject to adjustment from time to time as follows:
(a) If the Corporation at any time or from time to time after the Initial
Issue Date (A) pays any dividend or makes any distribution in additional Common
Shares of the Corporation or of securities convertible into, or exchangeable or
exercisable for, shares of Common Shares of the Corporation, (B) subdivides the
outstanding Common Shares, (C) combines the outstanding Common Shares into a
smaller number of shares or (D) issues by reclassification of the Common Shares
any shares in the capital of the Corporation, then, and in each such case, the
Conversion Ratio in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of Series A
Non-Voting Preferred Shares thereafter convertible into Class A Non-Voting
Shares pursuant to this Section 1.6 of this Article C shall be entitled to
receive the number and type of Class A Non-Voting Shares or other securities of
the Corporation which such holder would have owned or have been entitled to
receive after the happening of any of the events described above had such Series
A Non-Voting Preferred Shares been converted into Class A Non-Voting Shares
immediately prior to the happening of such event or the record date therefore,
whichever is earlier. An adjustment made pursuant to this clause (a) shall
become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of Common Shares entitled to receive such dividend or distribution,
or (y) in the case of such subdivision, reclassification or combination, at the
close of business on the day upon which such corporate action becomes effective.
(b) If the Corporation issues to all (or substantially all) holders of
Common Shares any rights or subscriptions to purchase Common Shares or Common
Share Equivalents after the Initial Issue Date at a price per Common Share (or
having a conversion or exercise price per share in the case of Common Share
Equivalents) of less than either (i) the Series A Non-Voting Liquidation Value
or (ii) the Market Price of the Common Shares on the earlier
-12-
<PAGE>
of the date of such issuance or the record date therefor (the "Applicable Date")
then, in each such case the Conversion Ratio shall be adjusted by multiplying
(A) the Conversion Ratio in effect at the close of business on the day
immediately prior to the Applicable Date by (B) a fraction, the numerator of
which shall be the sum of (1) the number of Common Shares outstanding at the
close of business on the date immediately prior to the Applicable Date and (2)
the number of additional Common Shares issued or issuable upon acceptance,
conversion, exchange or exercise of such rights or subscriptions (or upon
conversion, exchange or exercise of Common Share Equivalents issued or issuable
pursuant to such rights or subscriptions), and the denominator of which shall be
the sum of (x) the number of Common Shares outstanding at the close of business
on the date immediately prior to the Applicable Date and (y) the number of
Common Shares which would be purchasable for the aggregate consideration
received by the Corporation upon issuance of such Common Shares or Common Share
Equivalents or receivable by the Corporation for the total number of Common
Shares issuable upon acceptance, conversion, exchange or exercise of such rights
or subscriptions (or upon conversion, exchange or exercise of Common Share
Equivalents issued or issuable pursuant to such rights or subscriptions) if the
price per share for such purchase, conversion, exchange or exercise was equal to
the greater of (i) the Series A Non-Voting Liquidation Value or (ii) the Market
Price of the Common Shares as of the Applicable Date. An adjustment made
pursuant to this clause (b) shall become effective immediately after the close
of business on the Applicable Date.
(c) Except with respect to Deemed Outstanding Securities (as defined
below), if the Corporation issues any Common Shares (or Common Share
Equivalents) after the Initial Issue Date at a price per Common Share (or having
a conversion or exercise price per share in the case of Common Share
Equivalents) of less than either (i) the Series A Non-Voting Liquidation Value
or (ii) the Market Price of the Common Shares on the date of issuance of such
Common Shares (or Common Share Equivalents), then, in each such case, the
Conversion Ratio shall be adjusted by multiplying (A) the Conversion Ratio in
effect at the close of business on the day immediately prior to the date of
issuance of such Common Shares (or Common Share Equivalents) by (B) a fraction,
the numerator of which shall be the sum of (l) the number of Common Shares
outstanding at the close of business on the date immediately prior to the date
of issuance of such Common Shares (or Common Share Equivalents) and (2) the
number of such additional Common Shares and the number of Common Shares issued
or issuable upon conversion,
-13-
<PAGE>
exchange or exercise of such Common Share Equivalents, and the denominator of
which shall be the sum of (x) the number of Common Shares outstanding on the
date immediately prior to the date of issuance of such Common Shares (or Common
Share Equivalents) and (y) the number of Common Shares which would be
purchasable for the aggregate consideration received by the Corporation upon
issuance of such Common Shares or Common Share Equivalents or receivable by the
Corporation for the total number of Common Shares issuable or issuable upon
conversion, exchange or exercise of Common Share Equivalents if the price per
share for such purchase, conversion, exchange or exercise was equal to the
greater of (i) the Series A Non-Voting Liquidation Value or (ii) the Market
Price of the Common Shares as of the date of issuance of such Common Shares (or
Common Share Equivalents). An adjustment made pursuant to this clause (c) shall
be made on the next Business Day following the date on which any such issuance
is made and shall be effective retroactively to the close of business on the
date of such issuance. "Deemed Outstanding Securities" shall mean (i) the stock
options and Class A Non-Voting Shares to be issued upon the exercise of such
stock options, initially issued or issuable, or Permitted Reissued Options (as
defined in the Purchase Agreement) pursuant to the 1998 Long Term Incentive and
Share Award Plan (Amended) of the Corporation exercisable for a maximum of
4,445,813 Class A Non-Voting Shares; (ii) any Series A Non-Voting Preferred
Shares issued pursuant to the Purchase Agreement or any Class A Non-Voting
Shares or Series B Subordinate Voting Preferred Shares issued on the conversion
of the Series A Non-Voting Preferred Shares; (iii) 4,500,000 Common Shares
issued, or to be issued, in consideration for the acquisition by the Corporation
of fiber assets and related rights and obligations from Ledcor Industries
Limited or Ledcor Industries Inc. under the amended and restated Share Purchase
Agreement dated September 7, 1999 between Ledcor Industries Limited, Ledcor
Industries Inc. and the Corporation; (iv) any Class A Non-Voting Shares issued
on conversion of the Series B Subordinate Voting Shares; (v) any Common Shares
or Common Share Equivalent issued pursuant to any Minority Roll-Up Transaction;
or (vi) any Common Shares, or Common Share Equivalents issued pursuant to an
event described in clauses (a) or (b) of this Section 1.6(2).
(d) For purposes of this Section 1.6(2) the aggregate consideration
receivable by the Corporation in connection with the issuance of Common Shares
and/or Common Share Equivalents shall be deemed to be equal to the sum of the
aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties, if any) of all such Common
Shares and/or Common Share Equivalents plus the minimum aggregate amount, if
any, payable upon conversion, exchange or exercise of any such Common Share
Equivalents. Upon the expiration or termination of any unconverted, unexchanged
or unexercised Common Share Equivalents for which an adjustment has been made
pursuant to clause (b) or clause (c) of this Section 1.6(2), the adjustments
shall forthwith be reversed to effect such Conversion Ratio as would have been
in effect at the time of such expiration or termination had such Common Share
Equivalents, to the extent outstanding immediately prior to such expiration or
termination, never been issued. The consideration received by the Corporation in
connection with the sale or issuance of Common Shares (or Common Share
Equivalents) shall be computed as follows:
(A) insofar as such consideration consists of cash, such consideration
shall equal the aggregate amount of cash received by the Corporation prior to
-14-
<PAGE>
amounts paid or payable for accrued interest or accrued dividends and prior to
any commissions or expenses paid by the Corporation;
(B) insofar as such consideration consists of property other than cash,
such consideration shall be calculated at the fair value thereof at the time of
such issue, as determined in good faith by the Board of Directors, which shall
be based upon a written opinion of an investment banking or appraisal firm of
national standing in the United States if such consideration is given a value
exceeding $10 million; and
(C) in the event Common Shares or Common Share Equivalents are issued
together with other securities or other assets of the Corporation for
consideration that is allocable to both such Common Shares and Common Share
Equivalents, and to such other securities and assets, the portion of such
consideration allocable to such Common Shares or Common Share Equivalents shall
be that set forth in the instruments and agreements issued or entered into in
connection with such transaction, and if no such allocation is so set forth,
then the portion of such consideration allocable to such Common Shares or Common
Share Equivalents, calculated as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(e) For purposes of this Section 1.6(2) the number of Common Shares at any
time outstanding shall mean the aggregate of all Common Shares then outstanding
(other than any Common Shares then owned or held by or for the account of the
Corporation).
(f) If the Corporation shall take a record of the holders of its Common
Shares for the purpose of entitling them to receive a dividend or other
distribution and shall thereafter, and before such dividend or distribution is
paid or delivered to shareholders entitled thereto, legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the
Conversion Ratio then in effect shall be made by reason of the taking of such
record, and any such adjustment previously made as a result of the taking of
such record shall be reversed.
(3) Subject to compliance with the provisions of Section 1.6(5) of this
Article C, each holder of Series A Non-Voting Preferred Shares shall be entitled
at any time and from time to time to have all or any part of the Series A
Non-Voting Preferred Shares held by such holder converted into validly issued,
fully paid and non-assessable Series B Subordinate Voting Preferred Shares upon
the basis of one Series B Subordinate Voting Preferred Share for each Series A
Non-Voting Preferred Share in respect of which the conversion right is
exercised.
(4) (a) Before the Corporation shall be entitled to convert Series A
Non-Voting Preferred Shares into Class A Non-Voting Shares pursuant to Section
1.6(1) of
-15-
<PAGE>
this Article C, the Corporation shall not less than 10 days and not more than 20
days before the date specified for conversion (the "Conversion Date") send by
prepaid first class mail or deliver to the registered address of each person who
at the date not more than 7 days prior to the date of mailing or delivery is a
registered holder of Series A Non-Voting Preferred Shares to be converted a
notice in writing of the intention of the Corporation to convert the Series A
Non-Voting Preferred Shares registered in the name of such holder. Accidental
failure or omission to give such notice to one (1) or more holders shall not
affect the validity of such conversion, but upon such failure or omission being
discovered notice shall be given forthwith to such holder or holders and such
notice shall have the same force and effect as if given in due time. Such notice
shall set out the number of Series A Non-Voting Preferred Shares held by the
person to whom it is addressed which are to be converted, the Conversion Ratio,
the Conversion Date and the place or places at which holders of Series A
Non-Voting Preferred Shares may present and surrender such shares for
conversion. After the giving of such notice in writing, the election of the
Corporation shall be irrevocable.
(b) Within three (3) days following the Conversion Date, the Corporation
shall, on presentation and surrender of the certificate or certificates
representing the Series A Non-Voting Preferred Shares called for conversion at
the place or places specified in the notice of conversion, issue and deliver to
such holder of Series A Non-Voting Preferred Shares, or to the nominee or
nominees of such holder, a certificate or certificates for the number of Class A
Non-Voting Shares entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on the Conversion Date, and
the person or persons entitled to receive the Class A Non-Voting Shares issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such Class A Non-Voting Shares as of such date. The issuance of
certificates for Class A Non-Voting Shares, upon conversion of the Series A
Non-Voting Preferred Shares, shall be made without charge to the holder but the
holder shall pay any governmental or other tax imposed on or in respect of such
conversion. If less than all of the Series A Non-Voting Preferred Shares
represented by any certificate are to be converted, the holder shall be entitled
to receive a new certificate representing the number of Series A Non-Voting
Preferred Shares represented by the original certificate which are not to be
converted.
(c) The Corporation shall have the right at any time on or after the
Conversion Date to deposit the certificate or certificates representing Class A
Non-Voting Shares into trust for holders of the Series A Non-Voting Preferred
Shares called for conversion, which have not at the date of such deposit been
surrendered in connection with such conversion. Certificates deposited into
trust shall be held by the Corporation or other designated person named in the
notice of conversion or in a subsequent notice to the registered holders of the
Series A Non-Voting Preferred Shares in respect of which the deposit was made.
Upon such deposit being made, the Series A Non-Voting Preferred Shares in
-16-
<PAGE>
respect of which such deposit shall have been made shall be deemed to have been
converted and the rights of the holders thereof after such deposit or such
Conversion Date, as the case may be shall be, limited to receiving the
certificate or certificates representing the Class A Non-Voting Shares to which
they are entitled upon presentation and surrender of the certificate or
certificates representing the Series A Non-Voting Preferred Shares being
converted.
(5) Before any holder of Series A Non-Voting Preferred Shares shall be
entitled to convert the same into Class A Non-Voting Shares or Series B
Subordinate Voting Preferred Shares such holder shall surrender the certificate
or certificates therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for the Series A Non-Voting Preferred Shares, together with a
written notice to the Corporation stating therein: the name or names in which
the certificate or certificates for Common Shares or Preferred Shares are to be
issued; the number of Series A Non-Voting Preferred Shares to be converted; and
notice of such holder's election to convert such Series A Non-Voting Preferred
Shares. After giving such notice in writing, the election of the holder of
Series A Non-Voting Preferred Shares shall be irrevocable although may be
subject to the condition described below when the conversion is in connection
with an underwritten public offering. The Corporation shall, within three (3)
days of such written notice, issue and deliver at such office to such holder of
Series A Non-Voting Preferred Shares, or to the nominee or nominees of such
holder, a certificate or certificates for the number of Class A Non-Voting
Shares or Series B Subordinate Voting Preferred Shares, as the case may be, to
which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the Series A Non-Voting Preferred Shares to be converted,
and the person or persons entitled to receive the shares of Class A Non-Voting
Shares or Series B Subordinate Voting Preferred Shares, as the case may be,
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Class A Non-Voting Shares or Series B Subordinate
Voting Preferred Shares, as the case may be, as of such date. If the conversion
is in connection with an underwritten public offering of securities (other than
a Qualified IPO), the conversion into Common Shares may, at the option of any
holder tendering Series A Non-Voting Preferred Shares for conversion, be
conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Shares upon conversion of the Series A Non-Voting Preferred Shares shall
not be deemed to have converted such Series A Non-Voting Preferred Shares until
immediately prior to the closing of such sale of securities. The issuance of
certificates for Class A Non-Voting Shares or Series B Subordinate Voting
Preferred Shares, as the case may be, upon conversion of the Series A Non-Voting
Preferred Shares shall be made without charge to the holder but the holder shall
pay any stamp, documentary or similar tax imposed on or in respect of such
conversion. If less than all of the Series A Non-Voting Preferred Shares
represented by any certificate are to be
-17-
<PAGE>
converted, the holder shall be entitled to receive a new certificate
representing the number of Series A Non-Voting Preferred Shares which are not to
be converted.
(6) The Corporation shall at no time close its transfer books against the
transfer of any Series A Non-Voting Preferred Shares, or of any Class A
Non-Voting Shares or Series B Subordinate Voting Preferred Shares issuable upon
the conversion of any Series A Non-Voting Preferred Shares, in any manner which
interferes with the timely conversion of such Series A Non-Voting Preferred
Shares, except as may otherwise be required to comply with applicable laws or
the provisions of Schedule II to these Articles.
(7) As used in this Section 1.6 the term "Class A Non-Voting Shares" shall
mean and include the Corporation's Class A Non-Voting Shares as constituted on
the Initial Issue Date, and shall also include any shares of any class of the
capital of the Corporation thereafter authorized which shall neither be limited
to a fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends nor be entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation provided that the Class A Non-Voting Shares receivable upon
conversion of Series A Non-Voting Preferred Shares shall include only shares
designated as Class A Non-Voting Shares of the Corporation on the Initial Issue
Date, or in case of any reorganization or reclassification of the outstanding
shares thereof, the shares, securities or assets to be issued in exchange for
such Class A Non-Voting Shares pursuant thereto.
(8) If the Corporation shall be a party to any transaction including
without limitation, an amalgamation, arrangement, consolidation, sale of all or
substantially all of the Corporation's assets or a reorganization,
reclassification or recapitalization of the capital of the Corporation but
excluding any transaction for which provision for adjustment is otherwise made
in this Section 1.6 (each of the foregoing being referred to as a
"Transaction"), in each case, as a result of which Class A Non-Voting Shares are
converted into the right to receive shares, securities or other property
(including, without limitation, cash or any combination thereof), each Series A
Non-Voting Preferred Share shall thereafter be convertible into the number of
shares or other securities or property to which a holder of the number of Class
A Non-Voting Shares of the Corporation deliverable upon conversion of such
Series A Non-Voting Preferred Shares would have been entitled upon such
Transaction; and, in any such case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the provisions set forth
in this Section 1.6 with respect to the rights and interest thereafter of the
holders of the Series A Non-Voting Preferred Shares, to the end that the
provisions set forth in this Section 1.6 shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares or other property
thereafter deliverable upon the conversion of the Series A Non-Voting Preferred
Shares. The Corporation shall not effect any Transaction unless prior to or
simultaneously with the consummation thereof the Corporation
-18-
<PAGE>
or purchaser, as the case may be, shall provide in its charter document that
each Series A Non-Voting Preferred Share shall be converted into such shares,
securities or property as, in accordance with the foregoing provisions, each
such holder is entitled to receive. The provisions of this Section 1.6(8) shall
similarly apply to successive Transactions.
(9) No fractional shares shall be issued upon the conversion of any share
or shares of the Series A Non-Voting Preferred Shares, and the number of Common
Shares to be issued shall be rounded down to the nearest whole share. Whether or
not fractional shares are issuable upon such conversion shall be determined on
the basis of the total number of shares of Series A Non-Voting Preferred Shares
the holder is at the time converting into Common Shares or Series B Subordinate
Voting Preferred Shares and the number of Common Shares or Series B Subordinate
Voting Preferred Shares issuable upon such aggregate conversion.
(10) If an event not specified in this Section 1.6 occurs that has
substantially the same economic effect on the Series A Non-Voting Preferred
Shares as those specifically enumerated above in this Section 1.6, then this
Section 1.6 shall be construed liberally, mutatis mutandis, in order to give the
holders of Series A Non-Voting Preferred Shares the intended benefit of the
protections provided under this Section 1.6. In such event, the Corporation's
Board of Directors shall make an appropriate adjustment in the Conversion Ratio
so as to protect the rights of the holders of Series A Non-Voting Preferred
Shares; provided that no such adjustment shall increase or decrease the
Conversion Ratio as otherwise determined pursuant to this Section 1.6 or
decrease the number of Class A Non-Voting Shares issuable upon conversion of
each Series A Non-Voting Preferred Share.
(11) The Corporation will not, by amendment of its Articles or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, and will at all times in good faith assist in the
carrying out of all the provisions of this Section 1.6 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series A Non-Voting Preferred Shares
against impairment.
(12) All calculations under this Section 1.6 shall be made to (a) the
nearest cent or (b) the nearest one hundredth of a share or (c) the nearest one
percent, as the case may be.
1.7 Notice of Certain Events
In case, at any time while any Series A Non-Voting Preferred Shares are
outstanding,
-19-
<PAGE>
(1) the Corporation shall declare a dividend (or any other distribution) on
its Common Shares;
(2) the Corporation shall authorize the issuance to the holders of its
Common Shares, of Common Share Equivalents, or rights or warrants to subscribe
for or purchase Common Shares or of any other subscriptions rights or warrants;
(3) the Corporation shall authorize any reorganization, reclassification or
recapitalization of its Common Shares;
(4) the Corporation shall authorize the consolidation or merger of the
Corporation into or with any other person, the sale or transfer of all or
substantially all of its business or assets to another person, or any other
similar business combination or transaction; or
(5) the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up on the Corporation,
then the Corporation shall promptly deliver to the transfer agent of the Series
A Non-Voting Preferred Shares, if any, and to each of the holders of Series A
Non-Voting Preferred Shares at their last addresses as they shall appear on the
register for the Series A Non-Voting Preferred Shares, at least 15 days before
the date hereafter specified (or the earlier of the dates hereinafter specified,
in the event that more than one date is specified), a notice describing such
event and stating (A) the date on which a record is to be taken for the purpose
of such dividend, distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Shares of record to be
entitled to such dividend, distribution, rights or warrants are to be
determined, or (B) the date on which any such reclassification, reorganization,
recapitalization, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Shares of record shall be entitled
to exchange their Common Shares for securities or other property (including
cash), if any, deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up.
1.8 Reports as to Adjustment
Upon any adjustment of the Conversion Ratio then in effect pursuant to the
provisions of Section 1.6 of this Article C then, and in each such case, the
Corporation shall promptly deliver to each of the holders of the Series A
Non-Voting Preferred Shares, a certificate signed by an officer of the
Corporation setting forth in reasonable detail the event requiring the
adjustment, the method by which such adjustment was calculated and the
-20-
<PAGE>
Conversion Ratio then in effect following such Adjustment. Where appropriate,
such notice to holders of the Series A Non-Voting Preferred Shares may be given
in advance.
1.9 Mandatory Redemption
On November 2, 2009 (the "Redemption Date"), the Corporation shall redeem
all the Series A Non-Voting Preferred Shares then outstanding and not
theretofore surrendered for conversion, as follows: Thirty days prior to the
Redemption Date, the Corporation shall give written notice to all holders of
Series A Non-Voting Preferred Shares which shall specify the Redemption Date.
For each Series A Non-Voting Preferred Share which is to be redeemed, the
Corporation shall be obligated on the Redemption Date to pay and deliver share
certificates to the holder thereof (upon surrender by such holder at the
Corporation's principal executive office of the certificate representing such
share or an Affidavit of Loss with respect thereto) (a) an amount in immediately
available funds equal to the Series A Non-Voting Liquidation Value, and (b) such
number of Class A Non-Voting Shares as have an aggregate Market Price (as
determined on the day immediately before the Redemption Date) equal to the
excess of the Market Price (as determined on the day immediately before the
Redemption Date) of the Series A Non-Voting Preferred Share over the Series A
Non-Voting Liquidation Value. All Class A Non-Voting Shares shall, when issued
as contemplated herein, be validly issued, fully paid and non-assessable. If the
funds of the Corporation legally available for redemption of the Series A
Non-Voting Preferred Shares on the Redemption Date are insufficient to redeem
the total number of such shares to be redeemed on such date, then those funds
which are legally available shall be used to redeem the maximum possible number
of such shares ratably among the holders thereof, based upon the aggregate
Series A Non-Voting Liquidation Value of such Series A Non-Voting Preferred
Shares held by each such holder. At any time thereafter when additional funds of
the Corporation are legally available for the redemption of Series A Non-Voting
Preferred Shares, such funds shall immediately be used to redeem on a similar
ratable basis the balance of such shares. Notwithstanding the foregoing, each
holder of Series A Non-Voting Preferred Shares shall be entitled to convert all
or any portion of such holder's shares pursuant to Section 1.6 of this Article C
prior to the Redemption Date and thereafter until such Series A Non-Voting
Preferred Shares are redeemed.
1.10 Reservation of Shares Issuable Upon Conversion
The Corporation shall at all times reserve and keep available out of its
authorized but unissued Class A Non-Voting Shares and out of its authorized but
unissued Preferred Shares solely for the purpose of effecting the conversion of
the issued or issuable Series A Non-Voting Preferred Shares, such number of its
Class A Non-Voting Shares and Series B Subordinate Voting Preferred Shares, as
the case may be, as shall from time to time be sufficient to effect the
conversion of all outstanding Series A Non-Voting Preferred Shares, and if
-21-
<PAGE>
at any time the number of authorized but unissued Class A Non-Voting Shares or
Series B Subordinate Voting Preferred Shares shall not be sufficient to effect
the conversion of all then outstanding Series A Non-Voting Preferred Shares, the
Corporation will take all such corporate action as may be necessary to increase
its authorized but unissued Class A Non-Voting Shares or Series B Subordinate
Voting Preferred Shares to such number of shares as shall be sufficient for such
purpose. All Class A Non-Voting Shares and Series B Subordinate Voting Preferred
Shares shall, when issued upon conversion as contemplated herein, be validly
issued, fully paid and non-assessable.
1.11 Listing on Securities Exchanges, etc.
The Corporation will list on each national securities exchange on which any
Common Shares may at any time be listed, subject to official notice of issuance
upon the conversion of the Series A Non-Voting Preferred Shares, all Class A
Non-Voting Shares from time to time issuable upon the conversion of Series A
Non-Voting Preferred Shares and will maintain such listing as long as any Class
A Non-Voting Shares are listed.
1.12 Certain Covenants
Any registered holder of Series A Non-Voting Preferred Shares may proceed
to protect and enforce its rights and the rights of any other holders of Series
A Non-Voting Preferred Shares with any and all remedies available at law or in
equity.
1.13 Definitions
In addition to any other terms defined herein for purposes of this Article
C, the following terms shall have the meaning indicated (references to
particular sections of the Purchase Agreement or Shareholders Agreement shall
include any amended, successor or substitute provisions in such agreements, as
they may be amended from time to time in accordance with their respective
terms):
"Additional Issuance Ratio" is defined in Section 1.4(b) of the Purchase
Agreement.
"Affidavit of Loss" an affidavit or agreement satisfactory to the
Corporation to indemnify the Corporation (without the need to post any bond or
other security for such obligation) from any loss incurred in connection with
the loss of any share certificate evidencing shares of the Corporation's Capital
Securities.
-22-
<PAGE>
"Business Day" means any day other than a Saturday, Sunday or a day when
commercial banks in New York City or Vancouver, British Columbia are required to
be closed.
"Capital Securities" means, as to any Person that is a corporation, the
authorized shares of such Person's capital stock, including all classes of
common, preferred, voting and non voting capital stock, and, as to any Person
that is not a corporation or an individual, the ownership interests in such
Person, including, without limitation, the right to share in profits and losses,
the right to receive distributions of cash and property, and the right to
receive allocations of items of income, gain, loss, deduction and credit and
similar items from such Person, whether or not such interests include voting or
similar rights entitling the holder thereof to exercise control over such
Person.
"Common Share Equivalent" shall mean securities convertible into, or
exchangeable or exercisable for Common Shares of any class.
"Common Shares" means the Class A Non-Voting Shares, Class B Subordinate
Voting Shares and Class C Multiple Voting Shares in the capital of the
Corporation.
"Conversion Event" means (i) a Qualified IPO or (ii) (x) there shall occur
an underwritten public offering providing gross proceeds to the Corporation and
selling shareholders of at least U.S. $150,000,000 before deducting underwriting
discounts, commissions and offering expenses and (y) thereafter the closing
price for a period of 45 consecutive trading days per listed Common Share is at
least 300% of the per share price obtained by dividing US$345,000,000 by the
number of Series A Non-Voting Preferred Shares, Common Shares or Common Share
Equivalents issued by the Corporation pursuant to Section 1.1 and 1.4 of the
Purchase Agreement (as equitably adjusted to reflect any stock split, stock
dividend, combination, reorganization, recapitalization, reclassification or
other similar event). For purposes of clause (ii) above, the closing price of
each day shall be the last sale price or, in case no such sale takes place on
such day, the average of the closing bid and asked prices in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
listed Common Shares are listed or the last quoted sale price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the NASDAQ.
"Conversion Ratio" determined as of any date, shall equal the number of
Class A Non-Voting Shares (in the aggregate) into which one share of Series A
Non-Voting Preferred Shares is convertible pursuant to Section 1.6 of this
Article C.
The term "distribution" shall include the transfer of cash or property to
the holders of a class of shares of the Corporation, without consideration,
whether by way of
-23-
<PAGE>
dividend or otherwise (except a dividend in shares of such class), or the
purchase or redemption of shares of the Corporation, for cash or property,
including such transfer, purchase or redemption by a subsidiary of the
Corporation. The time of any distribution by way of dividends shall be the date
of declaration thereof, and the time of any distribution by purchase or
redemption of shares shall be the date on which cash or property is transferred
by the Corporation, whether or not pursuant to a contract of an earlier date;
provided, however, that, where a debt security is issued in exchange for shares,
the time of the distribution is the date when a Corporation acquires the shares
for such exchange.
"Dollars" and the symbol "$" shall mean, unless otherwise indicated, U.S.
dollars, and the symbol "C$" shall refer to Canadian dollars.
"Employee Shares" is defined in Section 1.4(b) of the Purchase Agreement.
"Event of Default" means (i) the Corporation shall default in the
performance of or compliance with the terms of Section 1.9 of this Article C or
(ii) Ledcor Inc. shall default in the performance of or compliance with Section
12.4 of the Shareholders Agreement.
"Initial Issue Date" means the date on which the first Series A Non-Voting
Preferred Shares were issued by the Corporation.
"Initial Purchase Price" means, U.S. $38.909 per Series A Non-Voting
Preferred Share, (as equitably adjusted to reflect any stock split, stock
dividend, combination, reorganization, recapitalization, reclassification or
other similar event involving Common Shares after the Initial Issue Date).
"Junior Shares" shall mean any of the Corporation's Common Shares and all
other Capital Securities of the Corporation (other than the Series A Non-Voting
Preferred Shares and the Series B Subordinate Voting Preferred Shares, which
shall rank equally with the Series A Non-Voting Preferred Shares).
"Market Price" of any security with a Minimum Float means the average of
the closing prices of such security's sales on all securities exchanges on which
such security may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is
-24-
<PAGE>
being determined and the 20 consecutive Business Days prior to such day. If
there is not a Minimum Float with respect to the Series A Non-Voting Preferred
Shares, then the Market Price of a Series A Non-Voting Preferred Share shall be
determined as equal to the Market Price of a Common Share times the number of
Common Shares into which the Series A Non-Voting Preferred Share is convertible
as of the date of determination of the Market Price. If at any time such
security does not have a Minimum Float or is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined jointly by the
Corporation and the holders of a majority of the Series A Non-Voting Preferred
Shares. If such parties are unable to reach agreement within a reasonable period
of time, such fair value shall be determined by an independent appraiser
experienced in valuing securities jointly selected by the Corporation and the
holders of a majority of the Series A Non-Voting Preferred Shares. If the
Corporation and the holders of a majority of the Series A Non-Voting Preferred
Shares are unable to agree on the selection of an independent appraiser within
30 days of the date when the holders of a majority of the Series A Non-Voting
Preferred Shares have first delivered notice in writing to the Corporation of
the name of a proposed independent appraiser, then the holders of a majority of
the Series A Non-Voting Preferred Shares may request the President of the
American Arbitration Association to appoint an independent appraiser and such
appointment shall be final and binding for purposes of determination of the
Market Price in question. The determination of such appraiser shall be final and
binding upon the parties, and the Corporation shall pay the fees and expenses of
such appraiser.
"Minimum Float" is achieved if the product of (i) the closing price of a
security listed on any securities exchange or quoted in the NASDAQ system or the
over-the-counter market multiplied by (ii) the number of shares or units of such
security registered pursuant to the United States Securities Act of 1933, as
then in effect, and held by the public is at least U.S. $150,000,000.
"Minority Roll-Up Transaction" is defined in Section 1.4(b) of the Purchase
Agreement.
"Minority Roll-Up Factor" means the sum of (i) 1.00 plus (ii) the
Additional Issuance Ratio.
"Minority Roll-Up Shares" is defined in Section 1.4(b) of the Purchase
Agreement.
"Person" shall have the meaning given it in the Canada Business
Corporations Act.
"Public Sale" is defined in Section 1.27 of the Shareholders Agreement.
-25-
<PAGE>
"Purchase Agreement" means the Preferred Share Purchase Agreement dated
September 7, 1999 among the Corporation and the parties named as "Investors"
therein, as the same may be amended from time to time in accordance with its
terms.
"Qualified IPO" shall mean the Corporation's first bona fide underwritten
public offering of Common Shares pursuant to a preliminary prospectus and a
prospectus if under Canadian federal and provincial securities laws and pursuant
to an effective registration statement under the United States Securities Act of
1933, as amended, (i) resulting in at least U.S. $150,000,000 of gross aggregate
proceeds to the Corporation and any selling stockholders before deducting
underwriting discounts and commissions and offering expenses, (ii) the gross
offering price per share of which is at least 300% of the per share price
obtained by dividing U.S.$345,000,000 by the number of Series A Non-Voting
Preferred Shares, Common Shares or Common Share Equivalents issued by the
Corporation pursuant to Sections 1.1 and 1.4 of the Purchase Agreement (as
equitably adjusted to reflect any stock split, stock dividend, combination,
reorganization, recapitalization, reclassification or other similar event), and
(iii) upon the consummation of which the Class A Non-Voting Shares or Class B
Subordinate Voting Shares are listed on The Toronto Stock Exchange and on a U.S.
national securities exchange or quoted on Nasdaq National Market.
"Shareholders Agreement" means the Shareholders Agreement dated as of
September 9, 1999 among the Corporation and the parties named therein, as the
same may be amended from time to time in accordance with its terms.
G. SERIES B SUBORDINATE VOTING PREFERRED SHARES
1. SERIES RIGHTS
1.1 Designation and Number
The second series of Preferred Shares shall consist of 100,000,000,000
Preferred Shares, which shares shall be designated as Series B Subordinate
Voting Preferred Shares (the "Series B Subordinate Voting Preferred Shares") and
which, in addition to the rights, privileges, restrictions and conditions
attached to the Preferred Shares as a class, shall have attached thereto the
rights, privileges, restrictions and conditions as set forth herein. The
Corporation shall only issue Series B Subordinate Voting Preferred Shares
pursuant to the Purchase Agreement or upon the conversion of Series A Non-Voting
Preferred Shares.
-26-
<PAGE>
1.2 Dividends
The holders of Series B Subordinate Voting Preferred Shares shall be
entitled to receive dividends equivalent on a per share basis to any dividends
declared, paid, issued or distributed with respect to shares of Common Shares
into which such share of Series B Subordinate Voting Preferred Shares could be
converted pursuant to the provisions of Section 1.6 of this Article D, on the
record date for the determination of holders of Common Shares entitled to such
dividends. The Board of Directors may not declare, and the Corporation shall not
pay, issue or distribute, any dividend on any Common Shares unless
simultaneously the Board of Directors declares, and the Corporation pays, issues
or distributes the dividend on the Series B Subordinate Voting Preferred Shares
specified in the first sentence of this Section 1.2. The holders of Series B
Subordinate Voting Preferred Shares shall not be entitled to any dividend other
than, or in excess of, the dividends as hereinbefore provided.
1.3 Voting Rights
The holders of the Series B Subordinate Voting Preferred Shares shall be
entitled, as such, to receive notice of and to attend (in person or by proxy)
and be heard at all meetings of the shareholders of the Corporation (other than
separate meetings of the holders of shares of any other class of shares of the
Corporation or of shares of any series of shares of any such other class of
shares) and to vote at all such meetings and each holder of Series B Subordinate
Voting Preferred Shares shall be entitled to one vote at any such meeting per
Series B Subordinate Voting Preferred Share held by such holder as at the record
date for such meeting.
1.4 Retired Shares
Any Series B Subordinate Voting Preferred Shares converted, purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. None of such Series B
Subordinate Voting Preferred Shares shall be reissued by the Corporation.
1.5 Liquidation, Dissolution or Winding Up
(1) Upon (i) any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, (ii) a sale of all or substantially all of the
assets of the Corporation or (iii) a reorganization of the Corporation required
by any court or administrative body in order to comply with any provision of law
(each of the events referred to in clauses (i), (ii) and (iii) being referred to
as a "Liquidation"), the holders of Series B Subordinate Voting Preferred Shares
shall be entitled to receive and to be paid out of assets of
-27-
<PAGE>
the Corporation available for distribution to its shareholders, before any
payment or distribution shall be made on any Junior Shares, the greater of (i)
the Series B Subordinate Voting Liquidation Value with respect to each such
outstanding Series B Subordinate Voting Preferred Share, and (ii) the amount
which would have been paid in such Liquidation, based upon the number of Class B
Subordinate Voting Shares into which a Series B Subordinate Voting Preferred
Share could be converted pursuant to the provisions of Section 1.6 of this
Article D. If, upon any Liquidation of the Corporation, the assets of the
Corporation available for distribution shall be insufficient to pay in full the
Series B Subordinate Voting Liquidation Value with respect to each outstanding
Series B Subordinate Voting Preferred Share, then such assets shall be
distributed among the holders of Series B Subordinate Voting Preferred Shares
ratably in accordance with the respective amounts that would be payable on such
Series B Subordinate Voting Preferred Shares if such assets were sufficient to
permit payment in full of all amounts payable thereon.
(2) After the payment to the holders of Series B Subordinate Voting
Preferred Shares of the full amount of the liquidating distribution to which
they are entitled under this Section 1.5, the holders of the Series B
Subordinate Voting Preferred Shares as such shall have no right or claim to any
of the remaining assets of the Corporation and shall not be entitled to share in
any further distribution of assets of the Corporation.
(3) Any consolidation, merger or other business combination of the
Corporation with or into any other Person or Persons shall be deemed to be a
Liquidation for purposes of this Section 1.5, except for any such merger,
consolidation or other business combination where, after the completion of such
transaction, the holders of voting shares in the capital of the Corporation
immediately prior to such merger, consolidation or other business combination
will beneficially own a majority of the voting shares in the capital of the
surviving or acquiring entity. Notwithstanding the foregoing, no consolidation,
merger or other business combination of the Corporation with or into any other
Person shall be deemed to be a Liquidation for the purposes of this Section 1.5
if the holders of not less than 85% of the issued and outstanding Series B
Subordinate Voting Preferred Shares waive in writing the provisions of this
Section 1.5 with respect to such event.
(4) "Series B Subordinate Voting Liquidation Value" determined as of any
date shall mean, in respect of each Series B Subordinate Voting Preferred Share,
the sum of (A) an amount equal to the Initial Purchase Price plus an amount
equal to six percent (6%) of the Initial Purchase Price, compounded annually on
each anniversary of the Initial Issue Date prior to the date of determination
and (B) all declared but unpaid dividends per Series B Subordinate Voting
Preferred Shares, if any. The Series B Subordinate Voting Liquidation Value
shall also be subject to adjustment as provided in Section 1.5(6) of this
Article D.
-28-
<PAGE>
(5) Notwithstanding the foregoing, (i) the rate of six percent (6%)
referred to in Clause (A) of Section 1.5(4) of this Article D shall be read as
eight percent (8%) from such time and as long as an Event of Default shall have
occurred and be continuing and (ii) no amount shall be added to the Initial
Purchase Price pursuant to clause (A) of Section 1.5(4) of this Article D if the
Corporation shall consummate a Qualified IPO prior to the first anniversary of
the Initial Issue Date.
(6) The Series B Subordinate Voting Liquidation Value shall be multiplied
by a factor equal to the sum of (x) 1.00 and (y) the Additional Issuance Ratio
if and for so long as the Corporation is in default in the performance of or
compliance with Section 1.4(a), 1.4(b) or 1.4(c) of the Purchase Agreement.
1.6 Conversion
(1) If a Conversion Event occurs, each Series B Subordinate Voting
Preferred Share may, at the option of the Corporation, and in compliance with
the provisions of Section 1.6(4) of this Article D, be converted into a number
of Class B Subordinate Voting Shares equal to the Conversion Ratio. In addition,
at the option of the holder of any Series B Subordinate Voting Preferred Shares,
such holder shall have the right, at any time and from time to time, by written
notice to the Corporation, to convert each Series B Subordinate Voting Preferred
Share owned by such holder into (a) a number of Class B Subordinate Voting
Shares equal in the aggregate to the Conversion Ratio or (b) Series A Non-Voting
Preferred Shares on a one for one basis, in each case without payment of any
additional consideration.
(2) The Conversion Ratio, determined at any time, shall equal one (1.00)
plus an adjustment equal to six percent (6%) of the Conversion Ratio, compounded
annually on each anniversary of the Initial Issue Date prior to the date of
determination but, from such time and as long as an Event of Default shall have
occurred and be continuing, the rate of six percent (6%) referred to above in
this Section 1.6(2) shall be read as eight percent (8%); provided, however, that
if the Corporation consummates a Qualified IPO prior to the first anniversary of
the Initial Issue Date then no adjustment shall be made pursuant to this
sentence. This Conversion Ratio shall also be adjusted as provided below in this
Section 1.6(2). The Conversion Ratio shall be multiplied by a factor equal to
the sum of (x) 1.00 and (y) the Additional Issuance Ratio if and for so long as
the Corporation is in default in the performance of or compliance with Section
1.4(a), 1.4(b) or 1.4(c) of the Purchase Agreement. The Conversion Ratio shall
also be subject to adjustment from time to time as follows:
(a) If the Corporation at any time or from time to time after the Initial
Issue Date (A) pays any dividend or makes any distribution in additional Common
Shares of the
-29-
<PAGE>
Corporation or of securities convertible into, or exchangeable or exercisable
for, shares of Common Shares of the Corporation, (B) subdivides the outstanding
Common Shares, (C) combines the outstanding Common Shares into a smaller number
of shares or (D) issues by reclassification of the Common Shares any shares in
the capital of the Corporation, then, and in each such case, the Conversion
Ratio in effect immediately prior to such event or the record date therefor,
whichever is earlier, shall be adjusted so that the holder of Series B
Subordinate Voting Preferred Shares thereafter convertible into Class B
Subordinate Voting Shares pursuant to this Section 1.6 shall be entitled to
receive the number and type of Class B Subordinate Voting Shares or other
securities of the Corporation which such holder would have owned or have been
entitled to receive after the happening of any of the events described above had
such Series B Subordinate Voting Preferred Shares been converted into Class B
Subordinate Voting Shares immediately prior to the happening of such event or
the record date therefore, whichever is earlier. An adjustment made pursuant to
this clause (a) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of Common Shares entitled to receive such dividend or
distribution, or (y) in the case of such subdivision, reclassification or
combination, at the close of business on the day upon which such corporate
action becomes effective.
(b) If the Corporation issues to all (or substantially all) holders of
Common Shares any rights or subscriptions to purchase Common Shares or Common
Share Equivalents after the Initial Issue Date at a price per Common Share (or
having a conversion or exercise price per share in the case of Common Share
Equivalents) of less than either (i) the Series B Subordinate Voting Liquidation
Value or (ii) the Market Price of the Common Shares on the earlier of the date
of such issuance or the record date therefor (the "Applicable Date") then, in
each such case the Conversion Ratio shall be adjusted by multiplying (A) the
Conversion Ratio in effect at the close of business on the day immediately prior
to the Applicable Date by (B) a fraction, the numerator of which shall be the
sum of (1) the number of Common Shares outstanding at the close of business on
the date immediately prior to the Applicable Date and (2) the number of
additional Common Shares issued or issuable upon acceptance, conversion,
exchange or exercise of such rights or subscriptions (or upon conversion,
exchange or exercise of Common Share Equivalents issued or issuable pursuant to
such rights or subscriptions), and the denominator of which shall be the sum of
(x) the number of Common Shares outstanding at the close of business on the date
immediately prior to the Applicable Date and (y) the number of Common Shares
which would be purchasable for the aggregate consideration received by the
Corporation upon issuance of such Common Shares or Common Share Equivalents or
receivable by the Corporation for the total number of Common Shares issuable
upon acceptance conversion, exchange or exercise of such rights or subscriptions
(or upon conversion, exchange or exercise of Common Share Equivalents issued or
issuable pursuant to such rights or subscriptions) if the price per share for
such purchase, conversion, exchange
-30-
<PAGE>
or exercise was equal to the greater of (i) the Series B Subordinate Voting
Liquidation Value or (ii) the Market Price of the Common Shares as of the
Applicable Date. An adjustment made pursuant to this clause (b) shall become
effective immediately after the close of business on the Applicable Date.
(c) Except with respect to Deemed Outstanding Securities (as defined
below), if the Corporation issues any Common Shares (or Common Share
Equivalents) after the Initial Issue Date at a price per Common Share (or having
a conversion or exercise price per share in the case of Common Share
Equivalents) of less than either (i) the Series B Subordinate Voting Liquidation
Value or (ii) the Market Price of the Common Shares on the date of issuance of
such Common Shares (or Common Share Equivalents), then, in each such case, the
Conversion Ratio shall be adjusted by multiplying (A) the Conversion Ratio in
effect at the close of business on the day immediately prior to the date of
issuance of such Common Shares (or Common Share Equivalents) by (B) a fraction,
the numerator of which shall be the sum of (l) the number of Common Shares
outstanding at the close of business on the date immediately prior to the date
of issuance of such Common Shares (or Common Share Equivalents) and (2) the
number of such additional Common Shares and the number of Common Shares issued
or issuable upon conversion, exchange or exercise of such Common Share
Equivalents, and the denominator of which shall be the sum of (x) the number of
Common Shares outstanding on the date immediately prior to the date of issuance
of such Common Shares (or Common Share Equivalents) and (y) the number of Common
Shares which would be purchasable for the aggregate consideration received by
the Corporation upon issuance of such Common Shares or Common Share Equivalents
or receivable by the Corporation for the total number of Common Shares issuable
or issuable upon conversion, exchange or exercise of Common Share Equivalents if
the price per share for such purchase, conversion, exchange or exercise was
equal to the greater of (i) the Series B Subordinate Voting Liquidation Value or
(ii) the Market Price of the Common Shares as of the date of issuance of such
Common Shares (or Common Share Equivalents). An adjustment made pursuant to this
clause (c) shall be made on the next Business Day following the date on which
any such issuance is made and shall be effective retroactively to the close of
business on the date of such issuance. "Deemed Outstanding Securities" shall
mean (i) the stock options and Class A Non-Voting Shares to be issued upon the
exercise of such stock options, initially issued or issuable, or Permitted
Reissued Options (as defined in the Purchase Agreement) pursuant to the 1998
Long Term Incentive and Share Award Plan (Amended) of the Corporation
exercisable for a maximum of 4,445,813 Class A Non-Voting Shares; (ii) any
Series A Non-Voting Preferred Shares issued pursuant to the Purchase Agreement
or any Class B Subordinate Voting Shares or Series A Non-Voting Preferred Shares
issued on the conversion of the Series B Subordinate Voting Preferred Shares;
(iii) 4,500,000 Common Shares issued, or to be issued, in consideration for the
acquisition by the Corporation of fiber assets and related rights and
obligations from Ledcor Industries Limited or Ledcor Industries
-31-
<PAGE>
Inc. under the amended and restated Share Purchase Agreement dated September 7,
1999 between Ledcor Industries Limited, Ledcor Industries Inc. and the
Corporation; (iv) any Class A Non-Voting Shares issued on conversion of the
Series B Subordinate Voting Shares; (v) any Common Shares or Common Share
Equivalents issued pursuant to a Minority Roll-Up Transaction; or (vi) any
Common Shares, or Common Share Equivalents issued pursuant to an event described
in clauses (a) or (b) of this Section 1.6(2).
(d) For purposes of this Section 1.6(2) the aggregate consideration
receivable by the Corporation in connection with the issuance of Common Shares
and/or Common Share Equivalents shall be deemed to be equal to the sum of the
aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties, if any) of all such Common
Shares and/or Common Share Equivalents plus the minimum aggregate amount, if
any, payable upon conversion, exchange or exercise of any such Common Share
Equivalents. Upon the expiration or termination of any unconverted, unexchanged
or unexercised Common Share Equivalents for which an adjustment has been made
pursuant to clause (b) or clause (c) of this Section 1.6(2), the adjustments
shall forthwith be reversed to effect such Conversion Ratio as would have been
in effect at the time of such expiration or termination had such Common Share
Equivalents, to the extent outstanding immediately prior to such expiration or
termination, never been issued. The consideration received by the Corporation in
connection with the sale or issuance of Common Shares (or Common Share
Equivalents) shall be computed as follows:
(A) insofar as such consideration consists of cash, such consideration
shall equal the aggregate amount of cash received by the Corporation prior to
amounts paid or payable for accrued interest or accrued dividends and prior to
any commissions or expenses paid by the Corporation;
(B) insofar as such consideration consists of property other than cash,
such consideration shall be calculated at the fair value thereof at the time of
such issue, as determined in good faith by the Board of Directors, which shall
be based upon a written opinion of an investment banking or appraisal firm of
national standing in the United States if such consideration is given a value
exceeding $10 million; and
(C) in the event Common Shares or Common Share Equivalents are issued
together with other securities or other assets of the Corporation for
consideration that is allocable to both such Common Shares and Common Share
Equivalents, and to such other securities and assets, the portion of such
consideration allocable to such Common Shares or Common Share Equivalents shall
be that set forth in the instruments and agreements issued or entered into in
connection with such transaction, and if no such allocation is so set forth,
then the portion of such consideration allocable to such Common Shares or Common
Share
-32-
<PAGE>
Equivalents, calculated as provided in clauses (A) and (B) above, as determined
in good faith by the Board of Directors.
(e) For purposes of this Section 1.6(2) the number of Common Shares at any
time outstanding shall mean the aggregate of all Common Shares then outstanding
(other than any Common Shares then owned or held by or for the account of the
Corporation).
(f) If the Corporation shall take a record of the holders of its Common
Shares for the purpose of entitling them to receive a dividend or other
distribution and shall thereafter, and before such dividend or distribution is
paid or delivered to shareholders entitled thereto, legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the
Conversion Ratio then in effect shall be made by reason of the taking of such
record, and any such adjustment previously made as a result of the taking of
such record shall be reversed.
(3) Subject to compliance with the provisions of Section 1.6(5) of this
Article D, each holder of Series B Subordinate Voting Preferred Shares shall be
entitled at any time and from time to time to have all or any part of the Series
B Subordinate Voting Preferred Shares held by such holder converted into validly
issued, fully paid and non-assessable Series A Non-Voting Preferred Shares upon
the basis of one Series A Non-Voting Preferred Share for each Series B
Subordinate Voting Preferred Share in respect of which the conversion right is
exercised.
(4) (a) Before the Corporation shall be entitled to convert Series B
Subordinate Voting Preferred Shares into Class B Subordinate Voting Shares
pursuant to Section 1.6(1) of this Article D, the Corporation shall not less
than 10 days and not more than 20 days before the date specified for conversion
(the "Conversion Date") send by prepaid first class mail or deliver to the
registered address of each person who at the date not more than 7 days prior to
the date of mailing or delivery is a registered holder of Series B Subordinate
Voting Preferred Shares to be converted a notice in writing of the intention of
the Corporation to convert the Series B Subordinate Voting Preferred Shares
registered in the name of such holder. Accidental failure or omission to give
such notice to one (1) or more holders shall not affect the validity of such
conversion, but upon such failure or omission being discovered notice shall be
given forthwith to such holder or holders and such notice shall have the same
force and effect as if given in due time. Such notice shall set out the number
of Series B Subordinate Voting Preferred Shares held by the person to whom it is
addressed which are to be converted, the Conversion Ratio, the Conversion Date
and the place or places at which holders of Series B Subordinate Voting
Preferred Shares may present and surrender such shares for conversion. After the
giving of such notice in writing, the election of the Corporation shall be
irrevocable.
-33-
<PAGE>
(b) Within three (3) days following the Conversion Date, the Corporation
shall, on presentation and surrender of the certificate or certificates
representing the Series B Subordinate Voting Preferred Shares called for
conversion at the place or places specified in the notice of conversion, issue
and deliver to such holder of Series B Subordinate Voting Preferred Shares, or
to the nominee or nominees of such holder, a certificate or certificates for the
number of Class B Subordinate Voting Shares entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the Conversion Date, and the person or persons entitled to receive
the Class B Subordinate Voting Shares issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Class B
Subordinate Voting Shares as of such date. The issuance of certificates for
Class B Subordinate Voting Shares, upon conversion of the Series B Subordinate
Voting Preferred Shares, shall be made without charge to the holder but the
holder shall pay any stamp, documentary or similar tax imposed on or in respect
of such conversion. If less than all of the Series B Subordinate Voting
Preferred Shares represented by any certificate are to be converted, the holder
shall be entitled to receive a new certificate representing the number of Series
B Subordinate Voting Shares represented by the original certificate which are
not to be converted.
(c) The Corporation shall have the right at any time on or after the
Conversion Date to deposit the certificate or certificates representing Class B
Subordinate Voting Shares into trust for holders of the Series B Subordinate
Voting Preferred Shares called for conversion, which have not at the date of
such deposit been surrendered in connection with such conversion. Certificates
deposited into trust shall be held by the Corporation or other designated person
named in the notice of conversion or in a subsequent notice to the registered
holders of the Series B Subordinate Voting Preferred Shares in respect of which
the deposit was made. Upon such deposit being made, the Series B Subordinate
Voting Preferred Shares in respect of which such deposit shall have been made
shall be deemed to have been converted and the rights of the holders thereof
after such deposit or such Conversion Date, as the case may be, shall be limited
to receiving the certificate or certificates representing the Class B
Subordinate Voting Shares to which they are entitled upon presentation and
surrender of the certificate or certificates representing the Series B
Subordinate Voting Preferred Shares being converted.
(5) Before any holder of Series B Subordinate Voting Preferred Shares shall
be entitled to convert the same into Class B Subordinate Voting Shares or Series
A Non-Voting Preferred Shares such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series B Subordinate Voting Preferred Shares, together
with a written notice to the Corporation stating therein: the name or names in
which the certificate or certificates for Common Shares or Preferred Shares are
to be issued; the number of Series B Subordinate Voting Preferred Shares to be
converted;
-34-
<PAGE>
and notice of such holder's election to convert such Series B Subordinate Voting
Preferred Shares. After giving notice in writing, the election of the holder of
Series B Subordinate Voting Preferred Shares shall be irrevocable although may
be subject to the condition described below when the conversion is in connection
with an underwritten public offering. The Corporation shall, within three (3)
days of such written notice, issue and deliver at such office to such holder of
Series B Subordinate Voting Preferred Shares, or to the nominee or nominees of
such holder, a certificate or certificates for the number of Class B Subordinate
Voting Shares or Series A Non-Voting Preferred Shares, as the case may be, to
which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the Series B Subordinate Voting Preferred Shares to be
converted, and the person or persons entitled to receive the shares of Class B
Subordinate Voting Shares or Series A Non-Voting Preferred Shares, as the case
may be, issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Class B Subordinate Voting Shares or Series A
Non-Voting Preferred Shares, as the case may be, as of such date. If the
conversion is in connection with an underwritten public offering of securities
(other than a Qualified IPO), the conversion into Common Shares may, at the
option of any holder tendering Series B Subordinate Voting Preferred Shares for
conversion, be conditioned upon the closing with the underwriters of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive the Common Shares upon conversion of the Series B Subordinate Voting
Preferred Shares shall not be deemed to have converted such Series B Subordinate
Voting Preferred Shares until immediately prior to the closing of such sale of
securities. The issuance of certificates for Class B Subordinate Voting Shares
or Series A Non-Voting Preferred Shares, as the case may be, upon conversion of
the Series B Subordinate Voting Preferred Shares shall be made without charge to
the holder thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Series B Subordinate Voting Preferred
Shares which is being converted.
(6) The Corporation shall at no time close its transfer books against the
transfer of any Series B Subordinate Voting Preferred Shares, or of any Class B
Subordinate Voting Shares or Series A Non-Voting Preferred Shares issuable upon
the conversion of any Series B Subordinate Voting Preferred Shares, in any
manner which interferes with the timely conversion of such Series B Subordinate
Voting Preferred Shares, except as may otherwise be required to comply with
applicable laws or the provisions of Schedule II for these Articles.
(7) As used in this Section 1.6 the term "Class B Subordinate Voting
Shares" shall mean and include the Corporation's issued Class B Subordinate
Voting Shares as constituted on the Initial Issue Date, and shall also include
any shares of any class of the
-35-
<PAGE>
capital of the Corporation thereafter authorized which shall neither be limited
to a fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends nor be entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation provided that the Class B Subordinate Voting Shares
receivable upon conversion of Series B Subordinate Voting Preferred Shares shall
include only shares designated as Class B Subordinate Voting Shares of the
Corporation on the Initial Issue Date, or in case of any reorganization or
reclassification of the outstanding shares thereof, the shares, securities or
assets to be issued in exchange for such Class B Subordinate Voting Shares
pursuant thereto.
(8) If the Corporation shall be a party to any transaction including
without limitation, an amalgamation, arrangement, consolidation, sale of all or
substantially all of the Corporation's assets or a reorganization,
reclassification or recapitalization of the capital of the Corporation but
excluding any transaction for which provision for adjustment is otherwise made
in this Section 1.6 (each of the foregoing being referred to as a
"Transaction"), in each case, as a result of which Class B Subordinate Voting
Shares are converted into the right to receive shares, securities or other
property (including, without limitation, cash or any combination thereof), each
Series B Subordinate Voting Preferred Share shall thereafter be convertible into
the number of shares or other securities or property to which a holder of the
number of Class B Subordinate Voting Shares of the Corporation deliverable upon
conversion of such Series B Subordinate Voting Preferred Shares would have been
entitled upon such Transaction; and, in any such case, appropriate adjustment
(as determined by the Board of Directors) shall be made in the application of
the provisions set forth in this Section 1.6 with respect to the rights and
interest thereafter of the holders of the Series B Subordinate Voting Preferred
Shares, to the end that the provisions set forth in this Section 1.6 shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares or other property thereafter deliverable upon the conversion of the
Series B Subordinate Voting Preferred Shares. The Corporation shall not effect
any Transaction unless prior to or simultaneously with the consummation thereof
the Corporation or purchaser, as the case may be, shall provide in its charter
document that each Series B Subordinate Voting Preferred Share shall be
converted into such shares, securities or property as, in accordance with the
foregoing provisions, each such holder is entitled to receive. The provisions of
this Section 1.6(8) shall similarly apply to successive Transactions.
(9) No fractional shares shall be issued upon the conversion of any share
or shares of the Series B Subordinate Voting Preferred Shares, and the number of
Common Shares to be issued shall be rounded down to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Series B Subordinate
Voting Preferred Shares the holder is at the time converting into Common Shares
or Series A Non-Voting Preferred Shares and the
-36-
<PAGE>
number of Common Shares or Series A Non-Voting Preferred Shares issuable upon
such aggregate conversion.
(10) If an event not specified in this Section 1.6 occurs that has
substantially the same economic effect on the Series B Subordinate Voting
Preferred Shares as those specifically enumerated above in this Section 1.6,
then this Section 1.6 shall be construed liberally, mutatis mutandis, in order
to give the holders of Series B Subordinate Voting Preferred Shares the intended
benefit of the protections provided under this Section 1.6. In such event, the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Ratio so as to protect the rights of the holders of Series B
Subordinate Voting Preferred Shares; provided that no such adjustment shall
increase or decrease the Conversion Ratio as otherwise determined pursuant to
this Section 1.6 or decrease the number of Class B Subordinate Voting Shares
issuable upon conversion of each Series B Subordinate Voting Preferred Share.
(11) The Corporation will not, by amendment of its Articles or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, and will at all times in good faith assist in the
carrying out of all the provisions of this Section 1.6 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series B Subordinate Voting Preferred
Shares against impairment.
(12) All calculations under this Section 1.6 shall be made to (a) the
nearest cent or (b) the nearest one hundredth of a share or (c) the nearest one
percent, as the case may be.
1.7 Notice of Certain Events
In case, at any time while any Series B Subordinate Voting Preferred Shares
are outstanding,
(1) the Corporation shall declare a dividend (or any other distribution) on
its Common Shares;
(2) the Corporation shall authorize the issuance to the holders of its
Common Shares, of Common Share Equivalents, or rights or warrants to subscribe
for or purchase Common Shares or of any other subscriptions rights or warrants;
(3) the Corporation shall authorize any reorganization, reclassification or
recapitalization of its Common Shares;
-37-
<PAGE>
(4) the Corporation shall authorize the consolidation or merger of the
Corporation into or with any other person, the sale or transfer of all or
substantially all of its business or assets to another person, or any other
similar business combination or transaction; or
(5) the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up on the Corporation;
then the Corporation shall promptly deliver to the transfer agent of the Series
B Subordinate Voting Preferred Shares, if any, and to each of the holders of
Series B Subordinate Voting Preferred Shares at their last addresses as they
shall appear on the register for the Series B Subordinate Voting Preferred
Shares, at least 15 days before the date hereafter specified (or the earlier of
the dates hereinafter specified, in the event that more than one date is
specified), a notice describing such event and stating (A) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Shares of record to be entitled to such dividend, distribution, rights
or warrants are to be determined, or (B) the date on which any such
reclassification, reorganization, recapitalization, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Shares
of record shall be entitled to exchange their Common Shares for securities or
other property (including cash), if any, deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
1.8 Reports as to Adjustment
Upon any adjustment of the Conversion Ratio then in effect pursuant to the
provisions of Section 1.6 of this Article D then, and in each such case, the
Corporation shall promptly deliver to each of the holders of the Series B
Subordinate Voting Preferred Shares, a certificate signed by an officer of the
Corporation setting forth in reasonable detail the event requiring the
adjustment, the method by which such adjustment was calculated and the
Conversion Ratio then in effect following such Adjustment. Where appropriate,
such notice to holders of the Series B Subordinate Voting Preferred Shares may
be given in advance.
1.9 Mandatory Redemption
On November 2, 2009 (the "Redemption Date"), the Corporation shall redeem
all the Series B Subordinate Voting Preferred Shares then outstanding and not
theretofore surrendered for conversion, as follows: Thirty days prior to the
Redemption Date, the Corporation shall give written notice to all holders of
Series B Subordinate Voting Preferred Shares which shall specify the Redemption
Date. For each Series B Subordinate Voting Preferred
-38-
<PAGE>
Share which is to be redeemed, the Corporation shall be obligated on the
Redemption Date to pay and deliver share certificates to the holder thereof
(upon surrender by such holder at the Corporation's principal executive office
of the certificate representing such share or an Affidavit of Loss with respect
thereto) (a) an amount in immediately available funds equal to the Series B
Subordinate Voting Liquidation Value, and (b) such number of Class B Subordinate
Voting Shares as have an aggregate Market Price (as determined on the day
immediately before the Redemption Date) equal to the excess of the Market Price
(as determined on the day immediately before the Redemption Date) of the Series
B Subordinate Voting Preferred Share over the Series A Non-Voting Liquidation
Value. All Class B Subordinate Voting Shares shall, when issued as contemplated
herein, be validly issued, fully paid and non-assessable. If the funds of the
Corporation legally available for redemption of the Series B Subordinate Voting
Preferred Shares on the Redemption Date are insufficient to redeem the total
number of such shares to be redeemed on such date, then those funds which are
legally available shall be used to redeem the maximum possible number of such
shares ratably among the holders thereof, based upon the aggregate Series B
Subordinate Voting Liquidation Value of such Series B Subordinate Voting
Preferred Shares held by each such holder. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
Series B Subordinate Voting Preferred Shares, such funds shall immediately be
used to redeem on a similar ratable basis the balance of such shares.
Notwithstanding the foregoing, each holder of Series B Subordinate Voting
Preferred Shares shall be entitled to convert all or any portion of such
holder's shares pursuant to Section 1.6 of this Article D prior to the
Redemption Date and thereafter until such Series B Subordinate Voting Preferred
Shares are redeemed.
1.10 Reservation of Shares Issuable Upon Conversion
The Corporation shall at all times reserve and keep available out of its
authorized but unissued Class B Subordinate Voting Shares and out of its
authorized but unissued Preferred Shares solely for the purpose of effecting the
conversion of the issued or issuable Series B Subordinate Voting Preferred
Shares, such number of its Class B Subordinate Voting Shares and Series A
Non-Voting Preferred Shares, as the case may be, as shall from time to time be
sufficient to effect the conversion of all outstanding Series B Subordinate
Voting Preferred Shares, and if at any time the number of authorized but
unissued Class B Subordinate Voting Shares or Series A Non-Voting Preferred
Shares shall not be sufficient to effect the conversion of all then outstanding
Series B Subordinate Voting Preferred Shares, the Corporation will take all such
corporate action as may be necessary to increase its authorized but unissued
Class B Subordinate Voting Shares or Series A Non-Voting Preferred Shares to
such number of shares as shall be sufficient for such purpose. All Class B
Subordinate Voting Shares and Series A Non-Voting Preferred Shares shall, when
issued upon conversion as contemplated herein, be validly issued, fully paid and
non-assessable.
-39-
<PAGE>
1.11 Listing on Securities Exchanges, etc.
The Corporation will list on each national securities exchange on which any
Common Shares may at any time be listed, subject to official notice of issuance
upon the conversion of the Series B Subordinate Voting Preferred Shares, all
Class B Subordinate Voting Shares from time to time issuable upon the conversion
of Series B Subordinate Voting Preferred Shares and will maintain such listing
as long as any Class B Subordinate Voting Shares are listed.
1.12 Certain Covenants
Any registered holder of Series B Subordinate Voting Preferred Shares may
proceed to protect and enforce its rights and the rights of any other holders of
Series B Subordinate Voting Preferred Shares with any and all remedies available
at law or in equity.
1.13 Definitions
In addition to any other terms defined herein for purposes of this Article
D, the following terms shall have the meaning indicated (references to
particular sections of the Purchase Agreement or Shareholders Agreement shall
include any amended, successor or substitute provisions in such agreements, as
they may be amended form time to time in accordance with their respective
terms):
"Additional Issuance Ratio" is defined in Section 1.4(b) of the Purchase
Agreement.
"Affidavit of Loss" an affidavit or agreement satisfactory to the
Corporation to indemnify the Corporation (without the need to post any bond or
other security for such obligation) from any loss incurred in connection with
the loss of any share certificate evidencing shares of the Corporation's Capital
Securities.
"Business Day" means any day other than a Saturday, Sunday or a day when
commercial banks in New York City or Vancouver, British Columbia are required to
be closed.
"Capital Securities" means, as to any Person that is a corporation, the
authorized shares of such Person's capital stock, including all classes of
common, preferred, voting and non voting capital stock, and, as to any Person
that is not a corporation or an individual, the ownership interests in such
Person, including, without limitation, the right to share in profits and losses,
the right to receive distributions of cash and property, and the right to
receive allocations of items of income, gain, loss, deduction and credit and
similar items
-40-
<PAGE>
from such Person, whether or not such interests include voting or similar rights
entitling the holder thereof to exercise control over such Person.
"Common Share Equivalent" shall mean securities convertible into, or
exchangeable or exercisable for Common Shares of any class.
"Common Shares" means the Class A Non-Voting Shares, Class B Subordinate
Voting Shares and Class C Multiple Voting Shares in the capital of the
Corporation.
"Conversion Event" means (i) a Qualified IPO or (ii) (x) there shall occur
an underwritten public offering providing gross proceeds to the Corporation and
selling shareholders of at least U.S. $150,000,000 before deducting underwriting
discounts, commissions and offering expenses and (y) thereafter the closing
price for a period of 45 consecutive trading days per listed Common Share is at
least 300% of the per share price obtained by dividing US$345,000,000 by the
number of Series A Non-Voting Preferred Shares, Common Shares or Common Share
Equivalents issued by the Corporation pursuant to Sections 1.1 and 1.4 of the
Purchase Agreement (as equitably adjusted to reflect any stock split, stock
dividend, combination, reorganization, recapitalization, reclassification, or
other similar event). For purposes of clause (ii) above, the closing price of
each day shall be the last sale price or, in case no such sale takes place on
such day, the average of the closing bid and asked prices in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
listed Common Shares are listed or the last quoted sale price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the NASDAQ.
"Conversion Ratio" determined as of any date, shall equal the number of
Class B Subordinate Voting Shares (in the aggregate) into which one share of
Series B Subordinate Voting Preferred Shares is convertible pursuant to Section
1.6 of this Article D.
The term "distribution" shall include the transfer of cash or property to
the holders of a class of shares of the Corporation, without consideration,
whether by way of dividend or otherwise (except a dividend in shares of such
class), or the purchase or redemption of shares of the Corporation, for cash or
property, including such transfer, purchase or redemption by a subsidiary of the
Corporation. The time of any distribution by way of dividends shall be the date
of declaration thereof, and the time of any distribution by purchase or
redemption of shares shall be the date on which cash or property is transferred
by the Corporation, whether or not pursuant to a contract of an earlier date;
provided, however, that, where a debt security is issued in exchange for shares,
the time of the distribution is the date when a Corporation acquires the shares
for such exchange.
-41-
<PAGE>
"Dollars" and the symbol "$" shall mean, unless otherwise indicated, U.S.
dollars, and the symbol "C$" shall refer to Canadian dollars.
"Employee Shares" is defined in Section 1.4(b) of the Purchase Agreement.
"Event of Default" means (i) the Corporation shall default in the
performance of or compliance with the terms of Section 1.9 of this Article D or
(ii) Ledcor Inc. shall default in the performance of or compliance with Section
12.4 of the Shareholders Agreement.
"Initial Issue Date" means the date on which the first Series A Non-Voting
Preferred Shares were issued by the Corporation.
"Initial Purchase Price" means, U.S.$38.909 per Series A Non-Voting
Preferred Share, (as equitably adjusted to reflect any stock split, stock
dividend, combination, reorganization, recapitalization, reclassification or
other similar event involving Common Shares after the Initial Issue Date).
"Junior Shares" shall mean any of the Corporation's Common Shares and all
other Capital Securities of the Corporation (other than the Series B Subordinate
Voting Preferred Shares and the Series A Non-Voting Preferred Shares, which
shall rank equally with the Series B Subordinate Voting Preferred Shares).
"Market Price" of any security with a Minimum Float means the average of
the closing prices of such security's sales on all securities exchanges on which
such security may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive Business Days prior to such day. If there is not a Minimum Float
with respect to the Series B Subordinate Voting Preferred Shares, then the
Market Price of a Series B Subordinate Voting Preferred Share shall be
determined as equal to the Market Price of a Common Share times the number of
Common Shares into which the Series B Subordinate Voting Preferred Share is
convertible as of the date of determination of the Market Price. If at any time
such security does not have a Minimum Float or is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined jointly by the
Corporation and the holders of a majority of the Series B Subordinate Voting
Preferred Shares. If such parties are
-42-
<PAGE>
unable to reach agreement within a reasonable period of time, such fair value
shall be determined by an independent appraiser experienced in valuing
securities jointly selected by the Corporation and the holders of a majority of
the Series B Subordinate Voting Preferred Shares. If the Corporation and the
holders of a majority of the Series B Subordinate Voting Preferred Shares are
unable to agree on the selection of an independent appraiser within 30 days of
the date when the holders of a majority of the Series B Subordinate Voting
Preferred Shares have first delivered notice in writing to the Corporation of
the name of a proposed independent appraiser, then the holders of a majority of
the Series B Subordinate Voting Preferred Shares may request the President of
the American Arbitration Association to appoint an independent appraiser and
such appointment shall be final and binding for purposes of determination of the
Market Price in question. The determination of such appraiser shall be final and
binding upon the parties, and the Corporation shall pay the fees and expenses of
such appraiser.
"Minimum Float" is achieved if the product of (i) the closing price of a
security listed on any securities exchange or quoted in the NASDAQ system or the
over-the-counter market multiplied by (ii) the number of shares or units of such
security registered pursuant to the United States Securities Act of 1933, as
then in effect, and held by the public is at least U.S. $150,000,000.
"Minority Roll-Up Factor" means the sum of (i) 1.00 plus (ii) the
Additional Issuance Ratio.
"Minority Roll-Up Transaction" is defined in Section 1.4(b) of the Purchase
Agreement.
"Minority Roll-Up Shares" is defined in Section 1.4(b) of the Purchase
Agreement.
"Person" shall have the meaning given it in the Canada Business
Corporations Act.
"Public Sale" is defined in Section 1.27 of the Shareholders Agreement.
"Purchase Agreement" means the Preferred Share Purchase Agreement dated
September 7, 1999 among the Corporation and the parties named as "Investors"
therein, as the same may be amended from time to time in accordance with its
terms.
"Qualified IPO" shall mean the Corporation's first bona fide underwritten
public offering of Common Shares pursuant to a preliminary prospectus and a
prospectus if under Canadian federal and provincial securities laws and pursuant
to an effective registration
-43-
<PAGE>
statement under the United States Securities Act of 1933, as amended, (i)
resulting in at least U.S. $150,000,000 of gross aggregate proceeds to the
Corporation and any selling stockholders before deducting underwriting discounts
and commissions and offering expenses, (ii) the gross offering price per share
of which is at least 300% of the per share price obtained by dividing
U.S.$345,000,000 by the number of Series A Non-Voting Preferred Shares, Common
Shares or Common Share Equivalents issued by the Corporation pursuant to
Sections 1.1 and 1.4 of the Purchase Agreement (as equitably adjusted to reflect
any stock split, stock dividend, combination, reorganization, recapitalization,
reclassification or other similar event) and (iii) upon the consummation of
which the Class A Non-Voting Shares or Class B Subordinate Voting Shares are
listed on The Toronto Stock Exchange and on a U.S. national securities exchange
or quoted on Nasdaq National Market.
"Shareholders Agreement" means the Shareholders Agreement dated as of
September 9, 1999 among the Corporation and the parties named therein, as the
same may be amended from time to time in accordance with its terms.
H. SERIES C REDEEMABLE PREFERRED SHARES
1. SERIES RIGHTS
1.1 Designation and Number
The third series of Preferred Shares shall consist of 45,000,000 Preferred
Shares, which shares shall be designated as Series C Redeemable Preferred Shares
(the "Series C Redeemable Preferred Shares") and which, in addition to the
rights privileges, restrictions and conditions attached to the Preferred Shares
as a class, shall have attached thereto the rights, privileges, restrictions and
conditions as set forth herein.
1.2 Dividends
The holders of the Series C Redeemable Preferred Shares shall not be
entitled to dividends.
1.3 Voting Rights
Except as required by law, the holders of the Series C Redeemable Preferred
Shares shall not be entitled to receive notice of nor to attend any meeting of
the shareholders of the Corporation.
-44-
<PAGE>
1.4 Redemption by Holder
1.4.1. Notice of Retraction
Each holder of Series C Redeemable Preferred Shares may, at any time after
November 2, 2009, demand by notice in writing that the Corporation redeem all or
any of the Series C Redeemable Preferred Shares held by such holder by payment
to the holder the sum of US $1.00 per share (the "Series C Redemption Amount").
1.4.2. Procedure for Redemption
(1) Such demand for redemption shall be made in writing and signed by the
holder demanding redemption and shall be delivered or mailed to the registered
office of the Corporation. Such demand for redemption shall be deemed to have
been received on the date of delivery if delivered and on the business day
following the date of mailing if mailed.
(2) Forthwith upon receipt of a demand for redemption the Corporation shall
deliver or mail a copy thereof to all other holders, if any, of Series C
Redeemable Preferred Shares. The rationale for this mailing shall be to allow
other holders of Series C Redeemable Preferred Shares to submit demands for
redemption.
(3) If there is only one holder of Series C Redeemable Preferred Shares the
Corporation shall redeem the Series C Redeemable Preferred Shares referred to in
the holder's notice forthwith upon receipt thereof; if there is more than one
such holder, thirty-one (31) days after deemed receipt of an initial demand for
redemption, the Corporation shall redeem all Series C Redeemable Preferred
Shares in respect of which it has received demands for redemption. If the assets
of the Corporation are not sufficient to redeem all Series C Redeemable
Preferred Shares in respect of which demands for redemption have been made,
redemption shall be made pro rata among the holders of Series C Redeemable
Preferred Shares in proportion to the number of Series C Redeemable Preferred
Shares specified in the notices given by the holders demanding redemption.
1.4.3. Effect of Payment
Upon payment of the Series C Redemption Amount of the Series C Redeemable
Preferred Shares so redeemed by the Corporation, the holders thereof shall cease
to exercise any rights of the holders in respect thereof.
-45-
<PAGE>
1.5 Liquidation, Dissolution or Winding-up
In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of assets of the Corporation among its
shareholders for the purpose of winding-up its affairs, the holders of the
Series C Redeemable Preferred Shares shall be entitled to receive, before any
payment or distribution shall be made on any shares ranking junior to the Series
C Redeemable Preferred Shares in respect of payment upon liquidation,
dissolution or winding-up of the Corporation, an amount equal to the amount of
the stated capital account maintained in respect thereof. After payment of such
amounts the holders of the Series C Redeemable Preferred Shares shall not be
entitled to share in any further distribution of the property or assets of the
Corporation.
1.6 Retired Shares
Any Series C Redeemable Preferred Shares converted, purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. None of such Series C
Redeemable Preferred Shares shall be reissued by the Corporation.
-46-
<PAGE>
SCHEDULE II
RESTRICTIONS ON THE ISSUE, TRANSFER AND OWNERSHIP
OF VOTING SHARES
For the purposes of this Schedule II and Appendix A hereto, "Voting Share"
means a share of any class or series of shares of the Corporation carrying
voting rights under all circumstances or by reason of an event that has occurred
and is continuing or by reason of a condition that has been fulfilled, and
includes:
(a) any security that is convertible into such a share at the time a
calculation of the percentage of shares owned and controlled by
Canadians is made; and
(b) any option or right to acquire such a share, or any security referred
to in paragraph (a), that is exercisable at the time the calculation
referred to in that paragraph is made.
The issue, transfer and ownership of Voting Shares are restricted as
follows.
(c) The Board of Directors of the Corporation may, in connection with the
issue, transfer or ownership of Voting Shares, take any action, or
refuse to take any action, as the case may be, as may be permitted by
the provisions of any of the Telecommunications Act (Canada) and the
rules, regulations, policies, decisions, directives and orders
promulgated or issued thereunder, as amended from time to time,
(collectively hereinafter referred to as the "Telecom Act"); and
(d) The issue and transfer of Voting Shares are restricted in accordance
with the constraints set out in Appendix A hereto.
In the event of any inconsistency among the provisions of the Telecom Act,
and Appendix A hereto, the provisions of the Telecom Act, shall prevail over
Appendix A hereto.
-47-
<PAGE>
Appendix A
ARTICLE 1
INTERPRETATION
1.1 Definitions - For the purposes of this Appendix A, the following terms
have the following meanings:
(a) "affiliate" and "associate" shall have their respective meanings as
defined in the CBCA and includes persons, firms and corporations
acting in concert with the person with respect to whom the term
affiliate or associate is relevant;
(b) "CBCA" means the Canada Business Corporations Act, as amended from
time to time;
(c) "Constrained Class" means: (i) any person or persons who are not
Canadians within the meaning of that Part of the Regulation dealing
with constrained share corporations, and (ii) any person or persons,
where the issue or transfer of shares to any such person or persons
will affect the ability of the Corporation or any of its affiliates or
associates to qualify under any applicable laws of Canada, including
for greater certainty, the Telecom Act and the regulations promulgated
thereunder, or any applicable laws of a province prescribed pursuant
to paragraph 57(l)(a) of the Regulations (a "Prescribed Law") in order
to carry on any business that the Company is currently engaged in or
proposes to engage in and to obtain, maintain, amend or renew any
licenses which are necessary to carry on any such business;
(d) "Maximum Aggregate Holdings" means the total number of Voting Shares
that may be held by or on behalf of persons in the Constrained Class
and their affiliates and associates pursuant to any applicable
Prescribed Law;
(e) "Maximum Individual Holding" means the total number of Voting Shares
that may be held by or on behalf of any one person in the Constrained
Class and their affiliates and associates pursuant to any applicable
Prescribed Law; and
(f) "Regulations" means those regulations made under the CBCA as amended
from time to time.
-48-
<PAGE>
1.2 Joint Ownership by Non-Canadians - For the purposes of this Appendix A,
where a Voting Share is held, beneficially owned or controlled jointly, and one
or more of the joint holders, beneficial owners or persons controlling the share
is a member of the Constrained Class, the share is deemed to be held,
beneficially owned or controlled, as the case may be, by such member of the
Constrained Class.
1.3 Purpose of Constrained Share Provisions - The power of the directors of
the Corporation to issue Voting Shares, and the right of any holder of Voting
Shares to transfer or vote such Voting Shares, is restricted in the manner
hereinafter set out, for the purposes of:
(a) ensuring that the Corporation, or any of its affiliates or associates,
is qualified under any applicable Prescribed Law to obtain or renew
any license to carry on any business and/or hold any licenses that are
necessary to carry on any such business; and
(b) ensuring that the Corporation, or any of its affiliates or associates,
is not in breach of any applicable Prescribed Law or the terms of any
license issued thereunder.
ARTICLE 2
CONSTRAINTS
2.1 Restriction on Issue or Transfer of Voting Shares - The directors of
the Corporation shall not issue a Voting Share (including the conversion into a
Voting Share of any share that is not a Voting Share) and shall refuse to
register a transfer of a Voting Share, if the issuance or transfer, as the case
may be, would, in the opinion of the directors of the Corporation, jeopardize
the purposes stated in section 1.3 of this Appendix A and, without limiting the
generality of the foregoing, the directors of the Corporation shall not issue a
Voting Share, and shall refuse to register a transfer of a Voting Share, to a
person who is a member of the Constrained Class, if:
(a) the total number of Voting Shares held by or on behalf of persons in
the Constrained Class exceeds the Maximum Aggregate Holdings and the
issuance or transfer, as the case may be, of such Voting Shares is to
a person in the Constrained Class;
(b) the total number of Voting Shares held by or on behalf of persons in
the Constrained Class does not exceed the Maximum Aggregate Holdings
and the issuance or transfer, as the case may be, of such Voting
Shares would
-49-
<PAGE>
cause the number of Voting Shares held by persons in the Constrained
Class to exceed the Maximum Aggregate Holdings;
(c) the total number of Voting Shares held by or on behalf of a person in
the Constrained Class exceeds the Maximum Individual Holdings and the
issuance or transfer, as the case may be, of such Voting Shares is to
that person; or
(d) the total number of Voting Shares held by or on behalf of a person in
the Constrained Class does not exceed the Maximum Individual Holdings
and the issuance or transfer, as the case may be, of such Voting
Shares would cause the number of such Voting Shares held by that
person to exceed the Maximum Individual Holdings.
2.2 Further Restrictions on the Issue or Transfer of Voting Shares - The
directors of the Corporation may refuse to issue a Voting Share or register a
transfer of a Voting Share, if the issue or transfer, as the case may be, is to
a person who may be a member of a Constrained Class and who, in respect of the
issue or registration of the transfer of such Voting Share, as the case may be,
has been requested by the Corporation to furnish it with information referred to
in subsection 56(l) of the Regulations, and has not furnished such information.
2.3 By-Laws - Subject to the CBCA, the Regulations and any Prescribed Law,
the directors of the Corporation may make, amend or repeal any by-laws required
to administer the constrained share provisions set out in this Appendix A,
including such by-laws as are contemplated in section 56 of the Regulations.
ARTICLE 3
POWERS AND DISCRETION OF DIRECTORS
3.1 Opinion of the Directors - Wherever in this Appendix A it is necessary
to determine the opinion of the directors of the Corporation, such opinion shall
be expressed and conclusively evidenced by a resolution of the directors of the
Corporation duly adopted, including a resolution in writing executed pursuant to
the provisions of the CBCA.
3.2 No Claims - Neither any shareholder of the Corporation nor any other
interested person shall have any claim or action against the Corporation or
against any director or officer of the Corporation nor shall the Corporation
have any claim or action against any director or officer of the Corporation
arising out of any act (including any omission to act) performed pursuant to or
in intended pursuance of the provisions of this Appendix A or any
-50-
<PAGE>
breach or alleged breach by the Corporation of any of the provisions of this
Appendix A, and, for greater certainty, no such person shall be liable for any
damages or losses related to or as a consequence of any such act or any such
breach of such provisions.
3.3 Powers of Directors - In the administration of this Appendix A, the
directors of the Corporation shall enjoy, in addition to the powers explicitly
set forth herein, all of the powers necessary or desirable, in their opinion, to
carry out the intent and purpose hereof, including but not limited to all powers
contemplated by the provisions relating to constrained share corporations in the
CBCA, the Regulations and any Prescribed Law.
ARTICLE 4
MISCELLANEOUS
4.1 Share Provisions - The directors shall cause to be noted conspicuously
upon every certificate representing a Voting Share the general nature of these
constrained share provisions.
ARTICLE 5
MISCELLANEOUS
5.1 Conflict - In the event of any conflict between the provisions of this
Appendix A and of the provisions in the CBCA and the Regulations relating to
constrained share corporations, the provisions in the CBCA and the Regulations
shall prevail, and the provisions of this Appendix A shall be deemed to be
amended accordingly and shall be retroactive in effect, as so amended.
5.2 Severability - The invalidity or unenforceability of any provision, in
whole or in part, of this Appendix A for any reason shall not affect the
validity or enforceability of any other provision hereof.
-51-
BY-LAW NO. 1
A by-law relating generally to the transaction of the business and affairs
of Worldwide Fiber Inc. (hereinafter referred to as the "Corporation").
CONTENTS
ONE - Interpretation
TWO - General
THREE - Borrowing and Securities
FOUR - Directors
FIVE - Meetings of Directors
SIX - Committees
SEVEN - Officers
EIGHT - Protection of Directors, Officers and Others
NINE - Interest of Directors in Contracts
TEN - Shares
ELEVEN - Dividends and Rights
TWELVE - Meetings of Shareholders
THIRTEEN - Notices
FOURTEEN - Effective Date
<PAGE>
-2-
BE IT ENACTED as a by-law of the Corporation as follows:
Section One
INTERPRETATION
1.01 Definitions. In the by-laws of the Corporation, unless the context
otherwise requires:
"Act" means the Canada Business Corporations Act as amended or re-enacted
from time to time;
"appoint" includes "elect" and vice versa;
"articles" means the articles attached to the certificate of incorporation
of the Corporation as from time to time amended or restated;
"board" means the board of directors of the Corporation;
"by-laws" means this by-law and all other by-laws of the Corporation from
time to time in force and effect;
"cheque" includes a draft;
"financial investors" means, collectively, each of the following: DWF SRL,
a Barbados Company; GS Capital Partners III, L.P., a Delaware limited
partnership, together with GSCP3 WWF (Barbados) SRL and WWF (Barbados) SRL, each
of which is an affiliate of the Goldman Sachs Group, Inc., and; Providence
Equity Fiber, L.P., a Delaware limited partnership;
"investor designees" means, collectively, those members of the board
nominated by each of the following: DWF SRL, a Barbados Company; GS Capital
Partners III, L.P., a Delaware limited partnership; Providence Equity Fiber,
L.P., a Delaware limited partnership, and; Tyco Group S.A.R.L., a Luxembourg
corporation;
"meeting of shareholders" includes an annual meeting of shareholders and a
special meeting of shareholders;
"non-business day" means Saturday, Sunday and any other day that is a
holiday as defined in the Interpretation Act (Canada) as amended or re-enacted
from time to time;
<PAGE>
-3-
"recorded address" means in the case of a shareholder his address as
recorded in the securities register; and in the case of joint shareholders the
address appearing in the securities register in respect of such joint holding or
the first address so appearing if there are more than one; and in the case of a
director, officer, auditor or member of a committee of the board, his latest
address as recorded in the records of the Corporation;
"signing officer" means, in relation to any instrument, any person
authorized to sign the same on behalf of the Corporation by or pursuant to
Section 2.05;
"senior officer" means any of the individuals, numbering at least five, who
hold any of the following positions, or their functional equivalents
irrespective of actual title held in the Corporation: chairman, vice-chairman,
chief executive officer, president, chief financial officer, chief operating
officer and executive vice president;
"special business" transacted or to be transacted at a special meeting of
shareholders means all business transacted or to be transacted at such special
meeting and "special business" transacted or to be transacted at an annual
meeting of shareholders means all business transacted or to be transacted at
such annual meeting, except consideration of the financial statements and the
report of the auditors thereon, the election of directors and reappointment of
the incumbent auditor;
"special meeting of shareholders" includes a meeting of any class or
classes of shareholders and a special meeting of all shareholders entitled to
vote at an annual meeting of shareholders; and
"Worldwide Fiber Holdings" means Worldwide Fiber Holdings Ltd., an Alberta
corporation.
1.02 Interpretation. Save as aforesaid, words and expressions defined in
the Act have the same meanings when used herein. Words importing the singular
number include the plural and vice versa; words importing gender include the
masculine, feminine and neuter genders; and words importing a person include an
individual, partnership, association, body corporate, trustee, executor,
administrator, and legal representative. Wherever reference is made in this or
any other by-law or in any special resolution of the Corporation to any statute
or section thereof, such reference shall be deemed to extend and refer to any
amendment to or re-enactment of such statute or section, as the case may be.
1.03 Headings. The headings herein are inserted for convenience of
reference only and shall not affect the construction or interpretation of the
provisions hereof.
<PAGE>
-4-
Section Two
GENERAL
2.01 Registered Office. The board may change the address of the registered
office of the Corporation within the place specified in the articles as the
place in which the registered office of the Corporation is to be situated.
2.02 Corporate Seal. The Corporation may have a corporate seal, which may
from time to time be changed by the board.
2.03 Financial Year. The board may fix the financial year of the
Corporation and may, from time to time, change the financial year of the
Corporation.
2.04 Banking Arrangements. The banking business of the Corporation, or any
part thereof, shall be transacted with such banks, trust companies or other
persons as the board may appoint from time to time and all such banking
business, or any part thereof, shall be transacted on the Corporation's behalf
by such one or more officers or other persons and to such extent as the board
may from time to time determine.
2.05 Execution of Documents.
(a) The board may from time to time determine which directors, officers or
other persons may sign in writing any contracts, and in the absence of any such
determination by the board any two directors or officers of the corporation may
sign in writing any contracts, documents or other instruments requiring
execution by the Corporation. The board may establish any procedures as it deems
necessary to determine how such contracts, documents or other instruments are to
be approved prior to execution as provided for herein. Notwithstanding the
foregoing, the board may from time to time by resolution appoint any director or
directors, officer or officers or any other person or persons on behalf of the
Corporation either to sign contracts, documents or other instruments in writing
generally or to sign a specific contract, document of other instrument in
writing.
(b) Subject to the board resolving otherwise, any person who executes a
contract, document or other instrument on behalf of the Corporation as provided
for in section 2.05(a), or the solicitor for the Corporation, may affix the
seal, if any, of the Corporation to any contract, document or instrument in
writing which has been executed in accordance with section 2.05(a) and may
certify a copy of a resolution, by-law, contract, document or instrument in
writing of the Corporation to be a true copy thereof.
<PAGE>
-5-
(c) The term "contract, document or other instrument in writing" as used
herein shall include deeds, mortgages, hypothecs, charges, conveyances,
transfers and assignments of property real or personal, immovable or movable,
agreements, releases, receipts and discharges for the payment of money or other
obligations, cheques, promissory notes, drafts, acceptances, bills of exchange
and orders for the payment of money, conveyances, transfers and assignments of
shares, instruments of proxy, stocks, bonds, debentures or other securities and
all paper writings.
(d) Subject to the provisions of section 10.03 hereof, the signature of any
person executing a contract, document or other instrument on behalf of the
Corporation, may if specifically authorized by the board, be printed, engraved,
lithographed or otherwise mechanically reproduced upon any contracts, documents
or instruments in writing or bonds, debentures or other securities of the
Corporation executed or issued by or on behalf of the Corporation and all
contracts, documents or other instruments in writing or bonds, debentures or
other securities of the Corporation on which the signature or signatures of any
of the foregoing officers or persons shall be so reproduced, by authorization by
the board, shall be deemed to have been manually signed by such officers or
persons whose signature or signatures is or are so reproduced and shall be as
valid as if they had been signed manually and notwithstanding that the officers
or persons whose signature or signatures is or are so reproduced may have ceased
to hold office at the date of the delivery or issue of such contracts, documents
or other instruments in writing or bonds, debentures or other securities of the
Corporation.
2.06 Voting Rights in Other Bodies Corporate. The signing officers of the
Corporation may execute and deliver proxies and arrange for the issuance of
voting certificates or other evidence of the right to exercise the voting rights
attaching to any securities held by the Corporation. Such instruments shall be
in favour of such persons as may be determined by the officers executing or
arranging for the same. In addition, the board may from time to time direct the
manner in which and the persons by whom any particular voting rights or class of
voting rights may or shall be exercised.
Section Three
BORROWING AND SECURITIES
3.01 Borrowing Power. Without limiting the borrowing powers of the
Corporation as set forth in the Act, but subject to the articles, the board may
from time to time on behalf of the Corporation:
(a) borrow money upon the credit of the Corporation;
<PAGE>
-6-
(b) issue, reissue, sell or pledge bonds, debentures, notes or other
evidences of indebtedness or guarantee of the Corporation, whether secured or
unsecured;
(c) to the extent permitted by the Act, give a guarantee on behalf of the
Corporation to secure performance of any present or future indebtedness,
liability or obligation of any person; and
(d) mortgage, hypothecate, pledge or otherwise create a security interest
in all or any currently owned or subsequently acquired real or personal, movable
or immovable, property of the Corporation including book debts, rights, powers,
franchises and undertakings, to secure any such bonds, debentures, notes or
other evidences of indebtedness or guarantee or any other present or future
indebtedness, liability or obligation of the Corporation.
Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.
<PAGE>
-7-
3.02 Terms of Issuance of Debt Obligations. Any bonds, debentures or other
debt obligations of the Corporation may be issued at a discount, premium or
otherwise, and with any special privileges as to redemption, surrender, drawing,
allotment of or conversion into or exchange for shares or other securities,
attending and voting at meetings of shareholders, appointment of directors or
otherwise and may by their terms be assignable free from any equities between
the Corporation and the person to whom they were issued or any subsequent holder
thereof, all as the directors may determine.
Section Four
DIRECTORS
4.01 General. The board shall manage the business and affairs of the
Corporation.
4.02 Qualification. A majority of the directors on the board and any
committees of the board shall be Canadian citizens ordinarily resident in
Canada.
4.03 Number. The maximum number of members of the board shall be twelve
(12) directors.
4.04 Quorum of Directors. Subject to Section 4.05, a quorum for meetings of
the board shall be nine (9) persons present of which three shall be investor
designees; provided, however, that at all times a majority of directors present
must be Canadian citizens ordinarily resident in Canada.
4.05 Quorum and Adjournments. If at a meeting of directors a quorum is not
present, the directors may adjourn the meeting to a fixed time and place
(provided they shall give written notice of such time and place to each director
not in attendance). At the meeting immediately following the adjourned meeting,
the directors present at such meeting shall constitute a quorum; provided,
however, that unless a full quorum is present as provided in section 4.04, the
directors present at such meeting may not transact any business except as
specifically set forth in the notice of meeting.
4.06 Election and Term. The election of directors shall take place at each
annual meeting of shareholders and all the directors then in office whose terms
have expired shall retire but, if qualified, shall be eligible for re-election.
Each director will hold office until his or her death or resignation or until
his or her successor shall have been duly elected and qualified.
<PAGE>
-8-
4.07 Resignation. A director may resign his office as a director by sending
to the Corporation his written resignation, which resignation shall become
effective at the later of the time such resignation is sent to the Corporation
or the time (if any) specified in such resignation.
Section Five
MEETINGS OF DIRECTORS
5.01 Calling of Meetings. Meetings of the board shall be held from time to
time at such time and at such place as the chairman of the board, the president,
a vice-president or any two directors may determine and the secretary shall give
notice of meetings when directed by the person or persons calling such meeting.
5.02 Canadian Majority. Unless otherwise provided for in the Act, the
directors shall not transact business at a meeting of directors or any committee
thereof unless a majority of directors present are resident Canadians.
5.03 Notice of Meetings.
(a) Notice of the time and place of any meeting of the board, including
adjourned meetings, shall be given in accordance with the terms of Section
Thirteen hereof to each director not less that 48 hours (excluding non-business
days) before the meeting is to take place.
(b) A meeting of the board may be held at any time without formal notice if
all the directors, in any manner, waive notice or signify their consent to the
meeting being held without formal notice. Notice of any meeting or any
irregularity in any meeting or in the notice thereof may be waived by any
director either before or after such meeting. Attendance of a director at a
meeting of directors is a waiver of notice of the meeting except where the
director attends the meeting for the express purpose of objecting to the manner
in which the meeting was called.
(c) A notice of a meeting of the board shall specify the purpose or the
business to be transacted at the meeting.
5.04 Regular Meetings. The board may appoint a day or days in any month or
months for regular meetings of the board at a place and hour to be named. A copy
of any resolution of the board fixing the place and time of such regular
meetings shall be sent to each director forthwith after being passed, and no
other notice shall be required for any
<PAGE>
-9-
such regular meeting except where the Act requires the purpose of or the
business to be transacted at the meeting to be specified.
5.05 First Meeting of New Board. Provided a quorum of directors is present,
each newly elected board may without notice hold its first meeting immediately
following the meeting of shareholders at which such board is elected.
5.06 Meetings by Conference Call. A director may participate in a meeting
of the board or of any committee of the directors by means of such telephone or
other communications facilities as permit all persons participating in the
meeting to hear each other. A director participating in a meeting in accordance
with this paragraph shall be deemed to be present at the meeting, shall be
counted in the quorum and shall be entitled to speak and vote.
5.07 Chairman. The chairman of any meeting of the board shall be the first
mentioned of such of the following officers as have been appointed and who is a
director and is present at the meeting: chairman of the board or president. If
no such officer is present, the directors present shall choose one of their
number to be chairman.
5.08 Votes To Govern. At all meetings of the board every question shall be
decided by a majority of the votes cast on the question. In case of an equality
of votes the Chairman of the meeting shall be entitled to a second or casting
vote.
5.09 Expenses. Directors shall be entitled to be paid all reasonable travel
expenses and other out-of-pocket disbursements incurred by them to attend
meetings of the board, meetings of any board of directors of a subsidiary, or
meetings of any committees thereof.
Section Six
COMMITTEES
6.01 Committees of the Board. The board may appoint from their number one
or more committees of the board, however designated, and delegate to any such
committee any of the powers of the board except those which pertain to items
which, under the Act, a committee of the board has no authority to exercise. A
majority of the members of any such committee shall be citizens ordinarily
resident in Canada.
6.02 Advisory Bodies. The board may from time to time appoint such advisory
bodies as it may deem advisable.
<PAGE>
-10-
6.03 Provisions Applicable. The following provisions shall apply to any
committees and advisory bodies appointed by the board:
(a) unless otherwise provided for by the board, each member of a committee
shall continue to be a member thereof until the expiration of his term of office
as a director;
(b) the meetings and proceedings of committees and advisory bodies shall be
governed by the provisions of the by-laws of the Corporation for regulating the
meetings and proceedings of the directors so far as the same are applicable
thereto and are not superseded by any regulations or restrictions made or
imposed by the board pursuant to the foregoing provisions hereof; and
(c) unless otherwise provided for by the board, meetings of committees and
advisory bodies may be convened by the direction of any member thereof.
6.04 Nominating Committee. The board shall establish a nominating committee
comprised of five (5) directors, two (2) of whom shall be designated by the
financial investors as long as designees of any of the financial investors
continue to serve on the board, and three (3) of whom shall be designated by
Worldwide Fiber Holdings and shall ordinarily be resident Canadians, which
committee shall have the exclusive authority to make nominations with respect to
hiring senior officers of the corporation.
6.05 Compensation Committee. The board shall establish a compensation
committee comprised of five (5) directors, two (2) of whom shall be designated
by the financial investors as long as designees of any of the financial
investors continue to serve on the board, and three (3) of whom shall be
designated by Worldwide Fiber Holdings and shall ordinarily be resident
Canadians, which committee shall have the exclusive authority to make
recommendations to the board with respect to all aspects of compensation and
other benefits, including stock options or other equity based compensation, of
senior officers of the corporation.
Section Seven
OFFICERS
7.01 Appointing Officers. The board shall have the sole and absolute
authority to elect, appoint and hire any senior officers. Each senior officer
shall be elected or appointed by the board only from nomination lists prepared
and approved by the nominating committee.
<PAGE>
-11-
Section Eight
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
8.01 Limitation of Liability. Every director and officer of the Corporation
in exercising his powers and discharging his duties shall act honestly and in
good faith with a view to the best interests of the Corporation and exercise the
care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. Subject to the foregoing, no director or officer shall
be liable for the acts, receipts, neglects or defaults of any other director,
officer, or employee, or for joining in any receipt or other act for conformity,
or for any loss, damage or expense happening to the Corporation through the
insufficiency or deficiency of title to any property acquired for or on behalf
of the Corporation, or for the insufficiency or deficiency of any security in or
upon which any of the moneys of the Corporation shall be invested, or for any
loss or damage arising from the bankruptcy, insolvency or tortious acts of any
person with whom any of the moneys, securities or effects of the Corporation
shall be deposited, or for any loss occasioned by any error of judgement or
oversight on his part, or for any other loss, damage or misfortune which shall
happen in the execution of the duties of his office or in relation thereto;
provided that nothing herein shall relieve any director or officer from the duty
to act in accordance with the Act and the regulations thereunder or from
liability for any breach thereof. So long as he is not in breach of any
applicable statute, no person referred to in this paragraph shall be liable for
any damage, loss, cost or liability sustained or incurred by the Corporation.
8.02 Indemnity. Subject to the Act, the Corporation shall indemnify a
director or officer of the Corporation, a former director or officer of the
Corporation, or a person who acts or acted at the Corporation's request as a
director or officer of a body corporate of which the Corporation is or was a
shareholder or creditor, and his heirs and legal representatives, against all
costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgement, reasonably incurred by him in respect of any civil,
criminal or administrative action or proceeding to which he is made a party by
reason of being or having been a director or officer of the Corporation of such
body corporate, if:
(a) he acted honestly and in good faith with a view to the best interests
of the Corporation; or
(b) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, he had reasonable grounds for believing that
his conduct was lawful.
<PAGE>
-12-
The Corporation shall also indemnify such person in such other
circumstances as the Act permits or requires. Nothing in this by-law shall limit
the right of any person entitled to indemnity to claim indemnity apart from the
provisions of this by-law.
8.03 Indemnification in Derivative Actions. Subject to the Act, the
Corporation shall with the approval of a court indemnify a person referred to in
section 8.02 in respect of an action by or on behalf of the Corporation or body
corporate to procure a judgment in its favour, to which he is made a party by
reason of being or having been a director or an officer of the Corporation or
body corporate, against all costs, charges and expenses reasonably incurred by
him in connection with such action if he fulfils the conditions set out in
sections 8.02(a) and (b).
8.04 Indemnity as of Right. Subject to the Act, a person referred to in
section 8.02 is entitled to indemnity from the Corporation in respect of all
costs, charges and expenses reasonably incurred by him in connection with the
defence of any civil, criminal or administrative action or proceeding to which
he is made a party by reason of being or having been a director or officer of
the Corporation or body corporate, if the person seeking indemnity:
(a) was substantially successful on the merits in his defence of the action
or proceeding, and
(b) fulfils the conditions set out in sections 8.02(a) and (b).
8.05 Insurance. Subject to the Act, the Corporation shall purchase and
maintain insurance for the benefit of any person referred to in section 8.02
against any liability incurred by him in his capacity as a director or officer
of the Corporation or of another body corporate where he acts or acted in that
capacity at the Corporation's request, except where the liability relates to his
failure to act honestly and in good faith with a view to the best interests of
the body corporate.
Section Nine
INTEREST OF DIRECTORS IN CONTRACTS
9.01 Disclosure of Interest of Director or Officer. A director or officer
who is a party to, or who is a director or officer of or has a material interest
in any person who is a party to, a material contract or proposed material
contract with the Corporation shall in accordance with the Act disclose in
writing to the Corporation or request to have entered in the minutes of a
directors' meeting the nature and extent of his interest. A director so
inter-
<PAGE>
-13-
ested shall not vote on or sign any resolution to approve such contract unless
permitted to do so by the Act. A general notice to the board by a director or
officer that he is a director or officer of or has a material interest in a
person and is to be regarded as interested in any contract made with that person
is a sufficient declaration of interest in relation to any contract so made.
9.02 Effect of Such Contracts. A material contract is neither void nor
voidable by reason only that one or more of the directors or officers has a
material interest therein as aforesaid, or that an interested director is
present at or is included in constituting the quorum at a meeting of directors
that authorized the contract, if the director or officer disclosed his interest
in the manner referred to above and the contract was approved by the directors
or shareholders and was reasonable and fair to the Corporation at the time it
was approved.
Section Ten
SHARES
10.01 Issuance of Shares. Subject to the provisions of the Act and the
articles, the board may from time to time issue or otherwise dispose of shares
of the Corporation, or grant options to purchase or otherwise deal in the whole
or any part of the authorized but unissued shares of the Corporation, at such
times and to such persons and for such consideration as the board shall
determine, provided that no share shall be issued until it is fully paid for as
provided by the Act.
10.02 Commissions. The board may from time to time authorize the
Corporation to pay reasonable commission to any person in consideration of his
purchasing or agreeing to purchase shares of the Corporation, whether from the
Corporation or from any other person, or procuring or agreeing to procure
purchasers for any such shares.
10.03 Share Certificates. Every shareholder is entitled to a share
certificate or a non-transferable written acknowledgement of his right to obtain
a share certificate, stating the number, class and series designation, if any,
of shares held by him as appearing in the records of the Corporation. Share
certificates shall be in such form or forms as the board shall from time to time
approve and, unless otherwise ordered by the board, shall be signed in
accordance with section 2.05 manually or as hereinafter provided, and need not
be under the corporate seal. Certificates representing shares in respect of
which a transfer agent has been ap-
<PAGE>
-14-
pointed shall not be valid unless countersigned by or on behalf of such transfer
agent. The corporate seal of the Corporation and the signature of one of the
signing officers, or in the case of share certificates representing shares in
respect of which a transfer agent has been appointed, the signatures of both
signing officers, may be mechanically reproduced in facsimile upon share
certificates and every such facsimile signature shall bind the Corporation.
Share certificates executed as aforesaid shall be valid notwithstanding that one
or both of the officers whose signature (whether manual or facsimile) appears
thereon no longer holds office at the date of issue or delivery of the
certificate.
10.04 Transfer Agent. The board may from time to time appoint or remove one
or more registrars and transfer agents to keep the securities register, appoint
or remove one or more branch transfer agents to keep branch securities registers
and provide for the transfer of securities in one or more places.
10.05 Registration of Transfer. No transfer of shares need be registered in
the securities register except upon presentation of the certificate representing
such shares endorsed by an appropriate person in accordance with the Act,
together with reasonable assurance that the endorsement is genuine and
effective, upon compliance with such restrictions on transfer, if any, as are
authorized by the articles, upon satisfaction of any debt for which the
Corporation has a lien on the shares and upon compliance with all other
conditions set out in the Act.
10.06 Lien for Indebtedness. If the articles so provide, when a shareholder
is indebted to the Corporation, the Corporation shall have a lien on shares
registered in the name of such shareholder or his legal representative to the
extent of the debt, and the right of the Corporation to the lien shall be noted
conspicuously on every share certificate. Subject to any other provision of the
articles, the Corporation may enforce such lien without notice or liability by
disposing of or cancelling without repayment any such shares, refusing to
register their transfer or setting off or recovering any dividends,
distributions or capital repayments due thereon.
10.07 Non-recognition of Trusts. Subject to the Act, the Corporation may
treat the registered owner of a share as the person exclusively entitled to
vote, to receive notices, to receive any interest, dividend or other payments in
respect of the share and otherwise to exercise all the rights and powers of an
owner of the share. The Corporation may, however, treat as the registered
shareholder any executor, administrator, heir, legal representative, guardian,
committee, trustee, liquidator or trustee in bankruptcy who furnishes
appropriate evidence to the Corporation establishing his authority to exercise
the rights relating to a share of the Corporation.
10.08 Joint Holders. If two or more persons are registered as joint holders
of any share, the Corporation shall not be bound to issue more than one
certificate in respect thereof, and delivery of such certificate to one of such
persons shall be sufficient delivery to all of them. Any one of such persons may
give effectual receipts for the certificate issued in
<PAGE>
-15-
respect thereof or for any dividend, bonus, return of capital or other money
payable or warrant issuable in respect of such share.
10.09 Deceased Shareholders. In the event of the death of a holder, or of
one of the joint holders, of any share, the Corporation shall not be required to
make any entry in the securities register in respect thereof or to make any
dividend or other payments in respect thereof except upon production of all such
documents as may be required by law and upon compliance with the reasonable
requirements of the Corporation and its transfer agents.
10.10 Replacement of Share Certificates. The board or any officer or agent
designated by the board may at its or his discretion direct the issue of a new
share or other such certificate in lieu of and upon cancellation of a
certificate that has been mutilated or in substitution for a certificate claimed
to have been lost, destroyed or wrongfully taken on payment of such reasonable
fee and on such terms as to indemnity, reimbursement of expenses and evidence of
loss and of title as the board may from time to time prescribe, whether
generally or in any particular case.
Section Eleven
DIVIDENDS AND RIGHTS
11.01 Dividends. Subject to the Act, the board may from time to time
declare dividends payable to the shareholders according to their respective
rights and interest in the Corporation. Dividends may be paid in money or
property or by issuing fully paid shares of the Corporation.
11.02 Dividend Cheques. A dividend payable in money shall be paid by cheque
to the order of each registered holder of shares of the class or series in
respect of which it has been declared and mailed by prepaid ordinary mail to
such registered holder at his recorded address, unless such holder otherwise
directs. In the case of joint holders the cheque shall, unless such joint
holders otherwise direct, be made payable to the order of all of such joint
holders and mailed to them at their recorded address. The mailing of such cheque
as aforesaid, unless the same is not paid on due presentation, shall satisfy and
discharge the liability for the dividend to the extend of the sum represented
thereby plus the amount of any tax which the Corporation is required to and does
withhold.
11.03 Non-receipt of Cheques. In the event of non-receipt of any dividend
cheque by the person to whom it is sent as aforesaid, the Corporation shall
issue to such person a replacement cheque for a like amount on such terms as to
indemnity, reimbursement of
<PAGE>
-16-
expenses and evidence of non-receipt and of title as the board may from time to
time prescribe, whether generally or in any particular case.
11.04 Record Date for Dividends and Rights. The board may fix in advance a
date, preceding by not more than 50 days the date for the payment of any
dividend or the making of any distribution or the date for the issue of any
warrant or other evidence of right to subscribe for any security of the
Corporation, as a record date for the determination of the persons entitled to
receive such dividend or distribution or to exercise the right to subscribe for
such security, as the case may be, and notice of any such record date shall be
given not less than seven days before such record date. Where no such record
date is fixed by the board, the record date for the determination of the persons
entitled to receive such dividend or distribution or to exercise the right to
subscribe for such security, as the case may be, shall be the close of business
on the day on which the board passes the resolution relating to such dividend,
distribution or right.
11.05 Unclaimed Dividends. Any dividend unclaimed after a period of six
years from the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.
Section Twelve
MEETINGS OF SHAREHOLDERS
12.01 Annual Meeting. The annual meetings of shareholders shall be held at
such time in each year and, subject to the Act, at such place as the board may
determine, for the purpose of considering the financial statements and reports
required by the Act to be placed before the annual meeting, electing directors,
appointing an auditor and for the transaction of such other business as may
properly be brought before the meeting. In default of an annual general meeting
being held as required, an annual general meeting may be called by any two
shareholders and such meeting shall be conducted in the same manner, as nearly
as possible, as annual general meetings called by the directors.
12.02 Special Meetings. The board shall have the power to call special
meetings of shareholders at such time and place as the board may determine which
meeting may be held in conjunction with an annual meeting of shareholders.
12.03 Notice of Meetings. Notice of the time and place of each meeting of
shareholders shall be given in the manner provided in Section Thirteen not less
than 21 nor more than 50 days before the date of the meeting to each director,
to the auditor, and to each shareholder who at the close of business on the
record date for notice is entered in the securi-
<PAGE>
-17-
ties register as the holder of one or more shares carrying the right to vote at
the meeting. Notice of a meeting of shareholders called for any purpose other
than consideration of the financial statements and auditor's report, election of
directors and reappointment of the incumbent auditor shall state the nature of
such business in sufficient detail to permit the shareholders to form a reasoned
judgement thereon and shall state the nature of any special business to be
transacted at the meeting.
12.04 Record Date for Notice. The board may fix in advance a date,
preceding the date of any meeting of shareholders by not less than 21 nor more
than 50 days, as a record date for the determination of the shareholders
entitled to notice of the meeting, and notice of any such record date shall be
given not less than seven days before such record date, by newspaper
advertisement in the manner provided in the Act. If no record date is so fixed,
the record date for the determination of the shareholders entitled to receive
notice of the meeting shall be at the close of business on the day immediately
preceding the day on which the notice is given or, if no notice is given, the
day on which the meeting is held.
12.05 List of Shareholders Entitled to Notice. For every meeting of
shareholders, the Corporation shall prepare a list of shareholders entitled to
receive notice of the meeting, arranged in alphabetical order and showing the
number of shares held by each shareholder entitled to vote at the meeting. If a
record date for the meeting is fixed pursuant to section 12.04, the shareholders
listed shall be those registered at the close of business on such record date.
If no record date is fixed, the shareholders listed shall be those registered at
the close of business on the day immediately preceding the day on which notice
of the meeting is given or, where no such notice is given, on the day on which
the meeting is held. The list shall be available for examination by any
shareholder during usual business hours at the registered office of the
Corporation or at the place where the central securities register is maintained
and at the meeting for which the list was prepared.
12.06 Meetings Without Notice. A meeting of shareholders may be held
without notice at any time and place permitted by the Act:
(a) if all the shareholders entitled to vote thereat are present in person
or duly represented or if those not present or represented waive notice of or
otherwise consent to such meeting being held; and
(b) if the auditors and the directors are present or waive notice of or
otherwise consent to such meeting being held so long as such shareholders,
auditors or directors present are not attending for the express purpose of
objecting to the transaction of any business on the grounds that the meeting is
not lawfully called. At such a meeting, any business may be transacted which the
Corporation at a meeting of shareholders may transact. If the meeting is held at
a place outside Canada, shareholders not present or duly represented, but who
have
<PAGE>
-18-
waived notice of or otherwise consented to such meeting, shall also be deemed to
have consented to the meeting being held at such place.
12.07 Chairman, Secretary and Scrutineers. The chairman of any meeting of
shareholders shall be the first mentioned of such of the following officers as
have been appointed and who is present at the meeting: president, chairman of
the board, or a vice-president who is a shareholder. If no such officer is
present within 15 minutes from the time fixed for holding the meeting, the
persons present and entitled to vote shall choose one of their number to be
chairman. If the secretary of the Corporation is absent, the chairman shall
appoint some person, who need not be a shareholder, to act as secretary of the
meeting. If desired, one or more scrutineers, who need not be shareholders, may
be appointed by ordinary resolution or by the chairman with the consent of the
meeting.
12.08 Persons Entitled to be Present. The only persons entitled to be
present at a meeting of shareholders shall be those entitled to vote thereat,
the directors and auditor of the Corporation and others who, although not
entitled to vote, are entitled or required under any provision of the Act or the
articles or by-laws to be present at the meeting. Any other person may be
admitted only on the invitation of the chairman of the meeting or with the
consent of the meeting.
12.09 Quorum. Subject to the Act, a quorum for the transaction of business
at any meeting of shareholders shall be two persons present in person, or by
proxy and holding or representing by proxy, not less than 5% of the shares
entitled to vote at the meeting. If a quorum is present at the opening of any
meeting of shareholders, the shareholders present or represented may proceed
with the business of the meeting notwithstanding that a quorum is not present
throughout the meeting. If at the opening of the meeting a quorum is not
present, the meeting, if convened by a requisition of members, shall be
dissolved. In any other case, the shareholders present may adjourn the meeting
to a fixed time and place, but may not transact any other business, and the
shareholders personally present or represented by proxy at the adjourned meeting
shall constitute a quorum.
12.10 Right to Vote. Every person named in the list referred to in section
12.05 shall be entitled to vote the shares shown thereon opposite his name at
the meeting to which such list relates except to the extent that:
(a) where the Corporation has fixed a record date in respect of such
meeting, such person has transferred any of his shares after such record date,
or where the Corporation has not fixed a record date in respect of such meeting,
such person has transferred any of his shares after the date on which such list
is prepared; and
(b) the transferee, having produced properly endorsed certificates
evidencing such shares or having otherwise established that he owns such shares,
has demanded not later
<PAGE>
-19-
than 10 days before the meeting that his name be included in such list. In any
such excepted case the transferee shall be entitled to vote the transferred
shares at such meeting.
12.11 Proxies. Every shareholder, including a shareholder that is a body
corporate, entitled to vote at a meeting of shareholders may by instrument in
writing appoint a proxyholder or alternate proxyholders, who need not be
shareholders, to attend and act at such meeting in the manner and to the extent
authorized by the proxy. Such instrument shall be signed by the shareholder or
his attorney authorized in writing, or if the shareholder is a body corporate,
under the hand of an officer or attorney thereof duly authorized. In addition to
the requirements of the Act, a proxy shall be in such form as the directors may
from time to time prescribe or in such other form as the chairman of the meeting
may accept. The board may specify in the notice calling the meeting a time, not
exceeding 48 hours (excluding non-business days), preceding the meeting, before
which proxies must be deposited with the Corporation or its agent. A proxy shall
be acted upon only if, prior to the time so specified, it shall be have been
deposited with the Corporation or an agent thereof specified in such notice or,
where no such time is specified in such notice, if it has been so deposited or
received by the secretary of the Corporation or by the chairman of the meeting
or any adjournment thereof prior to the time of voting. In addition to
revocation in any other manner permitted by law, a proxy may be revoked by an
instrument in writing executed in the same manner as a proxy and deposited
either at the registered office of the Corporation at any time up to and
including the last business day preceding the date of the meeting or with the
chairman of such meeting on the day of the meeting before any vote is cast under
its authority.
12.12 Authorized Representative. Any shareholder which is a body corporate
or association may authorize by resolution of its directors or governing body an
individual to represent it at a meeting of shareholders and such individual may
exercise on the shareholder's behalf all the powers it could exercise if it were
an individual shareholder. The authority of such an individual shall be
established by depositing with the Corporation a certified copy of such
resolution, or in such other manner as may be satisfactory to the secretary of
the Corporation or the chairman of the meeting. Any such representative need not
be a shareholder.
12.13 Joint Shareholders. If two or more persons hold shares jointly, any
one of them present in person or duly represented at a meeting of shareholders
may, in the absence of the other or others, vote the shares; but if two or more
of those persons are present in person or represented and vote, they shall vote
as one the shares jointly held by them.
12.14 Votes to Govern. At a meeting of shareholders every question shall,
unless otherwise required by the articles or by-laws or by law, be determined by
a majority of the votes cast on the question. In case of an equality of votes
either upon a show of hands or upon a poll, the chairman of the meeting shall be
entitled to a second or casting vote.
<PAGE>
-20-
12.15 Show of Hands. Subject to the Act, any question at a meeting of
shareholders shall be decided by a show of hands, and unless a ballot thereon is
required or demanded as hereinafter provided, upon a show of hands every person
who is present and entitled to vote shall have one vote. Whenever a vote by show
of hands shall have been taken upon a question, unless a ballot thereon is so
required or demanded, a declaration by the chairman of the meeting that the vote
upon the question has been carried or carried by a particular majority or not
carried, and an entry to that effect in the minutes of the meeting shall be
prima facie evidence of the fact without proof of the number or proportion of
the votes recorded in favour of or against any resolution or other proceeding in
respect of the said question, and the result of the vote so taken shall be the
decision of the shareholders upon the said question.
12.16 Ballots. On any question proposed for consideration at a meeting of
shareholders, and whether or not a show of hands has been taken thereon, the
chairman may require a ballot or any person who is present and entitled to vote
on such question at the meeting may demand a ballot. A ballot so required or
demanded shall be taken in such manner as the chairman shall direct. A
requirement or demand for a ballot may be withdrawn at any time prior to the
taking of the ballot. If a ballot is taken each person present shall be
entitled, in respect of the shares which he is entitled to vote at the meeting
upon the question, to that number of votes provided by the Act or the articles,
and the result of the ballot so taken shall be the decision of the shareholders
upon the said question.
12.17 Resolution need not be seconded. No resolution proposed at a meeting
need be seconded and the chairman of any meeting (provided he is entitled to
vote) shall be entitled to move or second a resolution without relinquishing the
chair.
12.18 Adjournment. The chairman at a meeting of shareholders may, with the
consent of the meeting and subject to such conditions as the meeting may decide,
adjourn the meeting from time to time and from place to place. If a meeting of
shareholders is adjourned for less than 30 days, it shall not be necessary to
give notice of the adjourned meeting, other than by announcement at the earliest
meeting that it is adjourned. Subject to the Act, if a meeting of shareholders
is adjourned by one or more adjournments for an aggregate of 30 days or more,
notice of the adjourned meeting shall be given as for an original meeting.
Section Thirteen
NOTICES
13.01 Method of Giving Notices. Any notice (which term includes any
communication or document) to be given (which term includes sent, delivered or
served) pur-
<PAGE>
-21-
suant to the Act, the regulations thereunder, the articles, the by-laws or
otherwise to a shareholder, director, officer, auditor, member of a committee of
the board or member of an advisory body shall be sufficiently given if delivered
personally to the person to whom it is to be given or to his recorded address or
if mailed to him by prepaid ordinary mail or sending it by telegram, telex,
telefax, telecommunication device or other similar form of communication to his
recorded address. A notice so delivered shall be deemed to have been received
when it is delivered personally or to the recorded address as aforesaid; a
notice so mailed shall be deemed to have been received at the time it would have
been delivered in the ordinary course of the mail, unless there are reasonable
grounds for believing it was not received at all; a notice sent by telegram,
telex, telefax, telecommuncation device or other similar form of communication
shall be deemed to have been given or made on the day following the day it was
sent. The secretary may change or cause to be changed the recorded address of
any shareholder, director, officer, auditor or member of a committee of the
board in accordance with any information believed by him to be reliable.
13.02 Notice to Joint Shareholders. If two or more persons are registered
as joint holders of any share, any notice may be addressed to all such joint
holders but notice addressed to one of such persons shall be sufficient notice
to all of them.
13.03 Computation of Time. In computing the date when notice must be given
under any provision requiring a specified number of days' notice of any meeting
or other event, the date of giving the notice shall be excluded and the date of
the meeting or other event shall be included.
13.04 Undelivered Notices. If any notice given to a shareholder pursuant to
section 13.01 is returned on three consecutive occasions because he cannot be
found, the Corporation shall not be required to give any further notices to such
shareholder until he informs the Corporation in writing of his new address.
13.05 Omission and Errors. The accidental omission to give any notice to
any shareholder, director, officer, auditor or member of a committee of the
board or the non-receipt of any notice by any such person or any error in any
notice not affecting the substance thereof shall not invalidate any action taken
at any meeting held pursuant to such notice or otherwise founded thereon.
13.06 Unregistered Shareholders. Every person who becomes entitled to any
share by any means whatsoever shall be bound by every notice in respect of such
share which shall have been duly given to the shareholder from whom he derives
his title to such share prior to his name and address being entered on the
securities register (whether such notice was given before or after the happening
of the event upon which he became so entitled) and prior to his furnishing to
the Corporation the proof of authority of his entitlement prescribed by the Act.
<PAGE>
-22-
13.07 Waiver of Notice. Any shareholder, proxyholder, other person entitled
to attend a meeting of shareholders, director, officer, auditor, member of a
committee of the board or member of an advisory body may at any time waive any
notice, or waive or abridge the time for any notice, required to be given to him
under the Act, the regulations thereunder, the articles, the by-laws or
otherwise and such waiver or abridgement, whether given before or after the
meeting or other event of which notice is required to be given, as the case may
be. Any such waiver or abridgement shall be in writing, except a waiver of
notice of a meeting of shareholders of the board, a committee of the board or an
advisory body, which may be given in any manner.
Section Fourteen
EFFECTIVE DATE
14.01 Effective Date. This by-law shall come into force when made by the
board in accordance with the Act.
MADE by the board the __ day of ____________, 19__.
------------------------------
CONFIRMED by the shareholders in accordance with the Act the __ day of
______________, 19__.
------------------------------
WORLDWIDE FIBER INC.
U.S. $500,000,000
12% SENIOR NOTES DUE 2009
INDENTURE
Dated as of July 28, 1999
HSBC Bank USA,
Trustee
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions....................................................1
Section 1.02. Other Definitions.............................................28
Section 1.03. Incorporation by Reference of Trust Indenture Act.............28
Section 1.04. Rules of Construction.........................................29
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating...............................................30
Section 2.02. Execution and Authentication..................................31
Section 2.03. Registrar and Paying Agent....................................31
Section 2.04. Paying Agent to Hold Money in Trust...........................32
Section 2.05. Holder Lists..................................................32
Section 2.06. Transfer and Exchange.........................................32
Section 2.07. Replacement Notes.............................................46
Section 2.08. Outstanding Notes.............................................47
Section 2.09. Treasury Notes................................................47
Section 2.10. Temporary Notes...............................................48
Section 2.11. Cancellation..................................................48
Section 2.12. Defaulted Interest............................................48
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee............................................49
Section 3.02. Selection of Notes to Be Redeemed.............................49
Section 3.03. Notice of Redemption..........................................49
Section 3.04. Effect of Notice of Redemption................................50
Section 3.05. Deposit of Redemption Price...................................51
Section 3.06. Notes Redeemed in Part........................................51
Section 3.07. Optional Redemption...........................................51
-i-
<PAGE>
Page
Section 3.08. Mandatory Redemption..........................................52
Section 3.09. Offer to Purchase by Application of Excess Proceeds...........52
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes..............................................55
Section 4.02. Maintenance of Office or Agency...............................55
Section 4.03. Reports.......................................................56
Section 4.04. Compliance Certificate........................................56
Section 4.05. Taxes; Payment of Additional Amounts..........................57
Section 4.06. Stay, Extension and Usury Laws................................58
Section 4.07. Restricted Payments...........................................59
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries................................................63
Section 4.09. Incurrence of Indebtedness and Issuance of
Preferred Stock.............................................65
Section 4.10. Limitation on Asset Sales.....................................69
Section 4.11. Transactions with Affiliates..................................70
Section 4.12. Liens.........................................................72
Section 4.13. Business Activities...........................................72
Section 4.14. Corporate Existence...........................................72
Section 4.15. Repurchase at the Option of Holders upon a Change
of Control..................................................72
Section 4.16. No Senior Subordinated Debt...................................74
Section 4.17. Issuances of Guarantees by Restricted Subsidiaries............74
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries.......75
Section 4.19. Payments for Consent..........................................76
ARTICLE 5
SUCCESSORS
Section 5.01. Amalgamation, Merger, Consolidation, or Sale of Assets........76
Section 5.02. Successor Corporation Substituted.............................77
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.............................................78
Section 6.02. Acceleration..................................................80
Section 6.03. Other Remedies................................................80
Section 6.04. Waiver of Past Defaults.......................................80
-ii-
<PAGE>
Page
Section 6.05. Control by Majority...........................................81
Section 6.06. Limitation on Suits...........................................81
Section 6.07. Rights of Holders of Notes to Receive Payment.................82
Section 6.08. Collection Suit by Trustee....................................82
Section 6.09. Trustee May File Proofs of Claim..............................82
Section 6.10. Priorities....................................................83
Section 6.11. Undertaking for Costs.........................................83
Section 6.12. Indemnification for Judgment Currency Fluctuations............83
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.............................................84
Section 7.02. Rights of Trustee.............................................85
Section 7.03. Individual Rights of Trustee..................................86
Section 7.04. Trustee's Disclaimer..........................................86
Section 7.05. Notice of Defaults............................................86
Section 7.06. Reports by Trustee to Holders of the Notes....................87
Section 7.07. Compensation and Indemnity....................................87
Section 7.08. Replacement of Trustee........................................88
Section 7.09. Successor Trustee by Merger, etc..............................89
Section 7.10. Eligibility; Disqualification.................................89
Section 7.11. Preferential Collection of Claims Against Company.............89
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance......90
Section 8.02. Legal Defeasance and Discharge................................90
Section 8.03. Covenant Defeasance...........................................91
Section 8.04. Conditions to Legal or Covenant Defeasance....................91
Section 8.05. Deposited Money and Government Securities to be Held
in Trust; Other Miscellaneous Provisions. ..................93
Section 8.06. Repayment to Company..........................................94
Section 8.07. Reinstatement.................................................94
-iii-
<PAGE>
Page
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes...........................95
Section 9.02. With Consent of Holders of Notes..............................95
Section 9.03. Compliance with Trust Indenture Act...........................97
Section 9.04. Revocation and Effect of Consents.............................97
Section 9.05. Notation on or Exchange of Notes..............................98
Section 9.06. Trustee to Sign Amendments, etc...............................98
ARTICLE 9A
SATISFACTION AND WAIVER
Section 9.01A Satisfaction and Discharge of Indenture.......................98
Section 9.02A Application of Trust Money....................................99
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.................................100
Section 10.02. Notices......................................................100
Section 10.03. Communication by Holders of Notes with Other Holders
of Notes...................................................101
Section 10.04. Certificate and Opinion as to Conditions Precedent...........101
Section 10.05. Statements Required in Certificate or Opinion................101
Section 10.06. Rules by Trustee and Agents..................................102
Section 10.07. No Personal Liability of Directors, Officers, Employees
and Stockholders...........................................102
Section 10.08. Governing Law................................................102
Section 10.09. Jurisdiction.................................................102
Section 10.10. No Adverse Interpretation of Other Agreements................103
Section 10.11. Successors...................................................103
Section 10.12. Severability.................................................103
Section 10.13. Counterpart Originals........................................104
Section 10.14. Table of Contents, Headings, etc.............................104
-iv-
<PAGE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
-v-
<PAGE>
INDENTURE dated as of July 28, 1999 between Worldwide Fiber Inc., a company
incorporated under the laws of the Province of Alberta, Canada (the "Company"),
and HSBC Bank USA, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 12% Senior Notes due
2009 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"1998 Notes" means the Company's 12.5% Senior Notes due December 15, 2005.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection
with, or in contemplation of, such other Person merging with or into,
or becoming a Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Additional Interest" has the meaning set forth in Section 5 of the
Registration Rights Agreement.
"Additional Senior Notes" means any Notes (other than the Initial Notes)
which have terms, conditions and covenants substantially identical to the terms,
conditions and covenants of the Notes and which are issued by the Company under
this Indenture subsequent to the Issue Date.
<PAGE>
-2-
"Adjusted Consolidated Cash Flow" means Consolidated Cash Flow minus all
non-cash items, increasing Consolidated Net Income for the applicable period to
the extent not previously deducted in computing Consolidated Cash Flow, whether
or not such non-cash items were accrued or incurred in the ordinary course of
business or otherwise.
"Adjusted Fiber Value" means, at any time after certain Affiliates of
Ledcor Inc. have contributed dark fiber strands to the Company pursuant to the
Undertaking Agreements, an amount equal to $72.5 million less one-twelfth (1/12)
of such amount for each of such dark fiber strands which has been sold, leased,
contributed or with respect to which an IRU has been granted to any Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights other than any sale, lease, transfer, conveyance, or other
disposition of telecommunications capacity, transmission rights, or
other telecommunications services provided over the Company's network
in the ordinary course of business; provided that the sale, conveyance
or other disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole will be
governed by the provisions of Section 4.15 and/or Section 5.01 and not
by the provisions of Section 4.10; and
(2) the issuance of Equity Interests by any of the Company's Restricted
Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries.
<PAGE>
-3-
Notwithstanding the preceding, the following items shall be deemed not to
be Asset Sales:
(1) any single transaction or series of related transactions that: (a)
involves assets having a fair market value of less than $1.0 million;
or (b) results in net proceeds to the Company and its Restricted
Subsidiaries of less than $1.0 million;
(2) a transfer of assets between or among the Company and its Restricted
Subsidiaries or between Restricted Subsidiaries;
(3) Permitted Telecommunication Asset Dispositions;
(4) an issuance of Equity Interests by a Restricted Subsidiary to the
Company or to a Wholly Owned Restricted Subsidiary; and
(5) a Permitted Investment or a Restricted Payment that is permitted by
the provisions of Section 4.07.
"Bankruptcy Law" means Title 11, U.S. Code, the Bankruptcy and Insolvency
Act (Canada) or the Companies' Creditors Arrangement Act (Canada) or any similar
federal, provincial, or state law of any jurisdiction relating to bankruptcy,
insolvency, winding up, liquidation, reorganization or relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
<PAGE>
-4-
"Canadian FOTS" means the 5,400 mile fiber optic network development across
Canada and the Northern United States constructed by Ledcor Inc. and its
Affiliates, as described in the Offering Memorandum.
"Canadian Taxing Authority" means any federal, provincial, territorial or
other Canadian government or any authority or agency therein or thereof having
power to tax.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means any of the following:
(1) any investment in direct obligations of the United States of America
or any agency thereof or of Canada or any province or agency thereof
of obligations guaranteed by the United States of America or any
agency thereof or of Canada or any province or agency thereof, in each
case with a term of not more than one year (provided that any province
of Canada must be rated at least "R-1" by the Dominion Bond Rating
Service Limited);
(2) investments in time deposit accounts, term deposit accounts,
certificates of deposit, money market deposits, bankers acceptances
and obligations 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, Canada or any
province thereof, and which bank or trust company has, or the
obligations of which bank or trust company is guaranteed by a bank or
trust company which has, capital, surplus and undivided profits
<PAGE>
-5-
aggregating in excess of $150.0 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 by Dominion
Bond Rating Service Limited or Canadian Bond Rating Service, Inc. or any money
market fund sponsored by a registered broker dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above
entered into with a bank meeting the qualifications described in
clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days after
the date of acquisition, issued by a corporation (other than the
Company or an Affiliate of the Company) organized and in existence
under the laws of the United States of America or Canada with a rating
at the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard & Poor's or at least "R-1" by Dominion
Bond Rating Service Limited or Canadian Bond Rating Service (in the
case of a Canadian issuer);
(5) investments in securities with maturities of six months or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth, territory or province of the United States of America or
Canada, or by any political subdivision or taxing authority thereof,
and rated at least "R-1" by the Dominion Bond Rating Service Limited
(in the case of a Canadian issuer);
(6) investments in money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1)
through (5) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company
and its Subsidiaries taken as a whole to any "person" (as such term is
used in Section 13(d)(3) of the Exchange Act) other than a Permitted
Holder;
(2) the adoption of a plan relating to the liquidation or dissolution of
the Company;
<PAGE>
-6-
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person"
(as defined above), other than a Permitted Holder, becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the
Voting Stock of the Company, measured by voting power rather than
number of shares;
(4) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors; or
(5) the Company consolidates with, or merges with or into, any Person, or
any Person consolidates with, or merges with or into, the Company, in
any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged
for cash, securities or other property, other than any such
transaction where the Voting Stock of the Company outstanding
immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or
transferee Person constituting a majority of the outstanding shares of
such Voting Stock of such surviving or transferee Person immediately
after giving effect to such issuance.
"Company" means Worldwide Fiber Inc., a company incorporated under the laws
of the Province of Alberta, Canada, and any and all successors thereto.
"Consolidated Capital Ratio" means, with respect to the Company as of any
date, the ratio of (i) the aggregate consolidated principal amount of
Indebtedness of the Company and its Restricted Subsidiaries then outstanding to
(ii) the Consolidated Net Worth of the Company and its Restricted Subsidiaries
as of such date, in each case as shown on the consolidated balance sheet of the
Company in accordance with GAAP.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:
(1) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net
Income; plus
(2) Fixed Charges of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued and whether or not capitalized
(including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in re-
<PAGE>
-7-
spect of letter of credit or bankers' acceptance financings, and net
payments, if any, pursuant to Hedging Obligations), to the extent that
any such expense was deducted in computing such Consolidated Net
Income; plus
(3) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period
to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income;
minus
(4) non-cash items increasing such Consolidated Net Income for such
period, other than items that were accrued in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the preceding, the provision for
taxes based on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Restricted Subsidiary of
the Company shall be added to Consolidated Net Income to compute
Consolidated Cash Flow of the Company only to the extent that a
corresponding amount would be permitted at the date of determination
to be dividended to the Company by such Restricted Subsidiary without
prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to
that Subsidiary or its stockholders.
"Consolidated Leverage Ratio" means, with respect to the Company, as of any
date, the ratio of (i) the aggregate amount of Indebtedness of the Company and
its Restricted Subsidiaries then outstanding (other than intercompany debt) to
(ii) the Consolidated Cash Flow of the Company and its Restricted Subsidiaries
on a consolidated basis for the most recently ended four fiscal quarters
immediately preceding the date of determination for which consolidated financial
statements of the Company are available (the "Reference Period").
In addition to the foregoing, for purposes of this definition,
"Consolidated Cash Flow" shall be calculated on a pro forma basis after giving
effect to the issuance of the Notes and the incurrence of the Indebtedness (and
the application of the proceeds therefrom) giving rise to the need to make such
calculation and any incurrence (and the application of the proceeds therefrom)
or repayment of Indebtedness, other than the incurrence or repayment of
indebtedness for ordinary working capital purposes, at any time subsequent to
the beginning of the Reference Period and on or prior to the date of
determination, as if such occurrence (and the
<PAGE>
-8-
application of the proceeds thereof), or the repayment, as the case may be,
occurred on the first day of the Reference Period.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Restricted
Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, it being
understood that the Net Income of any such Restricted Subsidiary for
such period shall be included in Consolidated Net Income up to the
aggregate amount of cash that such Restricted Subsidiary could have
paid pursuant to such dividends or similar distributions during such
period to the Company or any of its Restricted Subsidiaries;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(4) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the specified Person or one of
its Subsidiaries, except for purposes of the provisions of Sections
4.07 and 4.09 hereof, in which case the Net Income of any Unrestricted
Subsidiary will be included to the extent it would otherwise be
included under clause (1) of this definition above; and
(5) the cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to the Company as of any date,
the sum of (i) the consolidated equity of the common stockholders of the Company
and its Restricted Subsidiaries that are Restricted Subsidiaries as of such date
plus (ii) the respective amounts reported on the Company's balance sheet as of
such date with respect to any series of Preferred Stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of
<PAGE>
-9-
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by the Company upon issuance of such Preferred Stock
plus (iii) the Adjusted Fiber Value, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the Issue Date in the book value of any asset
owned by the Company or a Restricted Subsidiary of the Company, (y) all
outstanding net Investments as of such date in unconsolidated Restricted
Subsidiaries and in Persons that are not Restricted Subsidiaries, and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Director" means, as of any date of determination, any member of
the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the Issue Date; or
(2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing for
loans or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Custodian" means the Trustee, as custodian with respect to the Notes in
global form, or any successor entity thereto.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, substantially
in the form of Exhibit A hereto, except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
<PAGE>
-10-
"Depositary" means, with respect to the Global Notes, the Person specified
in Section 2.03 hereof as the Depositary with respect to the Notes, and any and
all successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature.
Notwithstanding the preceding sentence, any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
change of control or an asset sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with provisions of Section 4.07 hereof.
"Eligible Investments" means cash or Cash Equivalents or such other
investment grade debt securities as the Board of Directors shall approve from
time to time; provided, however, that in no event shall any funds required to be
held as Eligible Investments be used, directly or indirectly, to repurchase any
Notes, except as specifically provided in the Unrestricted Offer.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
<PAGE>
-11-
"Existing Indebtedness" means Indebtedness of the Company or any of its
Restricted Subsidiaries outstanding on the Issue Date (other than the Credit
Facilities).
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including,
without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net payments, if any,
pursuant to Hedging Obligations; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, whether or not such Guarantee or Lien is called upon;
plus
(4) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock (including, without limitation,
Disqualified Stock) of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable
solely in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the Company,
times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with
GAAP.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company which
(i) is not organized under the laws of (x) the United States or any state
thereof, (y) the District of Columbia or (z) Canada or any province thereof and
(ii) conducts substantially all of its business operations outside the United
States of America and Canada.
"GAAP" means generally accepted accounting principles in the United States
as 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 have been ap-
<PAGE>
-12-
proved by a significant segment of the accounting profession, which are in
effect from time to time.
"Global Notes" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any property,
except any such balance that constitutes an accrued expense or trade
payable; or
<PAGE>
-13-
(6) representing any Hedging Obligations, if and to the extent any of the
preceding items (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of the specified
Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien
on any asset of the specified Person (whether or not such Indebtedness
is assumed by the specified Person, which shall be deemed the lesser
of the full amount of such Indebtedness and the fair market value of
the property or asset so secured) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any
other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Initial Notes" means $500,000,000 aggregate principal amount of Notes
issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the provisions of Section 4.07.
<PAGE>
-14-
"IRU" means Indefeasible Rights of Use. A long-term lease of approximately
10 or 20 years with option periods thereafter to renew at lower rates, at the
option of the lessee.
"Issue Date" means the first date on which any Notes were issued under the
Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person and its Restricted Subsidiaries, determined in accordance with GAAP
and before any reduction in respect of preferred stock dividends, excluding,
however:
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with: (a) any Asset Sale; or
(b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any related provision
for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in each
case after taking into account any available tax credits or deductions and any
tax sharing arrangements
<PAGE>
-15-
and amounts required to be applied to the repayment of Indebtedness secured by a
Lien on the asset or assets that were the subject of such Asset Sale.
"Network" means the fiber optic telecommunications network constructed or
owned from time to time by the Company and its Restricted Subsidiaries.
"Non-Competition Agreement" means that certain Letter to the Company from
Ledcor Inc., dated as of May 31, 1998, regarding Ledcor Inc.'s agreement not to
compete with the Company in the business of developing or constructing fiber
optic communications infrastructure.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender; and
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or
both any holder of any other Indebtedness (other than the Notes, the
1998 Notes or the Credit Facilities) of the Company or any of its
Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this Indenture.
The Initial Notes and the Additional Senior Notes shall be treated as a single
class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Offering Memorandum" means that certain Offering Memorandum dated July 23,
1999 pursuant to which the Company offered the Notes.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the
<PAGE>
-16-
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice
President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the chief financial officer, or the treasurer of the Company, that
meets the requirements of Section 10.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 10.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Fiber Investment" means any Investment of up to 12 fibers on any
Segment of the Network.
"Permitted Holder" means any Parent Company and its Affiliates.
"Permitted Investments" means:
(1) any Investment in the Company or in any Restricted Subsidiary of the
Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the Company; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the
Company;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the provisions of Section 4.10;
<PAGE>
-17-
(5) advances and loans to officers and employees of the Company or any
Restricted Subsidiary in an amount not exceeding $5.0 million any one
time outstanding;
(6) Investments in the form of intercompany Indebtedness to the extent
permitted under clause (f) of the second paragraph of Section 4.09
hereof;
(7) Hedging Obligations, provided that such Hedging Obligations constitute
Permitted Indebtedness permitted by clause (g) of the second paragraph
of Section 4.09 hereof;
(8) Investments of the Company or any Restricted Subsidiary existing on
the Issue Date; and
(9) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers.
"Permitted Liens" means:
(1) Liens on the assets of the Company and any Restricted Subsidiary of
the Company securing Indebtedness and other Obligations under Credit
Facilities that are permitted by the terms of this Indenture to be
incurred;
(2) Liens in favor of the Company or its Restricted Subsidiaries;
(3) Liens on property of a Person existing at the time such Person becomes
a Restricted Subsidiary of the Company or is merged with or into or
consolidated with the Company or any Restricted Subsidiary of the
Company; provided that such Liens were in existence prior to the
contemplation of such Person becoming a Restricted Subsidiary of the
Company or merger or consolidation and do not extend to any assets
other than those of such person or the Person merged into or
consolidated with the Company or the Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that
such Liens were in existence prior to the contemplation of such
acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
<PAGE>
-18-
(6) Liens to secure Purchase Money Indebtedness and Vendor Financing
Indebtedness permitted by clause (d) of the second paragraph of
Section 4.09 covering only the assets (or portion thereof) acquired
with such Indebtedness;
(7) Liens existing on the Issue Date;
(8) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(9) Liens created for the benefit of the Notes;
(10) Liens imposed by law or arising by operation of law, including,
without limitation, landlords' mechanics', carriers' warehousemen's
materialmen's, suppliers' and vendors' Liens, Liens for master's and
crew's wages and other similar maritime Liens and mechanics' Liens, in
each case which are incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserves or other appropriate provisions, if any, as shall be required
by GAAP shall have been made with respect thereto;
(11) zoning restrictions, easements, license, covenants, reservations,
restrictions on the use of real property and defects, irregularities
and deficiencies in title to real property that do not, individually
or in the aggregate, materially affect the ability of the Company or
any Restricted Subsidiary to conduct its business and are incurred in
the ordinary course of business;
(12) Liens incurred or pledges and deposits made in the ordinary course of
business in connection with workers' compensation and unemployment
insurance and other types of social security;
(13) Liens to secure any extension, renewal, refinancing or refunding (or
successive extensions, renewals, refinancings or refundings), in whole
or in part, of any Indebtedness secured by Liens referred to in the
foregoing clauses (3), (4), (6), and (7) of this definition, provided
that such Liens do not extend to any other property of the Company or
any Restricted Subsidiary and the principal amount of the Indebtedness
secured by such Lien is not increased;
(14) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings that
may have been initiated for the review of such judgment, decree or
order shall not have been
<PAGE>
-19-
finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(15) Liens securing obligations of the Company under Hedging Obligations
permitted to be incurred under clause (g) of the second paragraph of
Section 4.09 or any collateral for the Indebtedness to which such
Hedging Obligations relate;
(16) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of banker's
acceptances issued or credited for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or
other goods;
(17) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating
to such letters of credit and products and proceeds thereof;
(18) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of
offset and set-off;
(19) Liens arising out of consignment or similar arrangements for the sale
of goods in the ordinary course of business;
(20) any interest or title of a lessor in the Property subject to any lease
other than a Capital Lease;
(21) leases or subleases granted to others that do not materially interfere
with the ordinary course of business of the Company and its Restricted
Subsidiaries;
(22) Liens encumbering Property or other assets under construction arising
from progress or partial payments by a customer or the company or its
Restricted Subsidiaries relating to such Property or other assets;
(23) Liens arising from filing Uniform Commercial Code financing statements
regarding leases, provided that such Liens do not extend to any
property or assets which are not leased property subject to such
leases or subleases;
(24) 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;
(25) Liens securing Permitted ROW Indebtedness;
<PAGE>
-20-
(26) Liens securing other Indebtedness not exceeding $5.0 million at any
time outstanding;
(27) Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations
that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair
the use thereof in the operation of business by the Company or such
Restricted Subsidiary; and
(28) Liens securing Qualified Subsidiary Indebtedness to the extent
permitted to be incurred by clause (h) of the second paragraph of
Section 4.09 hereof.
"Permitted Project Financing Investment" means an Investment by the Company
or any Restricted Subsidiary in any Unrestricted Subsidiary for the purpose of
facilitating the incurrence by such Unrestricted Subsidiary of Non-Recourse Debt
for the purpose of financing a portion of the cost of construction, engineering,
acquisition, installation, development or improvement by such Unrestricted
Subsidiary of any Segment of the Network; provided, however, that the amount of
any such Investment shall not exceed 55% of the total initial capitalization of
any such Unrestricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal
amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
equal to or later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refi-
<PAGE>
-21-
nancing Indebtedness has a final maturity date equal to or later than
the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders of Notes
as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded;
and
(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Permitted ROW Indebtedness" means Indebtedness evidencing the deferred
obligation to the seller of any ROW on which any Segment of the Company's
Network is being constructed to pay the purchase price for such ROW; provided,
however, that in no event shall the aggregate principal amount of any such
Indebtedness exceed, with respect to any Segment of the Network, more than 50%
of the total anticipated construction cost of such Segment, as determined by the
Board of Directors in good faith.
"Permitted Stockholder" means Worldwide Fiber Holdings Ltd., an Alberta
corporation, and its Affiliates.
"Permitted Telecommunications Asset Disposition" means the transfer,
conveyance, sale, lease, grant of an IRU or other disposition (each, a
"Disposition") in the ordinary course of business of dark fiber, conduit or
associated infrastructure of the Network, (i) the proceeds of which are treated
as revenues by the Company in accordance with GAAP and (ii) that, in the case of
the sale of dark fiber, would not result in the Company retaining less than (x)
24 fibers per route mile or (y) 12 fibers and one empty conduit per route mile,
in each case, on every Segment of the Network constructed or developed by the
Company (other than the Canadian FOTS in which the Company shall only be
required to retain six fibers per route mile on each Segment), provided,
however, that any Permitted Fiber Investment that results in the Company
retaining a minimum of 12 fibers per route mile (in the case of clause (x)
above) or one empty conduit (in the case of clause (y) above) shall be deemed to
be a Permitted Telecommunications Asset Disposition; provided further that any
subsequent Disposition of such Permitted Fiber Investment shall be deemed to be
an Asset Sale.
"Permitted Vendor Facilities" means Vendor Financing Indebtedness that is
permitted to include working capital facilities.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
<PAGE>
-22-
"Private Placement Legend" means the legend set forth in Section 2.06(g)(i)
to be placed on all Notes issued under this Indenture except where otherwise
permitted by the provisions of this Indenture.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including Capital Stock in, and other securities of, any other
Person.
"Public Equity Offering" means any underwritten public offering of common
stock of the Company in which the gross proceeds to the Company are at least
$100.0 million.
"Purchase Money Indebtedness" means Indebtedness of the Company (including
Acquired Indebtedness and Capital Lease Obligations, mortgage financings and
purchase money obligations) incurred for the purpose of financing all or any
part of the cost of construction, engineering, acquisition, installation,
development or improvement by the Company or any Restricted Subsidiary of any
Telecommunications Assets of the Company or any Restricted Subsidiary and
including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith, as the same may be amended,
supplemented, modified or restated from time to time.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Equity Offering" means (A) any underwritten public offering
(other than on Form S-4 or S-8 or any successor forms thereto) of common stock
of the Company in which the gross proceeds to the Company are at least $100.0
million or (B) the sale by the Company of its Equity Interests to any Strategic
Equity Investor, the net proceeds of which are at least $25.0 million.
"Qualified Subsidiary Indebtedness" means Indebtedness of any Restricted
Subsidiary under one or more senior credit agreements, senior secured loan
agreements or similar senior credit facilities (including any supply or similar
agreement under which the goods to be financed were obtained) entered into from
time to time, including related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith.
"Registration Rights Agreement" means the A/B Exchange Registration Rights
Agreement, dated as of July 28, 1999, by and among the Company, Donaldson,
Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated,
Salomon Smith Barney Inc., and TD Securities (USA) Inc., as such agreement may
be amended, modified or supplemented from time to time, and with respect to any
Additional Senior Notes, one or more registration rights agreements between the
Company and the other parties thereto, as such agreement(s) may be amended,
modified or supplemented from time to time, relating to rights given by the
<PAGE>
-23-
Company to the purchasers of Additional Senior Notes to register such Additional
Senior Notes under the Securities Act.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"ROW" means Rights-of-way, licenses and permits (creating a contractual
interest and not an interest in land) from third party landowners and
governmental authorities which permit the holder to install conduit and fiber.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
-24-
"Segment" means (x) with respect to the intercity portions of the Network,
the through-portion of the Network between two local networks and (y) with
respect to a local portion of the Network, the entire through-portion of the
Network, excluding the spurs which branch off the throughportion.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Strategic Equity Investor" means a corporation, partnership or other
entity engaged in one or more Telecommunications Businesses that has 80% or more
of the voting power of its Capital Stock owned by a Person or Persons that has
or have, as the case may be, at the time of the initial investment in the
Company, an equity market capitalization in excess of $1.0 billion; provided
that in no event shall any Affiliate of the Company (immediately prior to the
time of such investment) be eligible to be a Strategic Equity Investor.
"Subsidiary" means, with respect to any Person:
(1) any corporation a majority of whose Capital Stock with voting power,
under ordinary circumstances, to elect directors is, at the date of
determination, directly or indirectly, owned by such Person (a
"subsidiary"), by one or more subsidiaries of such Person or by such
Person and one or more subsidiaries of such Person;
(2) a partnership in which such Person or a subsidiary of such Person is,
at the date of determination, a general partner of such partnership;
or
(3) any partnership, limited liability company or other Person in which
such Person, a subsidiary of such Person or such Person and one or
more subsidiaries of such Person, directly or indirectly, at the date
of determination, has (x) at least a majority ownership interest or
(y) the power to elect or appoint or direct the election or
appointment of the managing partner or member of such Person or,
<PAGE>
-25-
if applicable, a majority of the directors or other governing body of
such Person.
"Tax" shall mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto).
"Telecommunications Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or intended for
use in connection with a Telecommunications Business and the Equity Interests of
a Person engaged entirely or substantially entirely in a Telecommunications
Business.
"Telecommunications Business" means the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through owned or leased terrestrial or submarine transmission facilities and
(ii) constructing, installing, maintaining, creating, developing or marketing
terrestrial or submarine communications related network infrastructure,
components, equipment, software and other devices for use in a
telecommunications business and any other business or opportunity that is
reasonably related or complementary thereto; provided that the determination of
what constitutes a Telecommunications Business shall be made in good faith by
the Board of Directors.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA;
provided, however, that in the event the Trust Indenture Act of 1939 is amended
after such date, then "TIA" means, to the extent required by such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trustee" means HSBC Bank USA until a successor replaces HSBC Bank USA in
accordance with the applicable provisions of this Indenture and thereafter means
the successor serving hereunder.
"Undertaking Agreements" means those certain Undertaking Agreements dated
as of May 31, 1998 between the Company (formerly known as Starfiber Inc.) and
786522 Alberta Ltd. pursuant to which 786522 Alberta Ltd. agreed to contribute
12 fiber strands on the Canadian FOTS to the Company in exchange for the
issuance of certain Capital Stock and the Agreement, dated May 28, 1999, as
amended, between the Company and certain affiliates of Ledcor Inc. whereby the
Company agreed to acquire certain fiber optic assets.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Note substantially in
the form of Exhibit A1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on
<PAGE>
-26-
behalf of and registered in the name of the Depositary, representing a series of
Notes that do not bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless
the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation to
maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
preceding conditions and was permitted by the provisions of Section 4.07. If, at
any time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09, the Company shall be in default of
such covenant. The Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (1) such Indebtedness is permitted under
the provisions of Section 4.09 hereof, calculated on a
<PAGE>
-27-
pro forma basis as if such designation had occurred at the beginning of the
four-quarter reference period; and (2) no Default or Event of Default would be
in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Vendor Financing Indebtedness" means Indebtedness of the Company incurred
pursuant to any agreements between the Company and one or more vendors or
lessors (or any Affiliate of any such vendor or lessor) of Telecommunications
Assets used or intended for use in a Telecommunications Business by the Company
providing financing for all or any part of the cost of construction,
engineering, acquisition, installation, development or improvement by the
Company or any Restricted Subsidiary of any Telecommunications Assets from any
such vendor or lessor (or any Affiliate of such vendor or lessor) and including
any related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time. Vendor Financing Indebtedness shall not
include any working capital facility or Indebtedness to fund interest or other
similar expenses made available by any vendor or lessor.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity,
in respect thereof, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making
of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and/or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
<PAGE>
-28-
Section 1.02. Other Definitions.
Defined in
Term Section
----
"Additional Amounts"........................ 4.05
"Affiliate Transaction"..................... 4.11
"Agreement Currency"........................ 6.12
"Asset Sale Offer".......................... 3.09
"Authentication Order"...................... 2.02
"Change of Control Offer"................... 4.15
"Change of Control Payment"................. 4.15
"Change of Control Payment Date"............ 4.15
"Covenant Defeasance"....................... 8.03
"DTC"....................................... 2.03
"Event of Default".......................... 6.01
"Guaranteed Indebtedness"................... 4.17
"incur"..................................... 4.09
"Judgment Currency"......................... 6.12
"Legal Defeasance".......................... 8.02
"Offer Amount".............................. 3.09
"Offer Period".............................. 3.09
"Paying Agent".............................. 2.03
"Payment Default"........................... 6.01
"Permitted Debt"............................ 4.09
"Process Agent"............................. 10.09
"Purchase Date"............................. 3.09
"Reference Period".......................... 4.09
"Registrar"................................. 2.03
"Restricted Payments"....................... 4.07
"Subsidiary Guarantee"...................... 4.17
Section 1.03. 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 of a Note;
<PAGE>
-29-
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Company and any successor obligor upon the
Notes.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.04. Rules of Construction.
(a) Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
(b) Whenever in this Indenture there is mentioned, in any context, the
payment of principal, premium, if any, redemption price, Change of Control
Payment, offer price or interest, or any other amount payable under or with
respect to any Note, 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.
<PAGE>
-30-
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and 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. However, to the extent any provision of
any Note conflicts with the express provisions of this Indenture, the provisions
of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in the
form of Exhibit A attached hereto (including the Global Note Legend thereon and
the "Schedule of Exchanges of Interests in the Global Note" attached thereto).
Notes issued in definitive form shall be substantially in the form of Exhibit A
attached hereto (but without the Global Note Legend thereon and without the
"Schedule of Exchanges of Interests in the Global Note" attached thereto). Each
Global Note shall represent such of the outstanding Notes as shall be specified
therein and each shall provide that it shall represent the aggregate principal
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate principal amount of outstanding Notes represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Notes
represented thereby shall be made by the Trustee or the Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
<PAGE>
-31-
Section 2.02. Execution and Authentication.
One Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an Officer
(an "Authentication Order"), authenticate Notes for original issue, with respect
to the Initial Notes up to the aggregate principal amount stated in paragraph 4
of the Notes and with respect to Additional Senior Notes, if any, any additional
amount permitted by this Indenture. The aggregate principal amount of Initial
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
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 agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
<PAGE>
-32-
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent shall hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium, if any, or interest on the Notes, and shall notify the Trustee of any
default by the Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) shall have no further liability for
the money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Notes.
Section 2.05. Holder Lists.
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
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes shall be exchanged
by the Company for Definitive Notes if:
(i) the Company delivers to the Trustee notice from the Depositary
that it is unwilling or unable to continue to act as Depositary or that it
is no longer a clearing agency registered under the Exchange Act and, in
either case, a successor Depositary is not appointed by the Company within
120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global
Notes (in whole but not in part) should be exchanged for Definitive Notes
and delivers a written notice to such effect to the Trustee.
<PAGE>
-33-
Upon the occurrence of either of the preceding events in (i) or (ii) above,
Definitive Notes shall be issued in such names as the Depositary shall instruct
the Trustee. Global Notes also may be exchanged or replaced, in whole or in
part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion thereof,
pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend. Beneficial
interests in any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers described
in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either:
(A)(1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited
a beneficial interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged; and,
(A)(2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to
be credited with such increase; or,
<PAGE>
-34-
(B)(1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Definitive
Note in an amount equal to the beneficial interest to be transferred
or exchanged; and,
(B)(2) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above.
Upon consummation of an Exchange Offer by the Company in accordance
with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii)
shall be deemed to have been satisfied upon receipt by the Registrar of the
instructions contained in the Letter of Transmittal delivered by the holder
of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to
Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
<PAGE>
-35-
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to subparagraph (B) or (D)
above.
<PAGE>
-36-
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Restricted Definitive Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule 904
under the Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(b) thereof; or
<PAGE>
-37-
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note issued
in exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global Note
may exchange such beneficial interest for an Unrestricted Definitive Note or may
transfer such beneficial interest to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of such beneficial interest, in the case of an exchange, or the transferee,
in the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or
<PAGE>
-38-
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a Definitive Note that
does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so
requests or if the Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive Note
or to transfer such beneficial interest to a Person who takes delivery thereof
in the form of a Definitive Note, then, upon satisfaction of the conditions set
forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate
principal amount of the applicable Global Note to be reduced accordingly
pursuant to Section 2.06(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests in
Global Notes.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange
such Note for a beneficial interest in a Restricted Global Note or to transfer
such Restricted Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in a Restricted Global Note, then, upon receipt by
the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
<PAGE>
-39-
(B) if such Restricted Definitive Note is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant
to an exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(b) thereof;
or
(G) if such Restricted Definitive Note is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A) above,
the appropriate Restricted Global Note, in the case of clause (B) above, the
144A Global Note, in the case of clause (C) above, the Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the Holder,
in the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of
<PAGE>
-40-
Transmittal that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange
such Notes for a beneficial interest in the Unrestricted Global Note,
a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer
such Notes to a Person who shall take delivery thereof in the form of
a beneficial interest in the Unrestricted Global Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so
requests or if the Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase
or cause to be increased the aggregate principal amount of the Unrestricted
Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Definitive Notes to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note at any time. Upon receipt of
a request for such an exchange or transfer, the Trustee shall cancel the
applicable Unrestricted Definitive Note and increase or cause to be increased
the aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted
<PAGE>
-41-
Global Note has not yet been issued, the Company shall issue and, upon receipt
of an Authentication Order in accordance with Section 2.02 hereof, the Trustee
shall authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of Definitive Notes so
transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in
<PAGE>
-42-
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note,
a certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so
requests, an Opinion of Counsel in form reasonably acceptable to the Company to
the effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes.
A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note. Upon receipt of a request to register such a transfer, the Registrar
shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of an Exchange Offer in accordance
with the Registration Rights Agreement, the Company shall issue and, upon
receipt of an Authentication Order in accordance with Section 2.02, the Trustee
shall authenticate (i) one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Notes tendered for acceptance by Persons that certify in
the applicable Letters of Transmittal that (x) they are not broker-
<PAGE>
-43-
dealers, (y) they are not participating in a distribution of the Exchange Notes
and (z) they are not affiliates (as defined in Rule 144) of the Company, and
accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE 'SECURITIES ACT')
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A 'QUALIFIED
INSTITUTIONAL BUYER' (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A 'QIB'), (B) IT HAS ACQUIRED THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) 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 'IAI'), (2) AGREES
THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE NOTE EXCEPT (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM
THE SELLER REASONABLY BE-
<PAGE>
-44-
LIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE
903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN
IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING
TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED
FROM THE TRUSTEE) AND , IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER
IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH OTHER APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS 'OFFSHORE TRANSACTION' AND 'UNITED
STATES' HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF 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."
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and
all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
<PAGE>
-45-
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE
TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF
THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, 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
<PAGE>
-46-
such transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05
hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (C) to register the transfer
of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Com-
<PAGE>
-47-
pany, an indemnity bond must be supplied by the Holder that is sufficient in the
judgment of the Trustee and the Company to protect the Company, the Trustee, any
Agent and any authenticating agent from any loss that any of them may suffer if
a Note is replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note; however, Notes held by the Company or a Subsidiary of the Company
shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. If
a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Note is
held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that a Responsible Officer of the Trustee knows are so owned shall be
so disregarded.
<PAGE>
-48-
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the form
of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes in accordance with its customary procedures. The Company may not
issue new Notes to replace Notes that it has paid or that have been delivered to
the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
<PAGE>
-49-
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee shall select the Notes to be redeemed or
purchased among the Holders of the Notes:
(a) if the Notes are listed, in compliance with the requirements of
the principal national securities exchange on which the Notes are listed;
or
(b) if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method as the Trustee shall deem fair and
appropriate. In the event of partial redemption by lot, the particular
Notes to be redeemed shall be selected, unless otherwise provided herein,
not less than 30 nor more than 60 days prior to the redemption date by the
Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class
<PAGE>
-50-
mail, a notice of redemption to each Holder whose Notes are to be redeemed at
its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion shall be issued upon cancellation of the
original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
<PAGE>
-51-
Section 3.05. Deposit of Redemption Price.
At or prior to 10:00 a.m., New York City time, on the redemption date, the
Company shall deposit with the Trustee or with the Paying Agent money sufficient
to pay the redemption price of and accrued interest on all Notes to be redeemed
on that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) and (c) of this Section 3.07, the
Company shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to August 1, 2004. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon, if any, to the applicable redemption date, if redeemed during
the twelve-month period beginning on August 1 of the years indicated below:
Date Percentage
---- ----------
2004 .............................................. 106.000%
2005 .............................................. 104.000%
2006............................................... 102.000%
2007 and thereafter................................ 100.000%
<PAGE>
-52-
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
prior to August 1, 2002, the Company may on any one or more occasions redeem up
to 35% of the sum of (a) the aggregate principal amount of the Notes originally
issued under this Indenture, and (b) the total amount of Additional Senior Notes
issued under this Indenture at a redemption price of 112% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
redemption date, with the net cash proceeds of one or more Qualified Equity
Offerings; provided that:
(i) at least 65% of the sum of (a) the aggregate principal amount of
Notes originally issued under the Indenture and (b) the total amount of
Additional Senior Notes issued under the Indenture remains outstanding
immediately after the occurrence of any such redemption (excluding Notes
held by the Company and its Subsidiaries); and
(ii) the redemption must occur within 90 days of the date of the
closing of such Qualified Equity Offering.
(c) Notwithstanding the provisions of clause (a) of this Section 3.07, the
Company may redeem the Notes in the event the Company becomes obligated to pay
any Additional Amounts as a result of a change in the laws or regulations of
Canada or any Canadian Taxing Authority, or a change in any official position
regarding the application or interpretation thereof, which is publicly announced
or becomes effective on or after the Issue Date. Upon the occurrence of any such
change, the Company may, at any time, redeem all, but not part, of the Notes at
a price equal to 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the redemption date.
(d) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
Except as otherwise provided in Section 4.10 or Section 4.15 below, the
Company shall not be required to make mandatory redemption payments with respect
to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that the Company shall be required to commence an offer to all
Holders to purchase Notes pursuant to Section 4.10 hereof (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applica-
<PAGE>
-53-
ble law (the "Offer Period"). No later than five Business Days after the
termination of the Offer Period (the "Purchase Date"), the Company shall
purchase the principal amount of Notes required to be purchased pursuant to
Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has
been tendered, all Notes tendered in response to the Asset Sale Offer. Payment
for any Notes so purchased shall be made in the same manner as interest payments
are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may elect to have Notes purchased in integral multiples of
$1,000 only;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives,
not later than the ex-
<PAGE>
-54-
piration of the Offer Period, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Note the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer or
if less than the Offer Amount has been tendered, all Notes tendered, and shall
deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written request from the Company shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
<PAGE>
-55-
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. New York City time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Additional Interest, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement. Whenever in this Indenture there
is mentioned, in any context, the payment of principal, premium, if any,
redemption price, Change of Control Payment, offer price and interest, or any
other amount payable under or with respect to any Note, 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.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including postpetition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
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
<PAGE>
-56-
from time to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the 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 designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
Whether or not required by the rules and regulations of the SEC, for so
long as any Notes remain outstanding, the Company shall furnish to the Holders
the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. Whether or not the Company is subject to Section 13(a) or 15(d)
of the Exchange Act, the Company shall file with the SEC and furnish to the
Holders and the Trustee (i) within 140 days after the end of each fiscal year,
annual reports on Form 20-F or 40-F, as applicable (or any successor form),
containing the information required to be contained therein (or required in such
successor form) and (ii) (a) within 45 days after the end of each of the first
three fiscal quarters of each fiscal year, reports on Form 10-Q or (b) within 60
days after the end of each of the first three fiscal quarters of each fiscal
year, reports on Form 6-K (or any successor form) which, regardless of
applicable requirements, shall, at a minimum, contain a "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture, including without limitation the obligations set forth in
Section 4.07, and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
<PAGE>
-57-
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation. In the
event that, after the Company has used its reasonable best efforts to obtain the
written statement of the Company's independent public accountants required by
the provisions of this paragraph, such statement cannot be obtained, the Company
shall deliver, in satisfaction of its obligations under this Section 4.04, an
Officers' Certificate (A) certifying that it has used its reasonable best
efforts to obtain such required statement but was unable to do so and (B)
attaching the written statement of the Company's accountants that the Company
received in lieu thereof.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
Section 4.05. Taxes; Payment of Additional Amounts.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
All payments made by or on behalf of the Company on or with respect to the
Notes shall be made without withholding or deduction for any Taxes imposed by
any Canadian Taxing Authority, unless required by law or the interpretation or
administration thereof by the relevant Taxing Authority. If the Company or any
other payor is required to withhold or deduct any amount on account of Taxes
from any payment made on or with respect to the Notes, the Company shall:
(a) make such withholding or deduction;
(b) remit the full amount deducted or withheld to the relevant
government authority in accordance with applicable law;
<PAGE>
-58-
(c) pay such additional amounts ("Additional Amounts") as may be
necessary so that the net amount received by each Holder (including
Additional Amounts) after such withholding or deduction shall not be less
than the amount the Holder would have received if such Taxes had not been
withheld or deducted;
(d) furnish to the Holders, within 30 days after the date the payment
of any Taxes is due, certified copies of tax receipts evidencing such
payment by the Company;
(e) indemnify and hold harmless each Holder (other than an Excluded
Holder) for the amount of (i) any Taxes paid by such Holder as a result of
payments made on or with respect to the Notes, (ii) any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto and (iii) any Taxes imposed with respect to any
reimbursement under (i) or (ii), but excluding any such Taxes on such
Holder's net income; and
(f) at least 30 days prior to each date on which any Additional
Amounts are payable, deliver to the Trustee an Officers' Certificate
stating the amounts so payable and such other information necessary to
enable the Trustee to pay such Additional Amounts to Holders on the payment
date.
Notwithstanding the foregoing, no Additional Amounts shall be payable to a
Holder in respect of a beneficial owner of a Note (an "Excluded Holder"):
(a) with which the Company does not deal at arm's length (within the
meaning of the Income Tax Act (Canada)) at the time of making such payment;
or
(b) which is subject to such Taxes by reason of its being connected
with Canada or any province or territory thereof otherwise than by the mere
acquisition, holding or disposition of Notes or the receipt of payments
thereunder.
The obligation of the Company to make payments of Additional Amounts
pursuant to this Section 4.05 shall survive any termination of this Indenture or
the defeasance of any rights under this Indenture.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any
<PAGE>
-59-
such law, and covenants that it shall not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any
of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or to the Company
or a Restricted Subsidiary of the Company);
(b) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company or any Restricted Subsidiary
of the Company (other than any such Equity Interests owned by the Company
or any Restricted Subsidiary of the Company);
(c) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes, except a payment of interest or principal at the
Stated Maturity thereof; or
(d) make any Restricted Investment (all such payments and other
actions set forth in clauses (a) through (d) above being collectively
referred to as "Restricted Payments"),
unless:
(a) at the time of and after giving effect to such Restricted Payment,
no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least
<PAGE>
-60-
$1.00 of additional Indebtedness pursuant to clause (i) or (ii) of the
first paragraph of Section 4.09; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (b), (c), (d), (f), (g), (h)(i), (i), (j), (k), (l) and (m)) is
less than the sum, without duplication, of
(i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the
first fiscal quarter commencing after the Issue Date to the end of the
Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the
Company since the Issue Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue or sale of
convertible or exchangeable Disqualified Stock or convertible or
exchangeable debt securities of the Company that have been converted
into or exchanged for such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to a
Subsidiary of the Company), plus the aggregate net cash proceeds
received by the Company upon any such conversion or exchange, plus
(iii) 100% of the net reduction in Investments on and after the
Issue Date, resulting from payments of interest on Indebtedness,
dividends, repayments of loan or advances, or other transfers of
property (but only to the extent such interest, dividends, repayments
or other transfers of property are not included in the calculation of
Consolidated Net Income), in each case to the Company or any of its
Restricted Subsidiaries from any Person (including, without
limitation, from Unrestricted Subsidiaries of the Company) or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(in each case, valued as provided in the definition of "Investments"),
not to exceed in the case of any Person the amount of Restricted
Investments previously made by the Company or any of its Restricted
Subsidiaries in such Unrestricted Subsidiary (subsequent to the Issue
Date) and in each such case which was treated as a Restricted Payment
(other than any such Restricted Payment that was made pursuant to the
provisions of paragraph (a) through (m) below).
The preceding provisions shall not prohibit:
<PAGE>
-61-
(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of this Indenture;
(b) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or of any
Equity Interests of the Company or any Restricted Subsidiary in
exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, Equity
Interests of the Company (other than Disqualified Stock); provided
that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph;
(c) the defeasance, redemption, repurchase or other acquisition
of subordinated Indebtedness of the Company with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness; provided
that the amount of any such net cash proceeds that are utilized for
any such defeasance, redemption, repurchase or other acquisition shall
be excluded from clause (c)(ii) of the preceding paragraph;
(d) Investments made out of the net cash proceeds of a
substantially concurrent issue and sale (other than to a Subsidiary of
the Company) of Equity Interests (other than Disqualified Stock) of
the Company; provided that the amount of any such net cash proceeds
that are utilized for any such Investment shall be excluded from
clause (c)(ii) of the preceding paragraph;
(e) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company pursuant to any
management equity subscription agreement or stock option agreement and
the repurchase of Equity Interests of the Company from employees,
officers or directors of the Company or any of its Restricted
Subsidiaries or their authorized representatives upon the death,
disability or termination of employment of such officers, directors
and employees in an aggregate amount not to exceed $1.0 million in any
calendar year plus (i) the aggregate cash proceeds from any issuance
during such calendar year of Equity Interests by the Company to
employees, officers or directors of the Company and its Restricted
Subsidiaries and (ii) the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries from any payments on
life insurance policies in which the Company or any of its Restricted
Subsidiaries is the beneficiary with respect to any employees,
officers or directors of the Company or its Restricted Subsidiaries
which proceeds are used to purchase Equity Interests of the Company
held by any such employees, officers or directors;
<PAGE>
-62-
(f) Investments in Telecommunications Assets, provided that the
aggregate fair market value of any such Investment, when taken
together with all other Investments made pursuant to this clause (f)
(measured on the date each such Investment was made), does not exceed
$15.0 million, and provided further however, that either the Company
or any of its Restricted Subsidiaries, after giving effect to such
Investments shall own at least 20% of the Voting Stock of such Person;
(g) Permitted Fiber Investments in Telecommunications Assets;
(h) Investments in any Unrestricted Subsidiary of the Company, if
either (i) such Investment is a Permitted Project Financing Investment
or (ii) the aggregate fair market value of any such Investment, when
taken together with all other Investments made pursuant to this
subclause h(ii) (measured on the date each such Investment was made),
does not exceed $20.0 million;
(i) Investments the payment for which consists exclusively of
Equity Interests (other than Disqualified Stock) of the Company;
(j) pro rata dividends or other distributions made by a
Restricted Subsidiary of the Company to minority stockholders (or
owners of an equivalent interest in the case of a Restricted
Subsidiary that is not a corporation);
(k) an Investment in any Person the primary business of which is
Telecommunication Business in an amount not to exceed at any one time
outstanding 10% of the Adjusted Consolidated Cash Flow, if positive,
accrued on a cumulative basis during the period (taken as one
accounting period) beginning on the first day of the first full fiscal
quarter immediately following the Issue Date and ending on the last
day of the last fiscal quarter preceding the date of such Investment;
(l) other Restricted Payments in an aggregate amount not to
exceed $20.0 million; and
(m) the repurchase of Equity Interests of the Company deemed to
occur upon the exercise of stock options if such Equity Interests
represent a portion of the exercise price thereof;
provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (b), (c), (d), (e), (h)(ii), (j),
(k), and (l) above, no Default in the payment of interest on the Notes or Event
of Default exists or would occur as a consequence thereof.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or
<PAGE>
-63-
issued by the Company or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment. The fair market value of any assets or
securities that are required to be valued by this covenant shall be determined
by the Board of Directors whose resolution with respect thereto shall be
delivered to the Trustee. The Board of Directors' determination must be based
upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the fair market value exceeds $15.0
million. No such opinion or appraisal shall be required for any Restricted
Payment made pursuant to clause (g) above. In any year in which the Company
makes one or more Restricted Payments, the Company shall include in its
compliance certificate to the Trustee pursuant to Section 4.04 hereof, a
certification stating that all such Restricted Payments are, or were, permitted
by this Indenture and shall set forth the basis upon which the calculations
required by this Section 4.07 were computed, together with a copy of any
fairness opinion or appraisal required hereby.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(a) pay dividends or make any other distributions on its Capital
Stock to the Company or any of the Company's Restricted Subsidiaries,
or with respect to any other interest or participation in, or measured
by, its profits, or pay any Indebtedness owed to the Company or any of
the Company's Restricted Subsidiaries;
(b) make loans or advances to the Company or any of the Company's
Restricted Subsidiaries; or
(c) transfer any of its properties or assets to the Company or
any of the Company's Restricted Subsidiaries.
However, the preceding restrictions shall not apply to encumbrances or
restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on the Issue Date and any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings are no
more restrictive, taken as a whole, with respect to such dividend and
other payment restrictions than those contained in such Existing
Indebtedness, as in effect on the Issue Date;
<PAGE>
-64-
(b) the Credit Facilities, this Indenture, the Notes and the
Exchange Notes, Qualified Subsidiary Indebtedness and Indebtedness
ranking pari passu with the Notes; provided that with respect to
Indebtedness ranking pari passu with the Notes such provisions are no
more restrictive than those set forth in the Notes;
(c) applicable law;
(d) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be
incurred;
(e) customary non-assignment provisions restricting subletting or
assignment in leases or other agreements entered into in the ordinary
course of business and consistent with past practices;
(f) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on the property
so acquired of the nature described in clause (c) of the preceding
paragraph;
(g) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by such Restricted
Subsidiary pending its sale or other disposition, provided that the
consummation of such transaction would not result in a Default or an
Event of Default, that such restriction terminates if such transaction
is not consummated and that the consummation or abandonment of such
transaction occurs within one year of the date such agreement was
entered into;
(h) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole,
than those contained in the agreements governing the Indebtedness
being refinanced;
(i) Liens securing Indebtedness otherwise permitted to be
incurred pursuant to the provisions of Section 4.12 that limit the
right of the Company or any of its Restricted Subsidiaries to dispose
of the assets subject to such Lien;
<PAGE>
-65-
(j) customary limitations on the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business; and
(k) restrictions on cash or other deposits or net worth imposed
by customers under contracts entered into in the ordinary course of
business.
(l) encumbrances and restrictions in Indebtedness incurred by
Foreign Subsidiaries in accordance with Section 4.09; and
(m) any Indebtedness or any agreement pursuant to which such
Indebtedness was issued if (A) the encumbrance or restriction applies
only upon a payment or financial covenant default or event of default
contained in such Indebtedness or agreement 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 in
good faith by the Board of Directors of the Company).
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) and issue Disqualified Stock and any Restricted Subsidiary may
incur Acquired Debt, if either:
(i) the Consolidated Leverage Ratio at the end of the Company's most
recently ended full fiscal quarter (the "Reference Period") for which a
consolidated balance sheet of the Company is available immediately
preceding the date on which such additional Indebtedness is incurred or
such Disqualified Stock is issued would have been less than 5.5 to 1.0,
determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock had been issued, as the case may be, at
the beginning of the Reference Period; or
(ii) the Consolidated Capital Ratio at the end of the Reference Period
would have been less than 2.0 to 1.0, determined after giving effect to the
incurrence or issuance of such Indebtedness or Disqualified Stock and, to
the extent set forth in the definitions used herein, on a pro forma basis
(including, to the extent set forth in the definitions used herein, a pro
forma application of the net proceeds therefrom).
<PAGE>
-66-
The first paragraph of this Section 4.09 shall not prohibit the incurrence
of any of the following items of Indebtedness (collectively, "Permitted Debt"):
(a) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness under Credit Facilities or Permitted Vendor
Facilities; provided that the aggregate principal amount of all
Indebtedness of the Company and its Restricted Subsidiaries outstanding
under all Credit Facilities or Permitted Vendor Facilities after giving
effect to such incurrence (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
thereunder) does not exceed an amount equal to $200.0 million less the
aggregate amount of all Net Proceeds of Asset Sales applied by the Company
or any of its Restricted Subsidiaries since the Issue Date to permanently
repay Indebtedness under a Credit Facility pursuant to Section 4.10 hereof;
(b) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(c) the incurrence by the Company of Indebtedness represented by the
Notes and the Exchange Notes;
(d) the incurrence by the Company or any of its Restricted
Subsidiaries of Purchase Money Indebtedness and Vendor Financing
Indebtedness provided (A) that the amount thereof does not exceed 100% of
the Company's and its Restricted Subsidiaries' aggregate cost (determined
in accordance with GAAP in good faith by the Board of Directors) of the
construction, acquisition, development, engineering, installation and
improvement of the applicable Telecommunications Assets and (B) in the case
of the incurrence of either Purchase Money Indebtedness or Vendor Financing
Indebtedness by a Restricted Subsidiary, such Indebtedness shall be
Qualified Subsidiary Indebtedness;
(e) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace,
Indebtedness (other than intercompany Indebtedness) that was permitted by
this Indenture to be incurred under the first paragraph of this Section or
clauses (b), (c), (d), (l), (n), (o) or (p) of this paragraph;
(f) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries and the issuance of preferred stock by a
Restricted Subsidiary to the Company or another Restricted Subsidiary of
the Company; provided, however, that:
<PAGE>
-67-
(i) if the Company is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the Notes; and
(ii) (A) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness or preferred stock being held by
a Person other than the Company or a Restricted Subsidiary thereof and
(B) any sale or other transfer of any such Indebtedness or preferred
stock to a Person that is not either the Company or a Restricted
Subsidiary thereof; shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause
(f);
(g) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest or foreign currency exchange rate risk with
respect to any floating rate Indebtedness or foreign currency based
Indebtedness, respectively, that is permitted by the terms of this
Indenture to be outstanding; provided that the notional amount of any such
Hedging Obligation does not exceed the amount of Indebtedness or other
liability to which such Hedging Obligation relates;
(h) the guarantee by the Company or any of its Restricted Subsidiaries
of Indebtedness of the Company or any Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this covenant;
(i) the accrual of interest, accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock; provided, in each such case, that the amount thereof is
included in Fixed Charges of the Company as accrued;
(j) the Company and its Restricted Subsidiaries may incur Indebtedness
solely in respect of bankers acceptances, letters of credit and performance
bonds or similar arrangements, all in the ordinary course of business
(other than to the extent not supporting Indebtedness);
(k) the incurrence by the Company or any of its Restricted
Subsidiaries arising from agreements of the Company or any of its
Restricted Subsidiaries providing for indemnification, adjustment of
purchase price, earn out or other similar obligation, in each case,
incurred or assumed in connection with the disposition of any business,
assets or Restricted Subsidiary of the Company or any of its Restricted
Subsidi-
<PAGE>
-68-
aries, 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;
(l) the incurrence of Indebtedness by Foreign Subsidiaries not to
exceed $10.0 million (or the equivalent amount thereof, in other foreign
currencies);
(m) the Company or any of its Restricted Subsidiaries may incur
Permitted ROW Indebtedness;
(n) the incurrence by the Company or any of its Restricted
Subsidiaries of Acquired Debt in an aggregate amount not to exceed $10.0
million at any time outstanding;
(o) Indebtedness of the Company not to exceed, at any one time
outstanding, two times the net cash proceeds received by the Company after
the Issue Date from the issuance and sale of its Equity Interest (other
than Disqualified Stock) to a Person that is not a Subsidiary of the
Company, to the extent such net cash proceeds have not been used pursuant
to (i) clause (c)(ii) of the first paragraph of Section 4.07 or (ii)
clauses (b) or (d) of the second paragraph of Section 4.07 to make a
Restricted Payment; and
(p) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding not to exceed
$15.0 million.
Indebtedness or preferred stock of any Person which is outstanding at the
time such Person becomes a Restricted Subsidiary of the Company (including upon
designation of any Subsidiary or other Person as a Restricted Subsidiary) or is
merged with or into or consolidated with the Company or a Restricted Subsidiary
of the Company shall be deemed to have been incurred at the time such Person
becomes such a Restricted Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Restricted Subsidiary of the Company, as
applicable.
Notwithstanding any other provisions of this Section 4.09, the maximum
amount of Indebtedness that the Company or a Restricted Subsidiary may incur
shall not be deemed to be exceeded solely as a result of fluctuations in the
exchange rates of currencies.
For purposes of determining compliance with this Section 4.09, in the event
that an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (a) through (p) above, or is
entitled to be incurred pursuant to
<PAGE>
-69-
the first paragraph of this covenant, the Company shall be permitted to classify
such item of Indebtedness on the date of its incurrence in any manner that
complies with this Section 4.09.
Section 4.10. Limitation on Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(a) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(b) such fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee; and
(c) at least 75% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash or Telecommunications
Assets. For purposes of this provision, each of the following shall be
deemed to be cash:
(i) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes) that
are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability; and
(ii) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that
are within 180 days converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received in that
conversion).
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Restricted Subsidiary, as applicable, may apply such Net
Proceeds at its option:
(a) to permanently repay or retire
(i) secured Indebtedness of the Company, including Indebtedness under
Credit Facilities,
(ii) Indebtedness of the Company that ranks equally with the Notes but
has a maturity date that is prior to the maturity date of the Notes, or
<PAGE>
-70-
(iii) Indebtedness of any Restricted Subsidiary of the Company (in
each case other than any Indebtedness owed to the Company or any Restricted
Subsidiary); or
(b) to acquire Telecommunications Assets.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph shall constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall
make an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in this Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount of
Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100%
of principal amount plus accrued and unpaid interest, if any, thereon to the
date of purchase and shall be payable in cash. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, the Company may use such Excess
Proceeds for any purpose not otherwise prohibited by this Indenture. If the
aggregate principal amount of Notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties, assets or securities to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
(a) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with a Person that is not an Affiliate; and
(b) the Company delivers to the Trustee:
<PAGE>
-71-
(i) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, a resolution of the Board of Directors set
forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with Section 4.11 and that such Affiliate
Transaction has been approved by a majority of the disinterested
members of the Board of Directors and is in the best interests of the
Company or such Restricted Subsidiary; and
(ii) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, an opinion as to the fairness to the Holders
of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national
standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, shall not be subject to the provisions of the prior paragraph:
(a) reasonable fees and compensation paid to, and indemnity
provided on behalf of, officers, directors, employees, agents or
consultants of the Company or any of its Restricted Subsidiaries as
determined in good faith by the Board of Directors or senior
management of the Company;
(b) transactions between or among the Company and any of the
Company's Restricted Subsidiaries;
(c) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of the Company;
(d) Restricted Payments that are permitted by the provisions of
Section 4.07 or by clauses (1), (3), (6), (7) or (8) of the definition
of "Permitted Investments"; and
(e) any agreement or arrangement as in effect on the Issue Date
or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) in any replacement
agreement or arrangement thereto so long as any such amendment or
replacement agreement or arrangement is not more disadvantageous to
the Company or its Restricted Subsidiaries, as the case may be, in any
material respect than the original agreement as in effect on the Issue
Date.
<PAGE>
-72-
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind on any asset now owned or hereafter acquired, except
Permitted Liens, without providing that the Notes shall be secured equally and
ratably with the Indebtedness so secured for so long as such obligations are so
secured.
Section 4.13. Business Activities.
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage to any material extent in any business other than the Telecommunications
Business.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, however, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate, partnership
or other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Notes.
Section 4.15. Repurchase at the Option of Holders upon a Change of Control.
Upon the occurrence of a Change of Control, each Holder of Notes shall have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of that Holder's Notes pursuant to the Change
of Control Offer. In the Change of Control Offer, the Company shall offer (the
"Change of Control Offer") a payment ( the "Change of Control Payment") in cash
equal to 101% of the aggregate principal amount of Notes repurchased plus
accrued and unpaid interest, if any, thereon to the date of purchase.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder (with a copy to the Trustee) describing the transaction or
transactions that constitute the Change of Control and stating:
<PAGE>
-73-
(a) the purchase price and the purchase date, which shall not exceed
30 business days from the date such notice is mailed (the "Change of
Control Payment Date");
(b) that any Note not tendered shall continue to accrue interest;
(c) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date;
(d) that Holders electing to have any Notes purchased pursuant to a
Change of Control Offer shall be required to surrender the Notes, with the
form entitled, "Option of Holder to Elect Purchase" on the reverse of the
Notes completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the
Change of Control Payment Date;
(e) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have the Notes
purchased; and
(f) that Holders whose Notes are being purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company shall comply
with the requirements of 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 connection with the repurchase of the Notes
as a result of a Change of Control.
On the Change of Control Payment Date, the Company shall, to the extent
lawful:
(a) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(b) deposit with the Paying Agent an amount equal to the Change of
Control Payment plus accrued and unpaid interest, if any, thereon in
respect of all Notes or portions thereof so tendered; and
<PAGE>
-74-
(c) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Company.
The Paying Agent shall promptly mail to each Holder of Notes so tendered
the Change of Control Payment plus accrued and unpaid interest, if any, thereon
for such Notes, and the Trustee shall promptly authenticate and mail (or cause
to be transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note shall be in a principal amount of $1,000 or an integral
multiple thereof. The Company shall publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The provisions described above that require the Company to make a Change of
Control Offer following a Change of Control shall be applicable regardless of
whether or not any other provisions in this Indenture are applicable. Except as
described above with respect to a Change of Control, this Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
Notwithstanding any other provision of this Section 4.15, the Company shall
not be required to make a Change of Control Offer upon a Change of Control if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this Indenture
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
Section 4.16. No Senior Subordinated Debt.
Notwithstanding the provisions of Section 4.09 hereof, the Company shall
not incur any Indebtedness (including Permitted Debt) that is contractually
subordinated in right of payment to any other Indebtedness of the Company unless
such Indebtedness is also contractually subordinated in right of payment to the
Notes on substantially identical terms; provided, however, that no Indebtedness
of the Company shall be deemed to be contractually subordinated in right of
payment to any other Indebtedness of the Company solely by virtue of being
unsecured.
Section 4.17. Issuances of Guarantees by Restricted Subsidiaries.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Company which is pari passu (other than any
Indebtedness incurred under a Credit Facility) with or subordinate in right of
payment to the Notes ("Guaranteed Indebtedness"), unless
<PAGE>
-75-
(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 shall not in any manner
whatsoever claim, or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any guarantee of any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was not incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the Notes,
then the guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Notes, then
the guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person that is not an Affiliate of the Company, of all of the Company's
and each Restricted Subsidiary's Capital Stock in, or all or substantially all
of the assets of, such Restricted Subsidiary (which sale, exchange or transfer
is not prohibited by this Indenture) or (ii) the release or discharge of the
guarantee which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such guarantee.
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by the Company and its Restricted Subsidiaries in
the Subsidiary so designated shall be deemed to be an Investment made as of the
time of such designation and shall reduce the amount available for Restricted
Payments under the first paragraph of Section 4.07. All such outstanding
Investments shall be valued at their fair market value at the time of such
designation. That designation shall only be permitted if such Restricted Payment
would be permitted at that time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the
redesignation would not cause a Default and such redesignation shall increase
the amount available for Restricted Payments under the first paragraph of
Section 4.07 as provided therein or Permitted Investments, as applicable.
<PAGE>
-76-
Section 4.19. Payments for Consent.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture or the Notes
unless such consideration is offered to be paid and is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
ARTICLE 5
SUCCESSORS
Section 5.01. Amalgamation, Merger, Consolidation, or Sale of Assets.
The Company shall not, directly or indirectly: (1) amalgamate or
consolidate or merge with or into (whether or not the Company is the surviving
corporation); or (2) or sell, assign, transfer, convey or otherwise dispose of
all or substantially all of its properties or assets in one or more related
transactions to, another Person; unless:
(a) either: (i) the Company is the surviving corporation; or (ii) the
Person formed by or surviving any such amalgamation, consolidation or
merger (if other than the Company) or to which such sale, assignment,
transfer, conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of Canada or any province
thereof or the United States, any state thereof or the District of
Columbia;
(b) the Person formed by or surviving any such amalgamation,
consolidation or merger (if other than the Company) or the Person to which
such sale, assignment, transfer, conveyance or other disposition shall have
been made assumes all the obligations of the Company under the Notes, the
Exchange Notes, this Indenture and the Registration Rights Agreement
pursuant to agreements reasonably satisfactory to the Trustee;
(c) no Default or Event of Default (or an event that, with the passing
of time or giving of notice or both, would constitute an Event of Default)
shall exist or shall occur immediately after giving effect on a pro forma
basis to such transaction;
(d) the transaction shall not result in the Company or the Person
formed by or surviving any such amalgamation, consolidation or merger (if
other than the Com-
<PAGE>
-77-
pany) being required to make any deduction or withholding on account of
Taxes as described under Section 3.07(c) and Section 4.05 from any payment
under or in respect of the Notes that the Company would not have been
required to make had such transaction or series of related transactions not
occurred;
(e) except in the case of the amalgamation, consolidation or merger of
the Company with or into a Wholly-Owned Restricted Subsidiary, the Company
or the Person formed by or surviving any such amalgamation, consolidation
or merger (if other than the Company) shall, on the date of such
transaction after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to clause (i) or (ii) of the first paragraph of
Section 4.09; and
(f) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that such amalgamation,
consolidation, merger or transfer and such supplemental indenture, if any,
comply with this Indenture.
In addition, the Company may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. For purposes of the foregoing, the transfer
(by assignment, sale or otherwise) of all or substantially all of the properties
and assets of one or more Subsidiaries, the Company's interest in which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company. The provisions of this Section 5.01 shall
not apply to a sale, assignment, transfer, conveyance or other disposition of
assets between or among the Company and any of its Wholly-Owned Restricted
Subsidiaries.
Section 5.02. Successor Corporation Substituted.
Upon any amalgamation, consolidation or merger or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01, the successor
corporation formed by such amalgamation or consolidation or into which the
Company is merged or to which such transfer is made shall succeed to and (except
in the case of a lease) be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor corporation had been named therein as the Company, and (except in the
case of a lease) the Company shall be released from the obligations under the
Notes, and this Indenture except with respect to any obligations that arise
from, or are related to, such transaction.
<PAGE>
-78-
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Additional Amounts, if any, with respect to, the Notes and such default
continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes;
(c) the Company or any of its Restricted Subsidiaries fails to comply
with any of the provisions of Article 5 hereof;
(d) the Company or any of its Restricted Subsidiaries fails to observe
or perform any of the provisions of Sections 4.10 and 4.15 for 15 days
after notice to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Notes (including Additional Senior Notes, if any) then outstanding;
(e) the Company or any of its Restricted Subsidiaries fails to observe
or perform any other covenant, representation, warranty or other agreement
in this Indenture or the Notes for 60 days after notice to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least
25% in aggregate principal amount of the Notes then outstanding;
(f) the Company voluntarily relinquishes any of its rights under the
Non-Competition Agreement or fails for 30 days after written notice thereof
has been given to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding to enforce any of such rights, in each case which is
materially detrimental to the interests of the Company or the Holders;
(g) the Company defaults under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed (or the payment of which is
guaranteed by the Com-
<PAGE>
-79-
pany or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, if
that default:
(i) is caused by a failure to pay principal of or premium, if
any, on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment
Default"); or
(ii) results in the acceleration of such Indebtedness prior to
its express maturity, and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $10.0 million or
more;
(h) the Company or any of its Restricted Subsidiaries fails to pay
final judgments which are non-appealable aggregating in excess of $10.0
million (net of applicable insurance coverage which is acknowledged in
writing by the insurer), which judgments are not paid, discharged or stayed
for a period of 60 days;
(i) the Company or any of its Restricted Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a custodian of it or for all
or substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors,
or
(v) generally is not paying its debts as they become due; and
(j) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries in an involuntary case;
(ii) appoints a custodian of the Company or any of its Restricted
Subsidiaries or for all or substantially all of the property of the
Company or any of its Restricted Subsidiaries; or
<PAGE>
-80-
(iii) orders the liquidation of the Company or any of its
Restricted Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in clause
(i) or (j) of Section 6.01 hereof with respect to the Company, any Restricted
Subsidiary that is a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary)
occurs and is continuing, the Trustee by notice to the Company or the Holders of
at least 25% in principal amount of the then outstanding Notes by notice to the
Company and the Trustee may declare all the Notes to be due and payable
immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause
(i) or (j) of Section 6.01 hereof occurs with respect to the Company, any
Restricted Subsidiary that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
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. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing
<PAGE>
-81-
Default or Event of Default in the payment of the principal of, premium, if any,
or interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
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 impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may involve the Trustee in
personal liability. The Trustee may take any other action which it deems proper
that is not inconsistent with any such directive.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any
loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
<PAGE>
-82-
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, and interest
on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to 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 the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian 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 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan
<PAGE>
-83-
of reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, 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, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, ratably, without preference
or priority of any kind, according to the amounts due and payable on the
Notes for principal, premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes 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 a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
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 does
not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to
Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount
of the then outstanding Notes.
Section 6.12. Indemnification for Judgment Currency Fluctuations.
The obligations of the Company to any Holder of Notes shall,
notwithstanding any judgment in a currency (the "Judgment Currency") other than
U.S. dollars (the "Agreement Currency"), be discharged only to the extent that
on the day following receipt by such Holder of Notes or the Trustee, as the case
may be, of any amount in the Judgment Currency, such Holder of Notes may in
accordance with normal banking procedures purchase the Agreement
<PAGE>
-84-
Currency with the Judgment Currency. If the amount of the Agreement Currency so
purchased is less than the amount originally to be paid to such Holder of Notes
or the Trustee, as the case may be, in the Agreement Currency, the Company shall
pay the difference and if the amount of the Agreement Currency so purchased
exceeds the amount originally to be paid to such Holder of Notes or the Trustee,
as the case may be, such Holder of Notes or the Trustee, as the case may be,
shall pay to or for the account of the Company such excess, provided that such
Holder of Notes or the Trustee, as the case may be, shall not have any
obligation to pay any such excess as long as a Default by the Company in its
obligations under the Notes or this Indenture has occurred and is continuing, in
which case such excess may be applied by such Holder of Notes to such
obligations.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
<PAGE>
-85-
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) 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 the rights or
powers conferred upon it by this Indenture.
<PAGE>
-86-
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) 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.
(g) The Trustee shall not be charged with knowledge of any Default or Event
of Default with respect to the Notes unless either (1) a Responsible Officer of
the Trustee assigned to the Corporate Trust Office of the Trustee (or any
successor division or office) shall have actual knowledge of such Default or (2)
written notice of such Default or Event of Default shall have been given to the
Trustee by the Company or any other obligor on the Notes or by any Holder of the
Notes
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 any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee or resign. Any Agent may do the same with like rights and duties. The
Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment
<PAGE>
-87-
of principal of, premium, if any, or interest on any Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of the
Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA ss. 313(a) (but if no event described in TIA ss.
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA ss. 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. 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. The Company
shall defend the claim and the Trustee shall cooperate in the defense. 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.
<PAGE>
-88-
The obligations of the Company under this Section 7.07 shall survive
resignation or removal of the Trustee and the satisfaction and discharge of this
Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the resignation or removal of the
Trustee and the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(i) or (j) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 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.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) 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 then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
<PAGE>
-89-
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a Holder
for at least six months, fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIAss. 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
<PAGE>
-90-
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option To Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of the Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder:
(a) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest on such Notes
when such payments are due from the trust referred to below;
(b) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(c) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's obligations in connection therewith;
(d) the Legal Defeasance provisions of this Indenture; and
(e) the Company's obligation to pay Additional Amounts.
<PAGE>
-91-
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Article 5 and Sections 4.03, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16 and 4.17 hereof with respect to
the outstanding Notes on and after the date the conditions set forth in Section
8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(c) through 6.01(e) hereof and Section 6.01(g) hereof shall not constitute
Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as shall be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the outstanding Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
<PAGE>
-92-
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that (a) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (b) since the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes shall not recognize income, gain or loss for United
States federal income tax purposes as a result of such Legal Defeasance and
shall be subject to United States federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred and the Company shall have delivered
to the Trustee an opinion of counsel in Canada reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes shall not
recognize income, gain or loss for Canadian federal income tax purposes as
a result of such Legal Defeasance and shall be subject to Canadian federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that the Holders of the outstanding
Notes shall not recognize income, gain or loss for United States federal
income tax purposes as a result of such Covenant Defeasance and shall be
subject to United States federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred and the Company shall have delivered
to the Trustee an opinion of counsel in Canada reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes shall not
recognize income, gain or loss for Canadian federal income tax purposes as
a result of such Covenant Defeasance and shall be subject to Canadian
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which shall be used to defease the Notes pursuant to this
Article Eight concurrently with such incurrence) or insofar as Sections
6.01(i) or 6.01(j) hereof is concerned, at any time in the period ending on
the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Restricted Sub-
<PAGE>
-93-
sidiaries is a party or by which the Company or any of its Restricted
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that
on the 91st day following the deposit, the trust funds shall not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, in the case of the Officers'
Certificate, stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied with and, in the
case of the opinion of counsel, that the conditions precedent in clauses
(a) (with respect to the validity and perfection of the security interest),
(b), (c) and (e) have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable
<PAGE>
-94-
Government Securities held by it as provided in Section 8.04 hereof which, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee (which may
be the opinion delivered under Section 8.04(a) hereof), are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining shall be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
<PAGE>
-95-
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to
Holders of Notes in the case of a merger or consolidation or sale of all or
substantially all of the Company's assets pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under this Indenture of any such Holder; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15
hereof) and the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes (including
Additional Senior Notes, if any) then outstanding voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any
<PAGE>
-96-
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including Additional Senior Notes, if any) voting as a single
class (including consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which
Notes are considered to be "outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional Senior
Notes, if any) then outstanding may waive compliance in a particular instance by
the Company with any provision of this Indenture or the Notes. However, without
the consent of each Holder affected, an amendment or waiver under this Section
9.02 may not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of
the Notes (except as provided above with respect to Sections 4.10 and 4.15
hereof);
<PAGE>
-97-
(c) reduce the rate of or change the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes (including
Additional Senior Notes, if any) and a waiver of the payment default that
resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described in Sections 4.10 and
4.15)
(h) cause the Notes to become subordinate in right of payment to any
other Indebtedness;
(i) make any change that would adversely affect the rights of the
Holders to receive Additional Amounts;
(j) modify the obligation of the Company to make a Change of Control
Offer to purchase Notes after the occurrence of an event which constitutes
a Change of Control; or
(k) make any change in the preceding amendment and waiver provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
<PAGE>
-98-
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
10.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 9A
SATISFACTION AND WAIVER
Section 9.01A Satisfaction and Discharge of Indenture.
This Indenture shall be discharged and shall cease to be of further effect
as to all Notes issued hereunder, when either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust and thereafter repaid to the Company) have been delivered to
the Trustee for cancellation; or (b)(i) all such Notes not theretofore delivered
to the Trustee for cancellation have become due and payable by reason of the
making of a notice of redemption or otherwise or will become due and payable
within one year and the Company has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust an amount of money sufficient
to pay and discharge the entire Indebtedness on such Notes not theretofore
delivered to the Trustee for cancellation for principal, premium, if
<PAGE>
-99-
any, and accrued interest to the date of maturity or redemption; (ii) no Default
or Event of Default with respect to this Indenture or the Notes shall have
occurred and be continuing on the date of such deposit or shall occur as a
result of such deposit and such deposit shall not result in a breach or
violation of, or constitute a default under, any other instrument to which the
Company is a party or by which the Company or a Subsidiary Guarantor, if any, is
bound: (iii) the Company has paid or caused to be paid all sums payable by it
under this Indenture; and (iv) the Company has delivered irrevocable
instructions to the Trustee under this Indenture to apply the deposited money
toward the payment of such Notes at maturity or the redemption date, as the case
may be.
In addition, the Company shall deliver an Officer's Certificate and an
Opinion of Counsel to the Trustee stating that all conditions precedent to the
satisfaction and discharge of this Indenture have been satisfied.
Section 9.02A Application of Trust Money.
All money deposited with the Trustee pursuant to Section 9.01A shall be
held in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine, to
Persons entitled thereto, of the principal (and premium, if any) and interest
for whose payment such money has been deposited with the Trustee.
If the Trustee or Paying Agent is unable to apply any money in accordance
with Section 9.01A 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 such deposit
had not occurred pursuant to Section 9.01A; 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 money shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
Company or money held by the Trustee or Paying Agent.
<PAGE>
-100-
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA ss. 318(c), the imposed duties shall control.
Section 10.02. Notices.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in Person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company: Worldwide Fiber Inc.
1510-1066 West Hastings Street
Vancouver, BC Canada V6E 3X1
Telecopier No.: (604) 681-6822
Attention: Stephen Stow
With a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopier No.: (212)701-3000
Attention: Roger Andrus, Esq.
If to the Trustee: HSBC Bank USA
140 Broadway, 12th Floor
New York, New York 10005-1180
Telecopier No.: (212) 658-6425
Attention: Corporate Trust Department
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) 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 tel-
<PAGE>
-101-
exed; when receipt acknowledged, if telecopied; and the next Business Day after
timely delivery to the courier, if sent by overnight air courier guaranteeing
next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 10.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA ss. 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 ss.
312(c).
Section 10.04. 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:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
Section 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
<PAGE>
-102-
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she 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 satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 10.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 10.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any of its Subsidiaries as such, shall have any
liability for any obligations of the Company or its Subsidiaries under the
Notes, this 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 issuance of the Notes.
Section 10.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 10.09. Jurisdiction.
To the fullest extent permitted by applicable law, the Company irrevocably
submits to the jurisdiction of any federal or state court in the City, County
and State of New York, United States of America, in any suit or proceeding based
on or arising under this Indenture (solely in
<PAGE>
-103-
connection with any such suit or proceeding), and irrevocably agrees that all
claims in respect of such suit or proceeding may be determined in any such
court. The Company irrevocably and fully waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Company hereby
irrevocably designates and appoints CT Corporation System (the "Process Agent"),
as the authorized agent of the Company upon whom process may be served in any
such suit or proceeding, it being understood that the designation and
appointment of CT Corporation System as such authorized agent shall become
effective immediately without any further action on the part of the Company. The
Company represents that it has notified the Process Agent of such designation
and appointment and that the Process Agent has accepted the same in writing. The
Company hereby irrevocably authorizes and directs the Process Agent to accept
such service. The Company further agrees that service of process upon the
Process Agent and written notice of said service to the Company mailed by
prepaid registered first class mail or delivered to the Process Agent at its
principal office, shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
right of any Holder or any Person controlling such Holder to serve process in
any other manner permitted by law. The Company further agrees to take any and
all action, including the execution and filing of any and all such documents and
instruments as may be necessary to continue such designation and appointment of
the Process Agent in full force and effect so long as the Company has any
outstanding obligations under this Agreement. 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 note, attachment prior to judgment,
attachment in aid of execution, executor or otherwise) with respect to itself or
its property, the Company hereby irrevocably waives such immunity in respect of
their obligations under this Indenture, to the extent permitted by law.
Section 10.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 10.11. 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
successors.
Section 10.12. Severability.
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.
<PAGE>
-104-
Section 10.13. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 10.14. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
SIGNATURES
Dated as of July 28, 1999
WORLDWIDE FIBER INC.
By:
------------------------------
Name:
Title:
HSBC BANK USA, as Trustee
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[Face of Note]
CUSIP/NO. ________/_______
12% Senior Notes due 2009
No. ___ $_________________
WORLDWIDE FIBER INC.
promises to pay to_____________________________________________________________
or registered assigns,
the principal sum of___________________________________________________________
Dollars ($_______________) on _______, 2009.
Interest Payment Dates: ______ and ________
Record Dates: ________ and ___________
Subject to Restrictions set forth in this Note.
A-1
<PAGE>
Dated:
WORLDWIDE FIBER INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
HSBC Bank USA, as Trustee
By: __________________________________
Authorized Signatory
A-2
<PAGE>
[Back of Note]
12% Senior Notes due 2009
["THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE."](1)
["THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE 'SECURITIES ACT') AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER: (1) REPRESENTS THAT (A) IT IS A 'QUALIFIED INSTITUTIONAL BUYER' (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A 'QIB'), (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) 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
'IAI'), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE NOTE EXCEPT
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND , IF SUCH TRANSFER IS IN RESPECT OF AN
- ----------
1 This paragraph should be included only if the Note is issued in global
form.
A-3
<PAGE>
AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH OTHER APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS 'OFFSHORE TRANSACTION' AND 'UNITED STATES' HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF 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."](2)
- ----------
2 This paragraph should be removed upon the exchange of Notes for Exchange
Notes in the Exchange Offer or upon the registration of the Notes pursuant
to the terms of the Registration Rights Agreement.
A-4
<PAGE>
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Worldwide Fiber Inc., a company incorporated under the laws of
Alberta (the "Company"), promises to pay interest on the principal amount of
this Note at the rate of 12% per annum from July 28, 1999 until maturity. The
interest rate on the Notes is subject to increase pursuant to the provisions of
the Registration Rights Agreement. The Company will pay interest semi-annually
in arrears on August 1 and February 1 of each year (each an "Interest Payment
Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be February 1, 2000. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360day year of twelve
30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the July 15 or January 15 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium, if any, and interest at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium on, all Global
Notes and all other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, HSBC Bank USA, the Trustee under
the Indenture, will act as Paying Agent and Registrar. The Company may change
any
A-5
<PAGE>
Paying Agent or Registrar without notice to any Holder. The Company or any of
its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
July 28, 1999 ("Indenture") between the Company and the Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Initial Notes are obligations of the Company limited to $500.0 million in
aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) and (c) of this Paragraph 5,
the Company shall not have the option to redeem the Notes prior to August 1,
2004. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 1 of the
years indicated below:
Date Percentage
---- ----------
2004.......................................... 106.000%
2005.......................................... 104.000%
2006.......................................... 102.000%
2007 and thereafter........................... 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
prior to August 1, 2002, the Company may on any one or more occasions redeem up
to 35% of the sum of (a) the aggregate principal amount of Notes originally
issued under the Indenture and (b) the total amount of Additional Senior Notes
issued under the Indenture at a redemption price of 112% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the redemption
date, with the net cash proceeds of one or more Public Equity Offerings;
provided that
(i) at least 65% of the sum of (a) the aggregate principal amount of
Notes originally issued under the Indenture and (b) the total amount of
Additional Senior Notes issued under the Indenture remains outstanding
immediately after the oc-
A-6
<PAGE>
currence of any such redemption (excluding Notes held by the Company and
its Subsidiaries); and
(ii) the redemption must occur within 90 days of the date of the
closing of such Qualified Equity Offering.
(c) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
the Company may redeem the Notes in the event the Company becomes obligated to
pay any Additional Amounts as a result of a change in the laws or regulations of
Canada or any Canadian Taxing Authority, or a change in any official position
regarding the application or interpretation thereof, which is publicly announced
or becomes effective on or after the Issue Date. Upon the occurrence of any such
change, the Company may, at any time, redeem all, but not part, of the Notes at
a price equal to 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the redemption date. The Company will give written notice
of any such redemption not less than 30 nor more than 60 days prior to the
redemption date.
6. PAYMENT OF ADDITIONAL AMOUNTS. All payments made by or on behalf of the
Company on or with respect to the Notes shall be made without withholding or
deduction for any Taxes imposed by any Canadian Taxing Authority, unless
required by law or the interpretation or administration thereof by the relevant
Taxing Authority. If the Company or any other payor is required to withhold or
deduct any amount on account of Taxes from any payment made on or with respect
to the Notes, the Company shall:
(a) make such withholding or deduction;
(b) remit the full amount deducted or withheld to the relevant
government authority in accordance with applicable law;
(c) pay such additional amounts ("Additional Amounts") as may be
necessary so that the net amount received by each Holder (including
Additional Amounts) after such withholding or deduction shall not be less
than the amount the Holder would have received if such Taxes had not been
withheld or deducted;
(d) furnish to the Holders, within 30 days after the date the payment
of any Taxes is due, certified copies of tax receipts evidencing such
payment by the Company;
(e) indemnify and hold harmless each Holder (other than an Excluded
Holder) for the amount of (i) any Taxes paid by such Holder as a result of
payments made on or with respect to the Notes, (ii) any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto and (iii) any Taxes imposed with
A-7
<PAGE>
respect to any reimbursement under (i) or (ii), but excluding any such
Taxes on such Holder's net income; and
(f) at least 30 days prior to each date on which any Additional
Amounts are payable, deliver to the Trustee an Officers' Certificate
stating the amounts so payable and such other information necessary to
enable the Trustee to pay such Additional Amounts to Holders on the payment
date.
Notwithstanding the foregoing, no Additional Amounts shall be payable to a
Holder in respect of a beneficial owner of a Note (an "Excluded Holder"):
(a) with which the Company does not deal at arm's length (within the
meaning of the Income Tax Act (Canada)) at the time of making such payment;
or
(b) which is subject to such Taxes by reason of its being connected
with Canada or any province or territory thereof otherwise than by the mere
acquisition, holding or disposition of Notes or the receipt of payments
thereunder.
7. MANDATORY REDEMPTION. Except as otherwise provided in Paragraph 8 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes. In addition, the Company is not required to make any
sinking fund payments with respect to the Notes.
8. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of that Holder's Notes pursuant to the
Change of Control Offer. In the Change of Control Offer, the Company will offer
(the "Change of Control Offer") a Change of Control Payment in cash equal to
101% of the aggregate principal amount of Notes repurchased plus accrued and
unpaid interest, if any, thereon to the date of purchase. Within 30 days
following any Change of Control, the Company will mail a notice to each Holder
(with a copy to the Trustee) describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the Change
of Control Payment Date specified in such notice, pursuant to the procedures
required by the Indenture and described in such notice. The Company will comply
with the requirements of 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 connection with the repurchase of the Notes as a
result of a Change of Control.
A-8
<PAGE>
(b) If the Company or a Subsidiary consummates any Asset Sale, within five
days of each date on which the aggregate amount of Excess Proceeds exceeds $10
million, the Company shall commence an offer to all Holders of Notes (an "Asset
Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum
principal amount of Notes (including Additional Senior Notes, if any) that may
be purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date fixed for the closing of such offer, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company (or such Subsidiary) may use such deficiency for any
purpose not otherwise prohibited by the Indenture. If the aggregate principal
amount of Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
9. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes, other than with respect to the payment of
Additional Amounts.
A-9
<PAGE>
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding Notes
(including Additional Senior Notes, if any), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including Additional Senior Notes, if any). Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation or sale of all or substantially all of the
Company's assets, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the TIA or to provide for the Issuance of Additional Senior Notes in
accordance with the limitations set forth in the Indenture.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on, or Additional Amounts, if any, with
respect to the Notes, (ii) default in payment when due of principal of or
premium, if any, on the Notes, (iii) failure by the Company or any of its
Restricted Subsidiaries to comply with Section 5.01 of the Indenture, (iv)
failure by the Company or any of its Restricted Subsidiaries for 15 days after
notice to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the Notes (including Additional
Senior Notes, if any) then outstanding to comply with Section 4.10 or 4.15 of
the Indenture or the Notes, (v) failure by the Company or any of its Restricted
Subsidiaries for 60 days after notice to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal amount of
the Notes then outstanding to comply with any of the other agreements in the
Indenture or the Notes, (vi) voluntary relinquishment by the Company of any of
its rights under the Non-Competition Agreement or failure by the Company for 30
days after written notice thereof has been given to the Company by the Trustee
or to the Company and the Trustee by Holders of at least 25% of the aggregate
principal amount of the Notes outstanding to enforce any of such rights, in each
case which is materially detrimental to the interests of the Company or the
Holders, (vii) default under certain other agreements relating to Indebtedness
of the Company which default results in the acceleration of such Indebtedness
prior to its express maturity; (viii) certain final judgments for the payment of
money that remain undischarged for a period of 60 days; (ix) certain events of
bankruptcy or insolvency with respect to the Company or any of its Material
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable. Notwithstanding the foregoing,
in the case of an
A-10
<PAGE>
Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, 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.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator
or stockholder, of the Company, as such, shall not 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.
16. GOVERNING LAW. This Note and the Indenture shall be governed by and
construed in accordance with the laws of the State of New York, as applied to
contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto and the holders agree
to submit to the jurisdiction of the courts of the State of New York in any
action or proceeding arising out of or relating to this Note.
17. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
A-11
<PAGE>
19. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the A/B Exchange Registration
Rights Agreement dated as of July 28, 1999, among the Company and Donaldson,
Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated,
Salomon Smith Barney Inc. and TD Securities (USA) Inc. (the "Registration Rights
Agreement").
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Worldwide Fiber Inc.
1510-1066 West Hastings Street
Vancouver, BC Canada V6E 3X1
Attention: Stephen Stow
Telecopier No.: (604) 681-6822
A-12
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:__________________________________
(Insert assignee's legal name)
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: _______________
Your Signature: ________________________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee:* _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-13
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:
$___________
Date: _______________
Your Signature: ________________________________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.: ________________________
Signature Guarantee:* _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-14
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer
Principal Amount of Principal Amount of following such decrease of Trustee or
Date of Exchange this Global Note this Global Note (or increase) Note Custodian
- ---------------- --------------------- --------------------- ----------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-15
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Worldwide Fiber Inc.
1510-1066 West Hastings Street
Vancouver, BC Canada V6E 3X1
HSBC Bank USA
140 Broadway, 12th Floor
New York, New York 10005-1180
Re: 12% Senior Notes due 2009
Reference is hereby made to the Indenture, dated as of July 28, 1999 (the
"Indenture"), between Worldwide Fiber Inc., as issuer (the "Company"), and HSBC
Bank USA, as trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture.
___________________ (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. /_/ Check if Transferee will take delivery of a beneficial interest in
the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
B-1
<PAGE>
2. /_/ Check if Transferee will take delivery of a beneficial interest
in the Regulation S Global Note or a Definitive Note pursuant to Regulation S.
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the Transfer is not being made to a person in the
United States and (x) at the time the buy order was originated, the Transferee
was outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act and (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Note and/or the Definitive
Note and in the Indenture and the Securities Act.
3. /_/ Check and complete if Transferee will take delivery of a beneficial
interest in a Definitive Note pursuant to any provision of the Securities Act
other than Rule 144A or Regulation S. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Notes and Restricted Definitive Notes and pursuant to and in
accordance with the Securities Act and any applicable blue sky securities laws
of any state of the United States, and accordingly the Transferor hereby further
certifies 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 and in compliance with the
prospectus delivery requirements of the Securities Act;
or
B-2
<PAGE>
(d) /_/ such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule
904, and the Transferor hereby further certifies that it has not engaged in
any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed,
which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has 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 Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Global Note and/or the Definitive Notes and in the
Indenture and the Securities Act.
4. /_/ Check if Transferee will take delivery of a beneficial interest
in an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) /_/ Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state
of the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes, on Restricted Definitive
Notes and in the Indenture.
(b) /_/ Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend
B-3
<PAGE>
printed on the Restricted Global Notes, on Restricted Definitive Notes and
in the Indenture.
(c) /_/ Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule
144, Rule 903 or Rule 904 and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of
any State of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will not
be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes or Restricted
Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
[Insert Name of Transferor]
By:
--------------------------------
Name:
Title:
Dated: ____________________
B-4
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) /_/ a beneficial interest in the:
(i) /_/ 144A Global Note (CUSIP ________), or
(ii) /_/ Regulation S Global Note (CUSIP ________), or
(b) /_/ a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) /_/ a beneficial interest in the:
(i) /_/ 144A Global Note (CUSIP ______), or
(ii) /_/ Regulation S Global Note (CUSIP ________), or
(iii) /_/> Unrestricted Global Note (CUSIP ________); or
(b) /_/ a Restricted Definitive Note; or
(c) /_/ an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Worldwide Fiber Inc.
1510-1066 West Hastings Street
Vancouver, BC Canada V6E 3X1
HSBC Bank USA
140 Broadway, 12th Floor
New York, New York 10005-1180
Re: 12% Senior Notes due 2009
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of July 28, 1999 (the
"Indenture"), between Worldwide Fiber Inc., as issuer (the "Company"), and HSBC
Bank USA, as trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture.
__________________________ (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note.
(a) /_/ Check if Exchange is from beneficial interest in a
Restricted Global Note to beneficial interest in an Unrestricted Global
Note. In connection with the Exchange of the Owner's beneficial interest in
a Restricted Global Note for a beneficial interest in an Unrestricted
Global Note in an equal principal amount, the Owner hereby certifies (i)
the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with
the transfer restrictions applicable to the Global Notes and pursuant to
and in accordance with the United States Securities Act of 1933, as amended
(the "Securities Act"), (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United
States.
C-1
<PAGE>
(b) /_/ Check if Exchange is from beneficial interest in a
Restricted Global Note to Unrestricted Definitive Note. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note
for an Unrestricted Definitive Note, the Owner hereby certifies (i) the
Definitive Note is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and
pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United
States.
(c) /_/ Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest
in an Unrestricted Global Note, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(d) /_/ Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Unrestricted
Definitive Note is being acquired in compliance with any applicable blue
sky securities laws of any state of the United States.
C-2
<PAGE>
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes.
(a) /_/ Check if Exchange is from beneficial interest in a
Restricted Global Note to Restricted Definitive Note. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a Restricted Definitive Note with an equal principal amount, the Owner
hereby certifies that the Restricted Definitive Note is being acquired for
the Owner's own account without transfer. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the Restricted
Definitive Note issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the
Restricted Definitive Note and in the Indenture and the Securities Act.
(b) Check if Exchange is from Restricted Definitive Note to beneficial
interest in a Restricted Global Note. In connection with the Exchange of
the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] /_/ 144A Global Note or /_/ Regulation S Global Note with
an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and
in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the relevant Restricted Global Note and in the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
[Insert Name of Transferor]
[Insert Name of Transferor]
By:
--------------------------------
Name:
Title:
Dated: ____________________
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Worldwide Fiber Inc.
1510-1066 West Hastings Street
Vancouver, BC Canada V6E 3X1
HSBC Bank USA
140 Broadway, 12th Floor
New York, New York 10005-1180
Re: 12% Senior Notes due 2009
Reference is hereby made to the Indenture, dated as of July 28, 1999 (the
"Indenture"), between Worldwide Fiber Inc., as issuer (the "Company"), and HSBC
Bank USA, as trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) /_/ a beneficial interest in a Global Note, or
(b) /_/ a Definitive Note,
we confirm 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 and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Notes or any interest therein except in compliance
with, such restrictions and conditions and the United States 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 and any interest therein
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 the Notes or any interest therein,
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
D-1
<PAGE>
the Company a signed letter substantially in the form of this letter and an
Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, 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 or beneficial interest therein 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.
[Insert Name of Accredited Investor]
By:
----------------------------------
Name:
Title:
Dated: ____________________
D-2
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of July 28, 1999
by and among
Worldwide Fiber Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
TD Securities (USA) Inc.
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of July 28, 1999, by and among Worldwide Fiber Inc., an Alberta
corporation (the "Company") and Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated, Salomon Smith Barney Inc. and TD
Securities (USA) Inc. (each, an "Initial Purchaser" and, together, the "Initial
Purchasers"), each of whom has agreed to purchase the Company's 12% Series A
Senior Notes due 2009 (the "Series A Notes") pursuant to the Purchase Agreement
(as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated July 23,
1999 (the "Purchase Agreement"), by and among the Company and the Initial
Purchasers. In order to induce the Initial Purchasers to purchase the Series A
Notes, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchasers set forth in Section 3 of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Indenture, dated July 28, 1999, between the
Company and HSBC Bank USA, as Trustee, relating to the Series A Notes and the
Series B Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Affiliated Market Maker: A Broker-Dealer who is deemed to be an Affiliate
of the Company.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day except a Saturday, Sunday or other day on which banks
are authorized to close in (a) the City of New York or (b) the city of the
corporate trust office of the Trustee.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date hereof.
2
<PAGE>
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of
this Agreement upon the occurrence of (a) the filing and effectiveness under the
Act of the Exchange Offer Registration Statement relating to the Series B Notes
to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the period required pursuant to Section
3(b) hereof and (c) the delivery by the Company to the Registrar under the
Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
Effectiveness Deadline: As defined in Sections 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose to
sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and pursuant to Regulation S under
the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Person: An individual, partnership, corporation, trust, unincorporated
organization or a government or agency or political subdivision thereof.
Predecessor Division: The telecommunications division of Ledcor Inc.
Prospectus: The prospectus included in a Registration Statement at the time
such Registration Statement is declared effective, as amended or supplemented by
any prospectus
3
<PAGE>
supplement and by all other amendments thereto, including post-effective
amendments, and all material incorporated by reference into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company relating
to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, in each case, (i) that is filed pursuant to the
provisions of this Agreement and (ii) including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 12% Series B Senior Notes due 2009 containing
terms identical in all material respects to the Series A Notes (except that (a)
interest thereon shall accrue from the last date on which interest was paid on
the Series A Notes or, if no such interest has been paid, from the date of their
original issue and (b) the transfer restrictions thereon shall be eliminated to
be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture.
Transfer Restricted Securities: Each (A) Series A Note, until the earliest
to occur of (i) the date on which such Series A Note is exchanged in the
Exchange Offer for a Series B Note which is entitled to be resold to the public
by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (ii) the date on which such Series A Note has been
disposed of in accordance with a Shelf Registration Statement (and the
purchasers thereof have been issued Series B Notes), (iii) the date on which
such Series A Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein) or (iv) the date on
which such Series A Note is distributed to the public pursuant to Rule 144 under
the Act.
4
<PAGE>
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company shall (i) cause the Exchange Offer Registration Statement to
be filed with the Commission as soon as practicable after the Closing Date, but
in no event later than 90 days after the Closing Date (such 90th day being the
"Filing Deadline"), (ii) use its reasonable best efforts to cause such Exchange
Offer Registration Statement to become effective at the earliest possible time,
but in no event later than 180 days after the Closing Date (such 180th day being
the "Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause it to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
Series B Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting (i) registration of the Series B Notes to be offered in exchange
for the Series A Notes that are Transfer Restricted Securities and (ii) resales
of Series B Notes by Broker-Dealers that tendered into the Exchange Offer Series
A Notes that such Broker-Dealer acquired for its own account as a result of
market making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its Affiliates) as contemplated by
Section 3(c) below.
(b) The Company shall use its reasonable best efforts to cause the Exchange
Offer Registration Statement to be effective continuously, and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; provided, however, that in no event shall such period be less than 20
Business Days. The Company shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Series B Notes shall be included in the Exchange Offer Registration Statement.
The Company shall use its reasonable best efforts to cause the Exchange Offer to
be Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 210 days
after the Closing Date (such 210th day being the "Consummation Deadline").
5
<PAGE>
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement.
Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company shall
permit the use of the Prospectus contained in the Exchange Offer Registration
Statement by such Broker-Dealer to satisfy such prospectus delivery requirement.
To the extent necessary to ensure that the prospectus contained in the Exchange
Offer Registration Statement is available for sales of Series B Notes by
Broker-Dealers, the Company agrees to use its reasonable best efforts to keep
the Exchange Offer Registration Statement continuously effective, supplemented,
amended and current as required by and subject to the provisions of Sections
6(a) and (c) hereof and in conformity with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of one year (excluding any Exchange Offer
Blackout Period (as defined)) from the Consummation Deadline or such shorter
period as will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold pursuant thereto; provided, further, that
the Company may suspend the effectiveness of the Exchange Offer Registration
Statement, in the event that, and for up to 2 periods of up to 30 consecutive
days, but no more than an aggregate of 45 days (an "Exchange Offer Blackout
Period") if, (a)(i) an event occurs and is continuing as a result of which the
Exchange Offer Registration Statement would, in the Company's good faith
judgment, contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading
and (ii) if the Company determines in good faith that the disclosure of such
event at such time would have a material adverse effect on the business
operations or prospectus of the Company or (b) the disclosure otherwise relates
to a pending material business transaction which has not yet been publicly
disclosed; provided, further, that the Company shall continue to pay Additional
Interest, if any, during the Exchange Offer Blackout Period. Upon the occurrence
of any such suspension, the Company will use its best efforts to reinstate
effectiveness of such Exchange Offer Registration Statement as soon as
practicable. The Company shall provide sufficient copies of the latest
6
<PAGE>
version of such Prospectus to such Broker-Dealers, promptly upon request, and in
no event later than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law or Commission Policy (after the Company has complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the consummation of the Exchange Offer that (A) such Holder was prohibited by
law or Commission policy from participating in the Exchange Offer or (B) such
Holder may not resell the Series B Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i)
the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above
and (ii) the date on which the Company receives the notice specified in
clause (a)(ii) above, (but no earlier than 90 days after the Closing Date)
(such earlier date, which shall not be earlier than 90 days after the
Closing Date, the "Filing Deadline"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the
Exchange Offer Registration Statement (the "Shelf Registration
Statement")), relating to all Transfer Restricted Securities, and
(y) shall use its reasonable best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline for the Shelf Registration Statement (but no earlier than
210 days after the Closing Date) (such day being the "Effectiveness
Deadline").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
(a)(i) above), then the filing of the Exchange Offer Registration Statement
shall be deemed to satisfy the requirements of clause (x) above; provided that,
in such event, the Company shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section
7
<PAGE>
6(b)(ii) hereof, the Company shall use its reasonable best efforts to keep any
Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for as long as any Initial
Purchaser is deemed to be an Affiliate of the Company, but in no event less than
the shorter of (i) two years (excluding any Shelf Blackout period (as defined))
(as extended pursuant to Section 6(d)) following the Closing Date or (ii) the
date on which all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto; provided, further, that
the Company may suspend the effectiveness of a Shelf Registration Statement, in
the event that, and for up to three periods of up to 45 consecutive days, but no
more than an aggregate of 90 days during any 365-day period (a "Shelf Blackout
Period") if, (a)(i) an event occurs and is continuing as a result of which the
Shelf Registration Statement would, in the Company's good faith judgment,
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading and (ii) if the
Company determines in good faith that the disclosure of such event at such time
would have a material adverse effect on the business, operations or prospects of
the Company or (b) the disclosure otherwise relates to a pending material
business transaction which has not yet been publicly disclosed; provided,
however, that the Company shall not pay Additional Interest, during any such
Shelf Blackout Period. Upon the occurrence of any such suspension, the Company
will use its reasonable best efforts to reinstate effectiveness of such Shelf
Registration Statement as soon as practicable.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to additional interest pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. ADDITIONAL INTEREST
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the
8
<PAGE>
Consummation Deadline or (iv) any Registration Statement required by this
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
within two days by a post-effective amendment to such Registration Statement
that cures such failure and that is itself declared effective (within five days
of filing such post-effective amendment to such Registration Statement) (each
such event referred to in clauses (i) through (iv), a "Registration Default"),
then the Company hereby agrees to pay to each Holder of Transfer Restricted
Securities affected thereby additional interest ("Additional Interest") which
will accrue and be payable at the time interest is due on the Series A Notes the
Series B Notes (in addition to the stated interest on the Series A Notes and the
Series B Notes) from and including the date such Registration Default occurs to,
but not including, the date on which the applicable Registration Statement is
filed or is declared effective, the Exchange Offer is consummated, or the
applicable Registration Statement is again declared effective or made usable.
During the time that Additional Interest is accruing continuously, the rate of
such Additional Interest shall be 0.50% per annum during the first 90-day period
and shall increase by 0.25% per annum for each subsequent 90-day period, but in
no event shall such rate exceed 1.50% per annum in the aggregate regardless of
the number of Registration Defaults. If, after the cure of all Registration
Defaults then in effect, there is a subsequent Registration Default, the rate of
Additional Interest for such subsequent Registration Default shall initially be
0.50%, regardless of the Additional Interest rate in effect with respect to any
prior Registration Default at the time of the cure of such Registration Default.
All accrued Additional Interest shall be paid by the Company to the Holders
entitled thereto in the same manner and on the same date as interest payments on
the Notes, as more fully described in the Indenture. Notwithstanding the fact
that any securities for which Additional Interest are due cease to be Transfer
Restricted Securities, all obligations of the Company to pay Additional Interest
with respect thereto shall survive until such time as such obligations with
respect to such securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company shall (x) comply with all applicable provisions of Section
6(c) below, (y) use its reasonable best efforts to effect such exchange and to
permit the resale of Series B Notes by Broker-Dealers that tendered in the
Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of its market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and (z) comply with all of the following provisions:
9
<PAGE>
(i) If, following the date hereof there has been announced a change in
Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company hereby agrees to seek a no-action
letter or other favorable decision from the Commission allowing the Company
to Consummate an Exchange Offer for such Transfer Restricted Securities
(unless in the reasonable opinion of counsel to the Company, the filing of
such no-action letter is not appropriate). The Company hereby agrees to
pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company hereby agrees to take all such
other actions as may be requested by the Commission or otherwise required
in connection with the issuance of such decision.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker-Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to
the effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Series B Notes to be issued in the Exchange Offer and (C) it is acquiring
the Series B Notes in its ordinary course of business. As a condition to
its participation in the Exchange Offer each Holder using the Exchange
Offer to participate in a distribution of the Series B Notes shall
acknowledge and agree that, if the resales are of Series B Notes obtained
by such Holder in exchange for Series A Notes acquired directly from the
Company or an Affiliate thereof, it (1) could not, under Commission policy
as in effect on the date of this Agreement, rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc. (available June 5,
1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated July 2,
1993, and similar no-action letters (including, if applicable, any
no-action letter obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of the
Act in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988),
10
<PAGE>
Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and, if
applicable, any no-action letter obtained pursuant to clause (i) above, (B)
including a representation that the Company has not entered into any
arrangement or understanding with any Person to distribute the Series B
Notes to be received in the Exchange Offer and that, to the best of the
Company's information and belief, each Holder participating in the Exchange
Offer is acquiring the Series B Notes in its ordinary course of business
and has no arrangement or understanding with any Person to participate in
the distribution of the Series B Notes received in the Exchange Offer and
(C) any other undertaking or representation required by the Commission as
set forth in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf Registration
Statement, the Company shall:
(i) comply with all the provisions of Section 6(c) below and use its
reasonable best efforts to effect such registration to permit the sale of
the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance
with the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of Series A
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation; the
Company shall register Series B Notes on the Shelf Registration Statement
for this purpose and issue the Series B Notes to the purchasers of
securities subject to the Shelf Registration Statement in the names as such
purchasers shall designate.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company shall:
(i) use its reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement, as
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained
11
<PAGE>
therein (A) to contain an untrue statement of material fact or omit to
state any material fact necessary to make the statements therein not
misleading or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company shall file promptly an appropriate amendment to such Registration
Statement curing such defect, and, if Commission review is required, use
its reasonable best efforts to cause such amendment to be declared
effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with Rules 424, 430A and 462, as applicable,
under the Act in a timely manner; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth
in such Registration Statement or supplement to the Prospectus;
(iii) advise each selling Holder and each Initial Purchaser who is
required to deliver a prospectus in connection with sales or market making
activities (an "Affiliated Market Maker") promptly and, if requested by
such Person, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any request
by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or
of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, and (D) of the existence of any fact or the happening of any
event that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement in
order to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, or
any state securities com-
12
<PAGE>
mission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer Restricted
Securities under state securities or Blue Sky laws, the Company shall use
its reasonable best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to each selling Holder and each Affiliated Market Maker,
in connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Persons in connection with such
sale, if any, for a period of at least five Business Days, and the Company
will not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which such
Persons shall reasonably object within five Business Days after the receipt
thereof. Such Person shall be deemed to have reasonably objected to such
filing if such Registration Statement, amendment, Prospectus or supplement,
as applicable, as proposed to be filed, contains an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading or fails to comply with the applicable
requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each selling Holder and each Affiliated
Market Maker in connection with such sale, if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such Persons may reasonably
request; provided, however, that such Persons shall first agree in writing
with the Company that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time of
delivery of such information shall be kept confidential by such Persons,
unless (a) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities,
13
<PAGE>
(b) disclosure of such information is required by law (including any
disclosure requirements pursuant to federal securities laws in connection
with the filing of such Registration Statement or the use of such
Prospectus), (c) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard such
information by such Person or (d) such information becomes available to
such Persons from a source other than the Company and its subsidiaries and
such source is not known, after due inquiry, by such Person to be bound by
a confidentiality agreement; provided, further, that the foregoing
investigation shall be coordinated on behalf of such Persons by one
representative designated by and on behalf of such Persons and any such
confidential information shall be available from such representative to
such Persons so long as any Person agrees to be bound by such
confidentiality agreement;
(vii) make available, at reasonable times, for inspection by each
selling Holder and each Affiliated Market Maker and any attorney or
accountant retained by such Persons, all financial and other records,
pertinent corporate documents of the Company and cause the Company's
officers, directors and employees to supply all information reasonably
requested in writing by any such Person, attorney or accountant in
connection with such Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its effectiveness;
(viii) if requested by any selling Holders in connection with such
sale or any Affiliated Market Maker, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such Persons may reasonably
request in writing to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities, and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(ix) furnish to each selling Holder in connection with such sale and
each Affiliated Market Maker, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder and each Affiliated Market Maker,
without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company hereby consents to the use (in
accordance with law) of the Prospectus
14
<PAGE>
and any amendment or supplement thereto by each Person in connection with
the offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto and all market making
activities of such Affiliated Market Maker, as the case may be;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in order
to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement contemplated
by this Agreement as may be reasonably requested in writing by any Holder
in connection with any sale or resale pursuant to any applicable
Registration Statement. In such connection, and also in connection with
market making activities by any Affiliated Market Maker, the Company shall:
(A) upon written request of any selling Holder or any Affiliated
Market Maker, furnish (or in the case of paragraphs (2) and (3), use
its reasonable best efforts to cause to be furnished) to each Person,
upon Consummation of the Exchange Offer or upon the effectiveness of
the Shelf Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company by (x) the President or any Vice President and (y) a
principal financial or accounting officer of the Company,
confirming, as of the date thereof, the matters set forth in
Sections 6(z), 9(a) and 9(b) of the Purchase Agreement and such
other similar matters as such Persons may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company covering matters similar to those set forth in Section
9(e) of the Purchase Agreement and such other matters as such
Holder may reasonably request, and including, without limitation,
the paragraph relating to Section 10b-5 under the Exchange Act;
and
(3) On the date of Consummation of the Exchange Offer or the
date of effectiveness of the Shelf Registration Statement, as
applicable, customary comfort letters, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the independent accountants of the Company and the
Predecessor Division, in the customary form and covering matters
of the type customarily covered in comfort letters to
underwrit-
15
<PAGE>
ers in connection with underwritten offerings, and affirming the
matters set forth in the comfort letters delivered pursuant to
Section 9(j) of the Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested in writing by the such Persons to evidence
compliance with the matters covered in clause (A) above and with any
customary conditions contained in any agreement entered into by the
Company pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling
Holders may reasonable request in writing and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would subject it to
the service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as the
selling Holders may request in writing at least two Business Days prior to
such sale of Transfer Restricted Securities;
(xiv) use its reasonable best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted Securities not
later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with the Depository Trust Company;
16
<PAGE>
(xvi) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders with regard to any applicable Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a
twelve-month period beginning after the effective date of the Registration
Statement (as such term is defined in paragraph (c) of Rule 158 under the
Act);
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and
the Holders to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the TIA;
and execute and use its best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder and each Affiliated Market
Maker, upon request, each document filed with the Commission pursuant to
the requirements of Section 13 or Section 15(d) of the Exchange Act, unless
already provided.
(d) Restrictions on Holders. Each Holder and each Affiliated Market Maker
agrees by acquisition of a Transfer Restricted Security that, upon receipt of
the notice referred to in Section 6(c)(iii)(C) or any notice from the Company of
the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof
(in each case, a "Suspension Notice"), such Person will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until (i) such Person has received copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or
(ii) such Person is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus (in
each case, the "Recommencement Date"). Each Person receiving a Suspension Notice
hereby agrees that it will either (i) destroy any Prospectuses, other than
permanent file copies, then in such Person's possession which have been replaced
by the Company with more recently dated Prospectuses or (ii) deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Person's possession of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of the Suspension
Notice. The time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by a number of days equal to the number of days in the period from and including
the date of delivery of the Suspension Notice to the date of delivery of the
Recommencement Date.
17
<PAGE>
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Series B Notes
to be issued in the Exchange Offer and printing of Prospectuses whether for
exchanges, sales, market making or otherwise), messenger and delivery services
and telephone; (iv) all fees and disbursements of counsel for the Company; (v)
all application and filing fees in connection with listing the Series B Notes on
a national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Predecessor Division
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
Each Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Transfer Restricted Securities.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities who are
tendering Series A Notes in the Exchange Offer and/or selling or reselling
Series A Notes or Series B Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel with respect to matters of U.S. law and one counsel with
respect to matters of Canadian law, who shall be Latham & Watkins and Osler,
Hoskin & Harcourt, respectively, unless another firm shall be chosen by the
Holders of a majority in principal amount of the Transfer Restricted Securities
for whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other ex-
18
<PAGE>
penses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Company to any Holder or any prospective purchaser of Series B
Notes or registered Series A Notes, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that is based upon
information relating to any of the Holders furnished in writing to the Company
by any of the Holders; provided, however, that the foregoing indemnity agreement
with respect to any preliminary prospectus, shall not inure to the benefit of
any such person who failed to deliver a Prospectus (so long as the Prospectus
was provided by the Company to such person in the requisite quantity and on a
timely basis to permit proper delivery) to the person asserting any losses,
claims, damages, liabilities or judgments caused by any untrue statement or
alleged untrue statement of a material fact contained in the preliminary
prospectus, 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, if such material misstatement or omission or alleged
material misstatement or omission was cured in the Prospectus.
(b) Each Holder of Transfer Restricted Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company, and its directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company, to the same extent
as the foregoing indemnity from the Company set forth in Section 8(a) above, but
only with reference to information relating to such Holder furnished in writing
to the Company by such Holder expressly for use in any Registration Statement.
In no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to
19
<PAGE>
both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys with respect to matters of U.S. law and
one separate firm of attorneys with respect to matters of Canadian law (in each
case, in addition to any local counsel) for all indemnified parties and all such
fees and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by a majority of the Holders, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty Business Days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action 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 the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or
20
<PAGE>
judgments referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or judgments (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Holders, on
the other hand, from their sale of Transfer Restricted Securities or (ii) if the
allocation provided by clause 8(d)(i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the Company,
on the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Holder, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or by the Holder, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
judgments referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8(d) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any matter, including any action
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of its Transfer
Restricted Securities pursuant to a Registration Statement exceeds the sum of
(i) the amount paid by such Holder for such Transfer Restricted Securities and
(ii) the amount of any damages which 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 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(d) are several in
proportion to the re-
21
<PAGE>
spective principal amount of Transfer Restricted Securities held by each Holder
hereunder and not joint.
(e) The Company agrees that the indemnity and contribution provisions of
this Section 8 shall apply to Affiliated Market Makers to the same extent, on
the same conditions, as it applies to Holders.
SECTION 9. RULE 144A AND RULE 144
For so long as any Notes remain outstanding, the Company shall furnish to
the Holders the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act. Whether or not the Company is subject to Section 13(a)
or 15(d) of the Exchange Act, the Company shall file with the SEC and furnish to
the Holders and the Trustee (i) within 140 days after the end of each fiscal
year, annual reports on Form 20-F or 40-F, as applicable (or any successor
form), containing the information required to be contained therein (or required
in such successor form) and (ii) (a) within 45 days after the end of each of the
first three fiscal quarters of each fiscal year, reports on Form 10-Q or (b)
within 60 days after the end of each of the first three fiscal quarters of each
fiscal year, reports on Form 6-K (or any successor form) which, regardless of
applicable requirements, shall, at a minimum, contain a "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
SECTION 10. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE
To the fullest extent permitted by applicable law, the Company irrevocably
submits to the jurisdiction of any federal or state court the Borough of
Manhattan in the City, County and State of New York, United States of America,
in any suit or proceeding based on or arising under this Agreement (solely in
connection with any such suit or proceeding), and irrevocably agrees that all
claims in respect of such suit or proceeding may be determined in any such
court. The Company irrevocably and fully waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Company agrees that
final judgment in any such suit, action or proceeding brought in such a court
shall be conclusive and binding upon the Company and may be enforced in the
courts of Canada (or any other courts to the jurisdiction of which the Company
is subject) by a suit upon such judgment, provided that service of process is
effected upon the Company in the manner specified herein. The Company hereby
irrevocably designates and appoints CT Corporation System (the "Process Agent"),
as the authorized agent of the Company upon whom process may be served in any
such suit or proceeding, it being understood that the designation and
appointment of CT Corporation System as such authorized agent shall become
effective immediately without any further action on the part of the Company. The
Company represents to the Initial Purchasers that it has notified the Process
Agent of such designation and appointment and that the Process Agent has
accepted the same in writing. The Company hereby irrevocably authorizes and
directs the Process Agent to accept such service.
22
<PAGE>
The Company further agrees that, to the extent permitted by law, service of
process upon the Process Agent and written notice of said service to the Company
mailed by prepaid registered first class mail at its address specified in
Section 12 of this Agreement, shall be deemed in every respect effective service
of process upon the Company in any such suit or proceeding. Nothing herein shall
affect the right of any Initial Purchaser or Affiliated Market Maker or any
person controlling such Initial Purchaser or Affiliated Market Maker or any
Indemnified Holder to serve process in any other manner permitted by law. The
Company further agrees to take any and all action, including the execution and
filing of any and all such documents and instruments as may be necessary to
continue such designation and appointment of the Process Agent in full force and
effect so long as the Company has any outstanding obligations under this
Agreement. 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 note, attachment prior to judgment, attachment in aid of
execution, executor or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of their obligations
under this Agreement, to the extent permitted by law.
The provisions of this Section 10 shall survive any termination of this
Agreement, in whole or in part.
SECTION 11. OBLIGATION CURRENCY
The obligation of the parties to make payments hereunder is in U.S. dollars
(the "Obligation Currency") and such obligation shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency or any other
realization in such other currency, whether as proceeds of set-off, security,
guarantee, distributions, or otherwise, except to the extent to which such
tender, recovery or realization shall result in the effective receipt by the
party which is to receive such payment of the full amount of the Obligation
Currency expressed to be payable hereunder, and the party liable to make such
payment agrees to indemnify the party which is to receive such payment (as an
additional, separate and independent cause of action) for the amount (if any) by
which such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation to
indemnify shall not be affected by judgment being obtained for any other sums
due under this Agreement.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Sections 3 and 4 hereof may result
in material irreparable injury to the Initial Purchasers or the Holders or
Affiliated Market Makers 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 Initial Purchasers or any Holder or
Affiliated Market Maker may obtain such relief as may be required to
specifically
23
<PAGE>
enforce the Company's obligations under Sections 3 and 4 hereof. The Company
further agrees to waive the defense in any action for specific performance that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except for the rights granted
pursuant to the Registration Rights Agreement dated December 23, 1998, among the
Company, Donaldson, Lufkin & Jenrette Securities Corporation and TD Securities
(USA) Inc., the Company has not previously entered into any agreement granting
any registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders and Affiliated Market Makers shall
be third party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders and Affiliated Market Makers hereunder.
(e) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
24
<PAGE>
(ii) if to the Company:
Worldwide Fiber Inc.
1510-1066 West Hastings Street
Vancouver, BC Canada V6E 3X1
Telecopier No.: (604) 681-6822
Attention: Stephen Stow
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopier No.: (212) 269-5420
Attention: Roger Andrus, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Donaldson, Lufkin &
Jenrette Securities Corporation, on behalf of the Initial Purchasers (in the
form attached hereto as Exhibit A) and shall be addressed to: Attention: Louise
Guarneri (Compliance Department), 277 Park Avenue, New York, New York 10172.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted 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, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
25
<PAGE>
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WORLDWIDE FIBER INC.
By:
---------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
----------------------------------
Name:
Title:
26
<PAGE>
MORGAN STANLEY & CO. INCORPORATED
By:
----------------------------------
Name:
Title:
SALOMON SMITH BARNEY INC.
By:
----------------------------------
Name:
Title:
TD SECURITIES (USA) INC.
By:
----------------------------------
Name:
Title:
27
<PAGE>
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: Worldwide Fiber Inc.
12% Senior Notes due 2005
Date: _____, 1999
For your information only (NO ACTION REQUIRED):
Today, ______, 1999, we filed [an A/B Exchange Registration Statement/a
Shelf Registration Statement] with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within __
Business Days of the date hereof.
PREFERRED SHARE PURCHASE AGREEMENT
by and among
WORLDWIDE FIBER INC.,
DWF SRL,
GSCP3 WWF (BARBADOS) SRL,
WWF (BARBADOS) SRL,
PROVIDENCE EQUITY FIBER L.P.,
and
TYCO GROUP S.A.R.L.
dated as of
September 7, 1999
<PAGE>
Table of Contents
Page
SECTION 1. Issuance and Sale of Preferred Shares...........................1
1.1. The Purchase....................................................1
1.2. The Closing.....................................................1
1.3. Deliveries at the Closing.......................................2
1.4. Purchase Price Adjustment.......................................2
SECTION 2. Representations and Warranties of the Corporation...............5
2.1. Organization and Good Standing; Power and Authority;
Qualifications.............................................5
2.2. Authorization of the Documents..................................6
2.3. Capitalization..................................................6
2.4. Authorization and Issuance of Share Capital.....................8
2.5. Reservation of Shares...........................................8
2.6. Financial Statements............................................8
2.7. Absence of Undisclosed Liabilities..............................9
2.8. Absence of Changes..............................................9
2.9. No Conflict....................................................11
2.10. Agreements.....................................................11
2.11. Intellectual Property Rights...................................12
2.12. Equity Investments; Subsidiaries...............................14
2.13. Corporate Minute Books.........................................14
2.14. Suitability....................................................14
2.15. Assets.........................................................15
2.16. Employee Benefit Plans.........................................15
2.17. Labor Relations; Employees.....................................17
2.18. Litigation; Orders.............................................18
2.19. Compliance with Laws...........................................18
2.20. Compliance with Telecommunications Laws........................19
2.21. Telecommunications Licenses....................................21
2.22. Licenses, Permits and Rights-of-Way............................21
2.23. Offering Exemption.............................................22
2.24. Related Transactions...........................................22
2.25. Boycott........................................................23
2.26. Taxes..........................................................23
2.27. Environmental Protection.......................................26
2.28. Consents.......................................................27
2.29. Insurance......................................................27
2.30. Brokers........................................................28
-i-
Page
<PAGE>
2.31. Suppliers and Customers........................................28
2.32. Real Property..................................................28
2.33. Investment Banking Services....................................28
2.34. Year 2000 Compliant............................................29
2.35. Previous Issuances Exempt......................................29
2.36. Investment Company Act.........................................29
2.37. Disclosure.....................................................29
SECTION 3. Representations, Warranties and Acknowledgments of the
Investors.................................................29
SECTION 4. Covenants Prior to Closing.....................................32
4.1. Cooperation by Parties; Satisfaction of Closing Conditions.....32
4.2. Conduct of Business............................................32
4.3. Required Notices...............................................33
4.4. No Shop........................................................33
SECTION 5. Other Covenants................................................34
5.1. Use of Proceeds................................................34
5.2. Shareholders Agreement.........................................34
5.3. HSR Filing.....................................................34
5.4. Tax Indemnity..................................................34
5.5. Roll-Up Transactions...........................................36
SECTION 6. Conditions to the Purchase.....................................36
6.1. Conditions to Obligations of Each Party........................36
6.2. Conditions to Obligations of the Investors.....................36
6.3. Conditions to the Obligations of the Corporation...............38
6.4. Default by an Investor.........................................39
SECTION 7. Termination....................................................39
SECTION 8. Transfer Taxes.................................................39
SECTION 10. Expenses.......................................................39
SECTION 11. Indemnification................................................40
11.1. General Indemnification........................................40
11.2. Indemnification Principles.....................................41
11.3. Claim Notice...................................................42
11.4. Claim Procedure................................................42
SECTION 12. Remedies.......................................................43
-ii-
<PAGE>
Page
SECTION 13. Further Assurances.............................................44
SECTION 14. Successors and Assigns.........................................44
SECTION 15. Entire Agreement...............................................44
SECTION 16. Notices........................................................44
SECTION 17. Amendments.....................................................47
SECTION 18. Counterparts...................................................47
SECTION 19. Headings.......................................................47
SECTION 20. Nouns and Pronouns.............................................48
SECTION 21. Governing Law; Waiver of Jury Trial............................48
SECTION 22. Severability...................................................48
SECTION 23. Currency.......................................................48
SECTION 24. No Partnership.................................................48
-iii-
<PAGE>
Schedules
---------
Schedule A Articles of Amendment
Schedule 1.1 List of Investors
Schedule 2.1(a) WFI Entities, Organization and Good Standing
Schedule 2.3(a) Capitalization
Schedule 2.3(b)(i) List of Shareholders
Schedule 2.3(b)(ii) Common Share Equivalents
Schedule 2.3(b)(iv) WFI Share Encumbrances or Restrictions
Schedule 2.3(b)(v) Nomination or Election of Director Rights
Schedule 2.7 Undisclosed Liabilities
Schedule 2.8 Changes
Schedule 2.10(a) Agreements
Schedule 2.10(c) Fiber Sales Agreements
Schedule 2.10(d) Changes in Network Description
Schedule 2.11(d) Trademarks
Schedule 2.11(e)(f) Third Party Intellectual Property
Schedule 2.15(a) Encumbrances
Schedule 2.15(c) Condemnation Proceedings
Schedule 2.16 Employee Benefit Plans
Schedule 2.17 Labor Relations; Employees
Schedule 2.18 Litigation; Orders
Schedule 2.19 Non-Compliance with Laws; Licenses
Schedule 2.20(a) Compliance with Telecommunications Laws
Schedule 2.20(e) Compliance with Communications Act
Schedule 2.21(a) Telecommunications Licenses
Schedule 2.22 Local Licenses, Permits and Rights-of-Way
Schedule 2.24(a) Related Transactions
Schedule 2.26 Taxes
Schedule 2.29 Insurance
Schedule 2.32 Real Property
Schedule 3 U.S. Representations and Warranties
Schedule 4.2 Conduct of Business
Schedule 5.1 Use of Proceeds
Schedule 5.2 Form of Shareholders Agreement
Schedule 6.2(f) Form of Registration Rights Agreement
Schedule 6.2(i) Form of Opinions
-iv-
<PAGE>
Index of Defined Terms
----------------------
1933 Act. Section 2.6(b)
Access Rights. Section 2.22(b)
Additional Issuance Ratio. Section 1.4(b)
Affiliate. Section 1.4(b)
Agreement. recitals
Arrangement. Section 2.27
Articles of Amendment. recitals
Balance Sheet. Section 2.6(a)
Benefit Plan. Section 2.16(a)
Board of Directors. Section 6.2(d)
Business Day. Section 1.2
Canadian Securities Laws. Section 3(i)
CFC. Section 2.26(d)
Claim Notice. Section 11.3
Closing. Section 1.2
Closing Date. Section 1.2
Code. Section 2.16(a)
Common Share Equivalents. Section 2.3(b)(ii)
Common Shares. Section 2.3(a)(ii)
Communications Act. Section 2.20(e)
Communications statutes. Section 2.20(a)
Competition Act. Section 2.18
Contract. Section 2.10
Conversion Shares. Section 2.5
Corporation. recitals
CRTC. Section 2.18
Deductible. Section 11.1
Deemed Outstanding Shares. Section 1.4(b)
Defaulted Shares. Section 6.4
Defined Benefit Plan. Section 2.16(a)
DLJ. recitals
Documents. Section 6.2(d)
Employee. Section 2.16(a)
Employee Agreement. Section 2.16(a)
Employee Shares. Section 1.4(b)
Encumbrances. Section 2.15(a)
Environmental Laws. Section 2.27
ERISA. Section 2.16(a)
ERISA Affiliate. Section 11.1
FCC. Section 2.18
FPHC. Section 2.26(d)
-v-
<PAGE>
GAAP. Section 2.6(a)
Governmental Authority. Section 2.26(n)
GSCP Parties. recitals
Hazardous Substances. Section 2.27
Hibernia Commitment. Section 6.2(l)
Hibernia Project. Section 2.10(e)
Hibernia Supply Contract. Section 2.10(e)
HSR. Section 5.3
Industry Canada. Section 2.18
Intellectual Property. Section 2.11
Investor. recitals
Investor Entity. Section 11.1
Lapsed Options. Section 2.3(c)
Leased Real Properties. Section 2.32
Ledcor Roll-Up Agreement. Section 2.3(c)
Licenses. Section 2.19(a)
Limit. Section 11.1
Litigation. Section 21
Losses. Section 11.2
Material Adverse Effect. Section 2.1
Minority Roll-Up Agreement. Section 1.4(b)
Minority Roll-Up Shares. Section 1.4(b)
Minority Roll-Up Transaction. Section 1.4(b)
Multiemployer Plans. Section 2.16(a)
Network. Section 2.10(d)
Offering Memorandum. Section 2.10(d)
Other Shareholders. Section 1.4(b)
Owned Real Properties. Section 2.32
Ownership Regulations. Section 2.20(b)
Permits. Section 2.22
Permitted Assigns. Section 14
Permitted Encumbrances. Section 1.4(e)
Permitted Lapsed Option Reissuance. Section 1.4(b)
Person. Section 2.26(n)
PFIC. Section 2.26(d)
PFIC Annual Information Statement. Section 2.26(e)
PHC. Section 2.26(d)
Preferred Shares. Section 2.3(a)(i)
Prohibited Transaction. Section 4.4
Project Subsidiary. Section 4.2(b
Providence. recitals
Purchase. Section 1.1
Purchase Price. Section 1.1
-vi-
<PAGE>
Purchase Price Adjustment. Section 1.4(a)
Real Properties. Section 2.32
Registration Rights Agreement. Section 6.2(f)
Release. Section 2.27
Retired Welfare Plan. Section 2.16(a)
Securities Act. Section 2.6(b)
Securities Laws. Section 2.35
Series A Non-Voting Preferred Shares. recitals
Shareholders Agreement. Section 5.2
Subsidiary. Section 2.12
Tax Return. Section 2.26
Taxes. Section 2.26
Telecommunications Licenses. Section 2.21(a)
Transaction Securities. Section 2.5
Transfer Taxes. Section 8
Tyco. recitals
WFI Entities. Section 2.1
WFI Subsidiary. Section 2.12
-vii-
<PAGE>
WORLDWIDE FIBER INC.
PREFERRED SHARE PURCHASE AGREEMENT
AGREEMENT, dated as of September 7, 1999 (as amended from time to time,
this "Agreement"), by and among WORLDWIDE FIBER INC., a Canadian corporation
(the "Corporation"), DWF SRL a Barbados company ("DLJ"), GSCP3 WWF (BARBADOS)
SRL, a Barbados company, WWF (BARBADOS) SRL, a Barbados company (collectively,
the "GSCP Parties"), PROVIDENCE EQUITY FIBER L.P., a Delaware limited
partnership ("Providence"), and TYCO GROUP S.A.R.L., a Luxembourg corporation
("Tyco") (each individually an "Investor" and collectively with DLJ, the GS
Parties, and Providence, the "Investors").
W I T N E S S E T H :
WHEREAS, the Corporation wishes to sell to the Investors, and the Investors
wish to purchase from the Corporation, shares of a newly created series of
Preferred Shares, the Series A Non-Voting Preferred Shares (the "Series A
Non-Voting Preferred Shares") with the terms set forth in the Articles of
Amendment of the Corporation in the form included in Schedule A hereto (the
"Articles of Amendment").
ACCORDINGLY, the parties hereto hereby agree as follows:
SECTION 1. Issuance and Sale of Preferred Shares.
1.1. The Purchase. (a) Subject to the terms and conditions set forth in
this Agreement, at the Closing, each Investor shall, severally and not jointly,
purchase from the Corporation and the Corporation shall issue to each Investor,
the number of Series A Non-Voting Preferred Shares set forth opposite such
Investor's name on Schedule 1.1 (the "Purchase"), subject to adjustment as set
forth in Section 1.4, at the purchase price set forth opposite such Investor's
name on Schedule 1.1. The aggregate purchase price to be paid by the Investors
to the Corporation for the Series A Non-Voting Preferred Shares purchased by
them hereunder is U.S. $345,000,000 (the "Purchase Price").
1.2. The Closing. (a) Subject to the terms and conditions set forth in this
Agreement, the closing of the Purchase (the "Closing") shall take place at the
offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, NY 10004 on the first Business Day after the day on which the last of the
conditions set forth in Section 6 hereof shall have been fulfilled or waived
(or, if contemplated to be satisfied simultaneously with the Closing, are
capable of being satisfied) or such other date as may be agreed to in writing by
each of the parties hereto (the "Closing Date"). For purposes of this
<PAGE>
Agreement, "Business Day" means any day other than a Saturday, a Sunday or a day
when commercial banks in New York City or Barbados are required to be closed.
1.3. Deliveries at the Closing. (a) At the Closing, the Corporation shall
deliver to each Investor a certificate or certificates representing the Series A
Non-Voting Preferred Shares purchased by such Investor, registered in the name
of such Investor or its nominee. Delivery of such certificates to an Investor
shall be made against receipt at the Closing by the Corporation from such
Investor of the Purchase Price, which shall be paid by wire transfer to an
account designated at least one Business Day prior to the Closing by the
Corporation.
(b) At the Closing, the Corporation will deliver to the Investors, and the
Investors will deliver to the Corporation, the various certificates, instruments
and documents referred to in Section 6 below.
1.4. Purchase Price Adjustment. (a) In addition to, and without limitation
of all other indemnities in this Agreement, as a protection to the Investors
against the existence of issued shares or other securities of the Corporation
not disclosed in Section 2.3, in the event that, at any time, the representation
and warranty set forth in Section 2.3(c) is determined to have been incorrect as
of the Closing, the Corporation shall issue to the Investors (on a pro rata
basis, based upon the amount of each Investor's original investment), at no
additional cost to the Investors, and as an adjustment to the purchase price
(whether under this paragraph (a) or paragraphs (b) or (c) of this Section 1.4,
a "Purchase Price Adjustment") paid by the Investors per Series A Non-Voting
Preferred Share, an additional amount of Series A Non-Voting Preferred Shares
such that, if such issuance of additional Series A Non-Voting Preferred Shares
had been made at Closing, such representation and warranty would have been true
and accurate in all respects.
(b) If at any time after the Closing, the Corporation shall either: (i)
subject to paragraph (f) of this Section 1.4, issue any Employee Shares (other
than (x) Common Shares issued upon the exercise of stock options listed as
Common Share Equivalents on Schedule 2.3(b)(ii) (i.e., [ ]* options granted
pursuant to the Worldwide Fiber Inc. 1998 Long Term Incentive and Share Award
Plan (Amended) (the "1998 Plan") (the "Existing 10% Option Pool")) or (y) Common
Shares issued upon the exercise of stock options granted under the New 5% Option
Pool (as defined below) to the extent the grant of such stock options as
Employee Shares previously resulted in an adjustment under this Section 1.4(b)),
Deemed Outstanding Shares, Permitted Reissued Options or Common Shares issued
upon the exercise of Permitted Reissued Options) or (ii) issue any Minority
Roll-Up Shares (except Minority Roll-Up shares issued after September 7, 2000),
then the Corporation shall (in the case of clause (i), at the end of each
calendar quarter (unless otherwise requested by any Investor), and in the case
of clause (ii) immediately) issue to the Investors (on a pro rata basis, based
upon the amount of each Investor's original investment), at no additional cost
to the Investors, and as a Purchase Price Adjustment, a number of Series A
Non-Voting Preferred Shares per each Series A Non-Voting Preferred Share equal
to
-2-
- ----------
* Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
[
]*
For purposes of this Agreement:
"Affiliate" means any partnership, corporation, trust, or other
organization which is controlled by or under common control of the Corporation
or its Subsidiaries.
"Deemed Outstanding Shares" means (i) any Common Shares or Common Share
Equivalents issuable pursuant to any Contract (as defined in Section 2.10)
entered into by the Corporation prior to the date hereof, or any preemptive
right granted by the Corporation prior to the date hereof, and (ii) 4,500,000
Common Shares issued, or to be issued, in consideration for the acquisition by
the Corporation of fiber assets and related rights and obligations from Ledcor
Industries Limited or Ledcor Industries Inc. under the amended and restated
Share Purchase Agreement entered into on September 7, 1999 between Ledcor
Industries Limited, Ledcor Industries Inc. and the Corporation (the "Ledcor
Roll-Up Agreement"). For greater certainty, Deemed Outstanding Shares do not
include Common Shares issuable pursuant to the Minority Roll-Up Transactions.
"Employee Shares" means any Common Shares (as defined in Section 2.3(a)) or
Common Share Equivalents (as defined in Section 2.3(b)) issued to directors,
officers, employees or consultants of the Corporation, its Subsidiaries or the
entities permitted under the terms of the 1998 Plan.
"Lapsed Options" means any stock options listed as Common Share Equivalents
on Schedule 2.3(b)(ii) (options granted pursuant to the Existing Option Pool) or
up to [ ]* options issued by the Corporation pursuant to the 1998 Plan
after the date hereof (the "New 5% Option Pool"), in either case which after the
Closing Date lapses or terminates without being converted or exercised.
"Minority Roll-Up Shares" means any Common Shares or Common Share
Equivalents issued pursuant to any Minority Roll-Up Transaction.
-3-
- ----------
* Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
"Minority Roll-Up Transaction" means the issuance by the Corporation of
Common Shares or Common Share Equivalents pursuant to any of the Minority
Roll-Up Agreements (or any transactions or series of related transactions with
similar effect).
"Minority Roll-Up Agreement" means (a) the unanimous shareholder agreement
dated as of May 28, 1999 between Worldwide Fiber Networks Ltd., Canadian
National Railway Company and WFI-CN Fibre Inc., (b) the limited liability
company agreement of Worldwide Fiber IC LLC effective as of May 28, 1999 between
Worldwide Fiber IC Holdings, Inc. and IC Fiber Holdings Inc., and (c) the
shareholders agreement dated December 31, 1998 between the Corporation,
Worldwide Fiber Networks Ltd., Ledcor Industries Inc., Worldwide Fiber (USA),
Inc. (formerly known as Pacific Fiber Link, Inc.), Mi-Tech Communications, LLC,
Ledcor and Michels Pipeline Construction, Inc.
"Permitted Reissued Option" means any Common Share Equivalent issued in
accordance with the Corporation's stock option plan then in effect to replace
any Lapsed Option with a conversion or exercise price equal to or greater than
the conversion or exercise price of the Lapsed Option (as adjusted to reflect
any stock split, stock dividend, combination, reorganization, reclassification
or other similar event involving Common Shares) and a term no longer than the
original term of the Lapsed Option.
(c) If, at the time of any Purchase Price Adjustment pursuant to Section
1.4(a) or (b), all Series A Non-Voting Preferred Shares have been converted into
Common Shares, in lieu of issuing Series A Non-Voting Preferred Shares pursuant
to Section 1.4(a) or Section 1.4(b), the Corporation shall promptly issue to the
Investors (on a pro rata basis), at no additional cost to the Investors and as a
Purchase Price Adjustment, an additional amount and kind of Common Shares equal
to the amount and kind of Common Shares issuable upon the conversion (based on
the conversion ratio that would have been in effect if the Series A Non-Voting
Preferred Shares were outstanding and had not been converted into Common Shares)
of the amount of Series A Non-Voting Preferred Shares which would have been
issued with respect to such Purchase Price Adjustment pursuant to Section 1.4(a)
or Section 1.4(b) treating for purposes of such Purchase Price Adjustment the
Series A Non-Voting Preferred Shares as not having been converted into Common
Shares.
(d) Any additional Series A Non-Voting Preferred Shares and Common Shares
issued to the Investors pursuant to this Section 1.4 shall be treated as if they
were issued on the date hereof and shall reflect any dividends or other
distributions which would have accrued or have been payable with respect to and
the application of any anti-dilution, ratable treatment or similar provisions as
set forth in the Articles of Amendment, applicable law or otherwise which would
have been applicable to such Series A Non-Voting Preferred Shares and Common
Shares had they been issued on the date hereof.
(e) In connection with any issuance of Series A Non-Voting Preferred Shares
pursuant to this Section 1.4, the Corporation shall reserve a sufficient number
of shares of Class A Non-Voting Common Shares for issuance to the Investors upon
the conversion of
-4-
<PAGE>
the Series A Non-Voting Preferred Shares so issued. Any Series A Non-Voting
Preferred Shares or Common Shares issued to the Investors pursuant to this
Section 1.4 shall, when issued, be validly issued and fully paid and
nonassessable with no personal liability attaching to the ownership thereof
(other than any Encumbrances, as defined in Section 2.15, that exist as a result
of any act, or failure to act, by any current or former holder, whether
beneficial or of record, of such shares, referred to as "Permitted
Encumbrances").
(f) Section 1.4(b) shall not apply to the issuance of Employee Shares after
the sum of all Employee Shares issued for which adjustment has been made in
accordance with Section 1.4(b)(i) equals 1,982,653 Common Shares or Common Share
Equivalents on an as converted basis (as equitably adjusted to reflect any stock
split, stock dividend, combination, reorganization, reclassification or other
similar event involving Common Shares).
SECTION 2. Representations and Warranties of the Corporation. The
Corporation hereby represents and warrants to the Investors as of the date
hereof and as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date hereof throughout this Agreement) as follows:
2.1. Organization and Good Standing; Power and Authority; Qualifications.
The Corporation and each of its subsidiaries (all of which are set forth in
Schedule 2.1(a)) (collectively with the Corporation, the "WFI Entities") (a) is
a corporation, limited liability company, general or limited partnership duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, organization, amalgamation or continuance, (b)
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as presently conducted and as proposed
to be conducted, and (c) has all requisite corporate power and authority to
enter into and carry out the transactions contemplated by each of the Documents
(as defined in Section 6.2(d)) to which it is a party. Each WFI Entity is
qualified to transact business as an extra-provincial corporation or foreign
corporation in, and is in good standing under the laws of, those jurisdictions
listed on Schedule 2.1(a) in square brackets opposite its name, which
jurisdictions constitute all of the jurisdictions wherein the character of the
property owned or leased or the nature of the activities conducted by it makes
such qualification necessary except where the failure to be so qualified would
not have a material adverse effect on the business, prospects, condition
(financial or otherwise), operations, properties, assets or liabilities of the
WFI Entities taken as a whole (a "Material Adverse Effect"). For all purposes of
this Agreement, the business, prospects, conditions (financial or otherwise),
operations, properties, assets or liabilities of the WFI Entities shall be
deemed to include the business, prospects, condition (financial or otherwise),
operations, properties, assets and liabilities associated with the Fiber Assets
(and the rights, liabilities and obligations associated with the Fiber Assets)
as defined in the Ledcor Roll-Up Agreement.
-5-
<PAGE>
2.2. Authorization of the Documents. The execution and delivery by the
Corporation of each of the Documents and the performance by the Corporation of
its obligations thereunder has been duly authorized by all requisite corporate
action on the part of the Corporation. As of the date hereof, this Agreement
constitutes, and as of the Closing Date, each of the Documents will constitute,
a legal, valid and binding obligation of the Corporation, enforceable against
the Corporation in accordance with its terms except to the extent that
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and by equitable principles generally,
whether enforced in a court of law or at equity.
2.3. Capitalization. (a) The authorized capital of the Corporation
immediately following the Closing will consist of:
(i) Preferred Shares. An unlimited number of Preferred Shares (the
"Preferred Shares") of which 8,866,808 Series A Non-Voting Preferred Shares are
issued and outstanding, no Series B Subordinate Voting Preferred Shares (the
"Series B Voting Preferred Shares") are issued and outstanding and no Series C
Redeemable Preferred Shares are issued and outstanding, and all such shares are
validly issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof when so issued and delivered and free and
clear of all Encumbrances other than Permitted Encumbrances; and
(ii) Common Shares. An unlimited number of Class A Non-Voting Shares, an
unlimited number of Class B Subordinate Voting Shares and an unlimited number of
Class C Multiple Voting Shares (together with any common shares of the
Corporation of any other class or series hereafter authorized, the "Common
Shares"), of which no Class A Non-Voting Shares are issued and outstanding,
23,843,500 of Class B Subordinate Voting Shares are issued and outstanding, and
no Class C Multiple Voting Shares are issued and outstanding. All such
outstanding shares are validly issued, fully paid and nonassessable with no
personal liability attaching to the ownership thereof and free and clear of all
Encumbrances other than Permitted Encumbrances.
(b) Except as set forth in clause (a) above, there will be no share capital
of the Corporation outstanding immediately following the Closing.
(i) Schedule 2.3(b)(i) Part I hereto contains a complete and correct list
of each holder of record of share capital of each WFI Entity immediately
preceding the Closing, including (A) whether, for purposes of the foreign
ownership and control requirements under the Telecommunications Act and the
rules and regulations promulgated thereunder, such holder is a "Canadian" or a
"non-Canadian," and (B) the number of shares of capital held by each such holder
and the percentage represented by such shares of (1) the outstanding Common
Shares, on a fully diluted basis (assuming the conversion, exchange or exercise
of all outstanding Common Share Equivalents), and (2) the total number of votes
able to be cast on any matter by all voting securities of the Corporation.
Schedule 2.3(b)(i) Part II hereto
-6-
<PAGE>
contains a complete and correct list of each holder of record of share capital
of the Corporation immediately following the Closing.
(ii) Schedule 2.3(b)(ii) hereto contains a complete and correct list of all
outstanding warrants, options, agreements, convertible securities or other
commitments or outstanding securities convertible into, or exchangeable or
exercisable for, Common Shares (collectively, "Common Share Equivalents"), or
pursuant to which any WFI Entity is or may become obligated to issue any shares
of its capital or other securities, which (A) names the holder of record of such
Common Share Equivalents, (B) and specifies which of the Common Share
Equivalents are, to the knowledge of the Corporation, "Canadian" for purposes of
the foreign ownership and control requirements under the Telecommunications Act
and the rules and regulations promulgated thereunder, and (C) the shares of
capital or other securities required to be issued thereunder as of the date
hereof and as of the Closing Date and the price per share, if any, payable with
respect to the issuance of any share of capital issuable thereunder. Schedule
2.3(b)(ii) also sets forth a true and accurate calculation of the number of the
Deemed Outstanding Shares (as defined in Section 1.4(b)). For greater certainty,
Common Share Equivalents do not include the agreements and commitments related
to the Minority Roll-Up Transactions or the Ledcor Roll-Up Agreement (as defined
in Section 1.4(b)).
(iii) Except as set forth on Schedule 2.3(b)(i), the Corporation has no
knowledge of the names of any beneficial owners of shares of capital of any WFI
Entity who are not otherwise holders of record. Except as set forth on Schedule
2.3(b)(ii) or as contemplated by the Documents there are, and immediately after
the Closing, there will be, no Common Share Equivalents and no rights, including
preemptive or similar rights, to purchase or otherwise acquire shares or sell or
otherwise transfer shares in the capital (or in the case of non-corporate
entities, other ownership interests) of any WFI Entity pursuant to any provision
of law, the articles of incorporation or the by-laws or similar constituent
documents of such WFI Entity, any agreement to which such WFI Entity is a party
or otherwise.
(iv) Except as set forth on Schedule 2.3(b)(iv) or as contemplated by the
Documents, none of the WFI Entities is a party to, and, to the Corporation's
knowledge, there are, and immediately after the Closing, there will be, no
agreement, restriction or encumbrance (such as a preemptive or similar right of
first refusal, right of first offer, proxy, voting agreement, voting trust,
registration rights agreement, shareholders' agreement, etc., whether or not the
Corporation is a party thereto) with respect to the purchase, sale or voting of
any shares of capital of any WFI Entities (whether outstanding or issuable upon
conversion, exchange or exercise of outstanding securities) or other securities
of any WFI Entities pursuant to any provision of law, the Articles of
Incorporation or By-Laws, any agreement or otherwise.
(v) Except (i) as set forth on Schedule 2.3(b)(v), (ii) as contemplated by
the Documents and (iii) for each shareholder's right to vote its Common Shares
for the election of directors, no person has the right to nominate or elect one
or more directors of any WFI Entities.
-7-
<PAGE>
(c) The Series A Non-Voting Preferred Shares issued to the Investors on the
Closing Date under this Agreement would, if converted into Common Shares, as of
the Closing Date represent, in the aggregate, [ ]* of the outstanding Common
Shares of the Corporation (treating for purposes of these calculations (i) all
Common Shares outstanding on the Closing Date as outstanding, (ii) all Deemed
Outstanding Shares (and any Common Shares or Common Share Equivalents issuable
pursuant to Deemed Outstanding Shares) as outstanding, (iii) all Common Shares
Equivalents outstanding on the Closing Date (or issuable pursuant to Deemed
Outstanding Shares) as having been converted, exchanged, exercised, issued,
and/or outstanding, as the case may be, and the resulting Common Shares as
outstanding, and (iv) all Series A Non-Voting Preferred Shares as having been
converted into outstanding Common Shares).
2.4. Authorization and Issuance of Share Capital. (a) The authorization,
issuance, sale and delivery of the Series A Non-Voting Preferred Shares pursuant
to this Agreement, and (b) the authorization, reservation, issuance, sale and
delivery of the Conversion Shares, in each case, have been duly authorized by
all requisite corporate action on the part of the Corporation, and when issued,
sold and delivered in accordance with this Agreement, the Transaction Securities
will be validly issued and outstanding, fully paid and nonassessable with no
personal liability attaching to the ownership thereof, free and clear of any
Encumbrances (other than any Permitted Encumbrances) and not subject to
preemptive or similar rights of the shareholders of the Corporation or others.
The terms, designations, powers, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations and
restrictions, of any series of Common Shares, or any series of Preferred Shares
of the Corporation are as stated in the Articles of Amendment and the By-Laws.
2.5. Reservation of Shares. The Corporation has reserved a sufficient
number of shares of (a) Class A Non-Voting Shares and Series B Voting Preferred
Shares for issuance to the Investors upon the conversion of any Series A
Non-Voting Preferred Shares issued to the Investors in accordance with this
Agreement (including pursuant to the provisions of Sections 1.4(a) and (b)), (b)
Series A Non-Voting Preferred Shares for issuance to the Investors pursuant to
the provisions of Sections 1.4(a) and 1.4(b), (c) Series A Non-Voting Preferred
Shares and Class B Subordinate Voting Shares for issuance to the Investors upon
conversion of the Series B Voting Preferred Shares, and (d) Common Shares for
issuance upon the exercise of all other Common Share Equivalents outstanding on
the date hereof. The Common Shares, Series B Voting Preferred Shares and Series
A Non-Voting Preferred Shares issuable upon conversion of the Series A
Non-Voting Preferred Shares or the Series B Voting Preferred Shares, as the case
may be, shall be referred to collectively as the "Conversion Shares," and the
Conversion Shares, together with the Series A Non-Voting Preferred Shares issued
pursuant to Sections 1.1 and 1.4, shall be referred to collectively as the
"Transaction Securities."
2.6. Financial Statements. (a) The Corporation has made available to the
Investors the audited divisional statements of operations
-8-
- ----------
* Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
and retained earnings and cash flows of the predecessor of the Corporation for
the fiscal years ended March 31, 1996 and August 31, 1997 and the nine months
ended May 31, 1998 and the audited divisional balance sheets of the predecessor
of the Corporation as of August 31, 1996, August 31, 1997 and May 31, 1998. The
Corporation has made available to the Investors the audited consolidated
statements of income, changes in shareholders' equity and cash flows of the
Corporation and its subsidiaries for the period ended December 31, 1998 and the
audited balance sheet of the Corporation and its subsidiaries as of December 31,
1998, and the unaudited consolidated balance sheet of the Corporation and its
subsidiaries as of June 30, 1999 (the "Balance Sheet") and the related unaudited
consolidated statements of income, changes in shareholders' equity and cash
flows of the Corporation and its subsidiaries for the six months ended June 30,
1999. All such financial statements (i) are in accordance with the books and
records of the predecessor of the Corporation, the Corporation and its
subsidiaries, (ii) have been prepared in accordance with generally accepted
accounting principles in the United States ("GAAP") consistently applied (except
that such unaudited financial statements do not contain all of the footnotes
required under GAAP) and (iii) fairly present the financial position of the
predecessor of the Corporation, or the Corporation and its subsidiaries as of
August 31, 1996, August 31, 1997, May 31, 1998, December 31, 1998 and June 30,
1999, respectively, and the results of their operations and cash flows for the
fiscal years ended March 31, 1996 and August 31, 1997 and the nine months ended
May 31, 1998, the fiscal year ended December 31, 1998 and the six months ended
June 30, 1999, respectively.
(b) The Corporation has made available to the Investors the pro forma
consolidated statements of income of the Corporation and its subsidiaries for
the fiscal year ended December 31, 1998. All such pro forma financial data was
prepared on a basis consistent with the historical financial statements of the
Corporation and its subsidiaries and the predecessor of the Corporation and its
subsidiaries, and give effect to the assumptions used in the preparation thereof
on a reasonable basis in accordance with Regulation S-X under the United States
Securities Act of 1933, as amended (the "1933 Act" or the "Securities Act") and
present fairly the data for the periods presented.
2.7. Absence of Undisclosed Liabilities. Except as disclosed on Schedule
2.7, no WFI Entity has any liabilities or obligations (whether known or unknown,
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due) other than (a) liabilities or obligations reserved against or
otherwise disclosed in the Balance Sheet or the footnotes thereto, (b) other
liabilities or obligations which were incurred after June 30, 1999 in the
ordinary course of business consistent (in amount and kind) with past practice
(none of which is a liability resulting from breach of contract, breach of
warranty, tort, infringement, claim or lawsuit) and which, individually or in
the aggregate, do not exceed US$10,000,000 and (c) liabilities or obligations
under Contracts (but not liabilities for breaches thereof) (x) identified in
Schedule 2.10 or (y) that are not required to be identified on Schedule 2.10
which arise in the ordinary course of business.
2.8. Absence of Changes. Except as set forth on Schedule 2.8, since
December 31, 1998, each WFI Entity has conducted its business
-9-
<PAGE>
in the ordinary course, consistent with past practice and there has not been:
(a) any material adverse change in the condition (financial or otherwise),
operations, properties, prospects, results of operations, business, assets, or
liabilities of any WFI Entity or any event or condition which could reasonably
be expected to, individually or in the aggregate, have such a material adverse
change, (b) any waiver or cancellation of any material right of any WFI Entity,
or the cancellation of any material debt or claim held by any WFI Entity, (c)
any payment, discharge or satisfaction of any claim, liability or obligation of
any WFI Entity other than in the ordinary course of business, (d) any
Encumbrance upon the assets of any WFI Entity other than an Encumbrance which
arises in the ordinary course of business and which does not materially impair
such WFI Entity's ownership, or use of such asset or ability to obtain financing
by using such asset as collateral, (e) any declaration or payment of dividends
on, or other distribution with respect to, or any direct or indirect redemption
or acquisition of, any securities of any WFI Entity other than as specifically
contemplated in this Agreement, (f) any issuance of any shares, bonds or other
securities of any WFI Entity, (g) any sale, assignment or transfer of any
tangible or intangible assets of any WFI Entity except in the ordinary course of
business, (h) any loan by any WFI Entity to any officer, director, employee,
consultant or shareholder of such WFI Entity (other than advances to such
persons in the ordinary course of business in connection with travel and travel
related expenses), (i) any damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting the assets, property, financial
condition or results of operations of any WFI Entity, (j) other than salary
increases in the ordinary course of business which would not constitute a Major
Transaction (as defined in the Shareholders Agreement) if the Shareholders
Agreement had been in effect, any increase, direct or indirect, in the
compensation (including bonuses and other benefits) paid or payable to any
officer or director of any WFI Entity or, other than in the ordinary course of
business, to any other employee, consultant or agent of any WFI Entity, (k) any
change in the accounting or tax methods, practices or policies, or any material
tax election, of any WFI Entity, (l) any indebtedness incurred for borrowed
money by any WFI Entity other than (1) in the ordinary course of business or (2)
pursuant to the Hibernia Commitment (as defined in Section 6.2(l)), (m) any
amendment to or termination of any material Contract to which any WFI Entity is
a party, (n) to the best knowledge of the Corporation, any material adverse
change with respect to the regulation of the Corporation and the WFI Entities
taken as a whole or its activities by any administrative agency or governmental
body, (o) any material change in the manner of business or operations of the
Corporation and the WFI Entities taken as a whole (including, without
limitation, any accelerations or deferral of the payment of accounts payable or
other current liabilities or deferral of the collection of accounts or notes
receivable), (p) any capital expenditures with respect to tangible assets or
commitments therefor by any WFI Entity that aggregate (with respect to all WFI
Entities) in excess of US$10,000,000, (q) any amendment of the articles of
incorporation, by-laws or other organizational documents of any WFI Entity other
than as specifically contemplated by this Agreement, (r) any transaction entered
into by a WFI Entity other than in the ordinary course of business or any other
transaction entered into by a WFI Entity material to the Corporation and the WFI
Entities taken as a whole whether or not in the ordinary course of business
other than as specifically contemplated by this Agree-
-10-
<PAGE>
ment, or (s) any agreement or commitment (contingent or otherwise) by any WFI
Entity to do any of the foregoing.
2.9. No Conflict. The execution, delivery and performance by the
Corporation of the Documents and the consummation by the Corporation of the
transactions contemplated hereby and thereby and the compliance by each WFI
Entity with the provisions hereof and thereof (including, without limitation,
the issuance, sale and delivery by the Corporation of the Transaction
Securities) will not (a) violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body applicable to any WFI
Entity, or any of their respective properties or assets, (b) conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute (with due notice or lapse of time, or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, or result in
the creation of any Encumbrance upon any of its properties or assets under, any
Contract, license or permit to which any WFI Entity is a party or (c) violate
the Articles of Continuance, as amended or By-Laws of the Corporation or the
Articles of Incorporation or By-Laws or other organizational documents of any
other WFI Entity.
2.10. Agreements. (a) Except as set forth on Schedule 2.10(a), no WFI
Entity is a party to any indenture, mortgage, guaranty, lease, license or other
contract, agreement or understanding, written or oral (a "Contract"), including
all construction agreements, asset swap agreements, co-development agreements,
right of way agreements and joint ventures, other than any Contract which (i)
pursuant to its terms, has expired, been terminated or fully performed by the
parties, and in each case, under which no WFI Entity has any liability,
contingent or otherwise, or (ii) involves payments to or from such WFI Entity
(as opposed to an indemnity agreement or similar contract under which a WFI
Entity has any contingent liability) which payments do not aggregate
US$10,000,000, and in each case, is not material to the business or financial
condition of the Corporation and the WFI Entities taken as a whole.
(b) Complete copies (or, if oral, full and accurate written descriptions)
of all Contracts required to be listed on Schedule 2.10(a), including all
amendments thereto, have been made available to the Investors. Each such
Contract is, as of the date hereof, and will continue to be after the Closing, a
legal, valid and binding obligation, enforceable against, and in full force and
effect against, all the parties thereto on identical terms following the
Closing. There is no breach, violation or default by any WFI Entity and no event
(including, without limitation, the consummation of the transactions
contemplated by the Documents or any pending or threatened (in writing)
termination, cancellation or material modification) which, with notice or lapse
of time or both, would (A) constitute a breach, violation or default by such WFI
Entity under any such Contract or (B) give rise to any lien or right of (or
result in any) termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration against such WFI Entity under, any such
Contract except where such breach, violation or default would not have a
Material Adverse Effect. To the knowledge of the Corporation, no other party to
any of such Contracts is in arrears in respect of the performance or
-11-
<PAGE>
satisfaction of the terms and conditions on its part to be performed or
satisfied under any of such Contracts, no waiver or indulgence has been granted
by any of the parties thereto and no party to any of such Contracts has
repudiated any provision thereof.
(c) Schedule 2.10(c) is a materially accurate and complete list of fiber
sales agreements, including the parties thereto, and the total revenue and the
booked portions thereof as of June 30, 1999.
(d) The disclosure contained in the Corporation's final offering memorandum
for $US500,000,000 of 12% Senior Notes due 2009 dated July 23, 1999 (the
"Offering Memorandum"), under the caption "Business--The Network" is accurate
and complete as at the date thereof and there has been no material change in the
facts disclosed therein since July 23, 1999, except as set forth on Schedule
2.10(d) (such disclosure amended as described in Schedule 2.10(d) referred to
herein as the "Network".
(e) The agreement dated June 18, 1999 with Tyco Submarine Systems Ltd. (the
"Hibernia Supply Contract") (a copy of which agreement has been previously
provided to the Investors and is described in Schedule 2.10(a)) contains an
accurate and complete summary of the current proposed completion schedule for
the Hibernia Project. "Hibernia Project" means the installation of a submarine
cable system connecting cable landing stations located in Lynn, Massachusetts to
Halifax, Nova Scotia to Dublin, Ireland to Southport (Liverpool), U.K. connected
to London, U.K. (vicinity) and connecting to Lynn, Massachusetts, with four
repeated segments of 4 fiber pairs capable of carrying thirty-two 10Gb/s
channels, including the cable landing stations.
2.11. Intellectual Property Rights. (a) Each WFI Entity owns or has the
right to use pursuant to license, sublicense, agreement or permission all
Intellectual Property (as defined below), individually or in the aggregate,
material to the operation of its business as currently conducted. Each item of
Intellectual Property owned or used by such WFI Entity immediately prior to the
Closing will be owned or available for use by such WFI Entity on identical terms
and conditions immediately subsequent to the Closing. Each WFI Entity has taken
all necessary action, and continues to do so, to maintain and protect their
interest in each item of Intellectual Property that is material to the conduct
of its business.
(b) To the knowledge of the Corporation, no WFI Entity has interfered with,
infringed upon or misappropriated any Intellectual Property rights of third
parties, and no WFI Entity has received any charge, complaint, claim, demand or
notice alleging any such interference, infringement or misappropriation
(including any claim that it must license or refrain from using any Intellectual
Property rights of any third party). To the knowledge of the Corporation, no
third party has interfered with, infringed upon or misappropriated any
Intellectual Property rights of any WFI Entity.
(c) No WFI Entity owns any patent or has any pending patent application.
-12-
<PAGE>
(d) Schedule 2.11(d) identifies all registered or unregistered trademarks
of each WFI Entity. No WFI Entity has granted any license or other permission to
any third party with respect to any of its Intellectual Property with a value of
US$100,000 or greater.
(e) The Corporation has made available to the Investors a correct and
complete copy of all licenses held by the Corporation and material to the
conduct of its business as presently conducted with respect to its Intellectual
Property, which licenses are identified in Schedule 2.11(e). With respect to
each item of Intellectual Property required to be identified in Schedule 2.11(d)
and Schedule 2.11(e) and except as set forth in Schedule 2.11(e):
(i) the relevant WFI Entity possesses all right, title and interest in and
to the item, free and clear of any encumbrance, license or other restriction;
(ii) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge; and
(iii) such WFI Entity has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict with
respect to the item.
(f) Schedule 2.11(f) identifies each item of Intellectual Property that is
material to the conduct of its business as presently conducted. No WFI Entity
has granted any sublicense or similar right with respect to any such agreements
or Intellectual Property, and, to the knowledge of the Corporation, (i) each
such item of Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling or change and (ii) no action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand is pending or to the
knowledge of the Corporation is threatened which challenges the legality,
validity, or enforceability of any such item of Intellectual Property.
(g) To the knowledge of the Corporation, neither it nor any other WFI
Entity interferes with, infringes upon or misappropriates any Intellectual
Property rights of third parties as a result of the operation of its business
except which interference, infringement or misappropriation would not have a
Material Adverse Effect.
For purposes of this Agreement, "Intellectual Property" means all worldwide
(a) inventions and discoveries (whether patentable or unpatentable and whether
or not reduced to practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (b) trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c)
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (d) mask works and all applications,
registrations and renewals in connection therewith, (e) know-how, trade secrets
and confidential business in-
-13-
<PAGE>
formation, whether patentable or unpatentable and whether or not reduced to
practice (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production process and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals), (f)
computer software (including data and related documentation), (g) other
proprietary rights, (h) copies and tangible embodiments thereof (in whatever
form or medium) and (i) licenses and agreements in connection therewith.
2.12. Equity Investments; Subsidiaries. (a) Schedule 2.1(a) sets forth a
complete and accurate list of each Subsidiary of the Corporation (each a "WFI
Subsidiary"). Except as set forth on Schedule 2.1(a), the Corporation has never
had, nor does it presently have, any Subsidiaries, nor has it owned, nor does it
presently own, whether directly or indirectly owned, any share capital or other
proprietary interest, directly or indirectly, in any corporation, association,
trust, partnership, joint venture or other entity. For purposes of this
Agreement, the term "Subsidiary" means, with respect to any person, any company,
limited liability company, general or limited partnership or other entity (i) of
which at least a majority of the shares of capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other similar managing body of such company, partnership or other
entity are at the time owned or controlled, directly or indirectly, by such
person or (ii) the management of which is otherwise controlled, directly or
indirectly, through one or more intermediaries by such person.
(b) The capital stock of each WFI Subsidiary held by a WFI Entity is
validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof, and is free of any Encumbrances,
except as set forth on Schedule 2.15(a).
2.13. Corporate Minute Books. The corporate, partnership or limited
liability company records of each WFI Entity are correct and complete in all
material respects. True and complete copies of all minutes of meetings or other
actions by the directors, members, partners, shareholders or incorporators of
each WFI Entity since their respective inceptions to the Closing Date have been
made available to the Investors.
2.14. Suitability. (a) To the knowledge of the Corporation, none of the
following events has occurred during the last five years with respect to any
director or officer of the Corporation: (i) a petition under Canadian federal
bankruptcy or insolvency laws was filed by or against, or a receiver, fiscal
agent or similar officer was appointed for the business or property of such
person; (ii) such person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding; (iii) such person is subject to an
order, judgment or decree enjoining him from engaging in any kind of business
practice or any other activity in connection with the purchase or sale of
securities, or to be associated with persons engaging in such activities; (iv)
such person was found by a court of competent jurisdiction in a civil action or
by a government agency to have violated any secu-
-14-
<PAGE>
rities laws, regulation or policy; or (v) such person has been the subject of
any investigation in respect of the breach or contravention of any securities
law, regulation or policy whether in Canada or any other jurisdiction.
(b) To the knowledge of the Corporation, none of the events described in
Item 401(f) of Regulation S-K under the 1933 Act, has occurred during the last
five years with respect to any director or officer of the Corporation.
2.15. Assets. (a) Each WFI Entity has good and marketable title to, or a
valid leasehold interest in or contractual right to use, all of its assets and
properties, free and clear of any mortgages, judgments, claims, liens, security
interests, pledges, escrows, charges or other encumbrances of any kind or
character whatsoever ("Encumbrances") except (i) as disclosed in Schedule
2.15(a), (ii) Encumbrances for taxes not yet due and payable, or (iii)
Encumbrances set forth on Schedule 2.15(a) for taxes and charges and other
claims, the validity of which it is contesting in good faith. The assets and
property owned by, or leased to, any WFI Entity are sufficient for the conduct
of the business and operation of such WFI Entity as presently conducted.
(b) All buildings, facilities, machinery, equipment, furniture, leasehold
and other improvements, fixtures, vehicles, structures, any related capitalized
items and other tangible property owned by, or leased to any WFI Entity, as of
the date hereof, (i) are in good operating condition and repair (normal wear and
tear excepted), free (in the case of buildings or structures located on the Real
Properties) of any material structural or engineering defects, (ii) are subject
to continued repair and replacement in accordance with past practice and all
material applicable regulations, and (iii) are suitable for their current use in
all material respects.
(c) Except as set forth on Schedule 2.15(c), no WFI Entity has received
written notice of, or has knowledge of, any pending, threatened or contemplated
condemnation proceeding or similar taking affecting the assets (including,
without limitation, any assets comprising or relating to the Corporation's fiber
optic network of such WFI Entity (including the Real Properties, as defined in
Section 2.32) which, if condemned or taken, would constitute a Material Adverse
Effect.
2.16. Employee Benefit Plans. (a) Schedule 2.16 hereto sets forth all
Benefit Plans and Employee Agreements. For purposes of this Agreement (i)
"Benefit Plan" means each plan, program, policy, payroll practice, contract,
agreement or other arrangement, or commitment therefor, providing for
compensation, severance, termination pay, pension, retirement or any other
post-termination benefit, performance awards, share or share-related awards,
fringe benefits or other employee benefits of any kind, whether formal or
informal, funded or unfunded, written or oral, which is now or previously has
been sponsored, maintained, contributed to or required to be contributed to by
any WFI Entity or pursuant to which any WFI Entity has any liability, contingent
or otherwise; (ii) "Employee Agreement" means each management, employment,
bonus, option, equity (or equity related), severance, consulting, noncompete,
confidentiality or similar agreement or con-
-15-
<PAGE>
tract between any WFI Entity and any current, former or retired employee,
officer, consultant, independent contractor, agent or director of such WFI
Entity (an "Employee") who receives or received annual salary from such WFI
Entity in excess of US$150,000 (excluding written offers of employment at will
that do not include any severance benefits other than those to which the
Employee may be entitled under applicable law); and (iii) "Defined Benefit Plan"
means any "registered pension plans" (as defined in the Income Tax Act (Canada))
or any "defined benefit plan" (as defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") Section 3(35)); (iv) "Multiemployer
Plans" means any "multiemployer plan" (as defined in ERISA Section 3(37)) as to
which any WFI Entity or ERISA Affiliates (as defined below) is required to
contribute; and (v) "Retired Welfare Plan" means any Benefit Plan which
provides, or has any liability to provide, life insurance or medical, severance
or other employee welfare benefits to any Employee beyond his or her retirement
or termination of employment, except as required by Section 4980B of the
Internal Revenue Code of 1986, as amended (the "Code"). No WFI Entity or ERISA
Affiliate currently sponsors, maintains, contributes to, or is required to
contribute to, and no WFI Entity or ERISA Affiliate has any material liability
contingent or otherwise with respect to any Defined Benefit Plan, Retired
Welfare Plan or Multiemployer Plan.
(b) The Corporation has made available to the Investors current, accurate
and complete copies of all documents embodying or relating to each Benefit Plan
and each Employee Agreement, including all amendments thereto, trust or funding
agreements relating thereto (if any), the most recent annual report (Series 5500
and related schedules) required under ERISA (if any), summary annual reports,
the most recent determination letter (if any) received from Revenue Canada or
the IRS, the most recent summary plan description (with all material
modifications) (if any), if the Benefit Plan is funded, the most recent annual
and periodic accounting of Benefit Plan assets, the most recent actuarial
report, if any, prepared for each Benefit Plan, and all material communications
to any Employee or Employees relating to any Benefit Plan or Employee Agreement
which could materially increase the liability under any such plan or agreement.
(c) To the knowledge of the Corporation, no Employee has been hired in
violation of any restrictive covenant or any non-compete agreement with any
other person or entity.
(d) With respect to each Benefit Plan and/or Employee Agreement, as the
case may be, (i) each WFI Entity has performed all obligations (including
contribution obligations) required to be performed by it under or in respect of
each Benefit Plan and Employee Agreement and no WFI Entity is in default under
or in violation of, any Benefit Plan or Employee Agreement except where such
default or violation would not have a Material Adverse Effect, (ii) each Benefit
Plan has been established and maintained in accordance with its terms and in
material compliance with all applicable Canadian and non-Canadian laws,
statutes, orders, rules and regulations, including without limiting the
foregoing, the timely filing of all required reports, documents and notices,
where applicable, with any governmental agency (Canadian or non-Canadian), (iii)
each WFI Entity has complied with all of its obligations un-
-16-
<PAGE>
der each Employee Agreement and each Employee Agreement is presently, and has at
all times in the past been, in compliance with all statutes, orders, rules and
regulations applicable to it, (iv) to the knowledge of the Corporation, each
Employee Agreement that is a confidentiality or other similar agreement is fully
enforceable in accordance with its terms and, to the knowledge of the
Corporation, no person or entity is presently, or has at any time in the past
been, in violation of any of the terms of any such Employee Agreement, (v) each
Benefit Plan intended to qualify under Section 401 of the Code has received or
has timely applied for a determination letter by the IRS to the effect that each
such Benefit Plan is so qualified and that each trust forming a part of any such
Benefit Plan is exempt from tax pursuant to Section 501(a) of the Code and, to
the knowledge of the Corporation, no circumstances exist which could adversely
affect this qualification or exemption; (vi) no material "prohibited
transaction," within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Benefit Plan; (vii) no action or failure
to act and no transaction or holding of any asset by, or with respect to, any
Benefit Plan has or may subject any WFI Entity or any fiduciary to any material
tax, penalty or other liability, whether by way of indemnity or otherwise,
(viii) there are no actions, proceedings, arbitrations, suits, claims or other
similar proceedings pending, or to the knowledge of the WFI Entities, threatened
or anticipated (other than routine claims for benefits) against any WFI Entity
or any administrator, trustee or other fiduciary of any Benefit Plan with
respect to any Benefit Plan or Employee Agreement, or against any Benefit Plan
or against the assets of any Benefit Plan, and (ix) no Benefit Plan is under
audit or investigation by any governmental agency (Canadian or non-Canadian),
and to the knowledge of the WFI Entities, no such audit or investigation is
pending or threatened.
(e) The execution of, and performance of the transactions contemplated in,
this Agreement or the other Documents will not (either alone or upon the
occurrence of any additional or subsequent events) (i) constitute an event under
any Benefit Plan or Employee Agreement that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligations to fund
benefits with respect to any Employee or (ii) result in the triggering or
imposition of any restrictions or limitations on the right of any WFI Entity to
amend or terminate any Benefit Plan or (iii) result in any payment made or to be
made by any WFI Entity constituting an "excess parachute payment" within the
meaning of Section 280G of the Code.
2.17. Labor Relations; Employees. Schedule 2.17 hereto lists all employees
of any WFI Entity with either (i) an annual base salary in excess of US$150,000
or (ii) employed under terms of written employment agreements that are not
terminable upon giving reasonable notice in accordance with applicable law that
provide for severance, change of control or other similar compensation
materially in excess of the amounts that would otherwise be payable to such
employee under applicable statutes or at common law. Except as listed on
Schedule 2.17, no WFI Entity is bound by a change of control provision or change
of control agreement in respect of any employee of a WFI Entity. Except as set
forth on Schedule 2.17 hereto, (a) no WFI Entity is delinquent in payments to
any of its employees, for any wages, salaries, commissions, bonuses or other
-17-
<PAGE>
compensation for any services performed through the date hereof or amounts
required to be reimbursed by them through the date hereof, (b) each WFI Entity
is in material compliance with all applicable Canadian and non-Canadian federal,
provincial, state and local laws, rules and regulations respecting employment,
employment practices, occupational health and safety, workers' compensation, pay
equity, labor, terms and conditions of employment and wages and hours, (c)
except as listed on Schedule 2.17, no WFI Entity is bound by or subject to (and
none of its assets or properties is bound by or subject to) any written or oral,
express or implied, commitment or arrangement with any labor union, and no labor
union has requested or, to the knowledge of the WFI Entities, has sought to
represent any of the employees, representatives or agents of any WFI Entity, or
has bargaining rights in respect of any of the employees, representatives or
agents of the WFI Entities, (d) there is no labor strike, dispute, slowdown or
stoppage actually pending, or, to the knowledge of the WFI Entities, threatened
against or involving any WFI Entity, and (e) other than as set forth on Schedule
2.17, to the knowledge of the Corporation, no salaried key employee has any
plans to terminate his or her employment with any WFI Entity.
2.18. Litigation; Orders. Except as set forth on Schedule 2.18, there is no
civil, criminal or administrative action, suit, claim, notice, hearing, inquiry,
proceeding or investigation at law or in equity by or before any court,
arbitrator or similar panel, governmental instrumentality or other agency
Canadian or non-Canadian (including, without limitation, proceedings, inquiries
or investigations of the Canadian Federal Department of Industry ("Industry
Canada"), the Canadian Radio-television and Telecommunications Commission (the
"CRTC"), the U.S. Federal Communication Commission (the "FCC") or arising under
the Competition Act (Canada) (the "Competition Act")) now pending or, to the
knowledge of the Corporation, threatened in writing against any WFI Entity or
the assets or the business of any WFI Entity. No WFI Entity is subject to any
order, writ, injunction or decree of any court of any Canadian or non-Canadian
federal, provincial, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which could reasonably be
expected to have a Material Adverse Effect.
2.19. Compliance with Laws. (a) Except as provided in Schedule 2.19, each
WFI Entity (i) has complied in all material respects with all Canadian and
non-Canadian federal, provincial, state, local and foreign laws, rules,
ordinances, codes, consents, authorizations, registrations, regulations,
decrees, directives, judgments and orders materially applicable to it and its
business, and (ii) has all Canadian and non-Canadian federal, provincial, state,
local and foreign governmental licenses, permits, authorizations, consents,
waivers, franchises, certificates and approvals material to and necessary in the
conduct of its business as currently conducted (collectively, "Licenses"), such
Licenses are in full force and effect, and no violations have been recorded in
respect of any such Licenses and no proceeding is pending or, to the best
knowledge of the Corporation, threatened to revoke or limit any such License,
except violations or proceedings which, if determined adversely to the WFI
Entity holding such License, would not have a Material Adverse Effect. The
provisions of this Section 2.19 shall not apply to the matters covered by
Section 2.22 (Licenses, Permits and Rights of Way).
-18-
<PAGE>
(b) To the Corporation's knowledge, each WFI Entity is in compliance with
the U.S. Foreign Corrupt Practices Act of 1977, as amended, and no present or
former stockholder, officer, director, employee or agent of the Corporation or
any WFI Entity, as the case may be, has in order to assist the Corporation or
any WFI Entity in obtaining or retaining any Telecommunications License (as
defined in Section 2.21) or any business for or with, authorized the payment of
any money, or offered, given, or promised to pay or authorized the payment of
any money, or offered, given, promised to give, or authorized the giving of
anything of value to (i) any officer or employee or any government or any
department, agency, instrumentality thereof, or any person acting in an official
capacity for or on behalf of any such government or department, agency or
instrumentality, any foreign political party or any official thereof or any
candidate for foreign political office, or (ii) any person, while knowing that
all or a portion of such money or thing of value will be offered, given, or
promised, directly or indirectly, to any foreign official, to any foreign
political party or official thereof, or to any candidate for political office,
in each case, for purposes of the following:
(A) (x) illegally or corruptly influencing any act or decision of any
foreign official, political party or official thereof, or candidate in such
person's official capacity, or (y) inducing such foreign official, political
party or official thereof, or candidate to do or omit to do any act in violation
of the lawful duty of such person; or
(B) illegally or corruptly inducing such foreign official, political party
or official thereof, or candidate to use such person's influence with a foreign
government or instrumentality thereof to affect or influence any act or decision
of such government or instrumentality.
2.20. Compliance with Telecommunications Laws. (a) No WFI Entity is in
violation of any judgment, decree, order, writ, law, statute, rule or regulation
rendered or enacted in Canada or any non-Canadian jurisdiction respecting
telecommunications and the regulation within Canada of "telecommunications
common carriers" (as defined in the Telecommunications Act) or in any
non-Canadian jurisdiction respecting telecommunications applicable to any of the
WFI Entities, or, to the knowledge of the Corporation, any published
interpretation or policy relating thereto applicable to any WFI Entity. Except
as set forth on Schedule 2.20(a), no notices, reports or other filings are
required to be made by any WFI Entity, either prior to or immediately after the
consummation of the transactions contemplated hereby, with, nor are any
consents, registrations, applications and Permits required to be obtained by any
WFI Entity from, any court or governmental agency or other regulatory body or
tribunal or similar entity pursuant to Canadian or non-Canadian
telecommunications and radio communication regulatory law in connection with the
consummation of the transactions contemplated hereby. The current development,
implementation, construction and operation of the Corporation's
telecommunications networks do not and, to the knowledge of the Corporation, the
proposed conduct of the foregoing, will not conflict with or result in a breach
or violation of any of the Communications statutes or existing regulations
thereunder except breaches or violations which may be remedied by the
Corporation at immaterial expense and which would not otherwise have a
-19-
<PAGE>
Material Adverse Effect. For the purposes of this Agreement, "Communications
statutes" means the Telecommunications Act, the Canadian Radio-television and
Telecommunications Commission Act, or other statutes of Canada or any
non-Canadian jurisdiction specifically relating to the regulation of the
telecommunications industry within Canada or any non-Canadian jurisdiction
(including for this purpose the orders, rules, regulations, directives,
decisions, notices and policies promulgated pursuant to such statutes, and
applicable statutes or regulations, if any, of any province of Canada or State
of the U.S. specifically relating to the regulation of the Canadian or U.S.
telecommunications industry and the orders, rules, regulations, directives,
decisions, notices and policies promulgated thereunder).
(b) Both prior to and immediately after the Closing, (i) Worldwide Fiber
(F.O.T.S.) Ltd. is and will be eligible to operate as a telecommunications
common carrier in Canada, as defined under and in accordance with the
Telecommunications Act and the Canadian Telecommunications Common Carrier
Ownership and Control Regulations (the "Ownership Regulations"); (ii) Worldwide
Fiber (F.O.T.S.) Ltd. does not and will not violate the prohibition contained in
subsection 16(4) of the Telecommunications Act against operating in Canada as a
telecommunications common carrier when ineligible to do so; (iii) the
Corporation has taken all reasonable steps such that control of Worldwide Fiber
(F.O.T.S.) Ltd. is not and will not be exercised by any person(s) that is (are)
not or will not be Canadian, in accordance with the meanings ascribed to the
term "control" under the Telecommunications Act and the term "Canadian" under
the Ownership Regulations.
(c) Both prior to and immediately after the Closing, (i) not less than
eighty percent of the members of the board of directors of Worldwide Fiber
(F.O.T.S.) Ltd. are or will be individual Canadians, as defined under the
Ownership Regulations; (ii) Canadians, as defined under the Ownership
Regulations, beneficially own, and will beneficially own directly or indirectly,
in the aggregate and otherwise than by way of security only, not less than
eighty percent of the issued and outstanding voting shares, as defined under the
Ownership Regulations, of Worldwide Fiber (F.O.T.S.) Ltd.; (iii) Worldwide Fiber
Networks Ltd., in respect of its ownership and control over Worldwide Fiber
(F.O.T.S.) Ltd., is a carrier holding corporation, as defined under the
Ownership Regulations; (iv) Worldwide Fiber Networks Ltd. is and will be a
carrier holding corporation that is a qualified corporation, as defined under
the Ownership Regulations; and (v) the Corporation has taken all reasonable
steps such that Worldwide Fiber (F.O.T.S.) Ltd. is not and will not be
controlled in fact by non-Canadians.
(d) With the exception of Worldwide Fiber (F.O.T.S.) Ltd., no other
subsidiary of the Corporation operates in Canada as a telecommunications common
carrier as that term is defined in the Telecommunications Act.
(e) Except as disclosed in Schedule 2.20(e), no WFI Entity is currently,
nor will the conduct of its business as presently proposed to be conducted cause
it to be in the future, subject to the provisions of the Communications Act of
1934, as amended by the Telecommunications Act of 1996 (the "Communications
Act") or to any rules, regulations and policies of the FCC related hereto. All
WFI Entities are in compliance with all federal, state
-20-
<PAGE>
and local telecommunications laws, rules, regulations and policies in the United
States to which they are subject, including the Communications Act and the
related rules, regulations and policies of the FCC except where failure to
comply would not have a Material Adverse Effect.
2.21. Telecommunications Licenses. (a) Except as set forth on Schedule
2.20(a), the Corporation holds all licenses, permits, certificates, waivers,
consents, franchises, orders, approvals and authorizations issuable under the
Telecommunications Act or other similar Canadian or U.S. statutes which are
required for the development, implementation and operation of the Corporation's
business as it is currently being conducted (collectively, the
"Telecommunications Licenses"). The WFI Entities are in material compliance with
each Telecommunications License held by them. The Telecommunications Licenses
held by each WFI Entity contain no restrictions or conditions attaching to the
Telecommunications Licenses that are (or would be) materially burdensome to the
WFI Entities.
(b) All of the WFI Entities have timely filed all renewal applications with
respect to all Telecommunications Licenses held by any of them and no protests
or competing applications have been filed that are either available to the
Corporation or of which the Corporation has knowledge with respect to such
renewal applications and nothing has come to the Corporation's attention that
would lead it to conclude that such renewal applications will not be granted by
the appropriate regulatory agency or body in the ordinary course and the WFI
Entities are authorized under the Communications statutes and the rules and
regulations promulgated thereunder to continue to provide the services which are
the subject of such renewal applications during the pendency thereof.
(c) The business of the WFI Entities as it is presently being conducted and
proposed to be conducted in Canada is not regulated by any federal, state or
provincial utility or rate-regulating commission, other than the CRTC and
Industry Canada, in the areas in which any WFI Entity conducts or proposes to
conduct such business, and the WFI Entities are not, and based on existing
regulations will not be, required to obtain any Telecommunications License from
any such utility or rate-regulating commission, other than the CRTC and Industry
Canada, in any such state or province.
2.22. Licenses, Permits and Rights-of-Way. (a) The WFI Entities currently
hold, have the right to or enjoy the use of all licenses, permits,
authorizations, consents, and franchises (the "Permits) as are required for the
construction, installation, maintenance and continued operation of the business
of the WFI Entities as it is presently conducted (including the Network and the
Hibernia Project). The WFI Entities have filed or intend to timely file for all
licenses, permits, authorizations, consents and franchises as are required to
operate the business as presently proposed to be conducted (including the
Network and the Hibernia Project), except where the failure to have such Permits
would not have a Material Adverse Effect. Each respective WFI Entity (or other
contractor acting on its behalf) maintains adequate and accurate records with
respect to
-21-
<PAGE>
the timely renewal or application for renewal of any such Permits. The Permits
described in Part 1 of Schedule 2.22(a) are currently held by or on behalf of
the appropriate WFI Entity or its contractor(s) and are all the Permits
necessary to operate the Network as it presently is operated except where the
failure to have such Permits would not have a Material Adverse Effect. The
Permits identified in Schedule 2.20(a) and Part 1 and Part 2 of Schedule 2.22(a)
together with licenses and permits which will be required in connection with the
Corporation's business plan to sell telecommunications services are all of the
material Permits that must be obtained by or on behalf of any WFI Entity or its
contractor(s) to operate the business of the WFI Entities as presently proposed
to be conducted (including the Network and the Hibernia Project) but are not
presently required. To the knowledge of the Corporation, no other party to any
Permit has repudiated any Permit or any provision thereof, and the Corporation
has no knowledge of any termination, cancellation or threatened termination or
cancellation or limitation of, or any material modification or change in, any
Permit.
(b) Except as set forth in Schedule 2.22(b), the WFI Entities currently
hold, have the right to use or enjoy the use of all access rights, rights of way
and leases (the "Access Rights") as are required for the construction,
installation, maintenance and operation of the business of the WFI Entities with
respect to the Network except where the failure to have such Access Rights would
not have a Material Adverse Effect. With respect to (i) the matters set forth on
Schedule 2.22(b) and (ii) the Hibernia Project, the WFI Entities have obtained
or intend to timely file for or obtain the right to use or to enjoy the use of
all Access Rights as may be required for the construction, installation,
maintenance and operation of the Network as presently proposed to be conducted.
To the knowledge of the Corporation, no other party to any Access Right has
repudiated any Access Right or any provision thereof, and the Corporation has no
knowledge of any termination, cancellation or threatened termination or
cancellation or limitation of, or any material modification or change in any
Access Right.
2.23. Offering Exemption. Assuming the accuracy of the representations and
warranties contained in Section 3 hereof, the offer, sale and/or the issuance
and delivery of the Transaction Securities are each exempt from the prospectus
and registration requirements under applicable Canadian and U.S. securities
laws.
2.24. Related Transactions. (a) Except as set forth in the Offering
Memorandum or Schedule 2.24(a), there have been no transactions, agreements,
arrangements or understandings between the Corporation or any of its
Subsidiaries that would be required to be disclosed under Item 404 of Regulation
S-K under the 1933 Act, if the Offering Memorandum were a prospectus included in
a registration statement on Form S-1 filed with the Commission. For the
avoidance of doubt, Schedule 2.24(a) also lists and describes any assets,
licenses, etc. the use of which are shared between any WFI Entity on the one
hand, and Ledcor or its Subsidiaries (other than the WFI Entities), on the other
hand.
-22-
<PAGE>
(b) Each ongoing intercorporation transaction set forth on Schedule 2.24(a)
is on terms that are no less favorable to the WFI Entities than those that would
have been obtained in a comparable transaction by the WFI Entities with a person
that is not an affiliate.
2.25. Boycott. Neither the Corporation nor any WFI Entity has at any time
participated in, and is not currently participating in, an anti-Israel boycott
within the scope of Chapter 7 of Part 2 of Division 4 of Title 2 of the
California Government Code.
2.26. Taxes.
(a) Except as set forth on Schedule 2.26, each of the WFI Entities has duly
and timely filed its Tax Returns with the appropriate Governmental Authority and
has duly, completely and correctly reported all income and all other amounts and
information required to be reported thereon except where any such failure would
not have a Material Adverse Effect. Except as set forth in Schedule 2.26,
complete copies of Tax Returns of each of the WFI Entities that have been filed
through the date hereof have been made available to the Investors prior to the
date hereof. Prior to the date hereof, copies of all revenue agents' reports and
other written assertions of deficiencies or other liabilities for Taxes of any
of the WFI Entities with respect to past periods for which the limitations
period has not run have been made available to the Investors.
(b) Except as disclosed in Schedule 2.26, each of the WFI Entities has duly
and timely paid all Taxes except where any such failure would not have a
Material Adverse Effect, including all installments on account of Taxes for the
year, that are due and payable by it that relate to periods ending on or prior
to the Closing Date, whether or not assessed by the appropriate Governmental
Authority. The WFI Entities have established reserves that are reflected on the
Balance Sheet that are at least equal to the amount of all Taxes payable by the
WFI Entities as disclosed in Schedule 2.26 and all Taxes that are not yet due
and payable and related to periods ending on or prior to the Closing Date.
(c) Except as set forth on Schedule 2.26, none of the WFI Entities has
requested, or entered into any agreement or other arrangement or executed any
waiver providing for, any extension of time within which (i) to file any Tax
Return covering any Taxes for which such WFI Entity is or may be liable; (ii) to
file any elections, designations or similar filings relating to Taxes for which
such WFI Entity is or may be liable; (iii) such WFI Entity is required to pay or
remit any Taxes or amounts on account of Taxes; or (iv) any Governmental
Authority may assess or collect Taxes for which such WFI Entity is or may be
liable.
(d) Except as set forth on Schedule 2.26, (i) there are no actions, suits,
proceedings, investigations, audits or claims now pending or, to the knowledge
of the WFI Entities, threatened, against any one of the WFI Entities in respect
of any Taxes, (ii) there are no matters under discussion, audit or appeal with
any Governmental Authority relating to Taxes, (iii) there are no Tax rulings,
requests for rulings or closing agreements relating to any of the
-23-
<PAGE>
WFI Entities which could affect their liability for Taxes for any period after
the Closing, (iv) none of the WFI Entities is a party to, nor is it bound by,
any Tax allocation or Tax sharing agreement or arrangement and have no current
contractual obligation to indemnify any other person or entity with respect to
Taxes, (v) to the knowledge of the WFI Entities no taxing authority in a
jurisdiction where any of the WFI Entities does not file Returns has made a
claim, assertion or threat that any of the WFI Entities is or may be subject to
taxation by such jurisdiction, (vi) none of the WFI Entities has agreed in
writing to, nor is it required to include in income, any adjustment by reason of
a change in accounting method or otherwise, nor do any of the WFI Entities have
any knowledge that any taxing authority has proposed, or is considering, any
such change in accounting method, (vii) none of the WFI Entities is a passive
foreign investment corporation ("PFIC") within the meaning of Section 1297 of
the Code, (viii) none of the WFI Entities is a controlled foreign corporation
("CFC") within the meaning of Section 957 of the Code, and (ix) none of the WFI
Entities is a (A) personal holding corporation ("PHC") within the meaning of
Section 542 of the Code or (B) foreign personal holding corporation ("FPHC")
within the meaning of Section 552 of the Code. None of the WFI Entities will
become PFIC, CFC, PHC or FPHC as a result of the transactions contemplated by
the Agreement.
(e) The Corporation agrees to make reasonably available to the Investors
books and records and personnel of the Corporation, and to provide information
to the Investors, as may be reasonably requested by the Investors with respect
to matters relating to its status as a PFIC, CFC or FPHC. The Corporation will
provide each Investor with all information reasonably available to the
Corporation or any of its subsidiaries as is reasonably requested by such
Investor to enable the Investor to determine whether the Corporation or any of
its subsidiaries are, have been, or are likely to become a PFIC, a CFC or a FPHC
during the period (or any portion thereof) in which the Investors own Series A
Non-Voting Preferred Shares or Common Shares. The Corporation will provide, or
make available to, each Investor information reasonably available to the
Corporation or any of its subsidiaries as is reasonably requested by such
Investor to (i) prepare accurately all Returns and comply with any reporting
requirement imposed as a result of its investment in the Corporation, including
as a result of the Investor determining, in its reasonable discretion, that the
Corporation or any of its subsidiaries is a PFIC, FPHC or CFC or (ii) make any
election (including, without limitation, a Qualified Electing Fund election
under Section 1295 of the Code), with respect to the Corporation or any of its
subsidiaries, and comply with any reporting or other requirements incident to
such election. In the event that, on the basis of such information, any Investor
determines that the Corporation is a PFIC for a particular year, then for such
year and for each year thereafter the Corporation shall also provide such
Investor a completed "PFIC Annual Information Statement" as required by U.S.
Treasury Regulation section 1.1295.IT(g). As further required by such Treasury
Regulation, the Corporation shall permit each Investor or its representative to
inspect and copy the Corporation's permanent books of account, records, and such
other documents as may be maintained by the Corporation that are necessary to
establish that the financial information included on such PFIC Annual
Information Statement is computed in accordance with U.S. income tax principles.
In addition, the Corporation shall promptly no-
-24-
<PAGE>
tify the Investors of any written assertion by the U.S. Internal Revenue Service
that the Corporation or any of its subsidiaries is or is likely to be a PFIC,
FPHC or CFC.
(f) The Canadian federal and provincial income and capital tax liabilities
of the WFI Entities have not been assessed by the relevant taxing authorities.
(g) For purposes of the Income Tax Act (Canada) or any applicable
provincial or municipal taxing statute, no Person or group of Persons has ever
acquired or had the right to acquire control of any of the WFI Entities.
(h) There are no circumstances existing which could result in the
application of any of Sections 78 or 80 to 80.4 of the Income Tax Act (Canada)
or any equivalent provision under provincial tax legislation in relation to the
WFI Entities.
(i) None of the WFI Entities has acquired property from a non-arm's length
person, within the meaning of the Income Tax Act (Canada), for consideration the
value of which is less than the fair market value of the property acquired in
circumstances which could subject it to a liability under Section 160 of the
Income Tax Act (Canada).
(j) Schedule 2.26 discloses each of the WFI Entities which are duly
registered under subdivision (d) of Division V of Part IX of the Excise Tax Act
(Canada) with respect to the goods and services tax and harmonized sales tax and
under Division I of Chapter VIII of the Title I of the Quebec Sales Tax Act with
respect to the Quebec sales tax. The Corporation's registration number under the
Excise Tax Act (Canada) is 983197424 RT0001.
(k) Each of the WFI Entities has duly and timely withheld from any amount
paid or credited by it to or for the account or benefit of any Person,
including, without limitation, any of its employees, officers and directors and
any non-resident Person, the amount of all Taxes and other deductions required
by any applicable law, rule or regulation to be withheld from any such amount
and has duly and timely remitted the same to the appropriate Governmental
Authority.
(l) None of the WFI Entities has filed any elections or designations which
will be applicable for any period ending after the Closing Date.
(m) For all transactions between any WFI Entity and any non-resident person
with whom the WFI Entity was not dealing at arm's length during a taxation year
commencing after 1998 and ending on or before the Closing Date, the WFI Entity
has made or obtained records or documents that meet the requirements of
paragraphs 247(4)(a) to (c) of the Income Tax Act (Canada).
(n) For purposes of this Agreement:
"Governmental Authority" means any government, regulatory authority,
governmental department, agency, commission, board, tribunal, crown corporation,
or court or
-25-
<PAGE>
other law, rule or regulating-making entity having or purporting to have
jurisdiction on behalf of any nation, or province or state or other subdivision
thereof or any municipality, district or other subdivision thereof;
"Person" means any individual, sole proprietorship, general, limited or any
other partnership, limited liability company, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, body corporate, or
other entity, Governmental Authority, and a natural person in such person's
capacity as trustee, executor, administrator or other legal representative;
"Taxes" includes all taxes, duties, fees, assessments, imposts, levies and
other charges of any kind whatsoever imposed by any Governmental Authority,
together with all interest, penalties, fines, additions to tax or other
additional amounts imposed in respect thereof, including those levied on, or
measured by, or referred to as income, gross receipts, profits, capital,
transfer, land transfer, sales, goods and services, use value-added, excise,
stamp, withholding, business, franchising, property, payroll, employment,
health, social services, education and social security taxes, all surtaxes, all
customs duties and import and export taxes, all license, franchise and
registration fees and all employment insurance, health insurance and Canada,
Quebec and other governmental pension plan premiums or contributions; and
"Tax Return" includes all returns, reports, declarations, elections,
notices, filings, information returns and statements filed or required to be
filed with any Governmental Authority in respect of Taxes.
2.27. Environmental Protection. The WFI Entities are conducting, and have
conducted their business in compliance with all applicable Environmental Laws,
except for such noncompliance which would not be reasonably expected to have a
Material Adverse Effect. No WFI Entity has caused, arranged or allowed, or
contracted with any party for, the transportation, treatment, storage or
disposal of any Hazardous Substance in connection with the operation of its
business or otherwise (collectively, an "Arrangement"), except for such
Arrangements which would not be reasonably expected to have a Material Adverse
Effect. To the knowledge of the Corporation, no Hazardous Substance has been
Released into the environment on or from the Real Properties or, to the
knowledge of the Corporation, any other property now or formerly owned, leased,
or controlled by the WFI Entities which Release is required or may be required
under applicable Environmental Laws to be abated or remediated by the
Corporation, except for such Releases which would not be reasonably expected to
have a Material Adverse Effect. Except as would not reasonably be expected to
have a Material Adverse Effect, there are no past or present Releases,
conditions, events, circumstances, facts, activities, practices, incidents,
actions, omissions, or plans that would reasonably be expected to form the basis
of any claim, action, suit, proceeding, order, administrative sanction, or
inquiry against or involving any WFI Entity allegedly or actually based on or
related to any violation of any Environmental Law or that is reasonably likely
to require such WFI Entity to incur any Losses in connection therewith.
-26-
<PAGE>
For purposes of this Agreement, the term "Environmental Laws" shall mean all
laws, rules, regulations, orders, ordinances, codes and judgments of any
Governmental Authority having jurisdiction relating in full or in part to the
protection of the environment, and employee and public health and safety, and
includes those relating to the storage, generation, use, handling, manufacture,
processing, labeling, transportation, treatment and Release of Hazardous
Substances in effect and as amended as of the date of this Agreement. For
purposes of this Agreement, the term "Hazardous Substances" shall mean any
pollutant, contaminant, waste of any nature, hazardous substance, hazardous
material or toxic substance as defined, judicially interpreted or identified in
any Environmental Law including any asbestos, asbestos containing materials,
petroleum and/or other hydrocarbons or petroleum by-products. For the purposes
of this Agreement, the term "Release" shall have the meaning prescribed in any
Environmental Law and includes any release, spill, leak, pumping, pouring,
emission, emptying, discharge, injection, escape, leaching, disposal, dumping,
deposit, spraying, burial, abandonment, incineration, seepage, or placement.
2.28. Consents. No permit, authorization, consent or approval of or by, or
any notification of or filing with, any Person (governmental or private) is
required in connection with the execution, delivery and performance by the
Corporation of the Documents, the consummation by the Corporation of the
transactions contemplated thereby, or the issuance, sale or delivery of the
Transaction Securities (other than such notifications or filings required under
applicable provincial securities laws, if any, which shall be made by the
Corporation on a timely basis).
2.29. Insurance. All of the material assets of each WFI Entity that is of
insurable character (including all material assets of such WFI Entity that are
of insurable character) are covered by insurance with reputable insurers against
risks of liability, casualty and fire and other losses and liabilities
customarily obtained to cover comparable businesses and assets in amounts, scope
and coverage which are consistent with prudent industry practice. Schedule 2.29
sets forth a list of all insurance coverage carried by the WFI Entities, the
carrier and the terms and amount of coverage. No WFI Entity is in default with
respect to its obligations under any material insurance policy maintained by it.
All such policies are in full force and effect and all premiums due with respect
thereto have been paid. No WFI Entity has failed to give any notice or present
any material claim under any such insurance policy in due and timely fashion or
as required by any of such insurance policies or has not otherwise, through any
act, omission or non-disclosure, jeopardized or impaired full recovery of any
material claim under such policies, and there are no material claims by any WFI
Entity under any of such policies to which any insurance corporation is denying
liability or defending under a reservation of rights or similar clause. No WFI
Entity has received written notice of any pending or threatened termination of
any of such policies or any premium increases for the current policy period with
respect to any of such policies and the consummation of the transactions
contemplated by this Agreement will not result in any such termination or
premium increase.
-27-
<PAGE>
2.30. Brokers. Neither the Corporation nor any of its officers, directors,
employees or shareholders has employed any broker, finder or placement agent in
connection with the transactions contemplated by this Agreement.
2.31. Suppliers and Customers. No supplier or proposed supplier of
materials or services (including, but not limited to, telecommunications
equipment, fiber, conduit and related electronics used to build the network) to
any WFI Entity in an amount in excess of US$10,000,000 per year has during the
last twelve months on such supplier's initiative decreased materially or, to the
best knowledge of the Corporation, threatened to decrease or limit materially
its provision of services or supplies to such WFI Entity, nor expressed material
dissatisfaction with the business relationship between such WFI Entity and the
supplier.
2.32. Real Property. Schedule 2.32 lists all real property owned or leased
by each WFI Entity. Each WFI Entity has unencumbered title to its owned real
properties (collectively, the "Owned Real Properties") and unencumbered
leasehold title to its leased real properties (the "Leased Real Properties,"
together with the Owned Real Properties, the "Real Properties"), in each case,
free and clear of all imperfections of title and all Encumbrances, except for
(a) those consisting of zoning or planning restrictions, easements, permits and
other restrictions or limitations on the use of such property or irregularities
in title thereto which, individually and in the aggregate, do not materially
impair the use of such property, (b) warehousemen's, mechanics', carriers',
landlords', repairmen's or other similar Encumbrances arising in the ordinary
course of business and securing obligations not yet due and payable, (c) other
Encumbrances which individually and in the aggregate do not materially impair
its use of such property or its ability to obtain financing by using such assets
as collateral, and (d) Encumbrances listed on Schedule 2.32. To the knowledge of
the Corporation, there are no intended public improvements which will result in
any material charge being levied against, or in the creation of any Encumbrances
upon, the Real Properties or any portion thereof. There are no options, rights
of first refusal, rights of first offer or other similar rights with respect to
any of the Real Properties that is material to the business of the WFI Entities
as currently conducted or proposed to be conducted. With respect to each lease
of Real Property to which any WFI Entity is a party, so long as the applicable
WFI Entity performs all of its obligations under such lease for Real Property
within applicable notice and grace periods, (a) the rights of such WFI Entity
under such lease shall not be terminated and (b) such WFI Entity's possession of
such Real Property and the use and enjoyment thereof shall not be disturbed by
any landlord, overlandlord, mortgagee or other superior party. No WFI Entity is
obligated to purchase any Leased Real Property and no Leased Real Property is
required to be accounted for under GAAP as a capitalized lease. No WFI Entity is
a real property holding company.
2.33. Investment Banking Services. The Corporation is not a party to any
Contract which grants rights to any third party with respect to the performance
of investment banking services for it, including, without
-28-
<PAGE>
limitation, with respect to its sale or a public offering, including an initial
public offering, of its securities.
2.34. Year 2000 Compliant. The disclosure contained in the Offering
Memorandum under the captions "Management's Discussion and Analysis of Financial
Condition and Results of Operations, -- Impact of Year 2000, -- Risks of Year
2000 Issues, -- Description of Our Year 2000 Program, -- State of Readiness, and
- -- Contingency Plans and Costs to Address Year 2000 Issues" is accurate and
complete as at the date thereof and there has been no adverse change in the
facts disclosed therein since July 23, 1999.
2.35. Previous Issuances Exempt. All shares and other securities issued by
the Corporation prior to the date hereof have been issued in transactions exempt
from the prospectus requirements or registration, as the case may be, under
applicable Canadian securities laws and the 1933 Act, and all applicable
provincial and state securities or "blue sky" laws or have been distributed or
registered, as the case may be, in compliance with all such laws (collectively,
"Securities Laws"). The Corporation has not violated the Securities Laws in
connection with the issuance of any shares or other securities prior to the date
hereof. The Corporation has not offered any of its shares, or any other
securities, for sale to, or solicited any offers to buy any of the foregoing
from the Corporation, or otherwise approached or negotiated with any other
person in respect thereof, in such a manner as to require distribution by
prospectus or registration under applicable Securities Laws.
2.36. Investment Company Act. Neither the Corporation nor any WFI Entity is
a "holding company", or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company", as such terms are defined in the United
States Public Utility Holding Company Act of 1935, as amended; nor is the
Corporation or any WFI Entity an "investment company", or an "affiliated person"
or a "principal underwriter" of an "investment company", as such terms are
defined in the United States Investment Company Act of 1940, as amended. Neither
the Corporation nor any WFI Entity is now, nor has it been within the past five
years, a "United States real property holding corporation" as defined in Section
897 of the Code.
2.37. Disclosure. Neither this Agreement nor any certificate, or written
statement made to the Investors by or on behalf of the Corporation delivered at
the Closing, together with the Offering Memorandum, taken as a whole, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading.
SECTION 3. Representations, Warranties and Acknowledgments of the
Investors. Each of the Investors represents, warrants and acknowledges to the
Corporation as of the date hereof as follows:
-29-
<PAGE>
(a) Such Investor is acquiring Series A Non-Voting Preferred Shares as
principal with an aggregate acquisition cost to the Investor of not less than
the amount set forth opposite such Investor's name on Schedule 1.1 and:
(i) if a corporation, it was not incorporated solely, nor is it used
primarily, to permit the purchase without a prospectus of the Series A
Non-Voting Preferred Shares, or, if the corporation was incorporated solely for
such purpose, each shareholder of the corporation has contributed at least
C$97,000 to the corporation for the purpose of investment by the corporation in
the Series A Non-Voting Preferred Shares; or
(ii) if not a corporation, is a partnership, trust, fund, syndicate,
association or other form of unincorporated organization, such partnership,
trust, fund, syndicate, association or other form of unincorporated organization
was not formed or established solely, nor is used primarily, to permit the
purchase of the Series A Non-Voting Preferred Shares without a prospectus, or if
formed or established or used primarily for such purpose, each member of such
partnership, trust, fund, syndicate, association or other form of unincorporated
organization, would have an aggregate acquisition cost of not less than C$97,000
for the Series A Non-Voting Preferred Shares if the participant were acquiring
its proportionate interest in the Series A Non-Voting Preferred Shares; and
(iii) is purchasing the Series A Non-Voting Preferred Shares for investment
only and not with a view to resale or distribution in violation of applicable
securities laws.
(b) Such Investor, if a "U.S. Person" (as defined in Regulation S under the
1933 Act), is an "Accredited Investor" (as defined in Rule 501(a)(1), (2), (3)
(7) or (8) under the 1933 Act), and such Investor makes the additional
representations and warranties contained in Schedule 3 of this Agreement.
(c) Such Investor acknowledges that no offering memorandum, prospectus or
registration statement has been prepared or filed by the Corporation with any
securities commission or similar authority in any jurisdiction in connection
with the Purchase and the issue and sale of Series A Non-Voting Preferred Shares
to such Investor is subject to such sale being exempt from the requirements of
applicable securities laws as to the filing of an offering memorandum,
prospectus or registration statement.
(d) Such Investor has not received or been provided with a prospectus,
offering memorandum or other similar document, nor has it requested, nor does it
have any need to receive, a prospectus, offering memorandum (other than the
Offering Memorandum (as defined in Section 2.10(d)) or any other similar
document describing the business and affairs of the Corporation.
(e) To such Investor's knowledge, the Series A Non-Voting Preferred Shares
were not advertised in printed media of general and regular paid circulation,
radio or
-30-
<PAGE>
television and such Investor has not purchased the Series A Non-Voting Preferred
Shares as a result of any form of general solicitation or general advertising,
including advertisements, articles, notices or other communications published in
any newspaper, magazine or similar media or broadcast over radio, or television,
or any seminar or meeting whose attendees have been invited by general
solicitation or general advertising.
(f) Such Investor has such knowledge and experience in financial and
business affairs as to be capable of evaluating the merits and risks of the
investment hereunder and is able to bear the economic risk of loss of such
investment.
(g) Such Investor understands that the Series A Non-Voting Preferred Shares
have not been and will not be registered under the 1933 Act, as amended, or the
securities laws of any state of the United States and that the sale contemplated
hereby is being made in reliance on an exemption from such registration
requirements and such Investor understands and agrees that the Series A
Non-Voting Preferred Shares may not be traded in the United States or by or on
behalf of a U.S. Person or a person in the United States unless permitted by the
terms of the Shareholders Agreement and either (x) registered under the 1933 Act
and any applicable state securities laws or (y) an exemption from such
registration requirements is available and that certificates representing the
Series A Non-Voting Preferred Shares will bear a legend to such effect.
(h) Such Investor understands that no prospectus has been or will be filed
in accordance with the securities laws, and the regulations thereunder, of, and
the applicable published rules, policy statements, blanket orders and notices of
the securities regulatory authorities in the provinces and territories of Canada
(the "Canadian Securities Laws") qualifying the distribution of the Series A
Non-Voting Preferred Shares in any province or territory of Canada and that the
Series A Non-Voting Preferred Shares may not be offered or sold by such Investor
in any province or territory of Canada except pursuant to an applicable
exemption from the prospectus requirements of the applicable Canadian Securities
Laws and from a dealer appropriately registered under the applicable Canadian
Securities Laws or, other than in Ontario, in accordance with an exemption from
the registration requirements of such laws.
(i) Such Investor has not employed any broker or finder in connection with
the transactions contemplated by this Agreement.
(j) Such Investor is duly organized and validly existing under the laws of
the jurisdiction of its organization and has all partnership, corporate or
company power, as applicable, and authority to enter into and perform the
Documents. Each of the Documents to which such Investor is a party has been duly
authorized by all necessary action on the part of such Investor. Each of the
Documents to which such Investor is a party constitutes a valid and binding
agreement of such Investor enforceable against such Investor in accordance with
its terms except to the extent that enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally.
-31-
<PAGE>
(k) The execution, delivery and performance by such Investor of each of the
Documents to which such Investor is a party and the consummation by such
Investor of the transactions contemplated thereby will not (i) violate any
provision of law, statute, rule or regulation, or any ruling, writ, injunction,
order, judgment or decree of any court, administrative agency or other
governmental body applicable to it, or any of its properties or assets; (ii)
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under any contract which such Investor is a party that would materially
adversely affect the Investor's ability to consummate the transactions
contemplated by this Agreement or perform its obligations under the Shareholders
Agreement; or (iii) violate its organizational documents (if any).
(l) No permit, authorization, consent or approval of or by, or any
notification of or filing with, any person (governmental or private) is required
in connection with the execution, delivery and performance by such Investor of
the Documents to which it is a party or any documentation relating thereto, or
the consummation by such Investor of the transactions contemplated thereby
(other than such notifications or filings required under applicable Canadian
Securities Laws, if any, which shall be made on a timely basis).
(m) Each Investor acknowledges and agrees that the foregoing
representations, warranties and covenants set out herein are made by such
Investor with the intent that they be relied upon in determining its suitability
as a purchaser of Series A Non-Voting Preferred Shares. Each Investor further
agrees that by accepting the Series A Non-Voting Preferred Shares, such Investor
shall be representing and warranting that the foregoing representations and
warranties are true as at the Closing Date with the same force and effect as if
they had been made by such Investor at the Closing Date and shall continue in
full force and effect notwithstanding any subsequent disposition by it of the
Series A Non-Voting Preferred Shares. Each Investor undertakes to notify the
Corporation in writing of any change in any representation, warranty or other
information relating to such Investor set forth herein which takes place prior
to the Closing Date.
SECTION 4. Covenants Prior to Closing.
4.1. Cooperation by Parties; Satisfaction of Closing Conditions. From the
date hereof and prior to the Closing, (i) each party shall use its commercially
reasonable efforts, and will cooperate with each other, to secure as promptly as
practicable all necessary consents, approvals, authorizations, exemptions and
waivers from third parties as shall be required in order to enable the parties
hereto to effect the transactions contemplated hereby, and (ii) the Corporation
shall use its commercially reasonable efforts to cause (but not waive) any
Closing Condition in Section 6.2 to be satisfied.
-32-
<PAGE>
4.2. Conduct of Business. (a) Except as may be otherwise contemplated by
the Documents or as described in Schedule 4.2, or except as the Investors may
otherwise consent to in writing (which consent shall not be unreasonably
withheld or delayed), from the date hereof and prior to the Closing, the
Corporation shall not, and shall cause each WFI Subsidiary not to, do any thing
or take any action or omit to do anything or to take any action which (i) would
cause any representation or warranty of the Corporation in this Agreement to be
untrue as of the Closing Date or (ii) would be a Major Transaction under the
Shareholders Agreement if the Shareholders Agreement were in effect.
(b) From the date hereof to the Closing Date, the Corporation shall cause
Worldwide Telecom (Bermuda) Limited (the "Project Subsidiary") to engage solely
in activities related or incidental to the Hibernia Project. Unless the Hibernia
Supply Contract (as defined in Section 2.10(e)) otherwise requires, the
Corporation shall cause the Project Subsidiary to diligently enforce all of its
rights under the Hibernia Supply Contract.
4.3. Required Notices. At all times prior to the Closing Date, the
Corporation shall promptly give written notice to the Investors of (a) any facts
or circumstances or the occurrence of any event or the failure of any event to
occur, which has or is reasonably likely to have, (i) a Material Adverse Effect
on the Corporation and/or any WFI Entity or (ii) a Material Adverse Effect on
the ability of the Corporation to consummate the transactions contemplated
hereby or to satisfy its obligations hereunder, (b) any complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any authority with respect to the Corporation and/or any WFI
Entity or the transactions contemplated hereby, (c) the institution or the
threat of institution of any litigation or similar action with respect to the
Corporation and/or any WFI Entity or the consummation of the transactions
contemplated hereby and (d) the occurrence of any event, or the discovery of any
facts or circumstances which will or is reasonably likely to result in the
failure (x) of any representation or warranty set forth herein to continue being
true or (y) to satisfy any condition set forth in Section 6. The Corporation
shall keep the Investors apprised of material changes with respect to such
events promptly upon the occurrence of such events.
4.4. No Shop. For the period between the date hereof and the earlier of the
Closing Date and October 4, 1999, the Corporation will not, and will not
authorize any of its officers or directors or any other person on its behalf,
to, solicit, encourage, negotiate or accept any offer from any party concerning
(i) the sale or disposition of all or any portion of the Corporation's business,
assets (other than in the ordinary course of business), subsidiaries or share
capital by merger, amalgamation, share issuance, sale or any other means, or
(ii) any other agreement or arrangement that would be inconsistent with the
consummation of the transactions contemplated hereby (clauses (i) and (ii)
together, each a "Prohibited Transaction"), nor will they participate in any
discussions or negotiations regarding, or furnish any information with respect
to, or facilitate in any other manner, any Prohibited Transaction. On or before
the date hereof, the Corporation will immediately terminate any existing
discussion with a third party regarding a possible Prohibited Transaction. The
-33-
<PAGE>
Corporation will promptly notify the Investors in writing of any inquiries or
proposals from any third party regarding a possible Prohibited Transaction.
SECTION 5. Other Covenants.
5.1. Use of Proceeds. The Corporation shall use the proceeds from the sale
of Series A Non-Voting Preferred Shares hereunder as set forth on Schedule 5.1.
5.2. Shareholders Agreement. The Corporation shall use its best efforts to
cause each shareholder of the Corporation holding Common Shares or Common Share
Equivalents and listed on Schedule I to the shareholders agreement in the form
annexed hereto as Schedule 5.2 (the "Shareholders Agreement") to execute and
deliver the Shareholders Agreement on the Closing Date.
5.3. HSR Filing. The Corporation shall file its notification of the
transactions contemplated by this Agreement under the United States
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"),
promptly upon request by any of the Investors and shall pay all costs and
expenses, including filing fees of the Investors, in connection therewith.
5.4. Tax Indemnity. (a) The Corporation shall indemnify and hold each
Investor, or the partners of the Investor where the Investor is a partnership,
(each referred to in this Section 5.4(a) as an "Investor") harmless from and
against any Canadian federal or provincial withholding tax liability (including
any such withholding tax liability on any payment made under this Section 5.4)
arising from or as a result of the holding, receipt of distributions on,
conversion, sale, redemption or other disposition of, the Preferred Shares or
the Common Shares (other than the receipt of any distributions of cash dividends
on the Common Shares), provided that the maximum withholding tax liability in
respect of which the Corporation shall indemnify and hold each Investor harmless
shall not exceed the amount of withholding tax payable under paragraph 2(b) of
Article X of the Canada-US Tax Convention (the "Convention") if the Investor
were a resident of the United States for purposes of the Convention. In the case
of a distribution, redemption or any similar payment by the Corporation with
respect to any Preferred Shares or Common Shares (other than a distribution of
cash dividends on Common Shares), if any Canadian federal or provincial
withholding tax is imposed on such distribution, redemption or other payment,
the indemnity provided for in the preceding sentence shall be satisfied by the
payment by the Corporation, at the same time as the making of such distribution,
redemption or other payment, of additional amounts as necessary so that the net
amount received by each Investor is the same as it would have received had no
such withholding tax been imposed. In any other case, the indemnity shall be
satisfied by payment in cash no later than three business days following demand
therefor (which demand shall be accompanied by a statement setting forth the
basis for indemnification). The Corporation shall not be obligated to indemnify
and hold an Investor harmless pursuant to this Section 5.4 in respect of (i) any
deemed dividend arising by virtue of
-34-
<PAGE>
the application of subsection 212.1(1) of the Income Tax Act (Canada), (ii) any
deemed dividend arising solely by virtue of the application of 84(3) of the
Income Tax Act (Canada) in respect of a sale to or a redemption by the
Corporation of Common Shares pursuant to an offer made by the Corporation to
purchase through the facilities of The Toronto Stock Exchange in a particular
twelve-month period not more than 5% of a particular class of Common Shares
issued and outstanding at the commencement of such twelve-month period, which
offer is completed in compliance with applicable Canadian Securities Laws and
the rules of The Toronto Stock Exchange, (iii) any income tax liability arising
from a capital gain; or (iv) any tax arising if any Investor holds or is deemed
to hold the Preferred Shares or Common Shares in carrying on a business in
Canada. The Corporation shall indemnify and hold each Investor harmless from and
against any income tax liability imposed by the jurisdiction in which such
Investor is organized or otherwise resident, which income tax liability is
imposed on or in respect of any payment made under this Section 5.4.
(b) In the event that any Investor shall be entitled to receive a refund of
tax or a credit against or relief or remission for, or repayment of, any tax
paid or payable by it (collectively, a "Tax Credit") in respect of or calculated
with reference to the withholding tax liability giving rise to the requirement
of the Corporation to make an indemnity payment under this Section 5.4, such
Investor shall use reasonable efforts to obtain the Tax Credit, and upon receipt
of such Tax Credit, to the extent that it can do so without prejudice to the
retention of the amount of such Tax Credit, pay or cause to be paid to the
Company such amount as such Investor shall have concluded, acting reasonably, to
be the after-tax value to it of the Tax Credit which is attributable to the
relevant withholding tax liability. Nothing herein contained shall interfere
with the right of each Investor to arrange its tax affairs in whatever manner it
thinks fit or require any Investor to disclose to the Company any information
regarding its tax affairs or tax calculations. Such payments shall be made
promptly upon the relevant Investor certifying that the amount of such credit,
relief, remission or repayment has been received by it and each Investor
undertake so to certify or cause to be certified promptly upon such receipt.
Notwithstanding anything to the contrary in this Agreement, the term "Investor"
as used in this Section 5.4(b) shall refer only to the direct holder of the
shares or other property in respect of which the indemnity payment was made and
not to any holder of an interest in such direct holder or any other Person.
(c) Notwithstanding anything to the contrary in Section 5.4(a), the
Corporation shall indemnify and hold each Investor harmless from and against all
loss incurred or suffered, directly or indirectly, by an Investor in respect of
or otherwise attributable to any additional liability for Taxes arising to the
Corporation or to an Investor as a result of the reorganization of capital
undertaken by the Corporation prior to or at Closing (the "Reorganization"). For
greater certainty, the Reorganization includes the following transactions
contemplated by the Corporation: the issuance of Series C Redeemable Preferred
Shares by the Corporation to Worldwide Fiber Holdings Ltd. ("WFH") as a stock
dividend, the disposition by WFH of all of its common shares to the Corporation
for additional Series C Redeemable Preferred Shares and for Class B Subordinate
Voting Shares, the joint election to be made by the Corporation and WFH pursuant
to subsection 85(1) of the Income Tax Act
-35-
<PAGE>
(Canada) in respect of such disposition, and the redemption by the Corporation
of the Series C Redeemable Preferred Shares held by WFH.
5.5. Roll-Up Transactions. The Corporation agrees that each of the Minority
Roll-Up Transactions (as defined in Section 1.4(b)) shall be consummated in
consideration solely for the issuance of Common Shares (and not cash or any
other assets or obligations of the Corporation or any of its Subsidiaries or
affiliates). The Corporation also agrees that the Ledcor Roll-Up Agreement (as
defined in Section 1.4(b)) shall be consummated in consideration solely for the
issuance of 4,500,000 Common Shares (and not cash or any other assets or
obligations of the Corporation or any of its Subsidiaries or affiliates) and in
accordance with the terms of the Ledcor Roll-Up Agreement in effect on the date
hereof.
SECTION 6. Conditions to the Purchase.
6.1. Conditions to Obligations of Each Party. The respective obligations of
each party hereto to consummate the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions, any or all of which may be waived in writing, in whole or in part,
by the Corporation or all the Investors, to the extent permitted by applicable
law:
(a) No federal, state or provincial governmental or regulatory body or
court of competent jurisdiction shall have enacted, issued, promulgated or
enforced any statute, rule, regulation, executive order, decree, judgment,
preliminary or permanent injunction or other order which is in effect and which
prohibits, enjoins or otherwise restrains the consummation of the transactions
contemplated hereby; provided, that the parties shall use commercially
reasonable efforts to cause any such decree, judgment, injunction or order to be
vacated or lifted.
(b) Each governmental or third party consent, approval or filing required
to be obtained or made and any waiting period required to have expired in order
to consummate the transactions contemplated by this Agreement at the Closing
shall have been obtained, or made, as the case may be, and any such waiting
period shall have expired.
6.2. Conditions to Obligations of the Investors. The obligations of each
Investor to consummate the Purchase shall be subject to the satisfaction (or
waiver, which shall not be effective against any Investor who does not consent
in writing thereto), on or prior to the Closing Date, of the following
conditions:
(a) Each representation and warranty made by the Corporation herein shall
be true and correct, in all material respects (except for such representations
and warranties that are qualified by their terms by reference to Material
Adverse Effect or materiality, which representations and warranties as so
qualified shall be true in all respects), on and as of the Clos-
-36-
<PAGE>
ing Date, with the same force and effect as though such representation and
warranty had been made on and as of the Closing Date, except for changes
permitted or contemplated by this Agreement and except for each representation
and warranty that is made as of a specific date or time, which shall be true and
correct in all material respects, only as of such specific date or time.
(b) The Corporation shall have complied in all material respects with all
its agreements and covenants contained herein or the Shareholders Agreement
required to be performed at or prior to the Closing to the extent such
agreements and covenants relate to the Closing.
(c) The Corporation shall have delivered to the Investors a certificate
executed by a senior executive officer of the Corporation, which shall be
satisfactory in form and substance to the Investors, certifying that the
conditions set forth in paragraphs (a) and (b) have been met.
(d) The Corporation shall have delivered to the Investors a certificate of
the Corporate Secretary of the Corporation, in form and substance satisfactory
to the Investors, certifying (i) a copy of the Articles of Continuance of the
Corporation and all amendments thereto, certified by the Director under the
Canada Business Corporations Act, (ii) the By-Laws of the Corporation, (iii) a
Certificate of Status for the Corporation issued by the Director under the
Canada Business Corporations Act and similar certificates for other WFI Entities
issued by the relevant Governmental Authority, (iv) resolutions of the board of
directors of the Corporation (the "Board of Directors") authorizing the
execution, delivery and performance by the Corporation of this Agreement, the
Shareholders Agreement, the Registration Rights Agreements, the Articles of
Incorporation, any other agreement entered into or instrument delivered by the
Corporation in connection herewith, and any letters entered into simultaneously
with this Agreement (collectively, the "Documents") and the transactions
contemplated thereby, (v) copies of each governmental or third party consent,
approval or filing required to be obtained or made in order to consummate the
transactions contemplated by this Agreement at the Closing, and (vi) incumbency
matters. (e) The Shareholders Agreement shall be executed and delivered by the
Corporation and each of the shareholders listed on Schedule I thereto.
(f) A registration rights agreement (the "Registration Rights Agreement")
among the Corporation and the Investors in the form annexed hereto as Schedule
6.2(f) shall be duly executed and delivered by the Corporation.
(g) The Articles of Amendment shall be in the form annexed hereto as
Schedule A.
(h) No Material Adverse Effect shall have occurred in respect of the
Corporation or any of the other WFI Entities, and no event or change shall have
occurred which,
-37-
<PAGE>
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the Corporation or any of the other WFI Entities.
(i) The Investors shall receive from each of McLennan Ross; Farris,
Vaughan, Wills & Murphy; and Cahill Gordon & Reindel, counsel for the
Corporation, an opinion addressed to the Investors, dated as of the Closing, in
the forms annexed hereto as Schedule 6.2(i).
(j) The composition of the Board of Directors shall be as provided in
Section 8.1 of the Shareholders Agreement.
(k) The Corporation shall have obtained, with financially sound and
reputable insurers, directors' and officers' liability insurance in the amount
of at least US$5,000,000, or a binder with respect to such insurance in form and
substance satisfactory to each Investor.
(l) The Corporation shall have obtained signed commitment letters for a
$550 million credit facility the proceeds of which will be used to finance the
Hibernia Project, in form and substance satisfactory to each Investor (the
"Hibernia Commitment").
(m) Each other Investor shall concurrently purchase and pay for the number
of Class A Preferred Shares set forth opposite its name in Schedule 1.1.
(n) There shall not have occurred any disruption or material adverse change
or development affecting financial, banking, currency or capital markets in
general in the United States in the reasonable opinion of the Investors.
(o) With the proceeds of the Purchase Price, at Closing the Corporation
shall concurrently repurchase from WFH 45,000,000 Series C Redeemable Preferred
Shares for an aggregate amount of US$45,000,000 in cash.
6.3. Conditions to the Obligations of the Corporation. The obligations of
the Corporation to consummate the Purchase shall be subject to the satisfaction
(or waiver), on or before the Closing Date, of the following conditions:
(a) Each representation and warranty made by the Investors herein shall be
true and correct in all material respects, with the same force and effect as
though such representation and warranty had been made on and as of the Closing
Date, except for changes permitted or contemplated by this Agreement and except
for each representation and warranty that is made as of a specific date or time,
which shall be true and correct, in all material respects, only as of such
specific date or time.
-38-
<PAGE>
(b) The Investors shall have complied in all material respects with all
their agreements and covenants contained herein required to be performed at or
prior to the Closing to the extent such agreements and covenants relate to the
Closing.
(c) Each Investor shall concurrently purchase and pay for the number of
Series A Non-Voting Preferred Shares set forth opposite such Investor's name on
Schedule 1.1.
(d) The Shareholders Agreement shall be executed and delivered by each of
the Investors.
6.4. Default by an Investor. If one or more of the Investors shall fail at
the Closing to purchase the Series A Non-Voting Preferred Shares set forth
opposite its name on Schedule 1.1 (the "Defaulted Shares"), each of the other
Investors shall have the right, but not any obligation, exercisable within 15
Business Days thereafter, to purchase its ratable share of the Defaulted Shares
and any additional Defaulted Shares that any other non-defaulting Investor shall
elect not to purchase pursuant to this Section 6.4.
SECTION 7. Termination. The obligation of the parties to effect the
Purchase may be terminated (i) by the mutual written consent of the Corporation
and each of the Investors or (ii) by any party in writing, without liability to
such party on account of such termination (provided the terminating party is not
otherwise in material breach and/or default of this Agreement), if the Closing
shall not have occurred on or before October 4, 1999.
SECTION 8. Transfer Taxes. The Corporation agrees that it will pay, and
will hold each Investor harmless from any and all liability with respect to, any
transfer, documentary or stamp taxes ("Transfer Taxes") which may be determined
to be payable in connection with the execution and delivery of this Agreement or
any modification, amendment or alteration of the terms or provisions of this
Agreement, and that it will similarly pay and hold each Investor harmless from
all such Transfer Taxes in respect of the issuance of any of the Transaction
Securities to such Investor.
SECTION 9. Survival of Representations, Warranties, Agreements and
Covenants, etc. All representations and warranties in the Documents shall
survive the Closing until the second anniversary of the date hereof and shall in
no way be affected by any investigation of the subject matter thereof made by or
on behalf of any Investor; provided, however, (x) the representations and
warranties set forth in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.11, 2.15, 2.19,
2.20, 2.21, 2.22, and 2.36 shall survive the Closing indefinitely and (y) the
representations and warranties set forth in Sections 2.9(a), 2.23, 2.26 and 2.27
shall survive the Closing until the expiration of all applicable statutes of
limitations. All statements contained in any certificate or other instrument
delivered by the Corporation pursuant to this Agreement shall constitute
representations and warranties by the Corporation under this Agreement. All
agreements and
-39-
<PAGE>
covenants contained herein or any other Document shall survive indefinitely
until, by their respective terms, they are no longer operative.
SECTION 10. Expenses. (a) Except as set forth in Section 10(b) and (c), the
Corporation and each Investor shall pay all the costs and expenses incurred by
it or on its behalf in connection with this Agreement and the consummation of
the transactions contemplated hereby.
(b) The Corporation shall promptly pay or reimburse the Investors for (and,
to the extent requested by the Investors, for expenses incurred prior to the
Closing, pay at the Closing): (i) the Investors' reasonable out-of-pocket
expenses (including, without limitation, all reasonable fees and expenses of
counsel of each of the Investors) arising in connection with the preparation,
negotiation and execution of the Documents and the other agreements or
instruments contemplated thereby, and the consummation of the transactions
contemplated thereby, (ii) the reasonable fees and expenses incurred by each
such Investor with respect to any amendments or waivers (whether or not the same
become effective) under or in respect of the Documents and the agreements
contemplated thereby (including, without limitation, in connection with any
proposed merger, sale or recapitalization of the Corporation), and (iii) the
fees and expenses incurred by the Investors in any filing with any governmental
agency with respect to its investment in the Corporation or in any other filing
with any governmental agency with respect to the Corporation that mentions any
Investor.
(c) Notwithstanding anything herein to the contrary, no Investor will
receive or is entitled to receive any broker's fee, finder's fee, placement fee
or other similar fee or commission in connection with the Purchase or the
consummation of the transactions contemplated by this Agreement and the
Documents.
SECTION 11. Indemnification.
11.1. General Indemnification. The Corporation shall indemnify, defend and
hold each Investor, its affiliates, and each of their respective officers,
directors, partners, managing directors, affiliates, employees, agents,
consultants, representatives, successors and assigns (each an "Investor Entity")
harmless from and against all Losses (as defined below) incurred or suffered by
an Investor Entity (whether incurred or suffered directly or indirectly through
ownership of Series A Non-Voting Preferred Shares or Conversion Shares) arising
out of, relating to, or resulting from (a) any breach of any of the
representations, warranties, covenants or agreements made by it in this
Agreement or in any agreement, certificate or other instrument delivered
pursuant hereto including, without limitation, the Documents, and (b) any third
party claim made against an Investor Entity relating to any transaction by the
Corporation financed in whole or in part, directly or indirectly, with proceeds
from the sale of any of the Series A Non-Voting Preferred Shares or Common
Shares hereunder. Each Investor, severally and not jointly, shall indemnify,
defend and hold the Corporation, its affiliates, and each of their respective
officers, directors, employees, agents, consultants, representatives, successors
and assigns harmless against all
-40-
<PAGE>
Losses arising from the breach of any of its representations, warranties,
covenants or agreements in this Agreement or in any certificate or other
instrument delivered pursuant hereto, including, without limitation, the
Documents. Notwithstanding anything to the contrary in this Agreement, no
indemnification payment by the Corporation pursuant to this Section 11 with
respect to any Losses otherwise payable hereunder as a result of a breach of its
representations and warranties (other than any Losses resulting from breaches of
the representations and warranties in Section 2.7, as they relate to Taxes,
Sections 2.26 and 2.27, to any covenants contained in this Agreement or any
other Document and to willful misrepresentation, fraud or deceit, which shall
not be subject to the Deductible or Limit) shall be payable (a) until the time
as such Losses shall aggregate (on a cumulative basis and not on a per item
basis) for all Investor Entities more than US$5,000,000 (the "Deductible"), and
then only to the extent that such Losses, in the aggregate for all Investors,
exceed the Deductible; or (b) with respect to the Investor Entities associated
with each Investor, in an aggregate amount in excess of the Purchase Price of
the shares issued to such Investor or its predecessors in interest as shown on
Schedule 1.1 hereto (as increased by the amounts by which the Series A
Non-Voting Liquidation Value, as defined in the Terms of the Series A Non-Voting
Preferred Shares, Series A in the Articles of Amendment, would increase from the
Closing Date to the date of determination) (the "Limit"). The Corporation shall
also indemnify, defend and hold harmless each Investor Entity against any and
all Losses (as defined in Section 11.2 and not subject to any Deductible or
Limit) arising under Title IV of ERISA, Section 302 of ERISA and Sections 412
and 4971 of the Code which may be incurred by any of them arising out of or
relating to any WFI Entity being or having been an ERISA Affiliate with any
other Person (other than another WFI Entity), whether such Losses arise out of
or relate to any event or state of facts occurring or existing before, on or
after the Closing Date.
An "ERISA Affiliate" is defined as any entity that is (i) a member of a
"controlled group of corporations," under "common control" or a member of an
"affiliated service group" within the meaning of Section 414(b), (c) or (m) of
the Code, (ii) required to be aggregated under Section 414(o) of the Code, or
(iii) under "common control," within the meaning of Section 4001(a)(14) of
ERISA, or any regulations promulgated or proposed under any of the foregoing
Sections, in each case with any WFI Entity.
11.2. Indemnification Principles. For purposes of this Section 11, "Losses"
shall mean each and all of the following items: claims, losses (including,
without limitation, losses of earnings), liabilities, obligations, payments,
damages (actual, punitive or consequential), charges, judgments, fines,
penalties, amounts paid in settlement, costs and expenses (including, without
limitation, interest which may be imposed in connection therewith), costs and
expenses of investigation, actions, suits, proceedings, demands, assessments and
fees, expenses and disbursements of counsel, consultants and other experts. For
purposes of Section 11.1(a) the Corporation shall not be obligated to indemnify,
defend or hold harmless any Investor Entity for any (i) punitive damages or (ii)
damages arising out of such Investor Entity's lost use of such Investor Entity's
share of the Purchase Price (as shown on Schedule 1.1 hereto) for an alternative
investment, except in any case where such damages are the result of the willful
misrepresentation, fraud or deceit of the
-41-
<PAGE>
Corporation. Any indemnification payment by the Corporation to any Investor
pursuant to this Section 11 shall include an additional amount so that the
Investor does not, directly or indirectly, bear any portion of such payment made
by the Corporation with respect to such payment on account of the Investor's
direct or indirect investment in the Corporation as contemplated by the
Purchase. Any payment by the Corporation to an Investor pursuant to this Section
11, shall be treated for federal income tax purposes as a Purchase Price
Adjustment.
11.3. Claim Notice. A party seeking indemnification under this Section 11
shall, promptly upon becoming aware of the facts indicating that a claim for
indemnification may be warranted, give to the party from whom indemnification is
being sought a claim notice relating to such Loss (a "Claim Notice"). Each Claim
Notice shall specify the nature of the claim, the applicable provision(s) of
this Agreement or other instrument under which the claim for indemnity arises,
and, if possible, the amount or the estimated amount thereof. No failure or
delay in giving a Claim Notice (so long as the same is given prior to expiration
of the representation or warranty upon which the claim is based) and no failure
to include any specific information relating to the claim (such as the amount or
estimated amount thereof) or any reference to any provision of this Agreement or
other instrument under which the claim arises shall affect the obligation of the
party from whom indemnity is sought except to the extent such party is
materially prejudiced thereby.
11.4. Claim Procedure.
(a) Procedure for Indemnification with Respect to Third-Party Claims. If
any indemnified party hereunder determines to seek indemnification under this
Section 11 with respect to Losses resulting from the assertion of liability by
third parties, such indemnified party shall give notice to the indemnifying
party hereunder within 30 days of such indemnified party becoming aware of any
such Losses or of facts upon which any claim for such Losses will be based; the
notice shall set forth such material information with respect thereto as is then
reasonably available to such indemnified party. In case any such liability is
asserted against such indemnified party, and such indemnified party notifies the
indemnifying party thereof, the indemnifying party will be entitled, if it so
elects by written notice delivered to such indemnified party within 10 days
after receiving such indemnified party's notice, to assume the defense thereof
with counsel satisfactory to such indemnified party, in which case, the
indemnifying party will not be liable to the indemnified party under this
Section 11.4 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
following sentence or (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying party. Notwithstanding the foregoing, (i) such indemnified party
shall also have the right to employ its own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless such indemnified party shall reasonably determine that there is a
conflict of interest between or among such indemnified party and the
indemnifying party with re-
-42-
<PAGE>
spect to such claim, in which case the fees and expenses of such counsel will be
borne by the indemnifying party, (ii) such indemnified party shall not have any
obligation to give any notice of any assertion of liability by a third party
unless such assertion is in writing, (iii) the rights of such indemnified party
to be indemnified hereunder in respect of any Losses that may or do result from
the assertion of liability by third parties shall not be adversely affected by
its failure to give notice pursuant to the foregoing unless, and, if so, only to
the extent that, the indemnifying party is materially prejudiced thereby, and
(iv) the indemnifying party's obligations to such indemnified party under this
Section 11 shall not terminate until such indemnified party's claims have been
finally satisfied to such indemnified party's sole satisfaction. In the event
that the indemnifying party, within 10 days after receipt of the aforesaid
notice of a claim hereunder, fails to assume the defense of such indemnified
party against such claim, such indemnified party shall have the right to
undertake the defense, compromise, or settlement of such action on behalf of and
for the account, expense, and risk of the indemnifying party.
Notwithstanding anything in this Section 11 to the contrary, (i) if there
is a reasonable probability that a claim may materially adversely affect such
indemnified party, such indemnified party shall have the right to participate in
such defense, compromise, or settlement and the indemnifying party shall not,
without such indemnified party's written consent (which consent shall not be
unreasonably withheld), settle or compromise any of such claims, or consent to
entry of any judgment in respect thereof unless such settlement, compromise, or
consent includes as an unconditional term thereof the giving by the claimant or
the plaintiff to such indemnified party a release from all liability in respect
of such claim. With respect to any assertion of liability by a third party that
results in any claim for indemnification hereunder, the parties hereto shall
make available to each other all relevant information in their possession
material to any such assertion.
(b) Procedure For Indemnification with Respect to Non-Third Party Claims.
In the event that an indemnified party asserts the existence of a claim with
respect to Losses (but excluding claims resulting from the assertion of
liability by third parties), it shall give written notice to the indemnifying
party. Such written notice shall state that it is being given pursuant to this
Section 11.4(b), specify the nature and amount of the claim asserted, and
indicate the date on which such assertion shall be deemed accepted and the
amount of the claim deemed a valid claim (such date to be established in
accordance with the next sentence). If the indemnifying party, within 30 days
after the mailing of notice by such indemnified party, shall not give written
notice to such indemnified party announcing its intent to contest such assertion
of such indemnified party, such assertion shall be deemed accepted and the
amount of claim shall be deemed a valid claim. In the event, however, that the
indemnifying party contests the assertion of a claim by giving such written
notice to such indemnified party within said period, then the parties shall act
in good faith to reach agreement regarding such claim. In the event that
litigation shall arise with respect to any such claim, the prevailing party
shall be entitled to reimbursement of costs and expenses incurred in connection
with such litigation including attorney fees, if the parties hereto, acting in
good faith, cannot reach agreement with respect to such claim within ten days
after such notice.
-43-
<PAGE>
SECTION 12. Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the
Corporation, each Investor may proceed to protect and enforce its rights either
by suit in equity and/or by action at law, including, but not limited to, an
action for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement, and
to exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that each party may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief (without posting a bond or other
security) in order to enforce or prevent any violation of the provisions of this
Agreement.
SECTION 13. Further Assurances. At any time or from time to time after the
Closing, the Corporation, on the one hand, and each Investor, on the other hand,
agree to cooperate with each other, and at the request of the other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby relating to
the Purchase and to otherwise carry out the intent of the parties hereunder.
SECTION 14. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the Corporation and the Investors and the respective successors,
Permitted Assigns, heirs and personal representatives of the Corporation and the
Investors. In addition, and whether or not any express assignment has been made,
except as otherwise expressly stated in this Agreement, the provisions of this
Agreement which are for each of the Investor's benefit as a purchaser or holder
of Transaction Securities are also for the benefit of, and enforceable by, any
permitted subsequent holder of such Transaction Securities. The parties
acknowledge that, subject to compliance with applicable securities laws, each
Investor may transfer and assign all or a part of its rights and obligations
under this Agreement to one or more other partnerships, corporations, trusts or
other organizations which have been created by, or are controlled by, control or
are under common control with such Investor or one or more of the current
partners, members or other equity holders of such Investor, without the consent
of the Corporation (collectively, "Permitted Assigns"). This Agreement shall not
be assignable by the Corporation, without the consent of each of the Investors.
SECTION 15. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or understandings with
respect thereto including, but not limited to, that certain letter of intent,
dated August 5, 1999, between the Corporation and the Investors.
-44-
<PAGE>
SECTION 16. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by fax, nationally
recognized overnight courier or first class registered or certified mail, return
receipt requested, postage prepaid, addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
such party to the other parties:
(i) if to the Corporation, to:
Worldwide Fiber Inc.
#1510-1066 West Hastings Street
Vancouver, British Columbia V6E 3X1
Fax: (604) 681-6822
Attention: Stephen Stow
with a copy to:
Farris, Vaughan, Wills & Murphy
2600-700 West Georgia Street
Vancouver, British Columbia V7Y 1B3
Fax: (604) 661-9349
Attention: Cameron G. Belsher
with a copy to:
Cahill Gordon & Reindel
Eighty Pine Street
New York, New York 10005
Fax: (212) 269-5420
Attention: Roger Andrus
(ii) if to DLJ, to:
DWF SRL
Chancery House
High Street
Bridgetown
Barbados, West Indies
Fax: (246) 431-0076
-45-
<PAGE>
and
DWF SRL
c/o DLJ Merchant Banking Partners II, L.P.
277 Park Avenue
New York, New York 10172
Fax: (212) 892-7272
Attention: Andrew Rush
with a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Fax: (212) 751-4864
Attention: Steven Della Rocca
(iii) if to any of the GSCP Parties, to:
c/o Ernst & Young Services, Ltd.
P.O. Box 261
Bay Street
Bridgetown, Barbados
Fax: (246) 426-9551
Attention: Carol-Ann Smith
and
c/o GS Capital Partners III, L.P.
85 Broad Street
New York, New York 10004
Fax: (212) 902-3000
Attention: Robert Gheewalla
with copies to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Fax: (212) 859-4000
Attention: Stuart Z. Katz
-46-
<PAGE>
and
GS Capital Partners III, L.P.
85 Broad Street
New York, New York 10004
Fax: (212) 357-5505
Attention: Ben Adler
(iv) if to Providence, to:
Providence Equity Fiber, L.P.
50 Kennedy Plaza
Providence, Rhode Island 02903
Fax: (401) 751-1790
Attention: Glenn M. Creamer
with a copy to:
Edwards & Angell, LLP
2800 BankBoston Plaza
Providence, Rhode Island 02903
Fax: (401) 276-6602
Attention: David K. Duffell
(v) if to Tyco, to:
c/o Tyco Group s.a.r.l.
2nd Floor
6, Avenue Emile Reuter
L-2420 Luxembourg
Fax: (352) 464-350
Attention: Managing Director
with a copy to:
Tyco Submarine System Ltd.
250 Industrial Way West
Eatontown, New Jersey 07724
Fax: (732) 578-7803
Attention: General Counsel
All such notices, requests, consents and other communications shall be
deemed to have been given when received.
-47-
<PAGE>
SECTION 17. Amendments. The terms and provisions of this Agreement may be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, pursuant to the written consent of the Corporation and each of the
Investors.
SECTION 18. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 19. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
SECTION 20. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
SECTION 21. Governing Law; Waiver of Jury Trial. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without giving effect to the principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
action, proceeding or investigation in any court or before any governmental
authority ("Litigation") arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any Litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by registered mail to its respective
address set forth in this Agreement shall be effective service of process for
any Litigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any Litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United States
of America, in each case located in the County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such Litigation brought in any such court has been brought
in an inconvenient forum. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO
TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 22. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be
-48-
<PAGE>
effective and valid, but if any provision of this Agreement is held to be
invalid or unenforceable in any respect, such invalidity or unenforceability
shall not render invalid or unenforceable any other provision of this Agreement.
SECTION 23. Currency. Unless otherwise indicated, references to "dollars",
"$" or U.S. dollars and references to "C$" are to Canadian dollars.
SECTION 24. No Partnership. The obligations of each of the parties to this
Agreement are several and not joint. Nothing in this Agreement shall imply or be
deemed to imply a partnership, joint venture or other relationship between the
parties.
-49-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as
of the date first above written.
CORPORATION:
WORLDWIDE FIBER INC.
By:________________________
Name:
Title:
DWF SRL
By:_______________________
Name:
Title:
GSCP3 WWF (BARBADOS) SRL
By:_______________________
Name:
Title:
(Signature Page to Preferred
Share Purchase Agreement)
-50-
<PAGE>
WWF (BARBADOS) SRL
By:_______________________
Name:
Title:
PROVIDENCE EQUITY FIBER L.P.
by its General Partner,
Providence Equity Partners III L.P.
by its General Partner,
Providence Equity Partners III L.L.C.
By:_______________________
Name: Glenn M. Creamer
Title: Member and Managing Director
TYCO GROUP S.A.R.L.
By:_______________________
Name:
Title:
(Signature Page to Preferred
Share Purchase Agreement)
-51-
SHAREHOLDERS AGREEMENT
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Certain Definitions...............................................1
SECTION 2. Methodology for Calculations......................................7
SECTION 3. Limitations on Purchases and Sales of Shares by Shareholders......8
SECTION 4. Rights of First Offer.............................................9
SECTION 5. Tag-Along Rights.................................................12
SECTION 6. Bring-Along Rights...............................................14
SECTION 7. Preemptive Rights................................................15
SECTION 8. Corporate Governance.............................................17
SECTION 9. Major Transactions...............................................22
SECTION 10. Liquidity Rights.................................................26
SECTION 11. Representations and Warranties...................................28
SECTION 12. Certain Covenants................................................29
SECTION 13. [Intentionally omitted]..........................................39
SECTION 14. Reservation of Common Shares; Conversion.........................39
SECTION 15. Confidentiality..................................................39
SECTION 16. Specific Performance; Injunction.................................40
SECTION 17. No Inconsistent Agreements.......................................41
SECTION 18. Further Assurances...............................................41
SECTION 19. Duration of Agreement............................................41
SECTION 20. Legends..........................................................41
SECTION 21. Contractual Management Rights....................................42
SECTION 22. Severability.....................................................42
SECTION 23. Governing Law; Waiver of Jury Trial..............................43
SECTION 24. Successors and Assigns...........................................43
SECTION 25. Notices..........................................................44
SECTION 26. Amendments.......................................................48
SECTION 27. Headings.........................................................48
SECTION 29. Entire Agreement.................................................49
SECTION 30. Counterparts.....................................................49
SECTION 31. No Partnership...................................................49
SECTION 32. Ledcor Assurances................................................49
-i-
<PAGE>
Schedule 1.15 - Key Shareholders
Schedule 3(a)(i) -Permitted Assignees of WFH
Schedule 11(b)(i) - Security holdings of each Shareholder
Schedule 11(b)(ii) -Agreements related to security holdings of each Shareholder
Schedule 12.16 - Ledcor Regulatory Matters
-ii-
<PAGE>
SHAREHOLDERS AGREEMENT
This SHAREHOLDERS AGREEMENT (the "Agreement"), dated as of September 9,
1999, by and among WORLDWIDE FIBER INC., a corporation continued under the laws
of Canada (the "Corporation"), DWF SRL, a Barbados company ("DLJ"), GS CAPITAL
PARTNERS III, L.P., a Delaware limited partnership ("GSCP") (signatory hereto
solely for purposes of Section 8), GSCP3 WWF (Barbados) SRL, a Barbados company,
WWF (Barbados) SRL, a Barbados company, each of which is an affiliate of The
Goldman Sachs Group, Inc. (collectively, with GSCP, the "GSCP Parties"),
PROVIDENCE EQUITY FIBER, L.P., a Delaware limited partnership, ("Providence"),
TYCO GROUP S.a.r.l., a Luxembourg corporation ("Tyco") (collectively with DLJ,
the GSCP Parties and Providence, the "Investors") WORLDWIDE FIBER HOLDINGS LTD.,
an Alberta corporation ("WFH"), LEDCOR INC., an Alberta corporation ("Ledcor")
(signatory hereto solely for purposes of the Sections specified in Section 32),
and the signatories listed on Schedule 1.15 hereto.
W I T N E S S E T H:
WHEREAS, the Corporation and the Investors are parties to that certain
Preferred Share Purchase Agreement, dated as of September 7, 1999 (the "Purchase
Agreement"), pursuant to which the Corporation has issued to the Investors, and
the Investors have purchased from the Corporation, shares of a newly created
series of Preferred Shares (the "Series A Non-Voting Preferred Shares"); and
WHEREAS, the Purchase Agreement contemplates that the parties hereto will
enter into this Shareholders Agreement and the parties hereto deem it to be in
their best interests to establish and set forth their agreement with respect to
certain rights and obligations associated with ownership of Shares (as defined
below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties hereto hereby agree as
follows:
SECTION 1. Certain Definitions. As used herein, the following terms shall
have the following meanings (capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Purchase
Agreement):
1.1. Affiliate shall mean (i) with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, or (ii) with respect to any
individual, shall also mean the spouse, child (including a stepchild or an
adopted child), grandchildren, parent, brother, sister or other
<PAGE>
-2-
bona fide estate planning recipient thereof or any spouse of any of the
foregoing, and each trust created for the exclusive benefit of any one or more
of them. Notwithstanding the foregoing, neither the Corporation nor any Person
controlled by the Corporation shall be deemed to be an Affiliate of any
Shareholder for purposes of this Agreement.
1.2. Board shall mean the Board of Directors of the Corporation.
1.3. Cause shall mean:
(a) if the Senior Officer is convicted of a criminal offense involving
fraud or dishonesty; or
(b) if the Senior Officer takes any action or omits to take any action
which constitutes gross negligence or willful misconduct which is likely to
bring the reputation of the Corporation into disrepute.
1.4. Common Share Equivalents shall mean all options, warrants and other
securities and obligations convertible into, or exchangeable or exercisable for,
at any time or upon the occurrence of any event or contingency and without
regard to any vesting or other conditions to which such securities may be
subject, Common Shares.
1.5. Common Shares shall mean any common shares of the Corporation of any
class or series whether now or hereafter authorized, including without
limitation the Corporation's Class A Non-Voting Common Shares, Class B
Subordinate Voting Shares and Class C Multiple Voting Common Shares, and any
shares into which such common shares may be exchanged, reclassified,
recapitalized, converted or otherwise.
1.6. Competitor shall mean (i) WFI Competitor and (ii) Tyco Competitor.
(a) WFI Competitor means any Person deriving 25% or more of its annual
consolidated revenues from the construction, development, operation or sale of
terrestrial or underwater fiber optic networks or bandwidth fiber optic
communication capacity. WFI Competitors currently include, without limitation,
(i) Qwest Communications International Inc., (ii) Williams Communications Group
Inc., (iii) IXC Communications Inc., (iv) Global Crossing Ltd., (v) MCI Worldcom
Inc., and (vi) Level 3 Communications Inc. This list does not preclude later
inclusion of other Persons whose nature and scope of business would qualify them
for inclusion under this definition.
(b) Tyco Competitor means any Person in the market of Tyco Submarine
Systems Ltd. ("TSSL") that contends for material market share against TSSL in
TSSL's Business (as defined below). A Tyco Competitor further means any Person
offering alone or to-
<PAGE>
-3-
gether with any other Person, to supply Systems which generate annual
consolidated revenues in excess of (a) 15% of such Person's consolidated
revenues, or (b) $50 million dollars. Tyco Competitors shall mean, as of the
date hereof, Alcatel Submarine Networks, KDD Submarine Cable Systems, and
Pirelli Submarine Systems. This list does not preclude later inclusion of other
Persons whose nature and scope of business would qualify them for inclusion
under this definition. "TSSL's Business" shall mean the design, manufacture or
sale of commercial undersea fiber optic telecommunication Systems (where such
Systems may be inclusive of segments or products supplied by vendors or other
undersea cable system suppliers), as conducted by TSSL or by TSSL through or
with the Operating Companies ("Operating Companies" means collectively, Trans
Oceanic Cable Ship Co., Coastal Cable Ship Co., The Rochester Corporation, and
Tyco Printed Circuit Board Group). "Systems" as used herein includes, in whole
or part: (1) undersea fiber optic cables, branching units and signal
amplification units; (2) land-based terminal equipment typically associated with
undersea fiber optic cable systems (e.g. power, maintenance and supervisory,
signal conditioning, multiplexing, and network protection equipment); (3)
terrestrial-based cable crossings between undersea fiber optic cables which are
a part of a larger undersea telecommunication systems ("Cable Crossings"); and
(4) terrestrial-based backhauls which are attendant to such undersea
telecommunication systems ("Backhauls").
1.7. Dollar, US$ and $ shall mean, unless otherwise indicated, U.S.
dollars, and the symbol C$ shall mean Canadian dollars.
1.8. Fair Market Value of Shares shall mean, for purposes of Section 10,
the fair market value of each Series A Non-Voting Preferred Share, Series B
Subordinate Voting Preferred Share (a "Series B Voting Preferred Share") or
other Share of the Corporation as determined, at the Corporation's expense, by
an appraisal firm or investment bank of national standing experienced in the
valuation of such securities ("Valuation Firm") selected in good faith by an
Investor making a Section 10 Offer and approved by the Board, which approval
shall not be unreasonably withheld or delayed. For purposes of Section 10 the
determination of Fair Market Value of each Series A Non-Voting Preferred Share,
Series B Voting Preferred Share or other Share shall be based on the value that
a willing buyer with knowledge of all relevant facts would pay a willing seller
for all the outstanding equity securities of the Corporation in connection with
an auction of the Corporation as a going concern assuming bidders are prepared
to pay a control premium and without any discount for lesser voting rights, lack
of liquidity, lack of control, minority holder status or similar factors. The
Valuation shall be determined by the Valuation Firm as soon as practicable but
in any event not later than 60 days following the date of the appointment of the
Valuation Firm. If the Board has not approved a Valuation Firm within 15 days of
the proposal of such Valuation Firm by the relevant Investors hereunder, then
(without prejudice to the Investors' other rights and remedies) such
Investors(s) may request the President of the American Arbitration Association
to ap-
<PAGE>
-4-
point a Valuation Firm, which will then be the Valuation Firm for the
transaction in question. The Corporation shall furnish to the Valuation Firm all
reasonably available information requested by the Valuation Firm. The fair
market value established by the Valuation Firm (or by the written agreement of
all parties to the transaction) shall be final and binding with respect to each
Section 10 Offer.
1.9. Financial Investors shall mean each of (i) DLJ, (ii) the GSCP Parties
and (iii) Providence, collectively.
1.10. Group shall mean two or more Persons who agree to act together for
the purpose of acquiring, holding, voting or disposing of Shares.
1.11. In-The-Money Common Share Equivalents shall mean, at any time, any
Common Share Equivalents as to which the effective price per Common Share
issuable upon conversion, exchange or exercise of such Common Share Equivalents
(determined by dividing (A) the sum of (x) the aggregate purchase price paid in
respect of such Common Share Equivalents plus (y) the aggregate amount payable
upon conversion, exchange or exercise of such Common Share Equivalents in order
to issue all Common Shares issuable pursuant to such Common Share Equivalents by
(B) the number of Common Shares issuable upon the conversion, exchange or
exercise of such Common Share Equivalents) is equal to or less than the then
fair market value per Common Share as determined in good faith by the Board,
provided that the Series A Non-Voting Preferred Shares shall for all purposes be
deemed In-The-Money Common Share Equivalents.
1.12. Initial Purchase Price shall mean US$38.909 per Share (as equitably
adjusted to reflect any stock split, stock dividend, combination,
reorganization, recapitalization, reclassification or other similar event
involving Common Shares).
1.13. Investor Shares shall mean the Shares issued by the Corporation to
the Investors under the Purchase Agreement, by conversion or otherwise.
1.14. IPO shall mean sale of Shares by the Corporation pursuant to a bona
fide underwritten public offering made pursuant to (a) a final prospectus (for
which a receipt or receipts have been obtained) under Canadian provincial
securities laws ("Canadian Securities Laws") or (b) an effective registration
statement filed under the United States Securities Act of 1933, as amended (the
"Securities Act," collectively with the Canadian Securities Laws, the
"Securities Laws").
1.15. Key Shareholders shall mean and include any person who is (i) a
holder of Shares (as defined below), and (ii) is (x) a director (other than an
Investor Designee), or (y) a Senior Officer or (z) an employee or consultant of
the Corporation or a Subsidiary, who ac-
<PAGE>
-5-
quires from the Corporation at least one-half of one percent of Shares in the
aggregate of the then outstanding Shares (on either a primary or fully diluted
basis).
1.16. Ledcorshall mean Ledcor Inc., a corporation incorporated under the
laws of Alberta.
1.17. Ledcor Entitiesshall mean Ledcor Inc. and each of its Subsidiaries,
collectively, except for those entities which are defined as WFI Entities in the
Purchase Agreement.
1.18. Ledcor Roll-Up Agreement shall mean the amended and restated share
purchase agreement entered into on September 7, 1999 among Ledcor Industries
Limited, Ledcor Industries Inc. and the Corporation.
1.19. Material Investor shall mean, (a) any Investor and (b) any transferee
of Shares from an Investor or Material Investor that, together with its
Affiliates, holds at least 5% of the outstanding Investor Shares.
1.20. Minority Roll-Up Agreements shall mean: (a) the unanimous shareholder
agreement made as of May 28, 1999 between Worldwide Fiber Networks Ltd.,
Canadian National Railway Company and WFI-CN Fibre Inc., (b) the limited
liability company agreement of Worldwide Fiber IC LLC effective as of May 28,
1999 between Worldwide Fiber IC Holdings, Inc. and IC Fiber Holding Inc. and (c)
the shareholders agreement dated December 31, 1998 between the Corporation,
Worldwide Fiber Networks Ltd., Ledcor Industries Inc., Worldwide Fiber (USA),
Inc. (formerly known as Pacific Fiber Link, Inc.), Mi-Tech Communications, LLC,
Ledcor and Michels Pipeline Construction, Inc.
1.21. Minority Roll-Up Transaction shall mean the issuance by the
Corporation of Common Shares pursuant to any of the Minority Roll-Up Agreements
(or any transactions or series of related transactions with similar effect).
1.22. National standing all references herein to an investment banking
firm, appraisal or accounting firm of national standing shall mean of national
standing in the United States.
1.23. Other Shareholders shall mean, in connection with any transaction
involving a Selling Shareholder, the Shareholders other than the Selling
Shareholder.
1.24. Person shall mean any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-stock
company, trust,
<PAGE>
-6-
unincorporated organization, other entity or government or any agency or
political subdivisions thereof.
1.25. Preferred Shares shall mean the Corporation's Series A Non Voting
Preferred Shares or Series B Voting Preferred Shares.
1.26. Private Sale shall mean a Sale that is not a Public Sale.
1.27. Public Sale shall mean a Sale (i) pursuant to a bona fide
underwritten public offering pursuant to (a) a final prospectus (for which a
receipt or receipts have been obtained) under Canadian Securities Laws or (b) an
effective registration statement filed under the United States Securities Act of
1933, as amended (the "Securities Act," collectively with the Canadian
Securities Laws, the "Securities Laws"), or (ii) pursuant to Rule 144 under the
Securities Act.
1.28. Qualified IPO shall mean a bona fide underwritten public offering of
Common Shares in a Public Sale pursuant to a final prospectus (for which a
receipt or receipts have been obtained) and/or an effective registration
statement, as the case may be, under the Securities Laws (i) resulting in at
least $150,000,000 of gross aggregate proceeds to the Corporation and any
Selling Shareholders before deducting underwriting discounts and commissions and
offering expenses, (ii) the gross offering price per share of which is at least
300% of the per share price (the "Adjusted Initial Per Share Price") obtained by
dividing US$345,000,000 by the number of Series A Non-Voting Preferred Shares,
Common Shares or Common Share Equivalents issued by the Corporation pursuant to
Sections 1.1 and 1.4 of the Purchase Agreement (as equitably adjusted to reflect
any stock split, stock dividend, combination, reorganization, recapitalization,
reclassification or other similar event involving Common Shares), and (iii) upon
consummation of which the Corporation's Class A Non-Voting Shares or Class B
Subordinate Voting Shares are listed on The Toronto Stock Exchange and a U.S.
national securities exchange or quoted on the Nasdaq National Market.
1.29. Sell shall mean, as to any Shares, to sell, or in any other way
directly or indirectly transfer, assign, distribute, pledge, encumber or
otherwise dispose of, either voluntarily or involuntarily, including the
assignment or transfer of voting rights attaching to such Shares (if any); the
terms Sale, Selling and Sold shall have meanings correlative to the foregoing.
1.30. Senior Officer shall mean any of the individuals, numbering at least
five, who hold any of the following positions or their functional equivalents
irrespective of actual title held in the Corporation: (A) Chairman; (B)
Vice-Chairman; (C) Chief Executive Officer; (D) President; (E) Chief Financial
Officer; (F) Chief Operating Officer; and (G) Executive Vice President.
<PAGE>
-7-
1.31. Shareholders shall mean the parties to this Agreement (other than the
Corporation, GSCP or, except as specified in Section 32, Ledcor) and any other
Person who executes, and agrees to be bound by the terms of, this Agreement.
1.32. Selling Shareholders shall mean any Shareholders who Sell or propose
to Sell any Shares of the Corporation.
1.33. Shares shall mean (i) any Common Shares and (ii) any Common Share
Equivalents, in each case, whether owned or outstanding on the date hereof or
hereafter.
1.34. Subsidiary shall mean with respect to any Person, any company,
partnership or other entity (i) of which at least a majority of the shares of
capital stock or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other similar managing body of such
company, partnership or other entity are at the time owned or controlled,
directly or indirectly, by such Person or (ii) the management of which is
otherwise controlled, directly or indirectly, through one or more intermediaries
by such Person.
1.35. Supermajority shall mean all or all but one of the following
Investors who then own, or whose Investor Affiliates then own, Shares: DLJ, the
GSCP Parties, Providence and Tyco.
1.36. Voting Shares shall mean the Series B Voting Preferred Shares into
which the Class A Non-Voting Preferred Shares are convertible and the Class B
Subordinate Voting Shares.
1.37. WFH Share Purchase Agreements shall mean the agreements, as may be
amended from time to time, between Worldwide Fiber Holdings Ltd. and (i) Stephen
Stow and (ii) Larry Olsen, as the case may be, to sell and purchase shares.
SECTION 2. Methodology for Calculations. For purposes of this Agreement,
the Sale of a Common Share Equivalent (whether or not an In-The-Money Common
Share Equivalent) shall be treated as the Sale of the Common Shares into which
such Common Share Equivalent can be converted, exchanged or exercised. Except as
otherwise specifically provided in this Agreement, for purposes of all
calculations under this Agreement (including, without limitation, calculations
to determine the ownership of Common Shares of any Shareholder and the
percentage of outstanding Common Shares owned by any Shareholder), all Series A
Non-Voting Preferred Shares and (without duplication) all other In-The-Money
Common Share Equivalents, but no other Common Share Equivalents, shall be
treated as having been converted, exchanged or exercised into or for Common
Shares.
<PAGE>
-8-
SECTION 3. Limitations on Purchases and Sales of Shares by Shareholders.
(a) Until the earlier of (x) 12 months from the date hereof, and (y) an IPO
by the Corporation, (the "Lockup Period"), no Shareholder shall Sell any Shares,
whether owned on the date hereof or acquired hereafter, other than:
(i) Sales of Shares to (x) with respect to any Investor, an
Investor Affiliate (as defined in Section 24) of such Investor, (y)
with respect to any individual, a spouse, child, parent, or trust
created for the exclusive benefit of such individual and/or any one or
more of such relatives or, (z) with respect to WFH, a wholly-owned
Subsidiary of Ledcor or the entities described in Schedule 3(a)(i) or
such other entity as may be consented to in writing by each of the
Investors;
(ii) Sales by WFH after the date hereof, in one or more
arm's-length transactions, of an aggregate of up to [ ]* Shares
(as equitably adjusted to reflect any stock split, stock dividend,
combination, reorganization, recapitalization, reclassification or
other similar event involving Common Shares) in one or more Private
Sales to any Person, provided in each case (A) each such Sale is made
in accordance with Section 5 hereof, (B) each potential purchaser has
not been disapproved by a Supermajority on the basis that a Sale to
such Person could reasonably be expected to diminish the value of the
Corporation and (C) the price per Share of each such Sale is equal to
or greater than the Adjusted Initial Per Share Price;
(iii) A Sale by WFH of all, but not less than all, of its Shares
in an arm's-length transaction to any Person; provided (A) such Sale is
made in accordance with Section 5 hereof and (B) the price per Share of
such Sale is equal to or greater than 300% of the Adjusted Initial Per
Share Price;
(iv) Sales of Shares pursuant to WFH Share Purchase Agreements;
(v) Sales of Shares pursuant to the letter agreement, dated as
of September 7, 1999, among WFH, the Investors and the other parties
thereto; and
(vi) Sales of Shares pursuant to Section 12.4.
(b) No Shareholder shall Sell any Shares, whether owned on the date hereof
or acquired hereafter, other than:
(i) Sales permitted by paragraph (a);
- ----------
* Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
-9-
(ii) Sales after the Lockup Period (but not including a pledge
or other encumbrance not constituting a disposition of a Shareholder's
entire interest therein) of Shares in accordance with Sections 4, 5 and
10 hereof;
(iii) Public Sales of Shares after the Lockup Period; and
(iv) Sales of Shares to the extent such Shares were acquired in
secondary market purchases (and not from the Corporation) following an
IPO.
(c) In addition to the restrictions set forth in paragraphs (a) and (b)
above, no Shareholder shall Sell any Shares in a Private Sale to a Competitor
except (i) in an Exit Sale (as defined in Section 6(a)) or (ii) in a Required
Sale (as defined in Section 10(c)).
(d) Ledcor shall not Sell any capital shares or other equity interests of
WFH or permit WFH to issue any of its capital shares or other equity interests
to any Person other than Ledcor or wholly-owned subsidiaries of Ledcor.
(e) Anything contained in this Agreement to the contrary notwithstanding,
any transferee of Shares pursuant to a Sale under paragraph (a) or clause (ii)
of paragraph (b) who is not a Shareholder shall, upon consummation of, and as a
condition to, such Sale (i) execute, and agree to be bound by the terms of, this
Agreement and shall thereafter be deemed a Shareholder, with the same rights and
obligations of the Shareholder which is the transferor of the Shares, for all
purposes of this Agreement (unless otherwise specified herein), and (ii) execute
and deliver a certificate and such other materials as shall be necessary to
establish to the satisfaction of the Corporation and each of the Investors that
(A) the transferee is purchasing the Shares for its own account, for investment
and not with a view to the distribution thereof, and (B) that such Sale is
otherwise being made in compliance with all applicable Canadian and non-Canadian
federal, provincial and state laws (including, without limitation, foreign
ownership and Securities Laws), and such Sale will not result in any violation
or non-compliance with any such laws on the part of the Corporation.
(f) Anything contained in this Agreement to the contrary notwithstanding,
each of Stephen Stow and Larry Olsen, as the case may be, shall be entitled to
pledge to a financial institution, insurance company, investment bank or other
similar entity, Shares acquired pursuant to the WFH Share Purchase Agreements;
provided, that such pledge is granted to secure amounts borrowed to purchase
such Shares.
SECTION 4. Rights of First Offer. Until the earlier of (x) two (2) years
from the date hereof, and (y) an IPO by the Corporation, subject to Section 4(e)
and Section 12.4 any Sale by a Shareholder, except a
<PAGE>
-10-
Sale pursuant to Section 3(a), shall be consummated only in accordance with the
following procedures:
(a) The Selling Shareholder shall first deliver to the Corporation and each
of the Other Shareholders a written notice (a "Section 4 Offer Notice"), which
shall (i) state the Selling Shareholder's intention to sell Shares to one or
more Persons (with no obligation (except in the case of a Sale that is permitted
only under the provision of Section 3(a)(ii) in which case the proposed
purchaser shall be identified) to identify or theretofore have identified the
name of such Person or Persons or to have negotiated a transaction with respect
to the Sale of such Shares), the amount and type of Shares to be sold (the
"Subject Shares"), the purchase price therefor and a summary of the other
material terms of the proposed Sale, and (ii) offer the Corporation and the
Other Shareholders the option to acquire all or a portion of such Subject Shares
upon the same terms and subject to the same conditions of the proposed Sale as
set forth in the Section 4 Offer Notice (the "Section 4 Offer"), provided that
such Section 4 Offer may require that it must be accepted by the Corporation and
the Other Shareholders on an all or nothing basis (an "All or Nothing Sale").
The Section 4 Offer shall remain open and irrevocable for the periods set forth
below (and, to the extent the Section 4 Offer is accepted during such periods,
until the consummation of the Sale contemplated by the Section 4 Offer). The
Corporation shall have the right and option, but not the obligation, for a
period of 30 days after delivery of the Section 4 Offer Notice (the "Section
4(a) Acceptance Period"), to accept all or any part of the Subject Shares at the
purchase price and on the terms stated in the Section 4 Offer Notice on its own
behalf or on behalf of a nominee of the Corporation that has been approved for
such purposes in writing by a Supermajority (a "Permitted Nominee"); provided,
however, that, if the Section 4 Offer contemplated an All or Nothing Sale and
only a part of the Subject Shares is accepted by the Corporation (or its
Permitted Nominee) during the Section 4(a) Acceptance Period, such acceptance
shall be subject to the acceptance of the Other Shareholders, pursuant to
Section 4(b), of the remaining Subject Shares. Notice of the Corporation's
intention to accept a Section 4 Offer, in whole or in part, shall be evidenced
by a writing signed by the Corporation (the "Section 4(a) Acceptance Notice")
and delivered to the Selling Shareholder and Other Shareholders prior to the end
of the Section 4 Acceptance Period, setting forth the number and type of Shares
that the Corporation elects to acquire.
(b) If the Corporation or its Permitted Nominee, as the case may be, (i)
shall fail to accept all of the Subject Shares offered for sale pursuant to the
Section 4 Offer, (ii) shall reject in writing the Section 4 Offer, or (iii)
shall fail to respond to a Section 4 Offer Notice prior to the expiration of the
Section 4(a) Acceptance Period, then, upon the earlier of the expiration of the
Section 4(a) Acceptance Period, the giving of the Section 4(a) Acceptance Notice
and the giving of written notice of rejection by the Corporation, each Other
Shareholder shall have the right and option, for a period of 15 days thereafter
(the "Section
<PAGE>
-11-
4(b) Acceptance Period"), to accept all or any part of the Subject Shares so
offered and not accepted by the Corporation or its Permitted Nominee, as the
case may be (the "Refused Shares") at the purchase price and on the terms stated
in the Section 4 Notice; provided, however, that, if the Section 4 Offer
contemplated an All or Nothing Sale, the Other Shareholders, in the aggregate,
may accept, during the Section 4(b) Acceptance Period, the Subject Shares which,
when taken together with the Subject Shares accepted by the Corporation pursuant
to Section 4(a), if any, constitute all, but not less than all, of the Subject
Shares, at the purchase price and on the terms stated in the Section 4 Offer
Notice. Such acceptance shall be made by delivering a written notice to the
Corporation and the Selling Shareholder within the Section 4(b) Acceptance
Period specifying the maximum number of Shares such Other Shareholder will
purchase (the "First Offer Shares"). If, upon the expiration of the Section 4(b)
Acceptance Period, the aggregate amount of First Offer Shares exceeds the amount
of Refused Shares, the Refused Shares shall be allocated among the Other
Shareholders as follows: (i) first, each Other Shareholder shall be entitled to
purchase no more than its Proportionate Percentage (as defined below) of Refused
Shares; (ii) second, if any of the Other Shareholders offered to purchase less
than its Proportionate Percentage in its acceptance notice so that Refused
Shares have not been allocated for purchase pursuant to (i) above (the
"Remaining Shares"), each Other Shareholder (an "Oversubscribed Shareholder")
which had offered to purchase a number of Refused Shares in excess of the amount
of Shares allocated for purchase to it in accordance with previous allocations
of such Refused Shares, shall be entitled to purchase an amount of Remaining
Shares equal to no more than its Proportionate Percentage (treating only
Oversubscribed Shareholders as Shareholders for these purposes) of the Remaining
Shares; and (iii) third, the process set forth in (ii) above shall be repeated
with respect to any Refused Shares not allocated for purchase until all Refused
Shares are allocated for purchase. For purposes of this Agreement,
"Proportionate Percentage" shall mean, as to each Other Shareholder, the
quotient obtained (expressed as a percentage) by dividing (A) the number of
Shares owned by such Other Shareholder on the first day of the Section 4(b)
Acceptance Period by (B) the aggregate number of Shares owned on the first day
of the Section 4(b) Acceptance Period by all Other Shareholders who exercise
their option to purchase Refused Shares.
(c) If complete effective acceptance shall not be received pursuant to
Sections 4(a) and 4(b) above with respect to all of the Subject Shares offered
for sale pursuant to the Section 4 Offer Notice, then the Selling Shareholder
may (subject to complying with the provisions of Section 5 hereof) Sell all or
any portion of the Subject Shares so offered for sale and not so accepted, at a
price not less than the purchase price, and on terms not more favorable, in the
aggregate, to the purchaser thereof than the terms stated in the Section 4 Offer
Notice at any time within 90 days after the expiration of the Section 4(b)
Acceptance Period (the "Sale Period"); provided, however, that, if the Section 4
Offer contemplated an All or Nothing Sale and only a part of the Subject Shares
has been accepted by the Corporation (or
<PAGE>
-12-
its Permitted Nominee) and the Other Shareholders following the expiration of
the Section 4(b) Acceptance Period, the Selling Shareholder may Sell all of, or
a portion of, the Subject Shares held by such Selling Shareholder. To the extent
the Selling Shareholder Sells all or any portion of the Subject Shares so
offered for sale during the Sale Period, the Selling Shareholder shall promptly
notify the Corporation, and the Corporation shall promptly notify the Other
Shareholders, as to (i) the number of Shares, if any, that the Selling
Shareholder then owns, (ii) the number of Shares that the Selling Shareholder
has sold, (iii) the terms and conditions of such Sale and (iv) the name of the
beneficial and record purchasers of any Shares sold. In the event that all of
the Shares are not sold by the Selling Shareholder during the Sale Period, the
right of the Selling Shareholder to Sell such unsold Shares shall expire and the
obligations of this Section 4 shall be reinstated; provided, however, that, in
the event that the Selling Shareholder determines, at any time during the Sale
Period, that the sale of all of the Shares on the terms set forth in the Section
4 Offer Notice is impractical, the Selling Shareholder may terminate the attempt
to Sell the Subject Shares as provided in this Section 4(c) by written notice to
all Shareholders that are a Party to this Agreement and reinstate the procedures
provided in this Section 4 without waiting for the expiration of the Sale
Period.
(d) All Sales of Subject Shares to the Corporation (or its Permitted
Nominee) and/or the Other Shareholders subject to any one Section 4 Offer Notice
shall be consummated contemporaneously at the offices of the Corporation on the
later of (i) a mutually satisfactory business day within 15 days after the
expiration of the Section 4(b) Acceptance Period or (ii) the fifth business day
following the receipt of all regulatory approvals, if any (including, without
limitation, (A) the expiration or termination of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR") and (B)
the receipt of all approvals required by any applicable Canadian regulatory
authorities), applicable to such sales, or at such other time and/or place as
the parties to such sales may agree. The delivery of certificates or other
instruments evidencing such Subject Shares duly endorsed for transfer and
accompanied by stock powers shall be made on such date against payment of the
purchase price for such Subject Shares.
(e) The requirements of this Section 4 shall not apply to (i) any Sale of
Shares by a Shareholder pursuant to Section 3(a) hereof, (ii) any other Sale as
to which the Corporation, all of the Investors and holders of at least
two-thirds (2/3) of the outstanding Shares as of the date of such Sale waive
compliance and (iii) any sale pursuant to Sections 6, 10 or 12.4 or Sales of
Shares pursuant to the letter agreement, dated as of September 7, 1999, among
WFH, the Investors and the other parties thereto.
SECTION 5. Tag-Along Rights. Subject to Section 5(c) and except for any
Sale of Shares pursuant to Sections 3(a)(i), 3(a)(ii), 3(a)(iv), 3(a)(v),
3(a)(vi) or 3(b)(iii), Section 10 (with respect to Sales by In-
<PAGE>
-13-
vestors and Investor Affiliates) or Section 12.4 or Sales of Shares pursuant to
the letter agreement, dated as of September 7, 1999, among WFH, the Investors
and the other parties thereto, or any Sale of Shares to the Corporation (or its
Permitted Nominee) and/or the Other Shareholders pursuant to Section 4, each
Shareholder shall not, whether acting alone or in concert with any Other
Shareholders, in any transaction or series of transactions, Sell any Shares to
another Person or Group (other than to an Investor), except in accordance with
the following procedures:
(a) (i) Any Shareholder or Shareholders proposing to Sell Shares (for
purposes of this Section, the "Section 5 Seller") shall first deliver to each
Section 5 Other Shareholder (as defined below) a written notice (the "Section 5
Notice"), which shall specifically identify the proposed transferee (the
"Section 5 Purchaser"), the amount and type of Shares proposed to be sold, the
purchase price therefor, and a summary of the other material terms and
conditions of the proposed sale, and shall contain an offer (the "Section 5
Offer") by the Section 5 Purchaser to each Section 5 Other Shareholder, which
shall be irrevocable for a period of ten days after the delivery thereof (the
"Section 5 Acceptance Period") (and, to the extent the Section 5 Offer is
accepted during such ten day period, until the closing of the Sale contemplated
by the Section 5 Offer), to purchase an amount of Shares of such Section 5 Other
Shareholder (as defined below) at the same price per share (and, in the case of
Common Share Equivalents, such price per share multiplied by the number of
Common Shares issuable upon the conversion, exchange or exercise of such Common
Share Equivalent subject to reduction, if appropriate, for the amount per share
of the exercise or purchase price (if any) to be paid by the holder of such
Common Share Equivalent) to be paid to, and upon the same terms and conditions
as, the Section 5 Seller. A copy of the Section 5 Notice shall promptly be sent
to the Corporation. Notice of a Section 5 Other Shareholder's intention to
accept a Section 5 Offer, in whole or in part, shall be evidenced by a writing
signed by such Section 5 Other Shareholder and delivered to the Section 5
Purchaser as specified in the Section 5 Notice and the Corporation prior to the
end of the Section 5 Acceptance Period, setting forth the number of Shares that
such Section 5 Other Shareholder elects to Sell; provided, however, that such
Section 5 Other Shareholder may only sell up to that number of Shares
(calculated in accordance with Section 2) as shall equal the product of (x) a
fraction, the numerator of which is the number of Shares owned by the Section 5
Other Shareholder as of the date of such proposed sale and the denominator of
which is the aggregate number of outstanding Shares as of the date of such
proposed sale, multiplied by (y) the aggregate number of Shares proposed to be
sold by the Section 5 Seller. The number of Shares proposed to be sold by the
Section 5 Seller shall be reduced if and to the extent necessary to provide for
such sale of Shares by such Section 5 Other Shareholders electing to exercise
their right to Sell Shares under this Section 5. If effective acceptance by any
Section 5 Other Shareholders has been received pursuant to this paragraph (a),
then the Selling Shareholder shall not consummate such Sale of Shares without
participation of such Section 5 Other Shareholders. For purposes of this
<PAGE>
-14-
Agreement, "Section 5 Other Shareholder" shall mean any Other Shareholder that
is an Investor or a Material Investor.
(b) All Sales of Shares to the Section 5 Purchaser shall be consummated
contemporaneously at the offices of the Corporation on a mutually satisfactory
business day as soon as practicable, but in no event more than 15 days after the
expiration of the Section 5 Acceptance Period, or, if later, the fifth business
day following the receipt of all regulatory approvals, if any (including,
without limitation, (A) the expiration or termination of all waiting periods
under HSR and (B) the receipt of all approvals required by any Canadian
regulatory authorities), applicable to such Sales. The delivery of certificates
or other instruments evidencing such Shares duly endorsed for transfer shall be
made on such date against payment of the purchase price for such Shares.
(c) Anything contained herein to the contrary notwithstanding, any Selling
Shareholder shall, prior to complying with the provisions of this Section 5,
shall have first complied with the provisions of Section 4 hereof.
SECTION 6. Bring-Along Rights.
(a) Until the earlier of (x) eighteen (18) months after the date hereof,
and (y) an IPO by the Corporation, if WFH proposes to Sell to any Person or
Group of Persons (collectively, a "Buyer"), in a bona fide arm's-length
transaction or series of transactions, including by way of a purchase agreement,
tender offer, merger or other business combination transaction or otherwise, all
of the Shares held by it at a price per Share of more than 300% of the Adjusted
Initial Per Share Price (any such transaction being referred to herein as an
"Exit Sale"), then WFH may elect to require all Other Shareholders to Sell all
Shares beneficially owned by each of them concurrently with such Exit Sale to
such Buyer at the purchase price per share (and, in the case of Common Share
Equivalents, such purchase price per share multiplied by the number of Common
Shares issuable upon the conversion, exchange or exercise of such Common Share
Equivalent subject to reduction, if appropriate, for the amount per share of the
exercise or purchase price (if any) of such Common Share Equivalent), including
any fees and the value of any other consideration received by WFH or its
Affiliates in connection with the Exit Sale, and upon the same terms and
conditions, of the Exit Sale.
(b) The rights set forth in Section 6(a) shall be exercised by giving
written notice (the "Section 6 Notice") to each Other Shareholder setting forth
in detail the terms of the proposed Sale and the proposed closing date of the
Exit Sale, which proposed date (the "Section 6 Closing Date") shall be the later
of (i) a business day not less than 15 or more than 60 days after such Section 6
Notice is delivered to the Other Shareholders or (ii) the fifth
<PAGE>
-15-
business day following the receipt of all regulatory or third party consents and
approvals, if any, applicable to such Sale.
(c) Each Other Shareholder will (i) take all such actions, including,
without limitation, voting in favor of such proposed Sale and waiving any
appraisal, dissenter or similar rights under applicable law, as may be requested
by WFH to carry out the purposes of this Section 6, and (ii) execute all
documents reasonably requested by WFH containing such terms and conditions,
including, without limitation, representations and warranties with respect to
(x) matters of title to such Other Shareholder's securities and (y) the due
authorization (or capacity) and due and valid execution and delivery by such
Other Shareholder of documentation in respect of the Exit Sale, as those
executed by WFH; provided, however, such Other Shareholder shall not be required
to make any other representations and warranties and shall not be required to
join in any indemnity other than with respect to such Other Shareholder's
specific representations and warranties described above, or be a party to any
non-compete or similar provision.
(d) All Sales of Shares to the Buyer pursuant to this Section 6 shall be
consummated contemporaneously at the offices of the Corporation (or such other
place as is mutually agreed upon by the parties in advance) on the Section 6
Closing Date. The delivery of certificates or other instruments evidencing the
Sale of such Shares, duly endorsed for transfer, shall be made on such date
against payment of the purchase price for such Shares. WFI will bear all of the
costs and expenses incurred solely in connection with an Exit Sale to the extent
such costs are incurred for the benefit of all Shareholders and are not
otherwise paid by the Corporation or the Buyer.
(e) Notwithstanding anything to the contrary contained herein, any Sale of
Shares pursuant to an Exit Sale shall be exempt from the provisions of Section 4
hereof.
SECTION 7. Preemptive Rights.
(a) Except for Exempt Securities (as defined below), the Corporation shall
not issue, sell or exchange, or agree to issue, sell or exchange (collectively,
"Issue," and any issuance, sale or exchange resulting therefrom, an "Issuance")
(i) any of the Corporation's capital shares, (ii) any Common Share Equivalent or
(iii) any other equity security of the Corporation, including any rights to
subscribe for, purchase or otherwise acquire any capital shares or other equity
security of the Corporation (collectively, an "Equity Security") unless, in each
case, the Corporation shall have first given written notice (the "Section 7
Offer Notice") to each then holder of Preferred Shares (each a "Preemptive
Holder") which shall (a) state the Corporation's intention to sell Equity
Securities, the amount to be issued, sold or exchanged, the terms of such
securities, the purchase price therefor and a summary of the
-16-
<PAGE>
other material terms of the proposed Issuance and (b) offer (a "Preemptive
Offer") to Issue to each Preemptive Holder such Preemptive Holder's Pro Rata
Share (as defined below) of such securities (with respect to each Preemptive
Holder, the "Offered Securities") upon the terms and subject to the conditions
set forth in the Section 7 Offer Notice, which Preemptive Offer by its terms
shall remain open for a period of 15 days from the date it is delivered by the
Corporation to the Preemptive Holder (and, to the extent the Preemptive Offer is
accepted during such 15 day period, until the closing of the Sales contemplated
by the Preemptive Offer). "Pro Rata Share," for purposes of this Section, shall
mean the quotient obtained by dividing (i) the number of Common Shares, as
determined in accordance with Section 2, owned by that Preemptive Holder on the
date of the Preemptive Offer, by (ii) the total number of Common Shares
outstanding, as determined by Section 2 hereof, on the date of the Preemptive
Offer.
(b) Notice of a Preemptive Holder's intention to accept a Preemptive Offer,
in whole or in part, shall be evidenced by a writing signed by the Preemptive
Holder and delivered to the Corporation prior to the end of the 15 day period of
such Preemptive Offer (each, a "Section 7 Notice of Acceptance"), setting forth
such portion of the Offered Securities that the Preemptive Holder elects to
purchase.
(c) (i) In the event that a Section 7 Notice of Acceptance is not given by
a Preemptive Holder accepting all of its Offered Securities, the Corporation
shall have 30 days following the earlier of (A) delivery of the Section 7 Notice
of Acceptance and (B) the expiration of the 15 day period referred to in clause
(b) above if no Section 7 Notice of Acceptance is delivered, to Issue all or any
part of such remaining Offered Securities not covered by the Section 7 Notice of
Acceptance to any other Person or Persons, but only upon terms and conditions,
including, without limitation, per Share price, payment terms and dividend
payment rates, interest rates, conversion ratios or similar terms, if any, which
are no more favorable, in the aggregate, to such other Person or Persons or less
favorable to the Corporation than those set forth in the Preemptive Offer.
(ii) If the Corporation does not consummate the Issuance of all or part of
the remaining Offered Securities to such other Person or Persons within the 30
day period referred to in clause (c) above, the right provided hereunder shall
be deemed to be revived and such securities shall not be offered unless first
reoffered to the Preemptive Holders in accordance with this Section 7.
(iii) The purchase by a Preemptive Holder of any Offered Securities is
subject in all cases to the execution and delivery by the Corporation and the
Preemptive Holder of a purchase agreement relating to such Offered Securities in
form and substance similar in all material respects to the extent applicable to
that executed and delivered between the Corporation and such other persons. All
Issuances of Shares to any Preemptive Holder pursuant to this Section 7 shall be
consummated contemporaneously at the offices of the Cor-
-17-
<PAGE>
poration (or such other place as is mutually agreed upon by the parties) on the
later of (A) a business day not less than 15 or more than 60 days after the end
of the 15 day period referred to in clause (b) above, and (B) the fifth business
day following the receipt of all regulatory or third party consents and
approvals, if any, applicable to such Sales, or at such other time and/or place
as the parties to such Sales may agree. The delivery of certificates or other
instruments evidencing such Shares duly endorsed for transfer shall be made on
such date against payment of the purchase price for such Shares.
(d) As used herein, "Exempt Securities" shall mean: (i) any Common Shares
issuable or issued to employees, directors and consultants of the Corporation
pursuant to any employee benefit plans, and which issuances have been approved
in accordance with Section 9 or are Employee Shares (as defined in the Purchase
Agreement); (ii) any Series A Non-Voting Preferred Shares issued pursuant to the
Purchase Agreement and any Common Shares or Series B Voting Preferred Shares
issuable upon the conversion of any such Series A Non-Voting Preferred Shares;
(iii) Common Shares or Common Share Equivalents issued and outstanding on the
date hereof or Common Shares issued upon the conversion or exercise of any such
outstanding Common Share Equivalents; (iv) Common Shares issued or issuable as
direct consideration for the acquisition by the Corporation of another business
entity or in connection with a merger or consolidation or in connection with the
acquisition or lease of assets or the issuance of indebtedness, which issuance
has been approved in accordance with Section 9; (v) Common Shares issued in any
IPO; (vi) Common Shares issued pursuant to a Minority Roll-Up Transaction; or
(vii) Common Shares issued pursuant to the Ledcor Roll-Up Agreement; (viii)
Shares issued upon conversion of other Shares to the extent permitted by the
terms of this Agreement and in accordance with their terms; or (ix) Shares
issued to Ramsey-Beirne Investment Partners, LLC to acquire Shares pursuant to
terms of the agreement dated July 7, 1999 between the Corporation and
Ramsey-Beirne Investment Partners, LLC..
SECTION 8. Corporate Governance.
8.1. Board of Directors.(a) The Board shall have overall responsibility for
managing and supervising the management of the business and affairs of the
Corporation, and the power and authority of the directors shall be subject only
to such restrictions as are imposed by this Agreement and by applicable law.
(b) The maximum number of members of the Board shall be twelve (12).
(c) At all times, a majority of the directors on the Board and any
committees of the Board shall be Canadian citizens ordinarily resident in
Canada.
<PAGE>
-18-
(d) From and after the date hereof and until DLJ, together with its
Investor Affiliates, Sell 25% or more of the Shares issued to it pursuant to the
Purchase Agreement (as equitably adjusted to reflect any stock split, stock
dividend, combination, reorganization, recapitalization, reclassification or
other similar event involving Common Shares), DLJ shall have the right to
nominate one person (the "DLJ Designee") to serve as a director on the Board.
(e) From and after the date hereof and until the GSCP Parties, together
with their Investor Affiliates, Sell 25% or more of its Shares issued to it
pursuant to the Purchase Agreement (as equitably adjusted to reflect any stock
split, stock dividend, combination, reorganization, recapitalization,
reclassification or other similar event involving Common Shares), GSCP shall
have the right to nominate one person (the "GSCP Designee") to serve as a
director on the Board.
(f) From and after the date hereof and until Providence, together with its
Investor Affiliates, Sell 25% or more of the Shares issued to it pursuant to the
Purchase Agreement (as equitably adjusted to reflect any stock split, stock
dividend, combination, reorganization, recapitalization, reclassification or
other similar event involving Common Shares), Providence shall have the right to
nominate one person (the "Providence Designee") to serve as a director on the
Board.
(g) From and after the date hereof and until Tyco, together with its
Investor Affiliates, Sell 56% or more of the Shares issued to it pursuant to the
Purchase Agreement (as equitably adjusted to reflect any stock split, stock
dividend, combination, reorganization, recapitalization, reclassification or
other similar event involving Common Shares), Tyco shall have the right to
nominate one person (the "Tyco Designee"; collectively with the DLJ Designee,
the GSCP Designee and the Providence Designee, the "Investor Designees"), to
serve as a director on the Board.
(h) From and after the date hereof, the remaining members of the Board
shall be nominated by members of management of the Corporation (the
"Non-Investor Designees", collectively with the DLJ Designee, the GSCP Designee,
the Providence Designee and the Tyco Designee, the "Designees").
(i) At each meeting of Shareholders at which the election of members of the
Board is on the agenda, the Corporation shall recommend to Shareholders the
election of the Designees as directors and each Shareholder shall vote all of
the voting securities of the Corporation over which such Person has voting
control so as to effect the provisions of this Section 8.
-19-
<PAGE>
(j) Prior to an IPO, the Corporation shall, after receiving notice from
such Investors as to the identity of any representative of such Investor (a
"Representative"), (i) permit a Representative to attend all Board meetings and
all committees thereof as an observer; and (ii) provide the Representative
advance notice of each such meeting, including such meeting's time and place, at
the same time and in the same manner as such notice is provided to the members
of the Board (or such committee thereof) and copies of all materials distributed
to the members of the Board (or such committee thereof) at the same time as such
materials are distributed to such Board (or such committee thereof) and shall
permit the Representative to have the same access to information concerning the
business and operations of the Corporation; and (iii) permit the Representative
to discuss the affairs, finances and accounts of the Corporation with, and to
make proposals and furnish advice with respect thereto to, the Board, without
voting. Reasonable out-of-pocket expenses incurred by the Representative for the
purposes of attending Board (or committee) meetings will be paid by the
Corporation.
8.2. Vacancies; Removal.
(a) Subject to paragraph (b) of this Section 8.2, each director of the
Corporation shall hold office until his or her death or resignation or until his
or her successor shall have been duly elected and qualified. If any Investor
Designee shall cease to serve as a director of the Corporation for any reason,
the vacancy resulting thereby shall be filled by another director nominated by
the Investor initially nominating that director.
(b) Each Shareholder in its capacity as a holder of Shares agrees that it
shall not vote in favor of a resolution in respect of the removal of an Investor
Designee unless that resolution has been put forward by the Investor having the
right to designate that director, and the removal of that director has been
recommended by the Investor having the right to designate that director. Each
Investor shall have the right to call a meeting of Shareholders to put forward a
resolution of the Shareholders removing any director designated by it, with or
without cause, at any time.
8.3. Quorum.
(a) Subject to paragraphs (b) and (c) below, a quorum for meetings of the
Board shall be nine persons present of which three shall be Investor Designees;
provided, however, that at all times a majority of directors present must be
Canadian citizens ordinarily resident in Canada.
(b) If at a meeting of directors a quorum is not present, the directors may
adjourn the meeting to a fixed time and place (provided they shall give written
notice of such time and place to each director not in attendance). At the
meeting immediately following the
-20-
<PAGE>
adjourned meeting, the directors present at such meeting shall constitute a
quorum; provided, however, that unless a full quorum is present as provided in
paragraph (a) above, the directors present at such meeting may not transact any
business except as specifically set forth in the notice of meeting.
(c) The Corporation agrees that (i) each director shall be provided written
notice of the meetings of the Board , including adjourned meetings, at least
forty-eight (48) hours before such meetings, unless such notice is waived in any
manner, with attendance at such meetings constituting valid waiver (other than
attendance for the express purpose of objecting to the manner in which the
meeting was called), and (ii) each Investor Designee shall be provided with an
opportunity to participate in each meeting of the Board by means of a conference
telephone or similar communications equipment.
8.4. Committees of the Corporation.
(a) On or before the date hereof, the Board shall establish a nominating
committee (the "Nominating Committee") comprised of five directors, two of whom
shall be designated by the Financial Investors as long as designees of any of
the Financial Investors continue to serve on the Board, and three of whom shall
be designated by WFH and, shall be resident Canadians (as defined in the Canada
Business Corporations Act), which committee will have the exclusive authority to
make nominations with respect to hiring the Corporation's Senior Officers.
(b) On or before the date hereof, the Board shall establish a compensation
committee (the "Compensation Committee") comprised of five directors, two of
whom shall be designated by the Financial Investors as long as designees of any
of the Financial Investors continue to serve on the Board, and three of whom
shall be designated by WFH and shall be resident Canadians, which committee will
have the exclusive authority to make recommendations to the Board with respect
to all aspects of compensation and other benefits, including stock options or
other equity based compensation, of the Senior Officers of the Corporation.
(c) Without limiting paragraphs (a) or (b) above, the Corporation shall, at
the request of any of the Investors, cause a Investor Designee to be appointed
or elected in each case to each of the other committees of the Board, provided
that, following an IPO, such Investor Designee meets the qualifications
necessary to serve on such committee established in compliance with Section 9.
If any director serving on any committee shall cease to serve as a director of
the Corporation for any reason or otherwise is unable to fulfill his or her
duties on any such committee, he or she shall be succeeded by another director
designated in accordance with the provisions of Section 8.1 by the party
initially designating the director.
<PAGE>
-21-
8.5. Directors' Indemnification.
(a) The Corporation shall obtain and cause to be maintained in effect, with
financially sound insurers, a policy of directors' and officers' liability
insurance in an amount of at least US$5,000,000 or more and upon such terms as
are reasonably acceptable to the Investors.
(b) The Articles of Continuance, or By-Laws, or both, shall to the fullest
extent permitted by law provide for indemnification of, and advancement of
expenses to, and limitation of the personal liability of, the directors of the
Corporation or such other person or persons, if any, who, pursuant to a
provision of such Articles of Incorporation, exercise or perform any of the
powers or duties otherwise conferred or imposed upon such directors, which
provisions shall not be amended, repealed or otherwise modified in any manner
adverse to the directors until at least six (6) years following the date that
the Investors are no longer entitled to designate directors pursuant to this
Section 8.
8.6. No Expansion of Duties. The parties acknowledge that the Investors and
their Investor Affiliates have investments in other business similar to and
which may compete with the Corporation's businesses ("Competing Businesses") and
reserve the right to make additional investments in other Competing Businesses
independent of their investments in the Corporation. By virtue of an Investor
holding Shares or by having persons designated by or affiliated with such
Investor serving on the Board or any Subsidiary's Board of Directors (or the
functional equivalent thereof in the case of non-corporate Subsidiaries) or
otherwise, no Investor nor any of the Investor Affiliates shall have any
obligation to the Corporation, any Subsidiary or any holder of Shares to refrain
from competing with the Corporation or any Subsidiary, making investments in
Competing Businesses, otherwise engaging in any commercial activity, and none of
the Corporation, any Subsidiary or any holder of Shares (other than such
Investor) shall have any right with respect to any such investments or
activities undertaken by such Investor. Without limitation of the foregoing,
each Investor or any Investor Affiliates may engage in or possess an interest in
other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Corporation or any
Subsidiary, and none of the Corporation, any Subsidiary or any holder of Shares
(other than the Investor) shall have any rights or expectancy by virtue of such
Investor's relationships with the Corporation, any Subsidiary, this Agreement or
otherwise in and to such independent ventures or the income of profits derived
therefrom; and the pursuit of any such venture, even if such investment is in a
Competing Business, shall not be deemed wrongful or improper. No Investor nor
any Investor Affiliates shall be obligated to present any particular investment
opportunity to the Corporation or any Subsidiary even if such opportunity is of
a character that, if presented to the Corporation or a Subsidiary, could be
taken by the Corporation or such Subsidiary, and the Investor and their Investor
Affiliates shall continue to have the right to
-22-
<PAGE>
take for their own respective account or to recommend to others any such
particular investment opportunity.
8.7. Expenses. The Corporation shall pay all reasonable travel expenses and
other out-of-pocket disbursements incurred by the directors to attend meetings
of the Board, of any Subsidiary board of directors or of any committees thereof.
8.8. Shareholder Voting Arrangement. Each Shareholder agrees to vote all
Voting Shares of the Corporation beneficially owned by it with respect to the
election or removal, to or from the Board, of (a) so long as DLJ has the right
to nominate a DLJ Designee in accordance with section 8.1(d), the DLJ Designee
in accordance with the directions of DLJ, (b) so long as GSCP has the right to
nominate a GSCP Designee in accordance with section 8.1(e) the GSCP Designee in
accordance with the directions of GSCP, (c) so long as Providence has the right
to nominate a Providence Designee in accordance with Section 8.1(f), the
Providence Designee in accordance with the directions of Providence, (d) so long
as Tyco has the right to nominate a Tyco Designee in accordance with Section
8.1(g), the Tyco Designee in accordance with the directions of Tyco, and (e) the
Non-Investor Designees in accordance with the directions of the members of
management nominating such Designees.
8.9. Appointment of Senior Officers. The Board shall have the sole and
absolute authority to elect, appoint or hire any Senior Officer of the
Corporation. Each Senior Officer shall be elected or appointed by the Board only
from nomination lists prepared and approved by the Nominating Committee.
SECTION 9. Major Transactions.
(a) To the fullest extent permitted by law, from and after the date hereof
until an IPO resulting in at least $150,000,000 of gross aggregate proceeds to
the Corporation and any Selling Shareholders before deducting underwriting
discounts and commissions and offering expenses, the Corporation shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, undertake
or enter into any binding agreements or commitments with respect to a Major
Transaction (as defined below) unless (1) the Corporation shall have given to
each Investor at least thirty (30) and not more than ninety (90) days prior
written notice (a "Major Transaction Notice"), setting forth in detail the
proposed terms of any Major Transaction and the proposed closing date (if
applicable) of the Major Transaction and (2) within thirty (30) days of
receiving the Major Transaction Notice Investors representing a Supermajority
shall not have given notice to the Corporation of their election to disapprove
or veto such Major Transaction.
(b) A "Major Transaction" shall mean any of the following actions:
<PAGE>
-23-
(i) the Corporation or any Subsidiary shall consolidate or
merge into or with any other Person, sell or transfer all or
substantially all of its assets to another Person, or enter into any
other similar business combination transaction (other than any such
transaction entered between or among the Corporation and any of its
wholly owned Subsidiaries); provided, however, that this Section
9(b)(i) shall not apply to any consolidation, merger, sale of assets or
other similar business combination transaction pursuant to Section 10;
(ii) the Corporation or any Subsidiary shall purchase, acquire
or obtain any capital shares or other proprietary interest, directly or
indirectly, in any other entity or related entities, or any business or
assets of another Person or related Persons or enter into or commit to
enter into or make any investment in any joint ventures or
partnerships, establish any entity, including an affiliate of the
Corporation, for consideration (including assumed liabilities) having a
value (individually or in the aggregate during the term of this
Agreement) in excess of $200 million;
(iii) the Corporation or the Corporation and its Subsidiaries
taken as a whole shall change significantly the scope and nature of its
business or operations;
(iv) the Corporation or any Subsidiary shall sell, lease,
transfer or otherwise dispose of any asset or group of assets (other
than sales, lease, transfer or other disposition of assets or group of
assets in the ordinary course of business), in an aggregate amount
(from the date hereof) with a book value or fair market value of $100
million or more;
(v) the Corporation or any Subsidiary shall pay, or set aside
any sums for the payment of, any dividends, or make any distribution
on, any outstanding capital shares of the Corporation or any Subsidiary
or redeem, repurchase or otherwise acquire any outstanding capital
shares of the Corporation or any Subsidiary (except for dividends and
distributions to, and redemptions, repurchases or other acquisitions
from the Corporation or any wholly-owned Subsidiary of the
Corporation);
(vi) the Corporation or any Subsidiary shall authorize, issue,
sell or grant any of its capital shares or other equity securities
individually or in the aggregate during the term of the Agreement
having a value (at the time of issuance) in excess of $100 million
except for (A) the issuance of Series A Non-Voting Preferred Shares or
other classes of Shares pursuant to the Purchase Agreement, (B) the
issuance of Common Shares or Preferred Shares upon conversion of the
Series A Non-Voting Preferred Shares issued or issuable pursuant to the
Purchase Agreement, (C) the issuance of Common Shares upon the
conversion, exchange or exercise of any Common Share Equivalent
outstanding as of the date hereof, (D) the issuance of Common Shares
<PAGE>
-24-
in connection with the Minority Roll-Up Transactions, or (E) issuance
of 4,500,000 Common Shares in connection with the Ledcor Roll-Up
Transaction;
(vii) the Corporation or any Subsidiary shall enter into any
transactions (except as expressly permitted by the this Agreement and
except for transactions between or among the Corporation, any of its
wholly-owned Subsidiaries or any of the following entities so long as
such entities and their wholly-owned Subsidiaries substantially retain
their current ownership: (A) Worldwide Fiber (USA), Inc., (B) WFI-CN
Fibre Inc. and (C) Worldwide Fiber IC LLC) with any shareholder,
director, officer or employee of the Corporation or any of its
Subsidiaries, or any person who, directly or indirectly, controls, is
controlled by, or is under common control with any current shareholder,
director, officer or employee or any relative or spouse of any current
shareholder, director, officer or employee, other than any transactions
existing as of the date hereof or transactions in the ordinary course
of business on terms that are no less favorable to the Corporation or
such Subsidiary than those that would have been obtained in a
comparable transaction by the Corporation with a Person who is not an
Affiliate, provided that if such transaction involves consideration
exceeding $10,000,000 the Corporation shall have delivered to each of
the Investors an opinion that the transaction is fair from a financial
point of view to the Corporation issued by an accounting, appraisal or
investment banking firm of national standing in the United States. If
the proposed Major Transaction contemplated by this clause (viii) is
with a Person who is an Investor or an Affiliate of any Investor, then
such Investor shall be excluded from voting in a Supermajority's
consideration of the subject Major Transaction and a fairness opinion
shall not be required with respect to the subject Major Transaction
with any Financial Investor or its Affiliates;
(c) the Corporation shall amend its Articles of Continuance, By-Laws or
other constituent corporate documents, including, without limitation, any change
in the number of directors comprising its Board or the establishment of
committees;
(d) the Corporation or any Subsidiary shall become a party to any agreement
which by its terms restricts the Corporation's performance of the terms of the
Purchase Agreement, the Registration Rights Agreement, the Series A Non-Voting
Preferred Shares or this Agreement;
(e) the Corporation or any Subsidiary shall incur, create, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to any indebtedness of more than $100 million
(individually or in the aggregate during the term of this Agreement) excluding
drawdowns of up to $150 million under the Corporation's senior credit facility,
substantially in accordance with the terms as set forth in the form of the draft
Credit Agreement dated August 30, 1999 between the Corporation, Certain Lend-
<PAGE>
-25-
ers and Citibank Canada, as Administrative Agent (the "Citibank Facility") that
was provided to each of the Investors or any replacement facility with terms
that are at least as favorable to the Corporation as those in the Citibank
Facility in all material respects;
(f) the approval or adoption by the Corporation of its financing and
capital plans as well as any material amendments to the Corporation's annual
budgets;
(g) the Corporation and its Subsidiaries shall incur capital expenditures
exceeding 110% of the amount permitted by the approved budget in any fiscal year
on a consolidated basis;
(h) the Corporation or any Subsidiary shall adopt or amend any stock option
plan, bonus plan or other employee benefit plan or grant or issue any Common
Shares, Common Share Equivalents or other equity securities under any such plan
other than initial grants or issuances under the "Existing 10% Option Pool" or
the "New 5% Option Pool" and grants of "Permitted Reissued Options," as such
terms are defined in the Purchase Agreement, and issuances of Common Shares upon
the exercise of Permitted Reissued Options;
(i) the Corporation shall change its independent auditors;
(j) the Corporation or any Subsidiary shall grant any severance or
termination pay to any executive officer or senior management except payments
made pursuant to any written agreements outstanding on the date hereof and
furnished to the Investors prior to the date hereof or approved in accordance
with this Section 9 or as determined by counsel to the Corporation to be
required by the applicable Canadian law;
(k) the Corporation shall adopt or change any accounting principle,
practice or method (including, without limitation, changes in revenue
recognition), except for such changes which (A) in the opinion of its
independent auditors, are required by law, (B) do not involve discretion on the
part of the reporting entity, and (C) are described in a written notice
delivered to each of the Investors prior to implementation thereof;
(l) the Corporation shall authorize, issue or Sell any Shares for a
purchase price per Common Share (including any consideration paid upon the
issuance thereof and upon conversion or exercise of any Common Share Equivalent)
less than the Adjusted Initial Per Share Price;
(m) the Board shall make the determination permitted by the last sentence
of Section 10(c);
-26-
<PAGE>
(n) the Corporation shall remove from office, dismiss or terminate the
employment of any Senior Officer, other than for Cause; and
(o) the Corporation or any Subsidiary shall agree or otherwise commit to
take any of the actions set forth in the foregoing subparagraphs (i) through
(xix).
SECTION 10. Liquidity Rights.
(a) Following the fourth anniversary of the date hereof, in the event the
Corporation has not completed a Qualified IPO, (i) any of DLJ, GSCP or
Providence, or (ii) Tyco, together with one of DLJ, GSCP or Providence (a
"Section 10 Seller"), may require the Corporation (provided the Corporation does
not exercise its right to either (i) acquire or (ii) cause a third party to
acquire, all but not less than all of the Shares held by the Section 10 Seller
and its Investor Affiliates pursuant to paragraph (b) below), to conduct,
pursuant to the auction process set forth below (the "Auction"), or otherwise as
provided in paragraph (c) below, a sale of the Corporation, whether by means of
a sale of all or substantially all of the Shares of the Corporation, a merger, a
sale of all or substantially all of the assets of the Corporation, or other
business combination transaction to a third party not affiliated with the
Investor exercising the Section 10 Offer (the "Acquiror").
(b) A Section 10 Seller may initiate an Auction by delivering written
notice to the Corporation and each other Investor (the "Section 10 Notice"),
which shall (i) contain an offer (the "Section 10 Offer") by the Section 10
Seller to the Corporation to sell all, but not less than all, of the Shares held
by the Section 10 Seller to the Corporation or a third party identified by the
Corporation for the greater of (a) the liquidation preference of the Shares and
(b) Fair Market Value (the "Section 10 Minimum Price") during the Section 10
Option Period (as defined below) and (ii) shall set forth the Section 10 Minimum
Price, as determined in accordance with Section 1.7. Each other Investor shall
have a period of 10 days after receipt of the Section 10 Offer to notify the
Corporation in writing that it also makes a Section 10 Offer on the same terms
as the original Section 10 Offer. All Sales of Shares pursuant to the Section 10
Offers shall be consummated contemporaneously at the offices of the Corporation
on a mutually satisfactory business day as soon as practicable, but in any event
not later than 180 days after the delivery of the original Section 10 Offer (the
"Section 10 Offer Period"). The delivery of certificates or other instruments
evidencing such Shares duly endorsed for transfer shall be made on such date
against payment of the purchase price for such Shares. The Corporation or third
party purchaser shall bear all costs and expenses incurred in connection with a
Section 10 Sale. If any such purchase is not consummated in accordance with this
Section 10, including without limitation due to failure by the Corporation or
third party purchaser to pay the purchase price, such Section 10 Offer shall be
deemed to have not been accepted by the Corporation.
<PAGE>
-27-
(c) If the Corporation or another Person shall not have purchased all of
the Section 10 Offered Shares for not less than the Section 10 Minimum Price
prior to the expiration of the Section 10 Offer Period or if the Corporation
shall have rejected the Section 10 Offer, the Corporation shall at the election
of the Section 10 Seller either (i) retain an investment bank of national
reputation (the "Auctioneer") to conduct the Auction on the Corporation's behalf
or (ii) cause the Corporation to be sold in such other manner as the Section 10
Seller may elect with the consent of a Supermajority of the Investors (which may
include the Section 10 Seller). If the Corporation is to be sold by Auction, the
Auction shall be conducted pursuant to bidding procedures that are (i)
determined by the Auctioneer in its sole discretion, and (ii) uniformly
applicable and applied to all interested parties who are identified by the
Auctioneer or are otherwise invited to participate in the Auction for the
submission and evaluation of proposals. The Auction shall be completed as
promptly as possible and in any event within six months of the expiration of the
Section 10 Offer Option Period. The Corporation shall provide the Auctioneer
with all reasonable assistance requested by the Auctioneer to consummate the
Auction. All Shareholders and each of the Investors shall have the right to
submit a bid pursuant to the Auction for the outstanding Shares of the
Corporation not held by them and have such bid evaluated on a basis no more or
less favorable than that afforded to other participants in the Auction; provided
that for so long as WFH or any Investor shall wish to have its bid considered
pursuant to the Auction, WFH or such Investor, as the case may be, and its
representatives on the Board shall be recused from all information received or
considered by the Corporation or the Board with respect to the Auction or the
Board with respect to the Auction or the results thereof. The Acquiror shall be
identified by the Auctioneer at the conclusion of the Auction; provided, that
the bid by such Acquiror shall be satisfactory to the Section 10 Seller, and the
sale of such assets or capital shares of the Corporation to such Acquiror shall
constitute the "Required Sale" unless, prior to a binding agreement for the
Required Sale being entered into with the Acquiror, the Board shall determine in
good faith, after consultation with its financial and legal advisors, that any
bona fide written proposal from a third party for a competing transaction is
more favorable to the shareholders of the Corporation from a financial point of
view than the Required Sale, is likely to and capable of being consummated, and
is in the best interest of the shareholders of the Corporation, and the
Corporation has determined that failure to enter into such a competing
transaction will constitute a breach of the Board's fiduciary duties under
applicable law.
(d) If the Required Sale is by means of a Sale of all or substantially all
of the issued and outstanding Shares of the Corporation, then the Required Sale
shall constitute an Exit Sale for purposes of Section 6 and the provisions of
Section 6 shall be applicable to such Required Sale as if the Section 10 Seller
had all of the rights of WFH thereunder to require the Other Shareholders to
participate in such Required Sale, provided, however, that if the Required Sale
shall not be consummated, all of the provisions of this Section 10 shall then be
reinstated.
<PAGE>
-28-
(e) If the Required Sale is other than by means of a sale of the
outstanding capital shares of the Corporation, then the Corporation shall
deliver a written notice (the "Required Sale Notice") to each Shareholder
setting forth in detail the terms of the proposed Required Sale and the proposed
closing date of the Required Sale, which proposed date (the "Required Sale
Closing Date") shall be the later of (i) a Business Day not less than 15 or more
than 60 days after such Required Sale Notice is delivered to the Shareholders,
or (ii) the fifth day following the receipt of all regulatory or third party
consents and approvals, if any, applicable to such Required Sale. Each
Shareholder will (x) take all such actions, including, without limitation,
voting in favor of such proposed Sale and waiving any appraisal, dissenter or
similar rights under applicable law, as may be requested by the first initial
Section 10 Seller to carry out the purposes of this Section 10 and (y) execute
all documents reasonably requested by the initial Section 10 Seller containing
such terms and conditions, including, without limitation, representations and
warranties with respect to (x) matters of title to such Other Shareholder's
securities and (y) the due authorization (or capacity) and due and valid
execution and delivery by such Other Shareholder of documentation in respect of
the Required Sale, as those executed by the initial Section 10 Seller; provided,
however, such Other Shareholder shall not be required to make any other
representations and warranties and shall not be required to join in any
indemnity other than with respect to such Other Shareholder's specific
representations and warranties described above, or be a party to any non-compete
or similar provision. The Required Sale shall be consummated at the offices of
the Corporation on the Required Sale Closing Date. The Corporation will bear all
costs and expenses incurred in connection with the Required Sale to the extent
such costs and expenses are not otherwise paid by the Acquiror. If the Required
Sale shall not be consummated, all of the provisions of this Section 10 shall
then be reinstated.
SECTION 11. Representations and Warranties.
(a) Each of the parties hereto represents and warrants to the other parties
hereto as follows:
(i) It has full power and authority to execute, deliver and
perform its obligations under this Agreement;
(ii) This Agreement has been duly and validly authorized,
executed and delivered by it, and constitutes a valid and binding
obligation of it, enforceable against it in accordance with its terms
except to the extent that enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally;
(iii) The execution, delivery and performance of this Agreement
by it does not (A) violate, conflict with, or constitute a breach of or
default under its organiza-
<PAGE>
-29-
tional documents, if any, or any material agreement to which it is a
party or by which it is bound or (B) violate any law, regulation,
order, writ, judgment, injunction or decree applicable to it;
(iv) No consent or approval of, or filing with, any governmental
or regulatory body is required to be obtained or made by it in
connection with the transactions contemplated hereby (except those
which have been made or obtained); and
(v) It is not a party to any contract or agreement which is
inconsistent with the rights of any party hereunder or otherwise
conflicts with the provisions hereof.
(b) Each of the Shareholders represents and warrants as follows:
(i) Schedule 11(b)(i) hereto sets forth a list of all
securities of the Corporation (including, without limitation, capital
shares, convertible securities, debentures, etc.) held of record or
beneficially owned by it immediately after the Closing; and
(ii) Except for this Agreement, the Purchase Agreement, the
Registration Rights Agreement of even date herewith or as set forth on
Schedule 11(b)(ii) hereto, it is not a party to any contract or
agreement, written or oral, (A) with respect to Common Shares, Common
Share Equivalents or other equity securities of the Corporation
(including, without limitation, any voting agreement, voting trust,
Shareholder's agreement, registration rights agreement, etc.) or (B)
otherwise with or relating to the Corporation.
SECTION 12. Certain Covenants.
12.1. Protection of Investors. The Corporation and the Shareholders each
agree that all of the following provisions of this Section 12 are for the
exclusive benefit, protection and enjoyment of each of the Investors (severally
and not jointly) and their permitted successors and assigns, and may only be
enforced or remedied by the Investors (severally and not jointly) and their
permitted successors and assigns.
12.2. Additional Issuances. The Corporation agrees that, anything contained
herein to the contrary notwithstanding, (a) any Person to which Shares are
issued in a Private Sale after the date hereof and who after giving effect to
such Issuance, would own more than 1% in the aggregate of the then total
outstanding Shares or voting power (on either a primary or fully diluted basis),
or (b) any Person to which Shares are issued and who is or becomes a Key
Shareholder of the Corporation, shall upon consummation of, and as a condition
to, such
<PAGE>
-30-
Issuance execute, and agree to be bound by the terms of, this Agreement and
shall thereafter be deemed a Shareholder for all purposes of this Agreement.
12.3. Ledcor Roll-Up Transactions. Ledcor and the Corporation shall
consummate the transaction contemplated by the Ledcor Roll-Up Agreement in
accordance with its terms. Neither Ledcor nor the Corporation shall amend,
modify or waive, temporarily or permanently, any of the terms or provisions of
the Ledcor Roll-Up Agreement in any manner adverse to the Corporation or the
Investors without the unanimous written consent of the Investors.
12.4. Ledcor Roll-Up Failure. In the event that the Corporation shall not
have consummated the transactions contemplated by the Ledcor Roll-Up Agreement
on or before the earliest of (w) the date of the pricing of an IPO, (x) the
earliest of the date of any corporate action approving, the record date of, or
the effective date of, a transaction of the nature referred to in Section
9(b)(i) (without giving effect to the proviso thereto), (y) the date any Section
5 Notice is given by WFH, Ledcor or their Affiliates (other than a Sale pursuant
to Section 3(a)(ii)), or (z) September 30, 1999, in consideration for the
issuance of 4,500,000 Common Shares in accordance with the terms of the Ledcor
Roll-Up Agreement (a "Ledcor Roll-Up Failure"), each Investor (a "Section 12.4
Seller") shall have the absolute right at any time thereafter by giving written
notice to Ledcor and each other Investor (the "Put Notice"), to sell to Ledcor
all, but not less than all, Shares held by such Investor (the "Section 12.4
Shares") for their aggregate Liquidation Value (the "Put Price"). Upon delivery
of the Put Notice pursuant to this Section 12.4 (the date of such delivery, the
"Put Date"), Ledcor will be obligated to purchase from the Section 12.4 Seller
and each other Investor who shall elect to put its Shares to Ledcor pursuant to
this Section 12.4 prior to the Purchase Date (as defined below) and each Section
12.4 Seller will be obligated to sell to Ledcor all, but not less than all, of
the Section 12.4 Shares, in exchange for payment of the Put Price. The
consummation of the purchase of the Section 12.4 Shares will take place on a
date (the "Purchase Date") mutually agreeable to the parties but in any event
not later than 15 days following the Put Date. On the Purchase Date, Ledcor
shall pay to each Section 12.4 Seller the Put Price by wire transfer of
immediately available funds to such account(s) as are specified in writing in
advance of the Purchase Date by each Section 12.4 Seller against delivery to
Ledcor of the Section 12.4 Shares, free and clear of all Encumbrances other than
this Agreement. The election of an Investor to sell its Shares to Ledcor under
this Section 12.4 shall not restrict or limit the right of any other Investor
who does not join in such Sale from subsequently exercising its rights under
this Section 12.4. The provisions of Section 3, Section 4 and Section 5 shall
not apply to a Sale of Shares pursuant to this Section 12.4.
12.5. Access to Records. From and after the Closing and so long as an
Investor or its Permitted Assigns continue to hold any Series A Non-Voting
Preferred Shares,
<PAGE>
-31-
Series B Voting Preferred Shares or Common Shares, the Corporation shall, and
shall cause each of its Subsidiaries to, afford such Investor or its Permitted
Assigns (as applicable) and their respective employees, counsel and other
authorized representatives access, during normal business hours, upon reasonable
advance notice, with due regard to its ongoing operations, to all of its books,
records and properties, and to all of its officers and employees for any
reasonable purpose whatsoever.
12.6. Financial Reports. From and after the Closing and provided an
Investor or its Permitted Assigns holds any Series A Non-Voting Preferred
Shares, Series B Voting Preferred Shares or Common Shares, the Corporation
agrees to furnish to such Investor or its Permitted Assigns (as applicable) the
following:
(a) Within 30 days after the end of each fiscal month, (i) internal monthly
financial and operating statements for such month ("Monthly Financials")
prepared by the Corporation under the direction of a senior executive officer of
the Corporation.
(b) Within 45 days after the end of each quarterly fiscal period, (i)
unaudited balance sheets and an income statement as of the end of such period,
together with statements of retained earnings and cash flow for such period
("Quarterly Financials") and a letter or memorandum discussing the summary
financial information for such period and setting forth a comparison by
reasonable categories of such financial information to the comparable figures
for the prior year and a reasonable explanation of any differences (a
"Management Letter") (with the Management's Discussion and Analysis of Financial
Condition and Results of Operation section of any Form 10-Q or Form 10-K or
similar document filed with the United States Securities and Exchange Commission
for such quarter being sufficient to satisfy this requirement), plus (ii) a
statement certified by the Chief Financial Officer of the Corporation,
certifying that the financial position and results of operations of the
Corporation for such period as presented in the Quarterly Financials are
presented fairly and have been prepared in accordance with GAAP (subject to
normal year-end adjustments and the absence of footnotes) consistently applied.
(c) Within 120 days (or such lesser period as is either (x) required under
applicable laws for similar disclosure to any securityholders of the Corporation
or (y) in which similar disclosure is provided to other financing sources of the
Corporation, including, without limitation, any banks) after the end of each
fiscal year, commencing with the first fiscal year ending after the Closing, (i)
audited balance sheets and an income statement as of the end of such fiscal
year, together with statements of retained earnings and cash flow for such
fiscal year, all in reasonable detail and certified by a recognized national
firm of independent accountants selected by the Board as presenting fairly the
financial position and results of op-
-32-
<PAGE>
erations of the Corporation and as having been prepared in accordance with GAAP
consistently applied, including their opinion thereon, (ii) the accounting
firm's management letter and (iii) a Management Letter (with the Management's
Discussion and Analysis of Financial Condition and Results of Operation section
of any Form 10-Q or Form 10-K or similar document filed with the United States
Securities and Exchange Commission for such quarter being sufficient to satisfy
this requirement).
(d) Promptly upon becoming available, (i) copies of all financial
statements, reports, press releases, notices, proxy statements and other
documents sent by the Corporation to its shareholders or released to the public
and copies of all regular and periodic reports, if any, filed by the Corporation
with any Canadian or non-Canadian securities regulatory agency or any securities
exchange and (ii) any other financial or other information available to
management of the Corporation as any Investors shall have reasonably requested
on a timely basis.
(e) If for any period the Corporation shall have any subsidiary or
subsidiaries whose accounts are consolidated with those of the Corporation,
then, in respect of such period, the financial statements and information
delivered pursuant to the foregoing paragraphs (a), (b) and (c) of this Section
12.6 shall be the consolidated and consolidating financial statements of the
Corporation and all such consolidated subsidiaries.
(f) At least 30 days but not more than 90 days prior to the beginning of
each fiscal year, an annual budget prepared on a monthly basis for the
Corporation for such fiscal year (displaying anticipated statements of income
and cash flows and balance sheets), and promptly upon preparation thereof any
other significant budgets prepared by the Corporation and any revisions of such
annual or other budgets, and, provided that an Investor make request therefor,
within 30 days after any monthly period in which there is a material adverse
deviation from the annual budget, a statement explaining the deviation and what
actions the Corporation has taken and proposes to take with respect thereto.
(g) Promptly (but in any event within seven Business Days) after the
discovery or receipt of notice of (i) any default under any material agreement
to which the Corporation and/or any of its Subsidiaries is a party, which
default could have a Material Adverse Effect on the Corporation or any of its
Subsidiaries, (ii) any other event which could reasonably be expected to have a
Material Adverse Effect (including, without limitation, the filing of any
material litigation against the Corporation or any of its Subsidiaries or the
existence of any dispute with any Person which involves a reasonable likelihood
of such litigation being commenced) a statement describing the foregoing in
reasonable detail.
-33-
<PAGE>
(h) Promptly, any information or financial data the Corporation provides to
its lenders or other sources of financing, which, if certified by an officer of
the Corporation, shall be certified to the Investors on no less favorable terms.
12.7. System of Accounting. The books of account and other financial and
corporate records of the Corporation and its Subsidiaries shall be maintained in
accordance with good business and accounting practices and the financial
condition of the Corporation shall be accurately reflected in the financial
statements referred to in this Section.
12.8. Compliance with Laws. The Corporation shall, and shall cause each of
its Subsidiaries to, comply with all applicable laws, rules regulations and
orders except where failure to comply would not have a Material Adverse Affect.
12.9. Insurance. The Corporation shall, and shall cause each of its
Subsidiaries to, keep its assets and those of its Subsidiaries which are of an
insurable character, if any, insured by financially sound and reputable insurers
against loss or damage by fire, extended coverage and other hazards and risks
and liability to Persons and property to the extent and in the manner customary
for companies in similar businesses similarly situated.
12.10. Licenses and Permits. The Corporation shall, and shall cause each of
its Subsidiaries to, use its best efforts to obtain all Canadian and
non-Canadian federal, provincial, state and local governmental licenses,
permits, authorizations, consents, waivers, certificates and approvals material
to and necessary in the conduct of their business, including the Hibernia
Project.
12.11. D&O. The Corporation shall maintain after the Closing the directors'
and officers' liability insurance described in Section 6.2(k) of the Purchase
Agreement.
12.12. Disclosure of Investment. The Corporation, on the one hand, and each
of the Investors, on the other hand, agrees that it will not use in advertising
or publicity the name of any party hereto, or any partner or employee of such
party hereto or any of its respective affiliates, or any trade name, trademark,
trade device, service mark, symbol or any abbreviation, contraction or
simulation thereof owned by the other party hereto or any of its respective
affiliates, in either case without the prior written consent of such party
(except as such release or announcement may be required by applicable securities
law or the rules or regulations of the United States Securities and Exchange
Commission, in which case the party required to make the release or announcement
shall make reasonable best efforts to allow each other party reasonable time to
comment on such release or announcement in advance of such issuance). From and
after the date hereof, neither the Corporation nor any of its Subsidiaries will
represent, directly or indirectly, that any product or any service provided by
the Corporation has been approved or endorsed by any Investor without the prior
written consent of all of
-34-
<PAGE>
the Investors. The Corporation and each of the Investors further agree that,
from the date hereof through the Closing Date, no public release or announcement
concerning the transactions contemplated hereby shall be issued by any party
without the prior consent of the Corporation and each Investor (which consent
shall not be unreasonably withheld), except as such release or announcement may
be required by applicable securities law or the rules or regulations of the
United States Securities and Exchange Commission, in which case the party
required to make the release or announcement shall make reasonable best efforts
to allow each other party reasonable time to comment on such release or
announcement in advance of such issuance.
12.13. Investor Consent for Conversion. WFH agrees that it will not convert
any Class B Subordinate Voting Shares held by WFH into Series A Non-Voting
Preferred Shares without the consent of each of the Investors.
12.14. Restrictions on Conversions into Voting Shares. (a) Each of the
Investors agrees that it may convert any Series A Non-Voting Preferred Shares
into Series B Voting Preferred Shares or any Class A Non-Voting Shares into
Class B Subordinate Voting Shares only concurrently with or after (1) any
underwritten public offering of shares with voting rights providing gross
aggregate proceeds to the Corporation or any selling shareholders of at least
$150,000,000 before deducting underwriting discounts and commissions and
offering expenses or (2) the Corporation has issued, paid any dividend of, or
made any distribution of, any shares with voting rights other than the Class B
Subordinate Voting Shares issued and outstanding as of the Initial Issue Date
and the Class C Multiple Voting Shares issued pursuant to the Ledcor Roll-Up
Agreement. The Corporation will provide to the Investors timely information
regarding the transactions referred to in clause (1) or (2) of the preceding
sentence in order to permit the Investors timely to convert Shares in accordance
with this Section 12.14 and the terms of such Shares. Notwithstanding the
foregoing, following the elimination of the restrictions on the ownership of
voting shares and on the control in fact of the Corporation by non-Canadians
under the Telecommunications Act (Canada) and the rules and regulations
promulgated thereunder, there shall be no restrictions on the conversion by the
Investors of any Series A Non-Voting Preferred Shares into Series B Voting
Preferred Shares or any Class A Non-Voting Shares into Class B Subordinate
Voting Shares.
(b) (i) The Corporation shall not issue any capital shares or equity
securities which fall within the definition of "voting shares" in the
Telecommunications Act (Canada) and the Ownership Regulations (as defined below)
except Sales of Shares pursuant to the Purchase Agreement or the Ledcor Roll-Up
Agreement.
(ii) WFH shall not sell, assign or otherwise dispose of any capital shares
or equity securities which fall within the definition of "voting shares" in the
Telecommunications Act (Canada) and the Ownership Regulations pursuant to a
Public Sale or in transaction pur-
<PAGE>
-35-
suant to Rule 144A of the Securities Act (or an analogous provision of Canadian
Securities Laws).
(iii) This Section 12.14(b) shall terminate following (x) the elimination
of the restrictions on the ownership of voting shares and on the control in fact
of the Corporation by non-Canadians under the Telecommunications Act (Canada)
and the Ownership Regulations promulgated thereunder or (y) any underwritten
public offering of Shares that do not fall with the definition of "voting
shares" in the Telecommunications Act (Canada) and the Ownership Regulations
providing gross aggregate proceeds to the Corporation of at least $150,000,000
before deducting underwriting discounts and commissions and offering
commissions.
(c) To the extent required by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder
(the "HSR Act"), if any of the Investors elect to convert their non-voting
Shares into voting Shares, such Investor and (upon written request by such
Investor) the Corporation agree to (i) file or cause to be filed, as promptly as
practicable after such request, with the United States Federal Trade Commission
and the Antitrust Division of the United States Department of Justice, all
reports and documents required to be filed by such Investors and the Corporation
under the HSR Act concerning the conversion transaction and (ii) promptly comply
with or cause to be complied with any requests by the United States Federal
Trade Commission or the Antitrust Division of the United States Department of
Justice for additional information concerning such transactions in order to
obtain antitrust regulatory clearance as soon as possible. The Company agrees to
request, and to cooperate with any Investor in requesting, early termination of
any applicable waiting period under the HSR Act.
12.15. CEO Appointment Procedure.
At least 10 days before the Board shall hold a meeting (the "Preliminary
CEO Appointment Meeting") to consider the appointment of a chief executive
officer (or the functional equivalent) of the Corporation ("CEO"), the
Corporation shall provide to each Investor the name of such individual and
biographical information as contemplated by Item 401 of Regulation S-K under the
Securities Act. If at, or prior to the Preliminary CEO Appointment Meeting, a
Supermajority of Investors indicate by written notice to the Corporation that
they disapprove of the appointment of the proposed CEO (a "Preliminary CEO
Disapproval"), then (i) no formal vote shall be taken on the appointment of the
proposed CEO at the Preliminary CEO Appointment Meeting and (ii) the Corporation
shall not hire the proposed CEO unless and until the Board passes a resolution
appointing the proposed CEO at a meeting of the Board (the "CEO Effective
Appointment Meeting") subsequent to the date the Preliminary CEO Appointment
Meeting is originally scheduled to be held, which meeting shall be held not
earlier than the tenth day following the date the Preliminary CEO Appointment
Meeting is
<PAGE>
-36-
originally scheduled to be held. If there is not a Preliminary CEO Disapproval,
then this Section 12.15 shall have no further application with respect to the
proposed CEO (but shall be applicable to any other individual proposed as CEO).
If, within the 15 day period commencing on the first day immediately following
the date the Preliminary CEO Appointment Meeting is originally scheduled to be
held, either (i) a CEO Effective Appointment Meeting does not occur, or (ii) the
Corporation does not hire the proposed CEO, then the Corporation may not hire
such proposed CEO or any other proposed CEO except with renewed compliance with
all of the terms of this Section 12.15. The provisions of this Section 12.15
shall terminate upon an IPO resulting in at least $150,000,000 of gross
aggregate proceeds to the Corporation before deducting underwriting discounts
and commissions and offering expenses.
12.16. Ledcor Entities Regulatory Covenants.
(a) Ledcor represents and warrants, and agrees that during the period prior
to the completion of the transaction contemplated by the Ledcor Roll-Up
Agreement, Ledcor shall, and shall cause Ledcor Industries Limited to ensure
that:
(i) no Ledcor Entity is in violation of any judgment, decree,
order, writ, law, statute, rule, directive or regulation rendered or
enacted in Canada or any non-Canadian jurisdiction respecting
telecommunications and the regulation within Canada of
"telecommunications common carriers" (as defined in the
Telecommunications Act) or in any non-Canadian jurisdiction respecting
telecommunications applicable to any of the Ledcor Entities, or, to the
knowledge of Ledcor, any published interpretation or policy relating
thereto applicable to any Ledcor Entity. Except as disclosed in
Schedule 12.16(a)(i), no notices, reports or other filings are required
to be made by any Ledcor Entity during the period prior to the
completion of the transaction contemplated by the Ledcor Roll-Up
Agreement, with, nor are any consents, registrations, applications and
Permits required to be obtained by any Ledcor Entity from, any court or
governmental agency or other regulatory body or tribunal or similar
entity pursuant to Canadian or non-Canadian telecommunications and
radiocommunication regulatory law in connection with the completion of
the transaction contemplated by the Ledcor Roll-Up Agreement. The
development, implementation, construction or operation of the
telecommunications assets of Ledcor Industries Limited does not
conflict with and will not result in a breach or violation of any of
the Communications Statutes (as defined below) or existing regulations
thereunder except breaches or violations which may be remedied by
Ledcor at immaterial expense and which would not otherwise have a
Material Adverse Effect on the WFI Entities taken as a whole or Ledcor.
For the purposes of this Agreement, "Communications Statutes" means the
Telecommunications Act, the Canadian Radio-television and
Telecommunications Commission Act, or other statutes of Canada or any
non-Canadian jurisdiction specifically relating to the regulation of
the telecommunications industry within Canada or any non-Canadian
jurisdiction (including for this purpose the orders, rules,
regulations, directives, decisions, notices and policies promulgated
pursuant to such statutes, and applicable statutes or regulations, if
any, of any province of Canada or State of the U.S. specifically
relating to the
<PAGE>
-37-
regulation of the Canadian or U.S. telecommunications industry and the
orders, rules, regulations, directives, decisions, notices and policies
promulgated thereunder);.
(ii) (A) Ledcor Industries Limited will remain eligible to
operate as a telecommunications common carrier in Canada, as defined
under and in accordance with the Telecommunications Act and the
Canadian Telecommunications Common Carrier Ownership and Control
Regulations (the "Ownership Regulations"); (B) Ledcor Industries
Limited will not violate the prohibition contained in subsection 16(4)
of the Telecommunications Act against operating in Canada as a
telecommunications common carrier when ineligible to do so; and (C)
control of Ledcor Industries Limited will not be exercised by any
person(s) that is (are) not Canadian, in accordance with the meanings
ascribed to the term "control" under the Telecommunications Act and the
term "Canadian" under the Ownership Regulations; and
(iii) (A) not less than eighty percent of the members of the
board of directors of Ledcor Industries Limited will continue to be
individual Canadians, as defined under the Ownership Regulations; (B)
Canadians, as defined under the Ownership Regulations, will continue to
beneficially own directly or indirectly, in the aggregate and otherwise
than by way of security only, not less than eighty percent of the
issued and outstanding voting shares, as defined under the Ownership
Regulations, of Ledcor Industries Limited; (C) Ledcor in respect of its
ownership of and control over Ledcor Industries Limited will remain a
carrier holding corporation, as defined under the Ownership
Regulations; (D) Ledcor will continue to be a carrier holding
corporation that is a qualified corporation, as defined under the
Ownership Regulations; and (E) Ledcor Industries Limited will not be
controlled in fact by non-Canadians.
(b) With the exception of Ledcor Industries Limited and Worldwide Fiber
(F.O.T.S.) Ltd., no other subsidiary of Ledcor operates in Canada as a
telecommunications common carrier as that term is defined in the
Telecommunications Act.
(c) During the period prior to the completion of the transaction
contemplated by the Ledcor Roll-Up Agreement, all Ledcor Entities will remain in
compliance with all federal, state and local telecommunications laws, rules,
regulations and policies in the United States to which they are subject,
including the Communications Act of 1934, as amended by the Telecommunications
Act of 1996 (the "Communications Act") or to any
<PAGE>
-38-
rules, regulations and policies of the FCC related hereto, except where failure
to comply would not have a Material Adverse Effect on the WFI Entities taken as
a whole or Ledcor.
(d) Except as set forth in Schedule 12.16(d), each of the Ledcor Entities
currently holds all licenses, permits, certificates, waivers, consents,
franchises, orders, approvals and authorizations issuable under the
Telecommunications Act or other similar Canadian or U.S. statutes which are
required for the development, implementation and operation of each Ledcor Entity
business as it is currently being conducted (collectively, the
"Telecommunications Licenses"). Each Ledcor Entity is in material compliance
with each Telecommunications License held by it. The Telecommunications Licenses
held by each Ledcor Entity contain no restrictions or conditions attaching to
the Telecommunications Licenses, that are (or would be) materially burdensome to
the Ledcor Entities and there are no other conditions attaching to the
Telecommunications Licenses.
(e) Except as set forth in Schedule 12.16(e), each of the Ledcor Entities
has timely filed all renewal applications with respect to all Telecommunications
Licenses held by any of them and no protests or competing applications have been
filed that are either available to the Ledcor Entities or of which the Ledcor
Entities have knowledge with respect to such renewal applications and nothing
has come to the attention of any of the Ledcor Entities that would lead them to
conclude that such renewal applications will not be granted by the appropriate
regulatory agency or body in the ordinary course, and the Ledcor Entities are
authorized under the Communications Statutes and the rules and regulations
promulgated thereunder to continue to provide the services which are the subject
of such renewal applications during the pendency thereof.
(f) The telecommunications business of the Ledcor Entities is not regulated
by any federal, state or provincial utility or rate-regulating commission, other
than the CRTC and Industry Canada, in the areas in which any Ledcor Entity
conducts or proposes to conduct such business, and the Ledcor Entities are not,
and based on existing regulations will not be, required to obtain any
Telecommunications License from any such utility or rate-regulating commission,
other than the CRTC and Industry Canada, in any such state or province.
(g) Ledcor shall cause Ledcor Industries Limited to take all necessary
actions by December 31, 1999 to, as soon as possible, assign and transfer
(including obtaining the approval of Industry Canada to such assignment) to the
Corporation or a wholly-owned Subsidiary of the Corporation all right, title and
interest of Ledcor Industries Limited in, to and under the International
Submarine Cable License issued by Industry Canada to Ledcor Industries Limited
and 3477967 Canada Inc. effective November 1, 1998 (the "ISCL License") pursuant
to the International Submarine Cable Licenses Regulations, in respect of a fiber
optic international submarine cable between the cable stations at Cordova Bay,
British Columbia and Point Roberts, Washington, and between the cable stations
located at Fleming
<PAGE>
-39-
Bay, British Columbia and Whidbey Island, Washington, as more fully described in
the annexes to the ISCL License.
12.17. Underwritten Offering-Related Lock-Up of Shares.
If requested in writing by the managing underwriter(s), if any, of the
first IPO by the Corporation of equity securities (or securities convertible
into or exchangeable for equity securities) of the Corporation, each Shareholder
holding Shares agrees not to effect any Sale or distribution, including, without
limitation, any sale pursuant to Canadian Securities Laws or Rule 144 under the
U.S. Securities Act, of Shares (other than as part of such underwritten public
offering) during the time period requested by the managing underwriter(s), if
any, not to exceed 180 days. This Section 12.17 does not apply to any subsequent
IPO.
SECTION 13. [Intentionally omitted]
SECTION 14. Reservation of Common Shares; Conversion.
(a) The Corporation shall at all times reserve and keep available out of
its authorized but unissued capital (i) sufficient Common Shares to permit
conversion of all outstanding Series A Non-Voting Preferred Shares and any
outstanding Series B Voting Preferred Shares and (ii) sufficient Preferred
Shares to satisfy the Corporation's obligation to issue additional Series A
Non-Voting Preferred Shares to the Investors in accordance with the terms of the
Purchase Agreement and to permit the conversion of the Series A Non-Voting
Preferred Shares into Series B Voting Preferred Shares. The Corporation
represents, warrants and agrees that all Common Shares and Preferred Shares
which are so issuable shall, when issued, be duly and validly issued, fully paid
and nonassessable and free from all taxes, liens, encumbrances and charges.
Ledcor, WFH and the Corporation shall take all such actions as may be necessary,
including adoption of amendments to the Articles of Continuance, to assure that
all such Common Shares may be so issued without violation of any applicable law
or governmental regulation or the Articles of Continuance of the Corporation or
any requirements of any securities exchange upon which such Common Shares may be
listed (except for official notice of issuance which shall be immediately
transmitted by the Corporation upon issuance).
(b) The Corporation agrees that, upon the request of any of the Investors,
it will convert any Non-Voting Shares held by such Investor into Voting Shares
of the same class unless in the reasonable opinion of the Corporation such
conversion would violate the statutory restrictions on "control" as defined in
the Telecommunications Act by "non-Canadians".
<PAGE>
-40-
SECTION 15. Confidentiality.
(a) The Investors and each of the other Shareholders severally (the
"Confidants") recognize that certain non-public, confidential, proprietary
information ("Confidential Information") may be furnished orally or in writing
to the Confidants by, or at the direction of, the Corporation. The Confidants
agree not to disclose any Confidential Information to any Person except to a
Person who is advised of the Confidant's obligations under this Section 15 and
who is (i) a partner, managing director, director, officer or employee of a
Confidant or a Confidant's Affiliate who is involved in the Confidant's
investment in the Corporation, who is consulted with respect to such investment,
or who a Confidant determines otherwise needs to know such information, or (ii)
a Person acting as an advisor to a Confidant in connection with such investment,
except with the consent of the Corporation or pursuant to a subpoena, civil
investigative demand (or similar process), order, statute, rule or other legal
requirement promulgated or imposed by a court or by a judicial, regulatory,
self-regulatory or legislative body, organization, agency or committee or
otherwise in connection with any judicial or administrative proceeding
(including, in response to oral questions, interrogatories or requests for
information or documents) in which a Confidant or Investor Affiliate is
involved. The Confidants acknowledge that the United States securities laws
prohibit any person who is in possession of material, non-public information
regarding an issuer from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
(b) If Confidential Information is to be disclosed pursuant to the
foregoing paragraph, the Confidant will, to the extent practicable, promptly
notify the Corporation thereof and cooperate with the Corporation to the extent
legally permissible if it should seek to obtain an order or other reliable
assurance that confidential treatment will be accorded to designated portions of
the Confidential Information. The Confidants shall be entitled to periodic
reimbursement from the Corporation for expenses incurred by it or any Investor
Affiliate, including the fees and expenses of counsel, in connection with any
action taken pursuant to this paragraph.
(c) Information will not be deemed Confidential Information if it (i) was
already available to, or in the possession of, the Confidant prior to its
disclosure by, or at the direction of, the Corporation, (ii) is or becomes
available in the public domain on or after the date hereof (other than as a
result of a disclosure by any Confidant or any of its advisors), or (iii) is
acquired from a person who is not known by a Confidant to be in breach of an
obligation of confidentiality to the Corporation.
<PAGE>
-41-
SECTION 16. Specific Performance; Injunction.
(a) The parties agree that it is impossible to determine the monetary
damages which would accrue to the Corporation or any Shareholder or his personal
representative by reason of the failure of any Other Shareholder or the
Corporation to perform any of his or its obligations under this Agreement
requiring the performance of an act other than the payment of money only. Each
Shareholder shall be entitled to enforce its rights under this Agreement
specifically and to exercise all other rights existing in their favor. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that each party
may in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief (without posting
a bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
(b) In the event of a breach or threatened breach by a Shareholder of any
of the provisions of this Agreement, the Corporation, and the remaining
Shareholders shall be entitled to an injunction restraining such Shareholder
from any such breach. The availability of these remedies shall not prohibit the
Corporation from pursuing any other remedies for such breach or threatened
breach, including the recovery of damages from the Shareholder.
SECTION 17. No Inconsistent AgreementsNeither the Corporation nor any
Shareholder shall take any action or enter into any agreement which is
inconsistent with the rights of any party hereunder or otherwise conflicts with
the provisions hereof.
SECTION 18. Further Assurances.
(a) At any time or from time to time after the date hereof, the parties
agree to cooperate with each other, and at the request of any other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby and to
otherwise carry out the intent of the parties hereunder.
(b) At any time or from time to time, the parties agree to take all action,
including, without limitation, voting to approve any amendment to the Articles
of Continuance, or the By-Laws of the Corporation required to increase the
authorized number of Common Shares or Preferred Shares, if necessary, to permit
the issuance of all Shares contemplated under the Purchase Agreement, and the
conversion of all outstanding Series A Non-Voting Preferred Shares or
outstanding Series B Voting Preferred Shares.
<PAGE>
-42-
SECTION 19. Duration of Agreement. The rights and obligations of a
Shareholder under this Agreement shall terminate at such time as such
Shareholder no longer holds any Shares. This Agreement shall terminate upon the
consummation of a Qualified IPO except that the terms of Section 8, Sections
12.1, 12.3, 12.4, 12.7, 12.8, 12.9, 12.10, 12.11, 12.12, 12.13, 12.14, 12.15,
12.16, 12.17, Sections 14 through Section 32 (inclusive) shall survive until, by
their respective terms, they are no longer operative. The terms of Sections 12.5
and 12.6 shall terminate upon the consummation of an IPO.
SECTION 20. Legends. Each certificate representing Shares shall bear a
legend containing the following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
QUALIFIED FOR PUBLIC DISTRIBUTION IN CANADA AND HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
APPLICABLE CANADIAN SECURITIES LAWS AND THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE
SHAREHOLDERS AGREEMENT, DATED AS OF SEPTEMBER 9, 1999, BY THE
CORPORATION AND THE PARTIES THERETO, A COPY OF WHICH IS ON FILE IN THE
OFFICE OF THE CORPORATION.
The requirement that the above securities legend be placed upon
certificates evidencing any such securities shall cease and terminate upon the
earliest of the following events: (i) when such Shares are transferred in an
IPO; (ii) when such Shares are transferred pursuant to Rule 144 under the
Securities Act; or (iii) when such Shares are transferred in any other
transaction if the seller delivers to the Corporation an opinion of its counsel,
which counsel and opinion shall be reasonably satisfactory to the Corporation to
the effect that such legend is no longer necessary in order to protect the
Corporation against a violation by it of the Securities Laws upon any sale or
other disposition of such Shares without registration thereunder. The
requirement that the above legend regarding the Shareholder Agreement be placed
upon certificates evidencing any such securities shall cease and terminate upon
the termination of this Agreement. Upon the occurrence of any event requiring
the removal of a legend hereunder, the Corporation, upon the surrender of
certificates containing such legend, shall, at its own expense, deliver to the
holder of any such Shares as to which the requirement
<PAGE>
-43-
for such legend shall have terminated, one or more new certificates evidencing
such Shares not bearing such legend.
SECTION 21. Contractual Management Rights. The Corporation and each of the
Shareholders acknowledge that the provisions of this Agreement are intended,
among other things, to provide DLJ, GSCP and Providence with "contractual
management rights" within the meaning of the Employee Retirement Income Security
Act of 1974, as amended, and the regulations promulgated thereunder.
SECTION 22. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid, but
if any provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement. In the event that pursuant
to any regulatory authority or regulation, the Corporation is required to make
any revisions or modifications to any provision of this Agreement or any of the
other Documents, the parties agree to enter into good faith negotiations and
make revisions or modifications, to the extent possible, that are in compliance
with such regulation or the rules of such regulatory authority, and which are
designed to accomplish the purposes of such provision to be revised or modified.
SECTION 23. Governing Law; Waiver of Jury Trial. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without giving effect to the principles of conflicts of law, except for the
provisions of Section 8 and the provision in the last sentence of Section 10(c)
permitting a Board determination regarding a competing transaction to a Required
Sale, which shall be governed by and construed in accordance with the laws of
the Province of British Columbia and the federal law of Canada. Each of the
parties hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
action, proceeding or investigation in any court or before any governmental
authority ("Litigation") arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any Litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by facsimile or registered mail to its
respective address set forth in this Agreement shall be effective service of
process for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York and of
the United States of America, in each case located in the County of New York,
and hereby further irrevocably and
<PAGE>
-44-
unconditionally waives and agrees not to plead or claim in any such court that
any such Litigation brought in any such court has been brought in an
inconvenient forum. Each of the parties irrevocably and unconditionally waives,
to the fullest extent permitted by applicable law, any and all rights to trial
by jury in connection with any Litigation arising out of or relating to this
Agreement or the transactions contemplated hereby.
SECTION 24. Successors and Assigns. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their respective
successors, assigns, heirs and personal representatives. Except pursuant to a
Sale of Shares permitted by Section 3, no Shareholder shall have the right to
assign its rights and obligations under this Agreement without the consent of
the other Shareholders. No Shareholder shall have the right to assign its rights
under Section 7 or 8 of this Agreement without the consent of the Corporation
and each other Investor. Upon any such assignment, such assignee shall have and
be able to exercise all rights of the assigning Shareholder. The parties
acknowledge that, subject to compliance with applicable securities laws, each
Investor may transfer and assign all or a part of its rights and obligations
under this Agreement (including, for the avoidance of doubt, under Section 7 or
8) to one or more other partnerships, corporations, trusts or other
organizations which have been created by or are controlled by, control or are
under common control with such Investor or one or more of the then current
partners, members or other equity holders of such Investor (the "Investor
Affiliates"), without the consent of the Corporation or any other Shareholder.
Notwithstanding the foregoing, neither the Corporation nor any Person controlled
by the Corporation shall be deemed to be an Investor Affiliate of any Investor
for purposes of this Agreement. Upon any such assignment, the assignee shall
have and be able to exercise all rights of the assigning Shareholder.
SECTION 25. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in Person or by telecopy, nationally
recognized overnight courier or first class registered or certified mail, return
receipt requested, postage prepaid, addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
such party to the other parties:
<PAGE>
-45-
(a) if to the Corporation, to:
Worldwide Fiber Inc.
#1510-1066 West Hastings Street
Vancouver, British Columbia V6E 3X1
Fax: (604) 681-6822
Attention: Stephen Stow
with a copy to:
Farris, Vaughan, Wills & Murphy
2600 - 700 West Georgia Street
Vancouver, British Columbia V7Y 1B3
Fax: (604) 661-9349
Attention: Cameron G. Belsher
and
Cahill Gordon & Reindel
Eighty Pine Street
New York, New York
U.S.A. 10005
Fax: (212) 269-5420
Attention: Roger Andrus
(b) if to DLJ, to:
DWF SRL
Chancery House
High Street
Bridgetown, Barbados, West Indies
and
DWF SRL
c/o DLJ Merchant Banking Partners II, L.P.
277 Park Avenue
New York, New York 10172
Fax: (212) 892-7272
Attention: Andrew Rush
<PAGE>
-46-
with a copy to:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
Fax: (212) 751-4864
Attention: Steven Della Rocca
(c) if to any of the GSCP Parties, to:
c/o Ernst & Young Services Ltd.
P.O. Box 261
Bay Street
Bridgetown,
Barbados, West Indies
Fax: (246) 426-9551
Attention: Carol-Ann Smith
and
c/o GS Capital Partners III, L.P.
85 Broad Street
New York, New York 10004
Fax: (212) 902-3000
Attention: Robert R. Gheewalla
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Fax: (212) 859-4000
Attention: Stuart Z. Katz
and
GS Capital Partners III, L.P.
85 Broad Street
New York, New York 10004
Fax: (212) 357-5505
Attention: Ben Adler
<PAGE>
-47-
(d) if to Providence, to:
Providence Equity Fiber, L.P.
50 Kennedy Plaza
Providence, Rhode Island 02903
Fax: (401) 751-1790
Attention: Glenn M. Creamer
with a copy to:
Edwards & Angell, LLP
2800 BankBoston Plaza
Providence, Rhode Island 02903
Fax: (401) 276-6602
Attention: David K. Duffell
(e) if to Tyco, to:
Tyco Group S.A.R.L.
2nd Floor
6, Avenue Emile Reuter
L-2420 Luxembourg
Fax: 352-464-350
Attention: Managing Director
with a copy to:
Tyco Submarine System Ltd.
250 Industrial Way West
Eatontown, New Jersey 07724
Fax: (732) 578-7803
Attention: General Counsel
(f) if to WFH, to:
Worldwide Fiber Holdings Ltd.
1000-1066 West Hastings Street
Vancouver, British Columbia V6E 3X1
Fax: (604) 681-6822
Attention: Chief Financial Officer
with a copy to:
<PAGE>
-48-
McLennan Ross
600 West Chambers
12220 Stony Plain Road
Edmonton, Alberta T5N 3Y4
Fax: (780) 482-9102
Attention: Rodney R. Neys
(g) if to Ledcor, to:
Ledcor Inc.
1000-1066 West Hastings Street
Vancouver, British Columbia V6E 3X1
Fax: (604) 681-6650
Attention: David Lede
with a copy to:
McLennan Ross
600 West Chambers
12220 Stony Plain Road
Edmonton, Alberta T5N 3Y4
Fax: (780) 482-9102
Attention: Rodney R. Neys
(h) if to any other Shareholder, to the notice information set forth in
Schedule I hereto.
All such notices, requests, consents and other communications shall be
deemed to have been given when received.
SECTION 26. Amendments. Unless otherwise set forth in this Agreement, the
terms and provisions of this Agreement may be modified or amended, or any of the
provisions hereof waived, temporarily or permanently, pursuant to the written
consent of the parties hereto.
SECTION 27. Headings. The headings of the Sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
<PAGE>
-49-
SECTION 28. Nouns and Pronouns. Whenever the context requires, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of names and pronouns shall include the plural and
vice-versa.
SECTION 29. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior and contemporaneous agreements and understandings
with respect thereto.
SECTION 30. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 31. No Partnership. The obligations of each of the parties to this
Agreement are several and not joint. Nothing in this Agreement shall imply or be
deemed to imply a partnership, joint venture or other relationship between the
parties.
SECTION 32. Ledcor Assurances. On the date hereof, Ledcor is a direct party
to this Agreement for purposes of Sections 1, 3(d), 8.4, 12.3, 12.4, 12.16,
12.17 and 16 through 32 (inclusive). Ledcor is also a direct party to this
Agreement as a Shareholder (as such) only if and so long as (whether now or at
any time or from time to time hereafter) it is a holder of Shares. Furthermore,
Ledcor agrees to take all action necessary to cause WFH or any other Affiliates
of Ledcor (with the exception of the Corporation and its Subsidiaries) to fully
perform their respective obligations under this Agreement.
<PAGE>
-50-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
WORLDWIDE FIBER INC.
By: ____________________________________________
Name:
Title:
DWF SRL
By: ____________________________________________
Name:
Title:
THE GSCP PARTIES:
GS CAPITAL PARTNERS III, L.P.
By: GS Advisors III, L.P., its general partner
By: GS Advisors III, L.L.C., its general
partner
By: ____________________________________________
Name:
Title:
GSCP3 WWF (Barbados) SRL
By: ____________________________________________
Name:
Title:
WWF (Barbados) SRL
By: ____________________________________________
Name:
Title:
<PAGE>
-51-
PROVIDENCE EQUITY FIBER, L.P.
By: Providence Equity Partners III L.P.
its general partner,
By: Providence Equity Partners III L.L.C.
its general partner
By: ____________________________________________
Name: Glenn M. Creamer
Title: Member and Managing Director
TYCO GROUP S.A.R.L.
By: ____________________________________________
Name:
Title:
WORDWIDE FIBER HOLDINGS, LTD.
By: ____________________________________________
Name:
Title:
LEDCOR INC.
By: ____________________________________________
Name:
Title:
-----------------------------------------------
MACKENZIE PARTNERS, LLC
-----------------------------------------------
CLIFFORD LEDE
-----------------------------------------------
DAVID LEDE
<PAGE>
-52-
-----------------------------------------------
LARRY OLSEN
-----------------------------------------------
WILLIAM RAMSEY
-----------------------------------------------
RON STEVENSON
-----------------------------------------------
STEPHEN STOW
-----------------------------------------------
JIM VOELKER
REGISTRATION RIGHTS AGREEMENT
by and among
WORLDWIDE FIBER INC.,
DWF SRL,
GSCP3 WWF (BARBADOS) SRL,
WWF (BARBADOS) SRL,
PROVIDENCE EQUITY FIBER, L.P.,
and
TYCO GROUP S.A.R.L.
Dated as of September 9, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
1. Certain Definitions.......................................................1
1.1. "Affiliate"......................................................1
1.2. "Canadian Prospectus"............................................1
1.3. "Canadian Securities Laws".......................................2
1.4. "Commission" or "SEC"............................................2
1.5. "Common Shares"..................................................2
1.6. "Common Share Equivalents".......................................2
1.7. "Dollars"........................................................2
1.8. "Exchange Act"...................................................2
1.9. "Holder" or "Holders"............................................2
1.10. "IPO"............................................................2
1.11. "Person".........................................................2
1.12. "Preferred Shares"...............................................3
1.13. "Register" "Registered" and "Registration".......................3
1.14. "Registrable Securities".........................................3
2. Registration Rights.......................................................4
2.1. Demand Registrations.............................................4
2.2. Piggyback Registrations..........................................6
2.3. Allocation of Securities Included in Registration Statement......7
2.4. Registration Procedures.........................................10
2.5. Registration Expenses...........................................15
2.6. Certain Limitations on Registration Rights......................16
2.7. Limitations on Sale or Distribution of Other Securities.........17
2.8. No Required Sale................................................17
2.9. Indemnification for Registrations...............................17
3. Underwritten Offerings...................................................21
3.1. Requested Underwritten Offerings................................21
3.2. Piggyback Underwritten Offerings................................22
3.3. Underwriting Services...........................................22
-i-
<PAGE>
Page
----
4. General..................................................................22
4.1. Adjustments Affecting Registrable Securities....................22
4.2. Rule 144........................................................23
4.3. Nominees for Beneficial Owners..................................23
4.4. Amendments......................................................23
4.5. Notices.........................................................23
4.6. Miscellaneous...................................................26
4.7. Prior Agreements................................................28
4.8. No Inconsistent Agreements......................................28
-ii-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of September 9, 1999 (this
"Agreement"), by and among WORLDWIDE FIBER INC., a corporation incorporated
under the laws of Canada (the "Corporation"), DWF SRL, a Barbados company
("DLJ"), GSCP3 WWF (BARBADOS) SRL, a Barbados company, WWF (BARBADOS) SRL, a
Barbados company (collectively, the "GSCP Parties"), PROVIDENCE EQUITY FIBER,
L.P., a Delaware limited partnership, ("Providence"), and TYCO GROUP S.A.R.L., a
Luxembourg corporation ("Tyco") (each individually an "Investor", collectively
with DLJ, the GSCP Parties, and Providence, the "Investors").
W I T N E S S E T H:
WHEREAS, the Corporation and the Investors are parties to that certain
Preferred Share Purchase Agreement, dated as of September 7, 1999 (as amended
from time to time, the "Purchase Agreement"), pursuant to which the Corporation
has issued to the Investors, and the Investors have purchased from the
Corporation, shares of a newly created series of First Preference Shares (the
"Preferred Shares");
WHEREAS, the Corporation, the Investors, Worldwide Fiber Holdings Ltd., and
certain other parties named therein have entered into a Shareholders Agreement,
dated as of September 9, 1999 (as amended from time to time, the "Shareholders
Agreement"); and
WHEREAS, in connection with (i) the Corporation and the Investors entering
into the Purchase Agreement, and (ii) the Corporation, the Investors and the
parties entering into the Shareholders Agreement, the Corporation has agreed to
provide the registration rights set forth in this Agreement.
ACCORDINGLY, the parties hereto agree as follows:
1. Certain Definitions. (a) As used in this Agreement, the following terms
shall have the meanings assigned to them below:
1.1. "Affiliate" shall mean with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person.
1.2. "Canadian Prospectus" shall mean a prospectus prepared in accordance
with applicable Canadian Securities Laws for the purposes of qualifying
securities for distribution or distribution to the public, as the case may be,
in any province or territory of Canada.
<PAGE>
-2-
1.3. "Canadian Securities Laws" shall mean the statutes and regulations
applicable to the trading of securities in any province or territory of Canada
including applicable rules, policy statements and blanket rulings and orders
promulgated by Canadian securities regulatory authorities.
1.4. "Commission" or "SEC" shall mean the United States Securities and
Exchange Commission.
1.5. "Common Shares" shall mean the Class A Common Non-Voting Shares, Class
B Common Voting Shares, and Class S Common Super Voting Shares of the
Corporation, whether now or hereafter authorized, and any shares into which such
Common Shares may be exchanged.
1.6. "Common Share Equivalents" shall mean all options, warrants and other
securities convertible into, or exchangeable or exercisable for, at any time or
upon the occurrence of any event or contingency and without regard to any
vesting or other conditions to which such securities may be subject, Common
Shares.
1.7. "Dollars" and the symbols "$" or "US$" shall mean, unless otherwise
indicated, U.S. dollars, and the symbol "C$" shall mean Canadian dollars.
1.8. "Exchange Act" shall mean the United States Securities Exchange Act of
1934, as amended.
1.9. "Holder" or "Holders" shall mean any party who is a signatory to this
Agreement and any party who shall hereafter acquire and hold Registrable
Securities.
1.10. "IPO" shall mean the initial underwritten public offering of Common
Shares, Common Share Equivalents or other capital stock pursuant to (i) a
Canadian Prospectus (for which receipts have been obtained) under Canadian
Securities Laws or (ii) an effective registration statement filed under the
United States Securities Act of 1933, as amended (the "U.S. Securities Act,"
collectively with the Canadian Securities Laws, the "Securities Laws").
1.11. "Person" shall mean any natural person, corporation, partnership,
limited liability company, firm, association, trust, government, governmental
agency or other entity, whether acting in an individual, fiduciary or other
capacity.
<PAGE>
-3-
1.12. "Preferred Shares" shall mean the Series A Non-Voting Preferred
Shares and Series B Voting Preferred Shares of the Corporation.
1.13. "Register" "Registered" and "Registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the U.S. Securities Act and the declaration or ordering of the
effectiveness of such registration statement. In addition, unless inconsistent
with the context: (i) the term "registration" and any references to the act of
registering include the qualification of a distribution or a distribution to the
public, as the case may be, of securities pursuant to a Canadian Prospectus
which has been filed and for which a receipt has been obtained under Canadian
Securities Laws; (ii) the term "registered" as applied to any securities
includes a distribution or distribution to the public, as the case may be, of
securities so qualified; (iii) the term "registration statement" includes a
Canadian Prospectus referred to in Section 1.13(i) above; (iv) any references to
a registration statement having become effective, or similar references, shall
include a Canadian Prospectus for which a final receipt has been obtained from
the relevant Canadian securities regulatory authorities; and (v) the provisions
of this Agreement shall be applied, mutatis mutandis, to any proposed
distribution of securities hereunder in any province or territory of Canada.
1.14. "Registrable Securities" shall mean (i) any Common Shares held as of
the date hereof by the Investors or hereafter acquired by any of the Investors
or their Investor Affiliates (as defined in the Shareholders Agreement); (ii)
any Common Shares issued or issuable, upon the conversion of the Preferred
Shares or the conversion, exercise or exchange of any other Common Share
Equivalents held as of the date hereof by any Investors or hereafter acquired by
any of the Investors or their Investor Affiliates (as defined in the
Shareholders Agreement); or (iii) any shares issued or issuable, directly or
indirectly, upon any subdivision, combination or reclassification of such shares
or share dividend in respect of the Common Shares referenced in clauses (i) and
(ii) above; provided, however, that with respect to a registration statement
pursuant to Section 2.1 or Section 2.2, Registrable Securities shall include all
Common Shares (including shares obtainable upon the exercise, exchange or
conversion of the Preferred Shares or any other Common Share Equivalents) owned
by each of the parties to this Agreement (other than the Corporation). As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a registration statement with respect to the sale of such
securities shall have been declared effective under the applicable Securities
Laws and such securities shall have been disposed of in accordance with such
registration statement or (ii) such securities shall have been sold (other than
in a privately negotiated sale) pursuant to Rule 144 (or any successor or
comparable provision) under the U.S. Securities Act or applicable Canadian
securities laws and in compliance with the requirements of Rule 144 or
applicable Canadian securities laws.
<PAGE>
-4-
(b) Capitalized terms used but not otherwise defined herein shall have the
meaning assigned to such terms in the Purchase Agreement or the Shareholders
Agreement.
2. Registration Rights.
2.1. Demand Registrations.
(a) Subject to Sections 2.1(d) and 2.3 below, at any time and from time to
time after the earlier of occur of (i) September 7, 2001, and (ii) the closing
of an IPO, two or more holders of Preferred Shares who in the aggregate hold not
less than 35% of the Registrable Securities at such time shall have the right to
require the Corporation to file a registration statement under the Securities
Laws covering all or part of their respective Registrable Securities, by
delivering a written request therefor to the Corporation specifying the number
of Registrable Securities to be included in such registration by such holders of
Preferred Shares and the intended method of distribution thereof. All requests
pursuant to this Section 2.1 are referred to herein as "Demand Registration
Requests," and the registrations requested are referred to herein as "Demand
Registrations." With respect to any Demand Registration, the holders of a
majority of the Preferred Shares making such demand for registration shall be
referred to as the "Initiating Holders." As promptly as practicable, but no
later than ten days after receipt of a Demand Registration Request, the
Corporation shall give written notice (the "Demand Exercise Notice") of such
Demand Registration Request to all Holders of record of Registrable Securities.
(b) The Corporation, subject to Sections 2.3 and 2.7, shall include in a
Demand Registration (i) the number of Registrable Securities requested by the
Initiating Holders of the Common Shares into which the Preferred Shares have
been or may be converted from time to time (either directly or indirectly as
Common Share Equivalents) and not been registered pursuant to a Canadian
Prospectus, a registration statement, or sold pursuant to Rule 144 under the
U.S. Securities Act and (ii) the Registrable Securities of any other Holder who
shall have made a written request to the Corporation for inclusion in such
Demand Registration (which request shall specify the maximum number of
Registrable Securities intended to be disposed of by such Holder) within 30 days
after the receipt of the Demand Exercise Notice.
(c) The Corporation shall, as expeditiously as possible following a Demand
Registration Request, use its best efforts to (i) effect such registration under
the Securities Laws of the Registrable Securities which the Corporation has been
so requested to register, for distribution in accordance with such intended
method of distribution and (ii) if requested by the Initiating Holders, obtain
acceleration of the effective date of the registration statement relating to
such registration.
<PAGE>
-5-
(d) The Demand Registration rights granted under Section 2.1 are subject to
the following limitations: (i) the Corporation shall not be required to cause a
registration pursuant to Section 2.1 to be declared effective within a period of
180 days after the effective date of any registration statement of the
Corporation filed pursuant to a Demand Registration Request; (ii) if the Board,
in its good faith judgment, determines that any registration of Registrable
Securities should not be made or continued because it would materially interfere
with any material financing, acquisition, corporate reorganization or merger or
other transaction involving the Corporation (a "Valid Business Reason"), (A) the
Corporation may postpone filing a registration statement relating to a Demand
Registration Request until such Valid Business Reason no longer exists, but in
no event for more than 120 days, and (B) in case a registration statement has
been filed relating to a Demand Registration Request, if the Valid Business
Reason has not resulted from actions taken by the Corporation, the Corporation
may cause such registration statement to be withdrawn and its effectiveness
terminated or may postpone amending or supplementing such registration statement
until such Valid Business Reason no longer exists, but in no event for more than
120 days (such period of postponement or withdrawal under subclauses (A) or (B)
of this paragraph (d), (the "Postponement Period"); and the Corporation shall
give written notice of its determination to postpone or withdraw a registration
statement and of the fact that the Valid Business Reason for such postponement,
withdrawal or premature termination no longer exists, in each case, promptly
after the occurrence thereof; provided, however, that the Corporation shall not
be permitted to postpone, withdraw or prematurely terminate a registration
statement after the expiration of any Postponement Period until six months after
the expiration of such Postponement Period; and (iii) the Corporation shall not
be required to effect a registration pursuant to this Section 2.1 with respect
to more than two Demand Registration Requests by each Investor under this
Agreement.
If the Corporation shall give any notice of postponement or withdrawal of
any registration statement, the Corporation shall not, during the Postponement
Period or withdrawal, register any Common Shares, other than pursuant to a
registration statement on Form S-4 or S-8 (or an equivalent registration form
then in effect) under the U.S. Securities Act. Each Holder of Registrable
Securities agrees that, upon receipt of any notice from the Corporation that the
Corporation has determined to withdraw any registration statement pursuant to
clause (ii) above, such party will discontinue its disposition of Registrable
Securities pursuant to such registration statement and, if so directed by the
Corporation, will deliver to the Corporation (at the Corporation's expense) all
copies, other than permanent file copies, then in such party's possession, of
the prospectus covering such Registrable Securities that was in effect at the
time of receipt of such notice. If the Corporation shall have withdrawn or
prematurely terminated a registration statement filed under Section 2.1 (whether
pursuant to this paragraph (d) or as a result of any stop order, injunction or
other order or requirement of the Commission or any other governmental agency or
court), the Corporation shall not be considered to have effected an effective
registration for the purposes of this Agreement until the
<PAGE>
-6-
Corporation shall have filed a new registration statement covering the
Registrable Securities covered by the withdrawn or prematurely terminated
registration statement and such subsequent registration statement shall have
been declared effective and shall not have been withdrawn or prematurely
terminated. If the Corporation shall give any notice of withdrawal or
postponement of a registration statement, the Corporation shall, at such time as
the Valid Business Reason that caused such withdrawal or postponement no longer
exists (but in no event later than 120 days after the date of the withdrawal or
postponement), use its best efforts to effect the registration under the
Securities Laws of the Registrable Securities covered by the withdrawn or
postponed registration statement in accordance with this Section 2.1 (unless the
Initiating Holders shall have withdrawn such request, in which case the
Corporation shall not be considered to have effected an effective registration
for the purposes of this Agreement).
(e) The Corporation, subject to Sections 2.3 and 2.7, may elect to include
in any registration statement and offering made pursuant to Section 2.1, (i)
authorized but unissued Common Shares or Common Shares held by the Corporation
as treasury shares and (ii) any other Common Shares which are requested to be
included in such registration (x) pursuant to the exercise of piggyback
registration rights granted by the Corporation after the date hereof in
accordance with the terms of this Agreement and the Shareholders Agreement, (y)
by Canadian National Railway Company ("CN") pursuant to the unanimous
shareholder agreement made as of May 28, 1999 between Worldwide Fiber Networks
Ltd., CN and WFI-CN Fiber Inc., or (z) by IC Fiber Holdings Inc. ("IC") pursuant
to the limited liability company agreement of Worldwide Fiber IC LLC effective
as of May 28, 1999, between Worldwide Fiber IC Holdings, Inc. and IC
(collectively, "Additional Piggyback Rights"); provided, however, that such
inclusion shall be permitted only to the extent that it is pursuant to, and
subject to, the terms of the underwriting agreement or arrangements entered into
by the Initiating Holders.
2.2. Piggyback Registrations.
(a) If at any time, the Corporation proposes or is required to register any
of its equity securities under the Securities Laws (other than equity securities
registered pursuant to registrations on Form S-4 or S-8 (or an equivalent
registration form for a domestic or foreign issuer then in effect) solely for
registration of securities in connection with an employee benefit plan or
dividend reinvestment plan or a merger or consolidation or a Demand Registration
under Section 2.1 of this Agreement), whether or not for its own account, the
Corporation shall give prompt written notice of its intention to do so to each
of the Holders of record of Registrable Securities. Upon the written request of
any Holder, made within 20 days following the receipt of any such written notice
(which request shall specify the maximum number of Registrable Securities
intended to be disposed of by such Holder and the intended method of
distribution thereof), the Corporation shall, subject to Sections 2.2(b), 2.3
and 2.7, use its best efforts to cause all such Registrable Securities, the
Holders of which have so requested
<PAGE>
-7-
the registration thereof, to be registered under the Securities Laws (with the
securities which the Corporation at the time proposes to register) to permit the
sale or other disposition by the Holders (in accordance with the intended method
of distribution thereof) of the Registrable Securities to be so registered. No
registration effected under this Section 2.2(a) shall relieve the Corporation of
its obligations to effect Demand Registrations under Section 2.1.
(b) If at any time after giving written notice of its intention to register
any equity securities and prior to the effective date of the registration
statement filed in connection with such registration, the Corporation shall
determine for any reason not to register or to delay registration of such equity
securities, the Corporation may, at its election, give written notice of such
determination to all Holders of Registrable Securities, and (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such abandoned registration,
without prejudice, however, to the rights of Holders of Registrable Securities
under Section 2.1 and (ii) in the case of a determination to delay such
registration of its equity securities, shall be permitted to delay the
registration of such Registrable Securities for the same period as the delay in
registering such other equity securities.
(c) Any Holder shall have the right to withdraw its request for inclusion
of its Registrable Securities in any registration statement pursuant to this
Section 2.2 by giving written notice to the Corporation of its request to
withdraw; provided, however, that (i) such request must be made in writing prior
to the execution of the underwriting agreement (or such other similar agreement)
with respect to such registration and (ii) such withdrawal shall be irrevocable
and, after making such withdrawal, a Holder shall no longer have any right to
include Registrable Securities in the registration as to which such withdrawal
was made.
2.3. Allocation of Securities Included in Registration Statement.
(a) If any requested registration pursuant to Section 2.1 involves an
underwritten offering and if the lead managing underwriter (the "Manager") shall
advise the Corporation that, in its view, the number of securities requested to
be included in such registration (including those securities requested by the
Corporation to be included in such registration) exceeds the largest number (the
"Section 2.1 Sale Number") that can be sold in an orderly manner in such
offering within a price range acceptable to the Initiating Holders, the
Corporation shall include in such registration:
(i) first, all Registrable Securities requested to be included
pursuant to Section 2.1(b)(i) and Section 2.2(a) in such registration
by the beneficial owners of the Common Shares into which the Preferred
Shares have been or may be converted from time to time (either directly
or indirectly as Common Share Equivalents) and have not been registered
pursuant to a Canadian Prospectus, a registration statement, or sold
<PAGE>
-8-
pursuant to Rule 144 under the U.S. Securities Act; provided, however,
that if the number of such Registrable Securities exceeds the Section
2.1 Sale Number, then the number of Registrable Securities (not to
exceed the Section 2.1 Sale Number) to be included in such registration
shall be reduced on a pro rata basis among all such holders, based on
the number of Registrable Securities owned by each such holder
requesting inclusion pursuant to Section 2.1(b)(i) and Section 2.2(a)
out of the total outstanding Common Shares of the Corporation;
provided, however, that such allocation shall not operate to reduce the
aggregate number of Registrable Securities to be included in such
registration, and if any Holder or other selling stockholder does not
request inclusion of the maximum number of shares of Registrable
Securities allocated to such Holder pursuant to the above-described
procedure, the remaining portion of such Holder's allocation shall be
reallocated among those requesting Holders and other selling
stockholders whose allocations did not satisfy their requests pro rata
on the basis of the number of shares of Registrable Securities which
would be held by such Holders and other selling stockholders, assuming
conversion, and this procedure shall be repeated until all of the
shares of Registrable Securities which may be included in the
registration on behalf of the Holders and other selling stockholders
have been so allocated;
(ii) second, to the extent that the number of Registrable
Securities to be included pursuant to Section 2.3(a)(i) is less than
the Section 2.1 Sale Number, securities that the Corporation proposes
to register; and
(iii) third, to the extent that the number of Registrable
Securities to be included by all Holders pursuant to Section 2.3(a)(i)
and the number of securities to be included by the Corporation pursuant
to Section 2.3(a)(ii) is less than the Section 2.1 Sale Number, any
other securities that the Holders thereof propose to register pursuant
to the exercise of Additional Piggyback Rights.
If, as a result of the proration provisions of this Section 2.3(a), any
Holder shall not be entitled to include all Registrable Securities in a
registration that such Holder has requested be included, such Holder may elect
to withdraw his request to include Registrable Securities in such registration
or may reduce the number requested to be included; provided, however, that (A)
such request must be made in writing prior to the execution of the underwriting
agreement with respect to such registration and (B) such withdrawal shall be
irrevocable and, after making such withdrawal, a Holder shall no longer have any
right to include such Registrable Securities in the registration as to which
such withdrawal was made.
(b) If any registration pursuant to Section 2.2 where the Corporation
initiated the registration involves an underwritten offering and the Manager
shall advise the Corporation that, in its view, the number of securities
requested to be included in such registration exceeds the number (the "Section
2.2 Sale Number") that can be sold in an orderly manner in
<PAGE>
-9-
such registration within a price range acceptable to the Corporation, the
Corporation shall include in such registration:
(i) first, all Common Shares that the Corporation proposes to
register for its own account ("Corporation Securities");
(ii) second, to the extent that the number of Corporation
Securities is less than the Section 2.2 Sale Number, all Registrable
Securities requested to be included by any Investors and Investor
Affiliates pursuant to Section 2.2(a) ("Investor Securities");
provided, however, that, if the number of such Investor Securities
exceeds the Section 2.2 Sale Number less the number of Corporation
Securities, then the number of Investor Securities included in such
registration shall be reduced on a pro rata basis, based on the number
of Registrable Securities owned by each Investor requesting inclusion
in such registration out of the number of Registrable Securities owned
by all Investors requesting inclusion; provided, however, that such
allocation shall not operate to reduce the aggregate number of
Registrable Securities to be included in such registration, and if any
Holder or other selling stockholder does not request inclusion of the
maximum number of shares of Registrable Securities allocated to such
Holder pursuant to the above-described procedure, the remaining portion
of such Holder's allocation shall be reallocated among those requesting
Holders and other selling stockholders whose allocations did not
satisfy their requests pro rata on the basis of the number of shares of
Registrable Securities which would be held by such Holders and other
selling stockholders, assuming conversion, and this procedure shall be
repeated until all of the shares of Registrable Securities which may be
included in the registration on behalf of the Holders and other selling
stockholders have been so allocated; and
(iii) third, to the extent the number of Corporation
Securities and Investor Securities is less than the Section 2.2 Sale
Number, all Registrable Securities requested to be included by all
other Holders; provided, however, if the number of such Registrable
Securities exceeds the Section 2.2 Sale Number less the number of (A)
Corporation Securities and (B) Investor Securities, then the number of
Registrable Securities included in such registration shall be reduced
on a pro rata basis, based on the number of Registrable Securities
owned by each Holder (but not Holders who are Investors or Investor
Affiliates) requesting inclusion to the number of Registrable
Securities owned by all Holders (but not Holders who are Investors or
Investor Affiliates) requesting inclusion; provided, however, that such
allocation shall not operate to reduce the aggregate number of
Registrable Securities to be included in such registration, and if any
Holder or other selling stockholder does not request inclusion of the
maximum number of shares of Registrable Securities allocated to such
Holder pursuant to the above-described procedure, the remaining portion
of such Holder's alloca-
<PAGE>
-10-
tion shall be reallocated among those requesting Holders and other
selling stockholders whose allocations did not satisfy their requests
pro rata on the basis of the number of shares of Registrable Securities
which would be held by such Holders and other selling stockholders,
assuming conversion, and this procedure shall be repeated until all of
the shares of Registrable Securities which may be included in the
registration on behalf of the Holders and other selling stockholders
have been so allocated.
2.4. Registration Procedures. If and whenever the Corporation is required
by the provisions of this Agreement to use its best efforts to effect or cause
the registration of any Registrable Securities under the U.S. Securities Act or
Canadian Securities Laws as provided in this Agreement, the Corporation shall,
as expeditiously as reasonably possible (but in any event, within 120 days after
a Demand Registration Request in the case of Section 2.4(a)):
(a) prepare and file with the Commission or Canadian securities regulatory
authorities a registration statement on an appropriate registration form of the
Commission or Canadian securities regulatory authorities for the disposition of
such Registrable Securities in accordance with the intended method of
disposition thereof, which form shall, in the case of a shelf registration, be
available for the sale of the Registrable Securities by the Holders thereof and
such registration statement shall comply in all material respects with the
requirements of the applicable form and include all financial statements
required by the Commission or Canadian securities regulatory authorities to be
filed therewith, and the Corporation shall use its best efforts to cause such
registration statement to become and, subject to 2.4(b), remain effective
(provided, however, that before filing a registration statement or prospectus or
any amendments or supplements thereto, or comparable statements under securities
or "blue sky" laws of any United States jurisdiction, the Corporation will
furnish to counsel (in the case of a registration pursuant to Section 2.1,
selected by the Initiating Holders, and, in the case of a registration pursuant
to Section 2.2, the Holder that, together with its Affiliates, includes the
largest number of Registrable Securities in such registration (the "Major
Holder")) for the Holders of Registrable Securities participating in the planned
offering and the underwriters, if any, copies of all such documents proposed to
be filed (including all exhibits thereto), which documents will be subject to
the reasonable review and reasonable comment of such counsel, and the
Corporation shall not file any registration statement or amendment thereto or
any prospectus or supplement thereto to which the Initiating Holder, in the case
of a Demand Registration Request, or the underwriters, if any, shall reasonably
object in writing);
(b) prepare and file with the Commission or Canadian securities regulatory
authorities such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for such period (which shall not be required to
exceed 120 days in the case of a registration pursuant to Sec-
<PAGE>
-11-
tion 2.1 or 90 days in the case of a registration pursuant to Section 2.2)
as any seller of Registrable Securities pursuant to such registration statement
may reasonably request and to comply with the provisions of the U.S. Securities
Act or Canadian Securities Laws with respect to the sale or other disposition of
all Registrable Securities covered by such registration statement in accordance
with the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement;
(c) furnish, without charge, to each seller of such Registrable Securities
and each underwriter, if any, of the securities covered by such registration
statement such number of copies of such registration statement, each amendment
and supplement thereto (in each case including all exhibits), and the prospectus
included in such registration statement (including each preliminary prospectus)
in conformity with the requirements of the U.S. Securities Act or Canadian
Securities Laws, and other documents, as such seller and underwriter may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such seller (the Corporation hereby
consenting to the use in accordance with all applicable laws of each such
registration statement (or amendment or post-effective amendment thereto) and
each such prospectus (or preliminary prospectus or supplement thereto) by each
such seller of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such registration statement or prospectus);
(d) use its best efforts to register or qualify the Registrable Securities
covered by such registration statement under such other securities or "blue sky"
laws of such jurisdictions as any sellers of Registrable Securities or any
managing underwriter, if any, shall reasonably request, and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
sellers or underwriter, if any, to consummate the disposition of the Registrable
Securities in such jurisdictions, except that in no event shall the Corporation
be required to qualify to do business as a foreign corporation in any
jurisdiction where it would not, but for the requirements of this paragraph (d),
be required to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) promptly notify each seller of Registrable Securities covered by such
registration statement and each managing underwriter, if any: (i) when the
registration statement, any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the Commission, any United States state securities
authority or any Canadian securities regulatory authority for amendments or
supplements to the registration statement or the prospectus related thereto or
for additional information, (iii) of the issuance by the Commission or any
Canadian securities regulatory authority of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceedings
for
-12-
<PAGE>
that purpose, (iv) of the receipt by the Corporation of any notification with
respect to the suspension of the qualification of any Registrable Securities for
sale under the securities or "blue sky" laws of any jurisdiction or the
initiation of any proceeding for such purpose, (v) of the existence of any fact
of which the Corporation becomes aware which results in the registration
statement, the prospectus related thereto or any document incorporated therein
by reference containing an untrue statement of a material fact or omitting to
state a material fact required to be stated therein or necessary to make any
statement therein not misleading, and (vi) if at any time the representations
and warranties contemplated by any underwriting agreement, securities sales
agreement, or other similar agreement relating to the offering shall cease to be
true and correct in all material respects; and, if the notification relates to
an event described in clause (v), the Corporation shall promptly prepare and
furnish to each such seller and each underwriter, if any, a reasonable number of
copies of a prospectus supplemented or amended so that, as thereafter delivered
to the purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading;
(f) comply with all applicable rules and regulations of the Commission or
any Canadian securities regulatory authority, and make generally available to
its security holders, as soon as reasonably practicable after the effective date
of the registration statement (and in any event within 15 months thereafter), an
earnings statement (which need not be audited) covering the period of at least
twelve consecutive months beginning with the first day of the Corporation's
first calendar quarter after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
U.S. Securities Act and Rule 158 thereunder;
(g) (i) cause all such Registrable Securities covered by such registration
statement to be listed on the principal securities exchange on which similar
securities issued by the Corporation are then listed (if any), if the listing of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) if no similar securities are then so listed, cause all such Registrable
Securities to be listed on a United States national securities exchange or
secure designation of each such Registrable Security as a Nasdaq National Market
"national market system security" within the meaning of Rule 11Aa2-1 of the
Commission or secure National Association of Securities Dealers Automated
Quotation authorization for such shares and, without limiting the generality of
the foregoing, take all actions that may be required by the Corporation as the
issuer of such Registrable Securities in order to facilitate the arranging for
the registration of at least two market makers as such with respect to such
shares with the National Association of Securities Dealers, Inc. (the "NASD");
(h) provide and cause to be maintained a transfer agent and registrar for
all such Registrable Securities covered by such registration statement not later
than the effective date of such registration statement;
<PAGE>
-13-
(i) enter into such customary agreements (including, if applicable, an
underwriting agreement) and take such other actions as the Major Holder (or the
Initiating Holders in the case of a Section 2.1 Demand Registration) shall
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities. The Holders of the Registrable Securities which are to
be distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that the Corporation, and in such
case the Corporation will, make to, and for the benefit of, such Holders the
representations, warranties and covenants of the Corporation which are being
made to, and for the benefit of, such underwriters and which are of the type
customarily provided to institutional investors in secondary offerings;
(j) obtain an opinion from the Corporation's counsel and a "cold comfort"
letter from the Corporation's independent public accountants in customary form
and covering such matters as are customarily covered by such opinions and "cold
comfort" letters delivered to underwriters in underwritten public offerings,
which opinion and letter shall be reasonably satisfactory to the underwriter, if
any, and to the Major Holders participating in such offering, and furnish to
each Holder participating in the offering and to each underwriter, if any, a
copy of such opinion and letter addressed to such Holder or underwriter;
(k) deliver promptly to each Holder participating in the offering and each
underwriter, if any, copies of all correspondence between the Commission, any
Canadian securities regulatory authority and the Corporation, its counsel or
auditors and all memoranda relating to discussions with the Commission, its
staff, any Canadian securities regulatory authority with respect to the
registration statement, other than those portions of any such correspondence and
memoranda which contain information subject to attorney-client privilege with
respect to the Corporation, and, upon receipt of such confidentiality agreements
as the Corporation may reasonably request, make reasonably available for
inspection by any seller of such Registrable Securities covered by such
registration statement, by any underwriter, if any, participating in any
disposition to be effected pursuant to such registration statement and by any
attorney, accountant or other agent retained by any such seller or any such
underwriter, all pertinent financial and other records, pertinent corporate
documents and properties of the Corporation, and cause all of the Corporation's
officers, directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement;
(l) use its best efforts to obtain the withdrawal of any order suspending
the effectiveness of the registration statement;
(m) provide a CUSIP number for all Registrable Securities, not later than
the effective date of the registration statement;
<PAGE>
-14-
(n) make reasonably available its employees and personnel and otherwise
provide reasonable assistance to the underwriters in the marketing of
Registrable Securities in any underwritten offering;
(o) promptly prior to the filing of any document which is to be
incorporated by reference into the registration statement or the prospectus
(after the initial filing of such registration statement) provide copies of such
document to counsel to the sellers of Registrable Securities and to the managing
underwriter, if any, and make the Corporation's representatives reasonably
available for discussion of such document and make such changes in such document
concerning such sellers prior to the filing thereof as counsel for such sellers
or underwriters may reasonably request;
(p) furnish to each Holder participating in the offering and the managing
underwriter, without charge, at least one signed copy of the registration
statement and any post-effective amendments thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
(q) cooperate with the sellers of Registrable Securities and the managing
underwriter, if any, to facilitate the timely preparation and delivery of
certificates not bearing any restrictive legends representing the Registrable
Securities to be sold, and cause such Registrable Securities to be issued in
such denominations and registered in such names in accordance with the
underwriting agreement prior to any sale of Registrable Securities to the
underwriters or, if not an underwritten offering, in accordance with the
instructions of the sellers of Registrable Securities at least three business
days prior to any sale of Registrable Securities;
(r) if a Canadian Prospectus is filed in the Province of Quebec, opinions
of Quebec counsel and of the auditors representing the Corporation for the
purposes of such registration relating to translation into the French language
of the applicable registration statement, in form and substance as is
customarily given to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities; and
(s) take all such other commercially reasonable actions as are necessary or
advisable in order to expedite or facilitate the disposition of such Registrable
Securities.
The Corporation may require as a condition precedent to the Corporation's
obligations under this Section 2.4 that each seller of Registrable Securities as
to which any registration is being effected furnish the Corporation such
information regarding such seller and the distribution of such securities as the
Corporation may from time to time reasonably request, provided that such
information shall be used only in connection with such registration.
<PAGE>
-15-
Each Holder of Registrable Securities agrees that upon receipt of any
notice from the Corporation of the happening of any event of the kind described
in clause (v) of paragraph (e) of this Section 2.4, such Holder will discontinue
such Holder's disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by paragraph
(e) of this Section 2.4 and, if so directed by the Corporation, will deliver to
the Corporation (at the Corporation's expense) all copies, other than permanent
file copies, then in such Holder's possession of the prospectus covering such
Registrable Securities that was in effect at the time of receipt of such notice.
In the event the Corporation shall give any such notice, the applicable period
mentioned in paragraph (b) of this Section 2.4 shall be extended by the number
of days during such period from and including the date of the giving of such
notice to and including the date when each seller of any Registrable Securities
covered by such registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by paragraph (e) of this Section
2.4.
If any such registration statement or comparable statement under "blue sky"
laws refers to any Holder by name or otherwise as the Holder of any securities
of the Corporation, then such Holder shall have the right to require, acting
reasonably, (i) the insertion therein of language, in form and substance
satisfactory to such Holder, to the effect that the holding by such Holder of
such securities is not to be construed as a recommendation by such Holder of the
investment quality of the Corporation's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Corporation, or (ii) in the event that such
reference to such Holder by name or otherwise is not in the judgment of the
Corporation, as advised by counsel, required by the U.S. Securities Act or any
similar federal statute or any state "blue sky" or United States securities law
then in force, the deletion of the reference to such Holder.
2.5. Registration Expenses.
(a) "Expenses" shall mean any and all fees and expenses incident to the
Corporation's performance of or compliance with this Article 2, including,
without limitation: (i) Commission, Canadian securities regulatory authorities,
United States or Canadian stock exchange or NASD registration and filing fees
and all listing fees and fees with respect to the inclusion of securities in the
Nasdaq National Market; (ii) fees and expenses of compliance with Securities
Laws or United States "blue sky" laws and in connection with the preparation of
a "blue sky" survey, including, without limitation, reasonable fees and expenses
of blue sky counsel; (iii) printing and copying expenses; (iv) messenger and
delivery expenses; (v) expenses incurred in connection with any road show; (vi)
fees and disbursements of counsel for the Corporation; (vii) with respect to
each registration, the fees and disbursements of one counsel in each of Canada
and the United States, as required, for the sellers of Registrable
<PAGE>
-16-
Securities (selected by the Initiating Holders in the case of a registration
pursuant to Section 2.1, and selected by the Majority Holder in the case of a
registration pursuant to Section 2.2) as well as of one local counsel; (viii)
fees and disbursements of all independent public accountants (including the
expenses of any audit and/or "cold comfort" letter) and fees and expenses of
other persons, including special experts, retained by the Corporation and (ix)
any other reasonable fees and disbursements of underwriters, if any, customarily
paid by issuers.
(b) The Corporation shall pay all Expenses with respect to any Demand
Registration pursuant to Section 2.1 whether or not such Demand Registration
becomes effective or does not remain effective for the period contemplated by
Section 2.4(b). The Corporation shall pay all Expenses of each Investor with
respect to any registration effected under Section 2.2. Each Holder of
Registrable Securities (other than the Investors) shall pay the expenses
incurred by that Holder with respect to any registration effected pursuant to
Section 2.2 (such expenses shall be allocated among the Holders of Registrable
Securities (other than the Investors or the Investor Affiliates) on a pro rata
basis based on the number of Registrable Securities included in such offering by
a Holder relative to the number of Registrable Securities included in such
offering by all Holders, except to the extent Expenses are attributable to a
Holder or to securities included in an offering by a Holder (other than an
Investor or the Investor Affiliates)).
(c) Notwithstanding the foregoing, (i) the provisions of this Section 2.6
shall be deemed amended to the extent necessary to cause these expense
provisions to comply with United States "blue sky" laws of each state or the
Securities Laws of any other jurisdiction in which the offering is made and (ii)
in connection with any registration hereunder, each Holder of Registrable
Securities being registered shall pay all underwriting discounts and commissions
and any transfer taxes, if any, attributable to the Registrable Securities, pro
rata with respect to payments of discounts and commissions in accordance with
the number of shares included in the offering by such Holder, and (iii) the
Corporation shall be responsible for all of its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties).
2.6. Certain Limitations on Registration Rights. In the case of any
registration under Section 2.1 pursuant to an underwritten offering, or in the
case of a registration under Section 2.2 if the Corporation has determined to
enter into an underwriting agreement in connection therewith, all securities to
be included in such registration shall be subject to an underwriting agreement
and no Person may participate in such registration unless such Person agrees to
sell such Person's securities on the basis provided therein and completes and/or
executes all questionnaires and other documents which must be executed in
connection therewith, and provides such other information to the Corporation or
the underwriter as may be necessary to register such Person's securities.
<PAGE>
-17-
2.7. Limitations on Sale or Distribution of Other Securities.
(a) If requested in writing by the managing underwriter(s), if any, of any
registration effected pursuant to Section 2.1 or 2.2, each Holder of Registrable
Securities agrees not to effect any public sale or distribution, including,
without limitation, any sale pursuant to Canadian Securities Laws or Rule 144
under the U.S. Securities Act, of any Registrable Securities, or of any other
equity security of the Corporation or of any security convertible into or
exchangeable or exercisable for any equity security of the Corporation (other
than as part of such underwritten public offering) during the time period
reasonably requested by the managing underwriter(s), if any, not to exceed 180
days (and the Corporation hereby also so agrees (except that the Corporation may
effect any sale or distribution of any such securities pursuant to a
registration on Form S-4 (if reasonably acceptable to the managing underwriter)
or Form S-8 under the U.S. Securities Act, or any successor or similar form for
a domestic or foreign issuer which is then in effect or upon the conversion,
exchange or exercise of any then outstanding Common Share Equivalent) to cause
each Holder of any equity security or of any security convertible into or
exchangeable or exercisable for any equity security of the Corporation purchased
from the Corporation at any time other than in a public offering so to agree).
(b) The Corporation hereby agrees that, if it shall previously have
received a request for registration pursuant to Section 2.1 or 2.2, and if such
previous registration shall not have been withdrawn or abandoned, the
Corporation shall not sell, transfer, or otherwise dispose of, any Common
Shares, or any other equity security of the Corporation or any security
convertible into or exchangeable or exercisable for any equity security of the
Corporation (other than as part of such underwritten public offering, a
registration on Form S-4 or Form S-8 under the U.S. Securities Act or any
successor or similar form for a domestic or foreign issuer which is then in
effect or upon the conversion, exchange or exercise of any then outstanding
Common Share Equivalent), until a period of 90 days shall have elapsed from the
effective date of such previous registration; and the Corporation shall so
provide in any registration rights agreements hereafter entered into with
respect to any of its securities.
2.8. No Required Sale. Nothing in this Agreement shall be deemed to create
an independent obligation on the part of any Holder to sell any Registrable
Securities pursuant to any effective registration statement.
2.9. Indemnification for Registrations.
(a) In the event of any registration of any securities of the Corporation
under the U.S. Securities Act or Canadian Securities Laws pursuant to this
Article 2, the Corporation shall, and hereby does, indemnify and hold harmless,
to the fullest extent permitted by law, the Holder of any Registrable
Securities, its directors, officers, fiduciaries, employees and
<PAGE>
-18-
shareholders or general and limited partners (and the directors, officers,
employees and shareholders thereof), each other Person who participates as an
underwriter or a Qualified Independent Underwriter, if any, in the offering or
sale of such securities, each officer, director, employee, shareholder or
partner of such underwriter or Qualified Independent Underwriter, and each other
Person, if any, who controls such seller or any such underwriter within the
meaning of the U.S. Securities Act, or Canadian Securities Laws against any and
all losses, claims, damages or liabilities, joint or several, actions or
proceedings (whether commenced or threatened) in respect thereof and expenses
(including reasonable fees of counsel and any amounts paid in any settlement
effected with the Corporation's consent, which consent shall not be unreasonably
withheld or delayed) to which each such indemnified party may become subject
under the U.S. Securities Act, Canadian Securities Laws or otherwise ("Claims"),
insofar as such Claims arise out of or are based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in any Canadian
Prospectus or registration statement under which such securities were registered
under the U.S. Securities Act or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary, final or summary
prospectus or any amendment or supplement thereto, together with the documents
incorporated by reference therein, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or (iii) any violation by the Corporation of any
federal, state, provincial, or common law rule or regulation applicable to the
Corporation and relating to action required or inaction of the Corporation in
connection with any such registration, and the Corporation will reimburse any
such indemnified party for any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
Claim as such expenses are incurred; provided, however, that the Corporation
shall not be liable to any such indemnified party in any such case to the extent
such Claim arises solely out of any untrue statement or alleged untrue statement
of a material fact or omission or alleged omission of a material fact made in
such registration statement or amendment thereof or supplement thereto or in any
such prospectus or any preliminary, final or summary prospectus in reliance
upon, and in conformity with, written information furnished to the Corporation
by, or on behalf of, such indemnified party specifically for use therein. Such
indemnity and reimbursement of expenses shall remain in full force and effect
regardless of any investigation made by, or on behalf of, such indemnified party
and shall survive the transfer of such securities by such seller.
(b) Each Holder of Registrable Securities that are included in the
securities as to which any registration under Section 2.1 or 2.2 is being
effected (and, if required by the Corporation as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 2.1 or Section 2.2, any underwriter or Qualified Independent
Underwriter, if any), shall, severally and not jointly, indemnify and hold
harmless (in
<PAGE>
-19-
the same manner and to the same extent as set forth in paragraph (a) of this
Section 2.9) to the extent permitted by law, the Corporation, its officers,
directors, fiduciaries, employees and shareholders or general and limited
partners (and the directors, officers, employees, and shareholders thereof),
each Person controlling the Corporation within the meaning of the U.S.
Securities Act and Canadian Securities Laws with respect to any untrue statement
or alleged untrue statement of any material fact in, or omission or alleged
omission of any material fact from, such registration statement, any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon, and in conformity with, written
information furnished to the Corporation or its representatives by, or on behalf
of, such Holder or underwriter or Qualified Independent Underwriter, if any,
specifically for use therein and shall reimburse such indemnified party for any
legal or other expenses reasonably incurred in connection with investigating or
defending any such Claim as such expenses are incurred; provided, however, that
the aggregate amount which any such Holder shall be required to pay pursuant to
this Section 2.9(b) and Sections 2.9(c) and (e) shall in no case be greater than
the amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities pursuant to the registration statement giving rise to
such Claim. Such indemnity and reimbursement of expenses shall remain in full
force and effect regardless of any investigation made by, or on behalf of, such
indemnified party and shall survive the transfer of such securities by such
Holder.
(c) Indemnification similar to that specified in the preceding paragraphs
(a) and (b) of this Section 2.9 (with appropriate modifications) shall be given
by the Corporation and each seller of Registrable Securities with respect to any
required registration or other qualification of securities under any state
securities and "blue sky" laws.
(d) Any person entitled to indemnification under this Agreement shall
promptly notify the indemnifying party in writing of the commencement of any
action or proceeding with respect to which a claim for indemnification may be
made pursuant to this Section 2.9, but the failure of any indemnified party to
provide such notice shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this Section 2.9, except to the extent the
indemnifying party is materially prejudiced thereby and shall not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than under this Article 2. In case any action or proceeding is brought
against an indemnified party, it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, unless in the reasonable opinion of outside counsel to the
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such Claim, to assume the defense
thereof jointly with any other indemnifying party similarly notified, to the
extent that it chooses, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the written consent of the indemnified party,
be counsel to the indemnifying party), and after notice from the
<PAGE>
-20-
indemnifying party to such indemnified party that it so chooses, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that (i) if the indemnifying party fails to take reasonable steps
necessary to defend diligently the action or proceeding within 20 days after
receiving notice from such indemnified party that the indemnified party believes
it has failed to do so, (ii) if such indemnified party who is a defendant in any
action or proceeding which is also brought against the indemnifying party
reasonably shall have concluded that there may be one or more legal defenses
available to such indemnified party which are not available to the indemnifying
party, or (iii) if representation of both parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct,
then, in any such case, the indemnified party shall have the right to assume or
continue its own defense as set forth above (but with no more than one firm of
counsel for all indemnified parties in each jurisdiction, except to the extent
any indemnified party or parties reasonably shall have concluded that there may
be legal defenses available to such party or parties which are not available to
the other indemnified parties or to the extent representation of all indemnified
parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct) and the indemnifying party shall be liable
for any expenses therefor (including, without limitation, any such counsel's
fees). No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or Claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (A) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (B) does not include a statement as to, or an admission
of, fault, culpability or a failure to act, by, or on behalf of, any indemnified
party.
(e) If for any reason the foregoing indemnity is unavailable or is
insufficient to hold harmless an indemnified party under Sections 2.9(a), (b) or
(c), then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of any Claim in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and the indemnified party, on the other hand, with respect to such
offering of securities. The relative fault 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 indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. If, however, the
allocation provided in the second preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative faults, but also the relative benefits of the
indemnifying party and the indemnified party, as well as any other relevant eq-
<PAGE>
-21-
uitable considerations. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 2.9(e) were to be determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the preceding sentences
of this Section 2.9(e). The amount paid or payable in respect of any Claim shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such Claim.
No person guilty of fraudulent misrepresentation (within the meaning of section
11(f) of the U.S. Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
anything in this Section 2.9(e) to the contrary, no indemnifying party (other
than the Corporation) shall be required pursuant to this Section 2.9(e) to
contribute any amount in excess of the net proceeds received by such
indemnifying party from the sale of Registrable Securities in the offering to
which the losses, claims, damages or liabilities of the indemnified parties
relate, less the amount of any indemnification payment made pursuant to Sections
2.9(b) and (c).
(f) The indemnity agreements contained herein shall be in addition to any
other rights to indemnification or contribution which any indemnified party may
have pursuant to law or contract and shall remain operative and in full force
and effect regardless of any investigation made or omitted by, or on behalf of,
any indemnified party and shall survive the transfer of the Registrable
Securities by any such party.
(g) The indemnification and contribution required by this Section 2.9 shall
be made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
3. Underwritten Offerings.
3.1. Requested Underwritten Offerings. If requested by the underwriters for
any underwritten offering by the Holders pursuant to a registration requested
under Section 2.1, the Corporation shall enter into a customary underwriting
agreement with the underwriters. Such underwriting agreement shall be
satisfactory in form and substance to the Initiating Holders acting reasonably
and shall contain such representations and warranties by, and such other
agreements on the part of, the Corporation and such other terms as are generally
prevailing in agreements of that type, including, without limitation,
indemnities and contribution agreements. Any Holder participating in the
offering shall be a party to such underwriting agreement and may, at its option,
require that any or all of the representations and warranties made by, and the
other agreements on the part of, the Corporation to, and for the benefit of,
such underwriters shall also be made to, and for the benefit of, such Holder and
that any or all of the conditions precedent
<PAGE>
-22-
to the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such Holder; provided, however, that
the Corporation shall not be required to make any representations or warranties
with respect to information specifically provided by a selling Holder of
Registrable Securities for inclusion in the registration statement. Such
underwriting agreement shall also contain such representations and warranties by
the participating Holders as are customary in agreements of that type.
3.2. Piggyback Underwritten Offerings. In the case of a registration
pursuant to Section 2.2 hereof, if the Corporation shall have determined to
enter into any underwriting agreements in connection therewith, all of the
Holders' Registrable Securities to be included in such registration shall be
subject to such underwriting agreements. Any Holder participating in such
registration may, at its option, require that any or all of the representations
and warranties by, and the other agreements on the part of, the Corporation to,
and for the benefit of, such underwriters shall also be made to, and for the
benefit of, such Holder and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Holder. Such underwriting agreement shall
also contain such representations and warranties by the participating Holders as
are customary in agreements of that type.
3.3. Underwriting Services. If a Demand Registration pursuant to Section
2.1 involves an underwritten offering, then the Corporation shall select the
underwriter from underwriting firms of national reputation in the United States
or Canada, as the case may be, subject to the approval of the Initiating
Holders, such approval not to be unreasonably withheld.
4. General.
4.1. Adjustments Affecting Registrable Securities. The Corporation agrees
that it shall not effect or permit to occur any combination or subdivision of
shares which would adversely affect the ability of the Holder of any Registrable
Securities to include such Registrable Securities in any registration
contemplated by this Agreement or the marketability of such Registrable
Securities in any such registration. The Corporation agrees that it will take
all reasonable steps necessary to effect a subdivision of shares if in the
reasonable judgment of (a) the Initiating Holders in the case of a Demand
Registration Request, or (b) the Manager for the offering in respect of any such
registration requests, such subdivision would enhance the marketability of the
Registrable Securities. Each Holder agrees to vote all of its share capital in a
manner, and to take all other actions necessary, to permit the Corporation to
carry out the intent of the preceding sentence including, without limitation,
voting in favor of an amendment to the Corporation's Articles of Incorporation
in order to increase the number of authorized capital shares of the Corporation.
<PAGE>
-23-
4.2. Rule 144. If the Corporation shall have filed a registration statement
pursuant to the requirements of Section 12 of the U.S. Exchange Act or a
registration statement pursuant to the requirements of the U.S. Securities Act
in respect of the Common Shares or Common Shares Equivalents, the Corporation
covenants that (a) so long as it remains subject to the reporting provisions of
the Exchange Act, it will timely file the reports required to be filed by it
under the U.S. Securities Act or the Exchange Act (including, without
limitation, the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c)(1) of Rule 144 under the U.S. Securities Act), and (b)
will take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the U.S.
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the U.S. Securities Act, as such Rule may be amended from time to time, or
(ii) any similar rule or regulation hereafter adopted by the Commission. Upon
the request of any Holder of Registrable Securities, the Corporation will
deliver to such Holder a written statement as to whether it has complied with
such requirements.
4.3. Nominees for Beneficial Owners. If Registrable Securities are held by
a nominee for the beneficial owner thereof, the beneficial owner thereof may, at
its option, be treated as the Holder of such Registrable Securities for purposes
of any request or other action by any Holder or Holders of Registrable
Securities pursuant to this Agreement (or any determination of any number or
percentage of shares constituting Registrable Securities held by any Holder or
Holders of Registrable Securities contemplated by this Agreement); provided,
however, that the Corporation shall have received written assurances reasonably
satisfactory to it of such beneficial ownership.
4.4. Amendments. The terms and provisions of this Agreement may be modified
or amended, or any of the provisions hereof waived, temporarily or permanently,
pursuant to the prior written consent of the Corporation and the party adversely
affected by such modification or waiver.
4.5. Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or sent by telecopy, nationally
recognized overnight courier or first class registered or certified mail, return
receipt requested, postage prepaid, addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
such party to the other parties:
(i) if to the Corporation, to:
Worldwide Fiber Inc.
<PAGE>
-24-
#1510-1066 West Hastings Street
Vancouver, British Columbia V6E 3X1
Fax: (604) 681-6822
Attention: Steven Stow
with copies to:
Farris, Vaughan, Wills & Murphy
2600 - 700 West Georgia Street
Vancouver, British Columbia V7Y 1B3
Fax: (604) 661-9319
Attention: Cameron G. Belsher
and
Cahill Gordon & Reindel
Eighty Pine Street
New York, New York 10005
Fax: (212) 269-5420
Attention: Roger Andrus
(ii) if to DLJ, to:
DWF SRL
Chancery House
High Street
Bridgetown,
Barbados, West Indies
and
DWF SRL
c/o DLJ Merchant Banking Partners II, L.P.
277 Park Avenue
New York, New York 10172
Fax: (212) 892-7272
Attention: Andrew Rush
with a copy to:
Latham & Watkins
<PAGE>
-25-
885 Third Avenue, Suite 1000
New York, New York 10022-4802
Fax: (212) 751-4864
Attention: Steven Della Rocca
(iii) if to any of the GSCP Parties to:
c/o Ernst & Young Services, Ltd.
P.O. Box 261
Bay Street
Bridgetown, Barbados
Attention: Carol-Ann Smith
and
c/o GS Capital Partners III, L.P.
85 Broad Street
New York, New York 10004
Fax: (212) 902-3000
Attention: Robert R. Gheewalla
with copies to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Fax: (212) 859-4000
Attention: Stuart Z. Katz
and
GS Capital Partners III, L.P.
85 Broad Street
New York, New York 10004
Fax: (212) 357-5505
Attention: Ben Adler
(iv) if to Providence, to:
Providence Equity Fiber, L.P.
50 Kennedy Plaza
<PAGE>
-26-
Providence, Rhode Island 02903
Fax: (401) 751-1790
Attention: Glenn M. Creamer
with a copy to:
Edwards & Angell, LLP
2800 BankBoston Plaza
Providence, RI 02903
Fax: (401) 276-6602
Attention: David K. Duffell
(v) if to Tyco, to
Tyco Group S.a.r.l.
2nd Floor
6, Avenue Emile Reuter
L-2420 Luxembourg
Fax: 352-464-350
Attention: Managing Director
with a copy to:
Tyco Submarine Systems Ltd.
250 Industrial Way West
Eatontown, New Jersey 07724
Fax: (732) 578-7803
Attention: General Counsel
Each Holder, by written notice given to the Corporation in accordance with
this Section 4.5, may change the address to which such notice or other
communications are to be sent to such Holder. All such notices, requests,
consents and other communications shall be deemed to have been given when
received.
4.6. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and the respective successors, personal
representatives and assigns of the parties hereto, whether so expressed or not.
No Person other than a Holder shall be entitled to any benefits under this
Agreement, except as otherwise expressly provided herein. This Agreement and the
rights of the parties hereunder may be assigned by any of the
<PAGE>
-27-
parties hereto to any transferee of Registrable Securities provided that
upon the consummation of, and as a condition to, any such assignment the
transferee assumes the obligations of the assignor under, and agrees to be bound
by the terms of, this Agreement.
(b) This Agreement and the other writings referred to herein or delivered
pursuant hereto which form a part hereof contain the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior and
contemplated arrangements and understandings with respect thereto, including but
not limited to, that certain letter of intent, dated as of August 5, 1999,
between the Corporation and the Investors.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to the principles of
conflicts of law thereof.
(d) The headings of the sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be a part of this
Agreement.
(e) This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed an original instrument, but all such
counterparts together shall constitute but one instrument.
(f) Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid, but if any provision of
this Agreement is held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not render invalid or unenforceable any
other provision of this Agreement.
(g) It is hereby agreed and acknowledged that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved person will be irreparably damaged and will
not have an adequate remedy at law. Any such person, therefore, shall be
entitled to injunctive relief, including specific performance, to enforce such
obligations, without the posting of any bond, and, if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy at
law.
(h) Each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
<PAGE>
-28-
(i) Each of the parties hereto hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the State of
New York and of the United States of America, in each case located in the County
of New York, for any action, proceeding or investigation in any court or before
any governmental authority ("Litigation") arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to commence
any Litigation relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document by registered mail to its
respective address set forth in this Agreement shall be effective service of
process for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York or the
United States of America, in each case located in the County of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such Litigation brought in any such court has
been brought in an inconvenient forum. EACH OF THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
4.7. Prior Agreements. Each of the Holders and the Corporation hereby
agrees that any agreement previously entered into by it pursuant to which the
Corporation granted to it any registration rights shall be superseded by this
Agreement and each such agreement (and any rights such Holder has pursuant to
such agreement) shall be terminated, null and void and no longer in effect.
4.8. No Inconsistent Agreements. Without the prior written consent of the
majority of the Investors, neither the Corporation nor any Holder will, on or
after the date of this Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted in this Agreement or
otherwise conflicts with the provisions hereof, other than any lock-up agreement
with the underwriters in connection with any registered offering effected
hereunder, pursuant to which the Corporation shall agree not to register for
sale, and the Corporation shall agree not to sell or otherwise dispose of,
Common Shares or any securities convertible into or exercisable or exchangeable
for Common Shares, for a specified period following the registered offering.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.
<PAGE>
-29-
CORPORATION:
WORLDWIDE FIBER INC.
By:________________________
Name:
Title:
DWF SRL
By:________________________
Name:
Title:
GSCP3 WWF (Barbados) SRL
By:________________________
Name:
Title:
WWF (Barbados) SRL
By:________________________
Name:
Title:
(Signature Page to Registration
Rights Agreement)
<PAGE>
-30-
PROVIDENCE EQUITY FIBER, L.P.
by its General Partner,
Providence Equity Partners III L.P.
by its General Partner,
Providence Equity Partners III L.P.
By:________________________
Name: Glenn M. Creamer
Title: Member and Manager Director
TYCO GROUP S.A.R.L.
By:________________________
Name:
Title:
(Signature Page to Registration
Rights Agreement)
AMENDED AND RESTATED SHARE PURCHASE AGREEMENT
This Share Purchase Agreement entered into on the 7th day of September,
1999
BETWEEN:
LEDCOR INDUSTRIES LIMITED, a corporation continued under the laws of
the Province of Alberta, having an office at 1000 - 1066 West Hastings
Street, Vancouver, British Columbia, and LEDCOR INDUSTRIES INC., a
company incorporated pursuant to the laws of the State of Washington,
United States of America, having an office at 215 Marine Drive, Blaine
Washington, U.S.A. 98231
(hereinafter collectively referred to as the "Sellers")
OF THE FIRST PART
AND:
WORLDWIDE FIBER INC., a corporation continued under the laws of Canada,
having an office at 1520 - 1066 West Hastings Street, Vancouver,
British Columbia
(the "Purchaser")
OF THE SECOND PART
WHEREAS:
A. The Sellers own fiber optic strands, conduits and related rights and
obligations attaching thereto and the Purchaser wishes to acquire such
assets;
B. The parties entered into an agreement effective the 28th day of May, 1999
whereby the Sellers agreed to transfer the fiber assets and related rights
and obligations to a wholly-owned subsidiary of the Sellers and the
Purchaser agreed to acquire from the Sellers all of the shares of such
subsidiary (the "Original Share Purchase Agreement");
C. The parties entered into an Amended and Restated Share Purchase Agreement
on June 28, 1999, to amend certain provisions of the Original Share
Purchase Agree-
<PAGE>
-2-
ment and to restate the provisions thereof (the "First Amended and Restated
Share Purchase Agreement"); and
D. The parties wish to amend certain provisions of the Amended and Restated
Share Purchase Agreement and have agreed to restate the provisions thereof
as provided herein;
IN CONSIDERATION of the sum of $10.00 (U.S.) and other good and valuable
consideration passing between the parties hereto, the receipt and adequacy of
which is acknowledged by both parties, the parties covenant and agree as
follows:
1. Recitals and Definition.
1.1 Effect of Recitals. The parties hereto represent and warrant that the
above recitals are true and agree that the terms of this Amended and Restated
Share Purchase Agreement shall supersede and replace the terms of the Original
Share Purchase Agreement and the first Amended and Restated Share Purchase
Agreement and shall have effect as of and from the Effective Date (as defined
herein);
1.2 Definitions. Schedules A and B and the Exhibits attached to such
schedules are incorporated in this Share Purchase Agreement by this reference.
Any capitalized term used in this Share Purchase Agreement shall have the
meaning ascribed to such term in the Terms of Purchase attached as Schedule A.
In addition, the following capitalized terms shall have the meaning set out
below:
(a) "Closing Date" means the date on which the Roll-In Transaction is
completed pursuant to the provisions of the Terms of Purchase;
(b) "Effective Date" means the 28th day of May, 1999;
(c) "Encumbrances" means any and all mortgages, liens, charges, security
interests, encumbrances or other claims;
(d) "Newco Shares" means all of the issued and outstanding shares of
Newco;
(e) "Roll-In Transaction" means the transaction of purchase and sale
between the Sellers as vendor, and Newco as purchaser, whereby the
Fiber Assets (as defined in Schedule A) are transferred to Newco in
accordance with the terms and provisions of Schedule A attached;
<PAGE>
-3-
(f) "Share Closing" means completion of the share purchase transaction
contemplated herein which shall occur immediately following completion
of the Roll-In Transaction on the Closing Date; and
(g) "Terms of Purchase" means the terms and conditions of Schedule A
attached;
(h) "WFI Shares" means the Class C Multiple Voting Shares in the capital
of the Purchaser, having the rights and restrictions attaching thereto
as set out in Schedule B attached and any amendment to such rights or
restrictions which are consented to by both parties on or prior to the
Share Closing.
2. Roll-In Structure.
2.1 Sellers' Obligations. The Sellers shall complete the Roll-In
Transaction in accordance with the Terms of Purchase on the Closing Date
specified therein.
3. Purchase and Sale of Shares.
3.1 Sale and Purchase Price. The Purchaser on the Share Closing shall
acquire from the Sellers and the Sellers shall sell to the Purchaser, all of the
Newco Shares for a purchase price of $45,000,000 (U.S.). Such Purchase Price
shall be satisfied by the Purchaser issuing to the Sellers 4,500,000 WFI Shares,
free and clear of all Encumbrances.
4. Representations and Warranties.
4.1 Representations and Warranties of the Sellers. The Sellers represent
and warrant to the Purchaser and acknowledge and confirm that the Purchaser is
relying on such representations and warranties in connection with the purchase
by the Purchaser of the Newco Shares:
(a) Organization and Qualification. On the Share Closing, Newco will:
(i) be a company duly incorporated and organized and validly
subsisting in good standing under the laws of Alberta;
(ii) have the corporate power to own its assets and carry on the
business of owning fiber optic communication cables and related
facilities;
(iii) be duly qualified as a company to do business; and
<PAGE>
-4-
(iv) be extra-provincially registered in the Province of British
Columbia to carry on business and no impediment shall exist for
Newco to carry on business in those jurisdictions in which it
carries on business or in which the location of its assets makes
such qualification necessary.
(b) Due Authorization Etc. The Roll-In Transaction contemplated hereunder
will on the Share Closing be duly authorized by all necessary
corporate action on the part of Newco.
(c) No Conflicts or Violations. The entering into of the Purchase
Agreement by Newco, as the case may be, will not result in violation
of any of the terms and provisions of the articles or by-laws of Newco
or of any indenture or other agreement, written or oral, to which any
of Newco or the Sellers may be a party or by which they are bound or
will be bound on the Share Closing.
(d) Authorized Capital. The authorized capital of Newco consists of an
unlimited number of common voting shares of which (i) immediately
prior to the Roll-In Transaction only one common share shall have been
duly issued to the Sellers jointly as fully paid and non-assessable;
and (ii) immediately prior to the Share Closing only 1,000 common
shares shall have been issued and those will have been issued in
favour of the Sellers and will be outstanding as fully paid and
non-assessable;
(e) Options Etc. No person has any option, warrant, right, call,
commitment, conversion right, right of exchange or other agreement or
any right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an option, warrant, right, call, commitment,
conversion right, right of exchange or other agreement:
(i) for the purchase from either of the Sellers of any of the issued
and outstanding shares of Newco; or
(ii) for the purchase, subscription, allotment or issuance of any of
the unissued shares of the capital of Newco or of any securities
of Newco.
(f) Status of Newco Shares. Subsequent to the Roll-In Transaction and
immediately prior to the Share Closing the Newco Shares shall be
issued in the name of the Sellers, jointly, as the registered and
beneficial owners thereof with good and marketable title thereto, free
and clear of all mortgages, liens,
<PAGE>
-5-
charges, pledges, security interests, encumbrances or other claims
whatsoever, other than rights in favour of the Purchaser pursuant to
this Share Purchase Agreement; each of the Sellers has the right,
power and authority to enter into this Agreement and to sell all the
Newco Shares on the Share Closing as contemplated herein, and the
delivery of such Newco Shares to the Purchaser pursuant to the
provisions hereof will transfer to the Purchaser valid title thereto,
free and clear of all Encumbrances.
(g) Title to Assets. Newco, on the Share Closing, shall beneficially own,
possess and have good and marketable title to the Fiber Assets, free
and clear of any Encumbrances save for the Permitted Encumbrances.
(h) Outstanding Debt or Guarantees. Newco, on the Share Closing, shall
have no outstanding liability for borrowed money or other indebtedness
and Newco shall not be a guarantor or otherwise contingently liable
for the obligations of any other person including for the Sellers or
either of them, except for the obligations to be assumed by Newco
pursuant to the Terms of Purchase.
(i) Employees. On the Share Closing, Newco shall have no employees.
4.2 Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Sellers and acknowledges and confirms that the
Sellers are relying on such representations and warranties in connection with
the issue by the Purchaser of the WFI Shares to the Sellers:
(a) Organization and Qualification. The Purchaser is a corporation duly
continued, validly subsisting and in good standing under the laws of
Canada and is extra-provincially registered to carry on business in
the Province of British Columbia.
(b) Due Authorization Etc. The Purchaser has the exclusive right and has
all necessary corporate power and authority to enter into this Share
Purchase Agreement and to carry out its obligations hereunder, and the
execution and delivery of this Share Purchase Agreement and the
consummation of the transactions contemplated hereunder have been duly
authorized by all necessary corporate action on the part of the
Purchaser.
(c) No Conflicts or Violations. The entering into of this Agreement and
the transactions contemplated hereby will not result in the violation
of any of the terms and provisions of the constating documents or
bylaws of the Purchaser
<PAGE>
-6-
or of any indenture or other agreement, written or oral, to which the
Purchaser is a party or by which it is bound.
(d) Authorized Capital. Immediately prior to the Share Closing the
authorized capital of the Purchaser shall consist of:
(i) an unlimited number of Class A Non-Voting Shares;
(ii) an unlimited number of Class B Subordinate Voting Shares;
(iii) an unlimited number of Class C Multiple Voting Shares;
(iv) an unlimited number of Preferred Shares, of which the first
series shall consist of 100,000,000,000 Series A Non-Voting
Shares, the second series shall consist of 100,000,000,000 Series
B Subordinate Voting Preferred Shares and the third series shall
consist of 45,000,000 Series C Preferred Shares,
of which no more than 24,000,000 Class B Subordinate Voting Shares
shall be issued and outstanding, which amount may be increased by any
additional shares issued pursuant to the options and agreements
described in Section 4.2(f) below.
(e) No Liens, Etc. On the Share Closing there shall be no Encumbrances
affecting any of the WFI Shares to be issued to the Sellers on
Closing.
(f) Options, Etc. On the Share Closing, except for options granted
pursuant to the Purchaser's director and employee stock option plan,
certain options issued to an employment agency or consultant engaged
by the Purchaser and agreements to issue certain shares to certain
investors and to certain minority shareholders of subsidiaries (all of
which have been accurately and fully disclosed by the Purchaser to the
Sellers), no person has any option, warrant, right, call commitment,
conversion right or other agreement capable of becoming an option,
warrant, right, call, commitment or conversion right for the purchase,
subscription, allotment or issuance of any of the unissued shares in
the capital of the Purchaser.
4.3 Survival of Representations and Warranties. The representations and
warranties of each of the Sellers and of the Purchaser contained in this
Agreement and contained in certificates or documents submitted pursuant to or in
connection with the transactions herein provided for shall survive the Share
Closing and, notwithstanding such
<PAGE>
-7-
closing, shall continue in full force and effect for the benefit of the Sellers
or the Purchasers, as the case may be, for a period of three years from the
Share Closing.
5. Purchaser's Rights of Assignment.
5.1 Reasonable Requests. The Sellers agree to accommodate all reasonable
requests of the Purchaser to transfer the Fiber Assets, as the case may be, to
Newco and/or additional wholly-owned subsidiaries of the Sellers as may be
expedient from the Purchaser's perspective for accounting or taxation purposes
and the parties agree to execute such amending agreements and additional
documents as may be reasonably required to reflect that "Newco" may be one or
more corporate entities, each owning a portion of the Fiber Assets subject to
the Roll-In Transaction.
6. Joint and Several Obligations.
6.1 The obligations of the Sellers herein shall be joint and several
obligations of Ledcor Industries Limited and Ledcor Industries Inc.
7. Covenants.
7.1 Covenants of the Sellers.
(a) Deliveries. On the Share Closing, the Sellers shall deliver or cause
to be delivered to the Purchaser the following in form and substance
satisfactory to the Purchaser:
(i) Share certificates representing the Newco Shares, duly endorsed
for transfer, or accompanied by duly executed irrevocable
security powers of attorney, together with evidence satisfactory
to the Purchaser that the Purchaser or its nominees have been
duly entered upon the books of Newco as the holder of the Newco
Shares;
(ii) A certificate of senior officers of both Sellers certifying the
names and signatures of its officers and directors authorized to
sign the documents to be delivered by the Sellers under this
Agreement;
(iii) Certificates duly executed by each of the Sellers to the effect
that each of the representations and warranties of such Sellers
set forth in section 4.1 of this Agreement are true and correct
as at the Share Closing with the same force and effect as if it
were made at and as of such time;
<PAGE>
-8-
(iv) Certificates duly executed by an officer of Newco to the effect
that each of the representations and warranties applicable to
Newco set forth in section 4.1 are true and correct at the Share
Closing with the same force and effect as if it were made at and
as of such time;
(v) Duly executed resignations of all persons who are directors or
officers of Newco immediately prior to the Share Closing;
(vi) All necessary deeds, conveyances, bills of sale, assurances,
transfers, assignments and consents, and any other documents
necessary or reasonably required effectively to transfer the
Newco Shares to the Purchaser with a good and marketable title
thereto, free and clear of all Encumbrances; and
(vii) Such other documents including opinions of legal counsel for
Newco as may be required by the Purchaser, acting reasonably.
(b) Restrictions against dealing with Fiber Assets. From and after the
Effective Date, the Sellers shall not transfer, encumber, lease,
exchange or otherwise deal with or alienate the Fiber Assets without
the prior written consent of the Purchaser. In addition, the Sellers
shall not amend or otherwise alter any obligations to be assumed by
Newco pursuant to the terms of the Terms of Purchase without the prior
written consent of the Purchaser being obtained. The Purchaser may
enter into agreements respecting the Fiber Assets conditional upon the
Purchaser acquiring control of the Fiber Assets as contemplated in
this Agreement and the Terms of Purchase.
(c) Rights of Purchaser. The Sellers acknowledge and agree that Newco or
the Purchaser may install on the Purchased Strands DWDM optical
equipment and ancillary support equipment required to utilize the
Purchased Strands for the transmission of telecommunication services
(such equipment being referred to herein as the "Equipment"). The
Sellers shall allow the Purchasers reasonable access to their shelters
and to the Purchased Strands to allow installation of the Equipment.
In the event that completion of the share purchase transaction
contemplated herein fails to complete on or prior to the Share Closing
Date, the Purchaser shall, at its option, exercisable by written
notice (the "Equipment Notice") delivered by the Purchaser to the
Sellers, either:
(i) remove the Equipment and restore the Purchased Strands to the
condition existing immediately prior to installation of the
Equipment; or
<PAGE>
-9-
(ii) require the Sellers to acquire the Equipment at a price equal to
the lesser of (A) fair market value of the Equipment at the time
of transfer and (B) the Purchaser's book value of the Equipment
determined in accordance with generally accepted accounting
principles at the time of transfer.
The Equipment Notice shall specify whether the Purchasers are
exercising option (i) or (ii) above and the date upon which either the
removal or transfer, as the case may be, will take place, which date
shall not be more than 180 days following delivery of the Equipment
Notice.
7.2 Covenants of the Purchaser.
(a) Deliveries. On or before the Share Closing, the Purchaser shall
deliver or cause to be delivered to the Sellers the following in form
and substance satisfactory to the Sellers.
(i) Share certificates representing the WFI Shares to be delivered to
the Sellers in satisfaction of the purchase price;
(ii) An opinion of counsel to WFI opining as to the due incorporation
of WFI that all necessary corporate action has been taken by WFI
with respect to issuance of the WFI Shares; any restrictions on
transfer effecting the WFI Shares; the issued and outstanding
shares of WFI at the time of issuance and any other matters
reasonably requested by the solicitors for the Sellers;
(iii) A certificate of a senior officer of the Purchaser certifying
the names and signatures of its officers and directors authorized
to sign the documents to be delivered by the Purchaser under this
Agreement;
(iv) A certificate duly executed by the Purchaser to the effect that
each of the representations and warranties of the Purchaser set
forth in section 4.2 are true and correct at the time of the
Share Closing with the same force and effect as if it were made
at and as of such time;
(v) All necessary deeds, conveyances, bills of sale, assurances,
transfers, assignments and consents, and any other documents
necessary or reasonably required to effectively issue, as fully
paid and nonassessable, the WFI Shares to the Sellers with a good
and marketable title thereto, free and clear of all Encumbrances;
and
<PAGE>
-10-
(vi) Such other documents as may be required by the Sellers, acting
reasonably.
7.3 Tax Election. The parties agree that Newco and the Purchaser will
jointly elect pursuant to Subsection 85(1) of the Income Tax Act (Canada) (the
"Act") that the proceeds of disposition for the Newco Shares shall be equal to
the Sellers' tax cost of such shares. The parties agree that such joint
elections shall be filed within the prescribed time and in the prescribed form
set forth in the Act.
8. General.
8.1 Notices. Any notice or other communications required or permitted to be
given pursuant to this Agreement shall be in writing and shall be hand delivered
(including delivery by courier service), or sent by certified mail return
receipt requested, postage prepaid or by facsimile transmission, as follows:
If to the Sellers:
c/o Ledcor Industries Limited
#1000 - 1066 West Hastings Street
Vancouver, B.C., Canada V6E 3X1
Facsimile: (604) 681-1606
Attention: Chief Financial Officer
If to the Purchaser:
Worldwide Fiber Inc.
1520 - 1066 West Hastings Street
Vancouver, B.C., Canada V6E 3X1
Facsimile: (604) 681-6822
Attention: Mr. Stephen Stow, Executive Vice President
Any notice or communication shall be deemed given or made (i) when delivered by
hand (or courier service) (ii) when mailed three business days after being
deposited in the mail postage prepaid sent by certified mail, return receipt
requested and (iii) when sent by facsimile transmission, when confirmation of
transmission is received.
8.2 Entire Agreement. This Share Purchase Agreement, together with the
Schedules attached hereto, including the Exhibits thereto, constitutes the
entire agreement between the parties and there are no other verbal statements,
representations, warranties, undertakings or agreements between the parties with
respect to the subject matter hereof or the transaction of purchase and sale
arising hereunder. This Share Purchase Agreement
<PAGE>
-11-
may not be amended or modified in any respect except by written instrument
signed by both parties and any agreements contemplated hereunder are to be
evidenced in writing.
8.3 Time of the Essence. Time shall be of the essence in this Share
Purchase Agreement.
8.4 Severability and Waiver. If any provision of this Share Purchase
Agreement is declared invalid or unenforceable by a court of competent
jurisdiction this Share Purchase Agreement shall endure except for that part
declared invalid or unenforceable by such order. A waiver of any breach or
provision of this Share Purchase Agreement shall not be construed as a
continuing waiver of other breaches of the same or other provisions of this
Share Purchase Agreement nor a waiver of a subsequent breach or default of any
term, provision or condition set out herein.
8.5 Governing Law. This Purchase Agreement has been made and shall be
governed by and construed in accordance with the laws of the Province of British
Columbia and the laws of Canada applicable therein.
8.6 Enurement. Save as specifically provided herein with respect to Newco
designating affiliates who may acquire all or some of the Fiber Assets, neither
party may assign their rights or obligations pursuant to this Share Purchase
Agreement without the prior written consent of the other, not to be unreasonably
withheld or delayed. This Share Purchase Agreement shall enure to the benefit of
and be binding upon the parties hereto and their respective administrators,
successors and permitted assigns.
8.7 Further Assurances. From time to time both prior to and subsequent to
the Share Closing the parties shall execute and deliver such additional
conveyances, transfers and other assurances as may be reasonably required to
carry out the intent and effect of this Share Purchase Agreement and to complete
the Roll-In Transaction.
8.8 Schedules. The Schedules listed below and attached to this Agreement
shall form part of this Share Purchase Agreement.
Schedule A Terms and Conditions of Roll-In Transaction
Schedule B Rights and Restrictions Attaching to WFI Shares
<PAGE>
-12-
IN WITNESS WHEREOF the parties have executed this Agreement to have effect
as of and from the Effective Date.
WORLDWIDE FIBER INC. LEDCOR INDUSTRIES LIMITED
per: per:
- ------------------------------- -------------------------------
signature signature
- ------------------------------- -------------------------------
Name and Office Name and Office
LEDCOR INDUSTRIES INC.
per:
- -------------------------------
signature
- -------------------------------
Name and Office
<PAGE>
SCHEDULE A
TO SHARE PURCHASE AGREEMENT BETWEEN
LEDCOR INDUSTRIES INC., LEDCOR INDUSTRIES LIMITED
AND WORLDWIDE FIBER INC.
TERMS AND CONDITIONS OF
ROLL-IN TRANSACTION
1. Definitions.
(a) "Assignment and Assumption Agreement(s)" means an agreement or
agreements between Ledcor as assignor and Newco as assignee:
(i) wherein Ledcor assigns its rights pursuant to the Assumed
Contracts to Newco as of and from the Closing Date;
(ii) Newco agrees to perform all of the obligations of Ledcor pursuant
to the Assumed Contracts as of and from the Closing Date; and
(iii) Ledcor indemnifies and holds harmless Newco from any damage,
loss, claim or costs suffered by Newco arising from breach or
default by Ledcor attributable to the period prior to the Closing
Date and Newco indemnifies and holds harmless Ledcor for any
damage, loss, claim or costs suffered by Ledcor arising from
breach or default by Newco attributable to the period on or
following the Closing Date;
(b) "Assumed Contracts" means those agreements currently binding Ledcor
relating to the Fiber Assets which are specified in Exhibit 2 to this
Schedule A together with the Build Agreements and any additional
agreements entered into by Ledcor in the normal course of its
telecommunications business prior to the Closing;
(c) "Build Agreements" means the agreements described in Exhibit 3
attached hereto;
(d) "Closing" means completion of the transactions contemplated hereby
which shall take place at the offices of Ledcor in Vancouver at 10:00
a.m. Vancouver time on the Closing Date or such other time as agreed
to by the parties;
<PAGE>
-2-
(e) "Closing Date" means September 30, 1999, unless otherwise extended or
amended in accordance with paragraph 3 of this Schedule A;
(f) "Dollars or $" means dollars in the currency of the United States of
America;
(g) "Fiber Assets" means:
(i) all rights of Ledcor pursuant to the Assumed Contracts, as
assigned to Newco under the Assignment and Assumption Agreements;
(ii) the segments of fiber optic strands identified in Exhibit 1
attached hereto, which strands, together with other strands, form
part of a cable which has been encased in conduit and placed in
ground or undersea or is otherwise located along the routes
identified in Exhibit 1, but which strands have not yet been
activated by electronics or optronics, together with certain
in-ground conduit also specified in Exhibit 1 (collectively the
"Purchased Strands");
(iii) a nonexclusive right to use and enjoy, in common with all others
having rights with respect to other strands forming part of the
fiber optic cable containing portions of the Purchased Strands,
each easement, license, right-of-way or similar right owned or
acquired or hereafter acquired by Ledcor, on and subject to the
terms and conditions set out in the agreements governing such
rights and all ancillary agreements thereto, with respect to
lands or buildings through which such fiber optic cable passes;
and
(iv) the rights of Ledcor relating to any Support Structures;
(h) "Ledcor" means Ledcor Industries Inc. and Ledcor Industries Limited
being the parties described as the Seller in the Purchase Agreement;
(i) "Newco" means a company to be incorporated by Ledcor under the Alberta
Business Corporations Act which shall have no assets or liabilities
exceeding a value of $10 (U.S.) immediately preceding the Closing
contemplated herein;
(j) "Newco Common Shares" means common voting shares in the capital of
Newco having the rights and restrictions described in Exhibit 4
attached hereto;
<PAGE>
-3-
(k) "Permitted Encumbrances" means those encumbrances, liens, agreements,
mortgages, charges, security interests or similar claims set out in
Exhibit 5 attached hereto;
(l) "Purchase Agreement" means the agreement of purchase and sale
containing the terms set out in this Schedule A between Ledcor as
Seller and the Purchaser, to be executed and delivered on Closing;
(m) "Share Purchase Agreement" means the Amended and Restated Purchase
Agreement between Ledcor and Newco to have effect from the 28th day of
May, 1999 and of which this Schedule A forms a part;
(n) "Support Structures" means the infrastructure necessary to support the
Purchased Strands, including, without limitation, communications
shelters, cable sheathing and all associated conduit, troughing,
pedestals and related equipment, but excluding electronics and
optronics necessary to activate the Purchased Strands; and
(o) "Underlying Rights" has the meaning set forth in section 6(f) below.
2. Purchase and Sale. On Closing Ledcor shall transfer to Newco the Fiber
Assets free and clear of all liens, charges and encumbrances save for the
Permitted Encumbrances and Newco shall purchase same for the purchase price of
$45,000,000 (U.S.) (the "Purchase Price") in accordance with the terms and
conditions set out in this Purchase Agreement.
3. Closing Date. In the event that Worldwide Fiber Inc. has not, on or
before September 30, 1999, completed an initial public offering of shares in its
common stock on a recognized exchange, either party may, by written notice to
the other - and with the consent of Worldwide Fiber Inc., extend the Closing
Date to a date no later than March 31, 2000. Notwithstanding any extension or
amendment of the Closing Date herein, Newco with the consent of Worldwide Fiber
Inc. may, at any time prior to the Closing Date, on ten days prior written
notice to Ledcor, accelerate the Closing Date to such date as may be set out in
the notice. The parties acknowledge that the Closing Date has been set at
September 27, 1999.
4. Satisfaction of Purchase Price. Newco shall satisfy the Purchase Price
by issuing to Ledcor 999 Newco Common Shares.
5. Adjustments. Following Closing, the parties shall make adjustments
between themselves as provided below:
<PAGE>
-4-
(a) Ledcor and Newco confirm and declare that the purchase price has been
calculated based on (x) the price paid by MetroNet to Ledcor and
fONOROLA for the transfer of certain fiber assets, and (y) deducting
therefrom the anticipated cost of performing certain obligations to be
assumed by Newco hereunder. It is the intention of Ledcor and Newco
that the transfer of the Fiber Assets be effected on economic terms
equivalent to the terms, responsibilities and arrangements between
Ledcor, fONOROLA and MetroNet relating to the transfer by Ledcor and
fONOROLA to MetroNet of such fiber assets.
(b) Accordingly, following Closing the parties shall adjust between
themselves, from time to time at and after the Closing, with respect
to the following matters:
(i) Ledcor and Newco shall each pay to the other such amounts as may
be necessary, acting reasonably, to effect the intent described
in subsection 5(a).
(ii) Without limiting the generality of the foregoing, all costs,
expenses and payments which relate to the cost of the builds
including, without limitation, right-of-way and similar charges
(for clarity, including without limitation those relating to WFI
or any other purchaser of fiber assets and, in respect of all
rights-of-way and similar charges, for the term expiring on March
1, 2018), construction costs, holdbacks, warranty claims and all
costs of performing any assumed obligations where Newco has not
received the associated revenue, shall be paid by Ledcor. For
greater certainty, this obligation shall continue indefinitely,
but Ledcor shall remain responsible for all right-of-way payments
relating to or necessary for the sale of fiber stands to MetroNet
or to Newco in respect of the initial term expiring March 1,
2018.
(iii) Without limiting the generality of the foregoing, with respect
to the obligation of fONOROLA to make ongoing right-of-way
payments to CPR, and the obligation of Ledcor to reimburse
fONOROLA for 50% of such payments, all such amounts shall be paid
by Ledcor, and Ledcor shall be entitled to any surplus which may
arise under (and Ledcor shall pay any deficiency in relation to)
the amounts held in trust by Stikeman, Elliott to secure the
obligation to CPR.
(iv) Except as expressly provided above, the parties shall adjust any
prepaid or accrued amounts owing pursuant to the Assumed
Contracts,
<PAGE>
-5-
and all costs and revenue associated with the Assumed
Contracts, with Ledcor to be responsible for all costs and
expenses and to receive all benefits attributable to the period
prior to the Closing Date and Newco to be responsible for all
costs and expenses and to receive all benefits attributable to
the period as of and from the Closing Date. For greater
certainty, Ledcor acknowledges it has prepaid amounts relating to
obligations which Newco will covenant to perform under the terms
of the Assignment and Assumption Agreements. In finalizing
adjustments between the parties, these amounts shall be pro rated
to the Closing Date and shall be credited to Newco.
(v) Except as expressly provided above, as of the Closing Date, there
shall also be adjusted between Ledcor and Newco, utility rates
and charges, other income from the Fiber Assets, taxes,
insurance, other amounts received from purchasers, licensees and
tenants, deposits and interest thereon, fuel, prepaid expenses
and all other items normally adjusted between a vendor and
purchaser in the sale of similar assets so that Ledcor shall pay
all expenses and receive all income relative to the Fiber Assets
prior to the Closing Date and Newco shall bear and pay all
expenses and receive all income relative to the Fiber Assets from
and including the Closing Date.
(vi) Newco shall be responsible for payment of all taxes, rates,
duties, assessments and charges levied, rated, charged or
assessed in respect of the Fiber Assets that are payable in
respect of all periods of time from and after the Closing Date,
and Ledcor shall be responsible for payment of all taxes, rates,
duties, assessments and charges levied, rated, charged or
assessed in respect of the Fiber Assets that are payable in
respect of all periods of time before the Closing Date.
(vii) The parties agree that assumption of the commitment in the Build
Agreements to supply 12 fiber strands between Portland and Los
Angeles to fONOROLA has been reflected in the calculation of the
Purchase Price and there will be no adjustment between the
parties with respect to such assumed obligation.
6. Representations and Warranties of Ledcor. Ledcor represents and warrants
to, and covenants with, Newco that:
(a) Status. Ledcor Industries Limited is a corporation duly continued,
validly existing and in good corporate standing under the laws of the
Province of
<PAGE>
-6-
Alberta with respect to all filings required under applicable
legislation and Ledcor Industries Inc. is duly incorporated and in
good standing under the laws of the State of Washington, U.S.A.;
(b) Authority. Ledcor has all necessary corporate capacity and authority
to carry on its business, including the construction and ownership of
fiber optic cables and has full power and capacity to enter into this
Purchase Agreement and carry out the terms of this Purchase Agreement;
(c) Residency. Ledcor Industries Ltd. is not a non-resident of Canada
within the meaning of Section 116 of the Canadian Income Tax Act;
(d) Title to Purchased Assets. Ledcor has good title to the Fiber Assets
free and clear of all liens, charges and encumbrances, with full right
to deal with such assets without the consent of any other person other
than the third party consents contemplated under Section 11, subject
however, in each case, to the Permitted Encumbrances;
(e) Licenses, Permits. Ledcor possesses all material licenses, permits,
tax registration certificates and operating authorities required to
carry on its business and Ledcor is not aware of any material default
by it under the terms of any such licenses, permits, tax registration
certificates and operating authorities;
(f) Underlying Rights. To the best of Ledcor's knowledge, pursuant to the
Build Agreements (described in Exhibit 3 attached hereto), one or more
of fONOROLA Telecommunications, Limited Partnership, fONOROLA Fiber
Development Inc. and Ledcor have secured or are proceeding to secure
from the owners of all lands and properties through which the
Purchased Strands pass sufficient easements, licenses, rights of way
or similar permission (collectively "Underlying Rights") to assure
peaceable occupation, quiet possession and use, subject to the terms
of and compliance with the Assumed Contracts and all related primary
licensing documents and laws, of the Purchased Strands and the
proportionate undivided interest in the Support Structures to which
the owner of the Purchased Strands is entitled, free of any material
adverse claims of such owners or those claiming through them;
(g) Litigation Etc. There are no material actions, suits, judgments,
proceedings or other adverse claims against or affecting Ledcor or the
Fiber Assets or the right to acquire or use them at law or at equity
before any federal, provincial, state, municipal or governmental
department, commission, court or
<PAGE>
-7-
agency with respect to construction, ownership or use of the Purchased
Strands or in connection with any of the Assumed Contracts, except
possibly the application commenced by Ledcor against the City of
Vancouver under Part VII of the Telecommunications Act (Canada)
relating to charges which the City of Vancouver attempted to impose;
(h) Status of Build Agreements. On Closing there shall be no restrictions
binding Ledcor which would prevent or impede the transfer of the Fiber
Assets to Newco as contemplated herein or place any restriction on
Newco's ability to deal with the Fiber Assets as it sees fits, other
than as set out in the Assumed Contracts or Permitted Encumbrances;
(i) Compliance with Constating Documents, Agreements and Laws. Execution
of this Purchase Agreement and completion of the transactions
contemplated hereby does not and will not:
(i) conflict with, breach, or violate any of the terms, conditions or
provisions of the constating documents of Ledcor;
(ii) conflict with, breach, or violate any of the terms, conditions or
provisions of any law, judgment, order or ruling of any court or
governmental authority, domestic or foreign, to which Ledcor is
subject or trigger default under any agreement or commitment to
which Ledcor is a party or by which its assets are bound which
would have a material adverse effect upon Ledcor, financial or
otherwise, or its ability to perform its obligations hereunder;
(iii) subject to Section 11 hereof, give to any person any remedy,
cause of action or right of termination with respect to any of
the Assumed Contracts or any other material agreement or
commitment to which Ledcor is a party; or
(iv) give to any governmental authority any right of termination or
constitute a default under any material permit, license, control
or authority issued to Ledcor in connection with the Fiber
Assets.
(j) GST Registrant. Ledcor Industries Ltd. is a "GST Registrant" in good
standing and its GST Registration Number is 103025847.
7. Representations and Warranties of Newco. Newco represents and warrants
to, and covenants with, Ledcor that, effective as of the Share Closing:
<PAGE>
-8-
(a) Corporate Status. Newco is a corporation duly incorporated, validly
existing and in good corporate standing under the laws of Alberta with
respect to all filings required under any applicable legislation;
(b) Authority. Newco has all necessary corporate capacity and authority to
carry on its business, including ownership of the Fiber Assets and has
full power and capacity to enter into and complete the transaction of
purchase and sale contemplated by this Purchase Agreement;
(c) Licenses, Permits. Newco possesses all material licenses, permits, tax
registration certificates and operating authorities required to carry
on its business and Newco is not aware of any material default by it
under the terms of any such licenses, permits, tax registration
certificates and operating authorities;
(d) Compliance with Constating Documents, Agreements and Laws. Completion
of the transactions contemplated hereby does not and will not:
(i) conflict with, breach, or violate any of the terms, conditions or
provisions of the constating documents of Newco;
(ii) conflict with, breach, or violate any of the terms, conditions or
provisions of any law, judgment, order or ruling of any court or
governmental authority, domestic or foreign to which Newco is
subject or trigger a default under any agreement or commitment to
which Newco is a party or by which its assets are bound which
would have a material adverse effect upon Newco, financial or
otherwise, or its ability to perform its obligations hereunder;
(iii) give to any person any remedy, cause of action or right of
termination with respect to any material agreement or commitment
to which Newco is a party; or
(iv) give to any governmental authority, including any department,
commission, board or administrative agency, any right of
termination or constitute a default under any material permit,
license, control or authority issued to Newco in connection with
the Fiber Assets;
(e) GST Registrant. Newco is a "GST Registrant" in good standing;
(f) Authorized Capital. The authorized capital of Newco consists, or will
consist on Closing of an unlimited number of Newco Common Shares of
which
<PAGE>
-9-
no more than one Newco Common Share issued to Ledcor shall be issued
and outstanding as fully paid and non-assessable shares as of the
Closing;
(g) No Liens, etc. On Closing, there shall be no liens, charges or
encumbrances charging any of the shares to be issued to Ledcor, as the
case may be, on Closing; and
(h) Options, Etc. Except as provided or referred to herein, no person has
any option, warrant, right, call commitment, conversion right or other
agreement capable of becoming an option, warrant, right, call
commitment or conversion right for the purchase, subscription,
allotment or issuance of any of the unissued shares in the capital of
Newco as at the Closing Date.
8. United States Real Property Interests. To the extent any of the assets
sold hereunder to Newco are, or are deemed to be, United States real property
interests (as defined in the United States Internal Revenue Code) sold by a
non-resident of the United States (within the meaning of the United States
Internal Revenue Code), Ledcor hereby agrees to indemnify and hold Newco
harmless with respect to all tax obligations and liabilities, penalties, costs
and interest in connection therewith.
9. Insurance. Ledcor shall cause the tangible Fiber Assets to be adequately
insured up to Closing and Newco shall be responsible for insuring such assets
following Closing.
10. Closing Deliveries. On closing the parties shall execute, deliver and
exchange such certificates, agreements, assignments, bills of sale and other
items required to complete the transactions contemplated herein, in form and
substance satisfactory to both parties, acting reasonably, including, without
limitation the following:
(a) documents duly executed and delivered by Ledcor:
(i) Bill(s) of Sale respecting the Purchased Strands;
(ii) Certified copy of a resolution of the board of directors of
Ledcor approving the sale of the Fiber Assets on the terms set
out herein and confirming that sale of the Fiber Assets does not
constitute a sale of all or substantially all of the assets of
Ledcor;
(iii) a certificate duly executed by Ledcor to the effect that each of
the representations and warranties of Ledcor set forth in
paragraph 6 are true and correct at Closing with the same force
and effect as if it were made at Closing;
<PAGE>
-10-
(iv) subject to Section 11 hereof, consents of any third parties
required to complete the sale transactions contemplated herein,
including the release of any lien, charge or encumbrance holders
who are not holders of Permitted Encumbrances; and
(v) the Assignment and Assumption Agreement(s);
(b) documents duly executed and delivered by Newco:
(i) certified copies of the (A) the certificate of incorporation,
articles and by-laws of Newco, (B) the resolutions of the
directors approving completion of the transactions contemplated
hereunder including the issuance of the Newco Common Shares, as
contemplated herein, and (C) all other documents evidencing
necessary corporate action of Newco;
(ii) a certificate duly executed by Newco to the effect that each of
the representations and warranties of Newco set forth in
paragraph 7 are true and correct as of Closing with the same
force and effect as if it were made at and as of Closing;
(iii) share certificates representing the Newco Shares to be issued to
Ledcor in satisfaction of the Purchase Price; and
(iv) the Assignment and Assumption Agreement(s) duly executed by
Newco.
11. Third Party Consents. To the extent the assignment of any contract,
agreement, commitment, license, permission or permit to be assigned to Newco
pursuant to this Agreement shall require the consent of any other party, this
Agreement shall not constitute a contract to assign same if an attempted
assignment would constitute a breach thereof. Ledcor shall use its reasonable
best efforts to procure consent to such assignments. If any such consent is not
obtained, Newco shall cooperate with Ledcor in any reasonable arrangement
designed to provide Newco the benefit of any such contract, agreement,
commitment, license, permission or permit. Nothing contained herein shall be
construed to negate or diminish as between Newco and Ledcor, Ledcor's covenants
and obligations to transfer and deliver to Newco the Fiber Assets as provided in
this Agreement.
12. Tax Election. The parties hereto agree that the transfer of the Fiber
Assets to Newco shall be accomplished, to the extent possible, on a tax-free
rollover basis. Ledcor and Newco agree that they will jointly elect, pursuant to
Subsection 85(1) of the
<PAGE>
-11-
Income Tax Act (Canada) (the "Act") in the prescribed form and within the time
limited thereby, specifying the elected proceeds of disposition for tax purposes
for that portion of the Fiber Assets in Canada to be equal to Ledcor Industries
Limited's adjusted cost base and, for U.S. tax purposes, that the elected amount
for that portion of the Fiber Assets located in the United States shall be equal
to the fair market value of such United States assets.
13. Miscellaneous.
(a) Notice. The provisions respecting notice set forth in paragraph 8.1 of
the Share Purchase Agreement apply with respect to any notice to be
given pursuant to the provisions of this Purchase Agreement.
(b) Representations, Warranties. The representations, warranties and
covenants of the parties set forth herein shall not merge on Closing
but shall survive for a period of 3 years following Closing.
(c) Entire Agreement. The Share Purchase Agreement, together with the
terms and conditions set forth in this Schedule A, including the
Exhibits hereto, constitute the entire agreement between the parties
and there are no other verbal statements, representations, warranties,
undertakings or agreements between the parties with respect to the
subject matter of the Share Purchase Agreement or the transaction of
purchase and sale arising thereunder. This Purchase Agreement may not
be amended or modified in any respect except by written instrument
signed by both parties and any agreements contemplated hereunder are
to be evidenced in writing.
(d) Time of the Essence. Time shall be of the essence of this Purchase
Agreement.
(e) Severability and Waiver. If any provision of this Purchase Agreement
is declared invalid or unenforceable by a court of competent
jurisdiction this Purchase Agreement shall endure except for that part
declared invalid or unenforceable by such order. A waiver of any
breach or provision of this Purchase Agreement shall not be construed
as a continuing waiver of other breaches of the same or other
provisions of this Purchase Agreement nor a waiver of a subsequent
breach or default of any term, provision or condition set out herein.
<PAGE>
-12-
(f) Governing Law. This Purchase Agreement has been made and shall be
governed by and construed in accordance with the laws of the Province
of British Columbia and the laws of Canada applicable therein.
(g) Enurement. Save as specifically provided herein with respect to Newco
designating affiliates who may acquire all or some of the Fiber
Assets, neither party may assign their rights or obligations pursuant
to this Purchase Agreement without the prior written consent of the
other, not to be unreasonably withheld or delayed. This Purchase
Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective administrators, successors and
permitted assigns.
(h) Further Assurances. From time to time both prior to and subsequent to
the Closing Date the parties shall execute and deliver shall
additional conveyances, transfers and other assurances as may be
reasonably required to carry out the intent and effect of this
Purchase Agreement and to transfer the Fiber Assets to Newco.
(i) Exhibits. The Exhibits listed below attached to this Schedule A shall
form part of this Purchase Agreement.
Exhibit 1 - Description of Purchased Strands
Exhibit 2 - List of Assumed Contracts
Exhibit 3 - Description of Build Agreements
Exhibit 4 - Rights and Restrictions Attaching to
Newco Common Shares
Exhibit 5 - Description of Permitted Encumbrances
<PAGE>
<TABLE>
<CAPTION>
Exhibit 1
Installed Installed
Ledcor Additional Additional No. of Contiguous 6 Remaining Total
Original Strands Conduit Route Km's Fiber Km's Fiber Km's Conduit Km's
"B" Strands
<S> <C> <C> <C> <C> <C> <C> <C
SOUTH-CANADA
Vancouver-Victoria-Seattle (Marine) 6 C C 258 1,548 C C
Vancouver-Victoria-Seattle (Terrestrial) 6 C 72 432 C C
301 Industrial Oak Street Bridge 48 11 C 528 C
Oak Street Bridge to Point Roberts 2 29 C C 58
Saanich 2 9 C 18
Victoria 1 6 C 6
Esquimalt 2 2 C 4
Port of Seattle 2 0 C 0
City of Seattle(1) 3 1 C 3
Vancouver-Calgary 8 C 1,032 6,192 2,064 C
Cambie St. to 301 Industrial 8 42 3 18 132
Calgary-Emerson 6 C 1,443 8,658 C C
SOUTH-USA C C C
Emerson-Minneapolis East (Rand) 6 C 622 3,732 C C
New Lisbon WI to Madison WI 1 125 C 125
Minneapolis East (Rand)-North Chicago 6 6 660 3,960 3,960 C
(Roundout)
North Chicago (Roundout)-Chicago 6 18 44 264 792 C
(Courtland Ave)
Chicago (Courtland Ave)-Chicago (Union Ave) 6 C 13 78 C C
Chicago (51st and 71st Streets) 1 1 C 1
Chicago (Union Ave)-Detroit (Milwaukee 6 9 501 3,006 4,509 C
Jnctn)
Detroit (Milwaukee Jnctn)-Port Huron 6 C 87 522 C C
NORTH C C C
Edmonton - Toronto C C C
Edmonton (CN Tower) - Edmonton 6 54 11 66 594 C
(Brettville)
Edmonton (Bretville) - Thunder Bay 6 C 1,958 11,748 C C
Thunder Bay - Toronto (Bay Street) 6 C 1,402 8,412 C C
OTHER ROUTES C C C
Calgary - Edmonton(2) C 307 C C C
---------------------------------------------------------------------
48,636 12,579 215
</TABLE>
<PAGE>
Exhibit 2
Assumed Contracts
1. All Support Structure Agreements entered into by Ledcor pursuant to the
Build Agreements, which the parties shall identify and list on or prior to
closing.
2. Reciprocal License/Access Agreement which the parties shall identify and
list on or prior to closing.
3. All Maintenance Agreements which the parties shall identify and list on
or prior to closing.
4. Underlying Rights Agreements providing Ledcor with occupation, access or
similar rights in connection with the Purchased Strands, to be identified by the
parties and listed on or prior to Closing.
<PAGE>
Exhibit 3
Description of Build Agreements
CANADIAN FOTS - NORTHERN ROUTE
1. Agreement between Ledcor Industries Limited and fonorola
Telecommunications Limited Partnership dated April 3, 1997, as amended by
Agreement dated February 3, 1998.
2. Supplementary Agreement between Ledcor Industries Limited and fONOROLA
Telecommunications Limited Partnership dated February 12, 1998.
CANADIAN FOTS - SOUTHERN ROUTE
1. Agreement for Construction of the Vancouver/Seattle Build (Build No. 1)
among Ledcor Industries Inc. (LII), Fonorola Fiber Development Inc. (Fonorola),
Ledcor Industries Limited (LIL) and Fonorola Telecommunications, Limited
Partnership (Fonorola Canada) dated February 12, 1998.
2. Agreement for Construction of the Vancouver/Calgary Build (Build No. 2)
among Ledcor Industries Limited (LIL) and Fonorola Telecommunications, Limited
Partnership (Fonorola) dated February 12, 1998
3. Agreement for Construction of the Calgary/Emerson Build (Build No. 3)
among Ledcor Industries Limited (LIL) and Fonorola Telecommunications, Limited
Partnership (Fonorola) dated February 12, 1998.
4. Agreement for Construction of the Emerson/Chicago Build (Build No. 4)
among Ledcor Industries Inc. (LII), Fonorola Fiber Development Inc. (Fonorola),
Ledcor Industries Limited (LIL) and Fonorola Telecommunications, Limited
Partnership (Fonorola Canada) dated February 12, 1998.
5. Agreement for Construction of the Chicago/Detroit/Port Huron Build
(Build No. 5) among Ledcor Industries Inc. (LII), Fonorola Fiber Development
Inc. (Fonorola), Ledcor Industries Limited (LIL) and Fonorola
Telecommunications, Limited Partnership (Fonorola Canada) dated February 12,
1998.
6. Amendment Agreement amending Agreement for Build No. 2 (Vancouver -
Calgary), Build No. 3 (Calgary - Emerson), Build No. 4 (Emerson - Chicago) and
Build No. 5 (Chicago - Port Huron) among Ledcor Industries Inc. (LII), Fonorola
Fiber Development Inc. (Fonorola), Ledcor Industries Limited (LIL) and Fonorola
Telecommunications, Limited Partnership (Fonorola Canada) dated May 2, 1998.
<PAGE>
-2-
All of the above together with all written and unwritten amendments and
change orders thereto, which have been made available and disclosed to WFI or
its subsidiaries.
<PAGE>
Exhibit 4
Rights and Restrictions Attaching to Newco Shares
The Newco Shares shall be common voting shares, each having one vote
attached thereto. Newco shall have no other classes of shares authorized or
issued. The terms of any restrictions on transfer of the Newco shares shall be
consented to by the Purchaser prior to the Closing.
<PAGE>
Exhibit 5
Permitted Encumbrances
1. PPSA Registrations which the parties shall identify and list on or prior
to Closing.
2. The obligations and restrictions being assumed by Newco under the
Assumed Contracts pursuant to the Terms of Purchase.
3. Minor deficiencies relating to licenses, permits, access rights,
rights-of-way and authorizations which would not, in the aggregate, materially
impair use and enjoyment of the Fiber Assets.
<PAGE>
Schedule B
Rights and Restrictions Attaching to WFI Shares
Rights and Restrictions attaching to Class C Multiple Voting Shares
described in Articles of Amendment at Worldwide Fibre Inc. filed with Industry
Canada on September 9, 1999.
LETTER AGREEMENT
September 27, 1999
Worldwide Fiber Inc.
1520 - 1066 West Hasting Street
Vancouver, B.C.
Worldwide Fiber (F.O.T.S.) No.3, Ltd.
1520 - 1066 West Hasting Street
Vancouver, B.C.
Dear Sirs/Mesdames:
Re: Transfer for Fiber from Ledcor to WFI
Reference is made to the Amended and Restated Share Purchase Agreement
dated as of September 7, 1999 (the "Share Purchase Agreement") between Ledcor
Industries Limited ("LIL"), Ledcor Industries Inc.("LII", and together with LIL,
"Ledcor") and Worldwide Fiber Inc. ("WFI") and the Asset Purchase Agreement
dated as of September 27, 1999 (the "Asset Purchase Agreement") between LIL, LII
and Worldwide Fiber (F.O.T.S.) No. 3, Ltd. ("Newco").
For the purposes of this letter agreement, all other capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the Share
Purchase Agreement.
Ledcor, Newco and WFI have agreed to amend certain items of the Share
Purchase Agreement and the Asset Purchase Agreement in order to take advantage
of certain tax planning and other opportunities not contemplated in the
agreements and to confirm the parties understanding with respect to access to
the Marine Strands (as defined herein).
In connection with the foregoing, Ledcor, Newco and WFI have agreed as
follows:
1. With respect to the Share Purchase Agreement, the parties hereto agree
as follows:
(a) LIL and LII hereby authorize and direct WFI to issue 4,500,000 WFI
Shares to LIL on the Share Closing, rather than to the Sellers as
stated in Section 3.1;
(b) the representation of Ledcor contained in Section 4.1(f) is hereby
amended to read as follows:
<PAGE>
-2-
"(f) Status of Newco Shares. Subsequent to the Roll-In Transaction and
immediately prior to the Share Closing the Newco Shares shall be
issued in the name of Ledcor Industries Limited as the registered
and beneficial owner thereof with good and marketable title
thereto, free and clear of all mortgages, liens, charges,
pledges, security interests, encumbrances or other claims
whatsoever, other than rights in favour of the Purchaser pursuant
to this Share Purchase Agreement; each of the Sellers has the
right, power and authority to enter into this Agreement and
Ledcor Industries Limited has the right, power and authority to
sell all the Newco Shares on the Share Closing, and the delivery
of such Newco Shares by Ledcor Industries Limited to the
Purchaser pursuant to the provisions hereof will transfer to the
Purchaser valid title thereto, free and clear of all
Encumbrances."
2. With respect to the Asset Purchase Agreement, the parties hereto agree
as follows:
(a) The Purchase Price shall be allocated as agreed between Newco, LIL and
LII, within 20 days of the date hereof :
The value of the assumed commitment in the Build Agreements to supply
12 fiber strands between Portland and Los Angeles to fONOROLA (the
"Portland-Los Angeles Build Obligation") shall be US$30,000,000.
Ledcor and Newco, in filing their respective Canadian and United
States income tax returns, will use the allocations of the Purchase
Price and the value of the Portland-Los Angeles Build Operation as set
forth above.
(b) LIL and Newco will each execute a GST closely related corporation
election under the Excise Tax Act (Canada) with respect to the sale
and purchase of the Fiber Assets.
(c) LIL and Newco will, if requested in writing by either LIL or Newco,
each execute an election under section 22 of the Income Tax Act
(Canada) as to the sale of any accounts receivable of LIL purchased
under the Asset Purchase Agreement, will designate therein the
applicable portion of the Purchase Price as the consideration paid by
Newco there-
<PAGE>
-3-
for and will each file such election with Revenue Canada forthwith
after the Closing Date.
(d) LIL and LII hereby authorize and direct Newco to issue one (1) share
certificate representing 999 Newco Common Shares to LIL rather than to
Ledcor as stated in Section 4.
(e) Section 1.1(c) is hereby amended to read as follows:
"(c) "Assumed Contracts" means those agreements which are specified in
Exhibit 2 to this Agreement together with the Build Agreements;"
(f) Notwithstanding the definition of Fiber Assets as found in Section
1.1(h) of the Asset Purchase Agreement, neither the Fiber Assets nor
the Purchased Strands (including for the purposes of the Assignment
and Assumption Agreements) shall include the fiber optic strands which
are part of an underwater cable in the marine build identified in
Exhibit 1 to the Asset Purchase Agreement as
"Vancouver-Victoria-Seattle (Marine)" (the "Marine Strands") or any
Underlying Rights for the Marine Strands. As a result, the reference
to the Marine Strands in Exhibit 1 to the Asset Purchase Agreement is
hereby deleted. The parties further agree that Section 2 is hereby
amended to read as follows:
"2. Purchase and Sale
On Closing Ledcor shall transfer to Newco the Fiber Assets free
and clear of all liens, charges and encumbrances save for the
Permitted Encumbrances and grant indefeasible rights of use ("IRU's")
to Newco in respect of the submarine strands (the "Marine Strands")
that connect the terrestrial portions of the fiber optic network from
Vancouver, B.C. to Victoria, B.C. to Seattle, Washington which
terrestrial strands are identified on Exhibit 1 attached hereto and
Newco shall purchase such Fiber Assets and IRU's for an aggregate
purchase price of $75,000,000 (U.S.) in accordance with the terms and
conditions set out in this Purchase Agreement."
(g) With respect to Section 10.1(a), (i) LIL shall execute and deliver a
Bill of Sale for the Purchased Strands (as such term is amended by
paragraph (e) above) located in Canada as identified by the parties in
a schedule attached to such Bill of Sale; and (ii) LII and LIL shall
execute
<PAGE>
-4-
and deliver a Bill of Sale for the Purchased Strands (as such term is
amended by paragraph (e) above) located in the United States as
identified by the parties in a schedule attached to such Bill of Sale.
(h) With respect to Section 10.1(a), (i) LIL shall execute and deliver an
Assignment and Assumption Agreement for the Assumed Contracts relating
to the Fiber Assets (as such term is amended by paragraph (e) above)
in Canada as identified by the parties in a schedule attached to such
Assignment and Assumption Agreement; and (ii) LII shall execute and
deliver an Assignment and Assumption Agreement for the Assumed
Contracts relating to the Fiber Assets (as such term is amended by
paragraph (e) above) in the United States as identified by the parties
in a schedule attached to such Assignment and Assumption Agreement.
(i) The certificates referred to in Section 10.1(c) and Section 10.2(c)
are not required to be delivered as the Asset Purchase Agreement is
dated the day of Closing.
(j) On Closing, (i) LIL shall execute and deliver an IRU with respect to
the Marine Strands located in Canada as identified by the parties in a
schedule attached to such IRU; and (ii) LII and LIL shall execute and
deliver an IRU with respect to the Marine Strands located in the
United States as identified by the parties in a schedule attached to
such IRU. Such IRU's shall provide for the ultimate transfer of the
Marine Strands to Newco, an option to acquire the Marine Strands at
any time subject to certain indemnification obligations of Newco, and
the granting of a collateral security interest in the Marine Strands
only to secure such option rights. As required by Section 7.1(b) of
the Share Purchase Agreement, WFI hereby consents to the granting of
such security interest and related registrations. If requested by
Newco, acting reasonably, LIL and LII shall grant a separate security
agreement, in a form acceptable to LIL and LII, acting reasonably, to
Newco to grant a security interest in the assets described in the
IRU's as being the collateral, and shall execute and deliver such
additional documents, instruments and other assurances as may be
reasonably requested by Newco, in forms acceptable to LIL and LII,
acting reasonably.
(k) Notwithstanding Section 9, Ledcor shall cause the tangible Fiber
Assets to be adequately insured up to day on which WFI obtains
insurance policies (the "Replacement Policies") with respect to the
tangible Fiber Assets. WFI agrees to obtain the Replacement Policies
as soon as rea-
<PAGE>
-5-
sonably practicable after Closing but in no event later than 90 days
after Closing after which time Ledcor may cancel its policies (the
"Policies") as they relate to the tangible Fiber Assets. WFI agrees to
reimburse Ledcor for any premiums incurred by Ledcor under the
Policies allocated to the tangible Fiber Assets for the period
following Closing until WFI obtains the Replacement Policies or Ledcor
cancels the Policies in accordance herewith, which ever is earlier.
(l) As required by Exhibit 4 of the Asset Purchase Agreement, WFI confirms
that it has consented to the terms of the restrictions on transfer of
the Newco Common Shares which are contained in the constating
documents of Newco, copies of which WFI acknowledges having received
and reviewed.
3. Pursuant to the terms of the Asset Purchase Agreement, (a) LIL hereby
transfers to Newco any and all beneficial interests it holds in the land in
Rocky Inlet (Ontario) and Pefferlaw (Ontario), and (b) LII and LIL hereby
transfer to Newco any and all beneficial interests held by them in the land at
Point Roberts (State of Washington) and Whidbey Island (State of Washington),
for the purposes of installing certain communications shelters forming part of
the Fiber Assets. Each of LII and LIL covenants to execute and deliver such
additional conveyances, transfers and other assurances as may be reasonably
required by Newco after Closing to transfer any and all legal interest in such
land to Newco.
4. Ledcor undertakes and agrees with Newco that all warranties and
guarantees from material suppliers, equipment makers or subcontractors are
hereby extended to include Newco as a beneficiary thereof (as may be permitted
by such underlying agreements) to the extent of Newco's interest in the Fiber
Assets.
5. Newco further agrees that in order to assist LIL and LII to preserve any
remedy, right or defence which LIL or LII could have sought, asserted or claimed
as a party to an Assumed Contract, Newco shall comply with any reasonable
request made by LIL or LII in the furtherance of the seeking of such a remedy,
assertion of such a right or claiming of such a defence and, at LIL's or LII's,
as the case may be, expense, Newco shall cooperate with LIL or LII in the
enforcement of such a remedy or right. Notwithstanding the foregoing, Newco
shall not be obligated to perform any act which would materially prejudice
Newco.
6. Except as amended hereby, the parties confirm and agree that the Share
Purchase Agreement and the Asset Purchase Agreement continue in full force and
effect.
7. This letter agreement shall be governed by and construed in accordance
with the laws of the Province of British Columbia and the laws of Canada
applicable therein.
<PAGE>
-6-
8. This letter agreement, the Share Purchase Agreement and the Asset
Purchase Agreement, along with the other agreements and documents referred to
herein and therein, constitute the entire agreement between the parties with
respect to the subject matter hereof. If there is any conflict or inconsistency
between the provisions of this letter agreement and the provisions of the Share
Purchase Agreement and the Asset Purchase Agreement, the rights and obligations
of the parties shall be governed by the provisions of this letter agreement. No
amendment or variation of this letter agreement shall be valid or binding unless
set forth in writing duly executed by the parties hereto.
9. Save as specifically provided in the Share Purchase Agreement with
respect to Newco designating affiliates who may acquire all or some of the Fiber
Assets, neither party may assign their rights or obligations pursuant to this
letter agreement without the prior written consent of the other, not to be
unreasonably withheld or delayed. This letter agreement shall enure to the
benefit of and be binding upon the parties hereto and their respective
administrators, successors and permitted assigns.
10. From time to time subsequent to the date hereof the parties shall
execute and deliver such additional conveyances, transfers and other assurances
as may be reasonably required to carry out the intent and effect of this letter
agreement.
11. This letter agreement and any amendment, supplement, restatement or
termination of any provision of this letter agreement may be executed and
delivered in any number of counterparts, each of which when executed and
delivered is an original but all of which taken together constitute one and the
same instrument.
12. This letter agreement may be executed by facsimile and the facsimile
execution pages will be binding upon the executing party to the same extent as
the original executed pages. The executing party covenants to provide originals
of the facsimile execution pages for insertion into the original letter
agreement in place of the facsimile pages.
If you are in agreement with the terms and conditions contained herein, it
would be appreciated if you would execute a copy of this letter agreement in the
space provided below and return a copy to us.
Yours very truly,
LEDCOR INDUSTRIES LIMITED
Per:
-------------------------------------
LEDCOR INDUSTRIES INC.
Per:
-------------------------------------
<PAGE>
-7-
Each of the undersigned accepts the terms and conditions set forth above
and agrees to act in accordance with the terms of this letter agreement with
effect from the date noted below.
Dated this 27th day of September, 1999.
WORLDWIDE FIBER INC.
Per:
-------------------------------------
WORLDWIDE FIBER (F.O.T.S.) NO. 3, LTD.
Per:
-------------------------------------
Subsidiaries of Worldwide Fiber Inc.
Jurisdiction of
Incorporation/
Name Organization
---- ------------
Worldwide Fiber Communications Ltd. Alberta
Ledcom Holdings Ltd. Alberta
Ledcor Communications Ltd. Alberta
Ledcor Cayer Inc. Quebec
Worldwide Fiber (FOTS) Ltd. Alberta
Worldwide Fiber (FOTS) No. 2, Inc. Alberta
Worldwide Fiber Networks Ltd. Alberta
Ledcor Communications, Inc. Nevada
Worldwide Fiber (F.O.T.S.), Inc. Nevada
Worldwide Fiber (USA), Inc. Nevada
Worldwide Fiber Networks, Inc. Nevada
Worldwide Fiber IC Holdings Inc. Nevada
WFI Liquidity Management Hungary Limited Liability Company Hungary
Ledcor Engineering Inc. Ontario
Worldwide Fiber Finance Ltd. Alberta
Worldwide Fiber IC LLC Delaware
IC Fiber Alabama LLC Alabama
IC Fiber Illinois LLC Illinois
IC Fiber Iowa LLC Iowa
IC Fiber Kentucky LLC Kentucky
IC Fiber Louisiana LLC Louisiana
IC Fiber Mississippi LLC Mississippi
IC Fiber Tennessee LLC Tennessee
WFI-CN Fibre Inc. Canada
Worldwide Telecom (Bermuda) Ltd. Bermuda
Worldwdie Telecom (Bermuda) Holdings Ltd. Bermuda
Worldwide Telecom Limited Bermuda
Worldwide Telecom (Denmark) ApS Denmark
WTI Telecom (Ireland) Limited Ireland
WTI Telecom (UK) Limited United Kingdom
Worldwide Telecom (Barbados) Inc. Barbados
Worldwide Telecom (USA) Inc. Nevada
Worldwide Telecom (Canada) Inc. Alberta
[Letterhead of PricewaterhouseCoopers LLP]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form F-4 of our report dated March 12, 1999, except as
to the subsequent events described in notes 1(i) and 14 which are as of
September 27, 1999, relating to the consolidated financial statements of
Worldwide Fiber Inc., which appear in such Prospectus.
We also hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form F-4 of our report dated March 12, 1999 relating
to the consolidated income statement and statements of changes in shareholders'
equity and of cash flows of Worldwide Fiber (USA), Inc., which appears in such
Prospectus.
We also consent to the references to us under the headings "Experts", Summary
Financial Data and "Selected Financial Data" in such Prospectus. However, it
should be noted that PricewaterhouseCoopers LLP has not prepared or certified
such Summary Financial Data and "Selected Financial Data".
/s/ PricewaterhouseCoopers LLP
Vancouver, Canada
October 25, 1999
[Letterhead of Deloitte & Touche LLP]
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form F-4 of our report dated November 30, 1998,
relating to the divisional financial statements of Ledcor Industries Limited -
Telecommunications Division as at May 31, 1998, August 31, 1997 and August 31,
1996 and the divisional statements of operations and retained earnings and cash
flows for the year ended March 31, 1996, which appears in such Prospectus.
We also consent to the references to us under the headings "Experts" and
"Selected Financial Data" in such Prospectus. However, it should be noted that
Deloitte & Touche LLP has not prepared or certified such "Selected Financial
Data".
/s/ Deloitte & Touche LLP
Edmonton, Canada
October 25, 1999
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Larry Olsen, Vice
Chairman of Worldwide Fiber (USA), Inc. its true and lawful attorney-in-fact,
with power of substitution and resubstitution, in its name, place and stand, in
any and all capacities, to sign as authorized representative, the Registration
Statement on Form F-4 registering US$500,000,000 aggregate principal amount of
12% Senior Notes due 2009 (the "Exchange Notes") of Worldwide Fiber Inc.
("Parent") and any and all amendments (including post-effective amendments) and
supplements thereto and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
In WITNESS WHEREOF, the undersigned, has caused this Power of Attorney to
be executed on this the day of October, 1999.
Worldwide Fiber (USA), Inc.
By: /s/ Stephen Stow
-------------------------------------------
Name: Stephen Stow
Title: Director
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
HSBC Bank USA
(Exact name of trustee as specified in its charter)
New York 161057879
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. Identification No.)
national bank)
140 Broadway, New York, NY 100051180
(212) 6581000 (Zip Code)
(Address of principal executive offices)
Warren L. Tischler
Senior Vice President
HSBC Bank USA
140 Broadway
New York, New York 10005-1180
Tel: (212) 658-5167
(Name, address and telephone number of agent for service)
WORLDWIDE FIBER INC.
(Exact name of obligor as specified in its charter)
Alberta, Canada Not Applicable
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1510-1066 West Hastings Street
Vancouver, BC Canada V6E 3X1
(604) 681-1994 (Zip Code)
(Address of principal executive offices)
12% Senior Notes due 2009
<PAGE>
-2-
(Title of Indenture Securities)
<PAGE>
-3-
General
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
State of New York Banking Department.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
Item 16. List of Exhibits
Exhibit
T1A(i) (1) Copy of the Organization Certificate of HSBC Bank USA.
T1A(ii) (1) Certificate of the State of New York Banking Department dated
December 31, 1993 as to the authority of HSBC Bank USA to commence
business as amended effective on March 29, 1999.
T1A(iii) Not applicable.
T1A(iv) (1) Copy of the existing By-Laws of HSBC Bank USA as adopted on January
20, 1994 as amended on October 23, 1997.
T1A(v) Not applicable.
T1A(vi) (2) Consent of HSBC Bank USA required by Section 321(b) of the Trust
Indenture Act of 1939.
<PAGE>
-4-
T1A(vii) Copy of the latest report of condition of the trustee (June 30, 1999),
published pursuant to law or the requirement of its supervisory or
examining authority.
T1A(viii) Not applicable.
T1A(ix) Not applicable.
Exhibits previously filed with the Securities and Exchange Commission with
registration No. 022-22429 and incorporated herein by reference thereto.
Exhibit previously filed with the Securities and Exchange Commission with
Registration No. 33-53693 and incorporated herein by reference thereto.
<PAGE>
-5-
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HSBC Bank USA, a banking corporation and trust company organized 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 9th day of September, 1999.
HSBC BANK USA
By: /s/ Frank J. Godino
--------------------------------
Frank J. Godino
Vice President
<PAGE>
Exhibit T1A (vii)
Board of Governors of the Federal Reserve System
OMB Number: 71000036
Federal Deposit Insurance Corporation
OMB Number: 30640052
Office of the Comptroller of the Currency
OMB Number: 15570081
Federal Financial Institutions Examination
Council Expires March 31, 2000 1
Please refer to page i,
Table of Contents, for
the required disclosure
of estimated burden.
Consolidated Reports of Condition (19980930) and Income for
A Bank With Domestic and Foreign (RCRI 9999) Offices--FFIEC 031
Report at the close of business June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
This report is required by law; 12 U.S.C. ss.324 (State This report form is to be filed by banks with branches
member banks); 12 U.S.C. ss. 1817 (State nonmember banks); and consolidated subsidiaries in U.S. territories and
and 12 U.S.C. ss.161 (National banks). possessions, Edge or Agreement subsidiaries, foreign
branches, consolidated foreign subsidiaries, or
International Banking Facilities.
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National Banks.
The Reports of Condition and Income are to be prepared in
I, Gerald A. Ronning, Executive VP & Controller accordance with Federal regulatory authority instructions.
Name and Title of Officer Authorized to Sign Report
We, the undersigned directors (trustees), attest to the
of the named bank do hereby declare that these Reports correctness of this Report of Condition (including the supporting
of Condition and Income (including the supporting schedules) and declare that it has been examined by us and to
schedules) have been prepared in conformance with the the best of our knowledge and belief has been prepared in con-
instructions issued by the appropriate Federal regula- formance with the instructions issued by the appropriate
tory authority and are true to the best of my know- Federal regulatory authority and is true and correct.
ledge and belief.
/s/ Gerald A. Ronning /s/ Bernard J. Kennedy
Signature of Officer Authorized to Sign Report Director (Trustee)
/s/ Malcolm Burnet
July 23, 1999 Director (Trustee)
- ----------------------------------------------------------- /s/ Sal H. Alfieri
Date of Signature Director (Trustee)
- ----------------------------------------------------------------------------------------------------------------------------------
Submission of Reports
Each Bank must prepare its Reports of Condition and For electronic filing assistance, contact EDS Call Report
Income either: Services, 2150 N. Prospect Ave., Milwaukee, WI 53202,
telephone (800) 255-1571.
a in electronic form and then file the computer data
file directly with the banking agencies' collection To fulfill the signature and attestation requirement for the
agent, Electronic Data System Corporation (EDS), by Reports of Condition and Income for this report date, attach
modem or computer diskette; or this signature page to the hardcopy of the completed report
that the bank places in its files.
</TABLE>
<PAGE>
b) in hard-copy (paper) form and arrange for another party to convert the
paper report to automated form. That party (if other than EDS) must
transmit the bank's computer data file to EDS.
- -------------------------------------------------------
FDIC Certificate Number
0 0 5 8 9
- -------------------------------------------------------
(RCRI 9030)
- -------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
http://WWW.BANKING.US.HSBC.COM HSBC Bank USA
- --------------------------------------------------------------- -------------------------------------------------------------
Primary Internet Web Address of Bank (Home Page), if any (TEXT Legal Title of Bank (TEXT 9010)
4087)
(Example: www.examplebank.com) Buffalo
-------------------------------------------------------------
City (TEXT 9130)
N.Y.
14203
-------------------------------------------------------------
State Abbrev. (TEXT 9200) ZIP Code
(TEXT 9220)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the
Currency
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
HSBC Bank USA of Buffalo
- ----------------------------------------------------------
Name of Bank City
in the state of New York, at the close of business June 30, 1999
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
-----------------------
<S> <C>
Non-interest-bearing balances currency and coin ............................................ $ 1,127,147
Interest-bearing balances .................................................................. 1,390,182
Held-to-maturity securities ................................................................ -
Available-for-sale securities .............................................................. 3,454,383
Federal funds sold and securities purchased under agreements to resell ..................... 3,065,533
Loans and lease financing receivables:
Loans and leases net of unearned income ...................................... $ 23,063,375
LESS: Allowance for loan and lease losses .................................... 369,444
LESS: Allocated transfer risk reserve ........................................ -
Loans and lease, net of unearned income, allowance, and reserve ............................ $ 22,693,931
Trading assets ............................................................................. 834,032
Premises and fixed assets (including capitalized leases) ................................... 200,386
Other real estate owned ....................................................................... 3,059
Investments in unconsolidated subsidiaries and associated companies ........................... -
Customers' liability to this bank on acceptances outstanding .................................. 219,995
Intangible assets ............................................................................. 484,044
Other assets .................................................................................. 618,261
Total assets .................................................................................. 34,090,953
<PAGE>
LIABILITIES
Deposits:
In domestic offices ........................................................................ 21,989,426
Non-interest-bearing ......................................................... 3,223,308
Interest-bearing ............................................................. 18,766,118
In foreign offices, Edge and Agreement subsidiaries, and IBFs ................................. 5,910,332
Non-interest-bearing ......................................................... -
Interest-bearing ............................................................. 5,910,332
Federal funds purchased and securities sold under agreements to repurchase .................... 724,111
Demand notes issued to the U.S. Treasury ...................................................... 93,732
Trading Liabilities ........................................................................... 47,182
Other borrowed money (including mortgage indebtedness and obligations under
capitalized leases):
With a remaining maturity of one year or less .............................................. 1,011,100
With a remaining maturity of more than one year through three years ........................ 75,266
With a remaining maturity of more than three years ......................................... 237,741
Bank's liability on acceptances executed and outstanding ...................................... 219,995
Subordinated notes and debentures ............................................................. 698,152
Other liabilities ............................................................................. 639,805
Total liabilities ............................................................................. 31,646,842
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................................. -
Common Stock .................................................................................. 205,000
Surplus ....................................................................................... 1,987,736
Undivided profits and capital reserves ........................................................ 277,110
Net unrealized holding gains (losses) on available-for-sale securities ........................ (25,735)
Accumulated net gain (losses) on cash flow hedges ............................................. -
Cumulative foreign currency translation adjustments ........................................... -
Total equity capital .......................................................................... 2,444,111
Total liabilities and equity capital .......................................................... 34,090,953
</TABLE>
LETTER OF TRANSMITTAL
WORLDWIDE FIBER INC.
OFFER TO EXCHANGE ITS 12% SENIOR NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS 12% SENIOR NOTES DUE 2009
PURSUANT TO THE PROSPECTUS, DATED , 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
HSBC Bank USA, as Exchange Agent
By Registered or Certified Mail: By Hand or Overnight Courier:
HSBC Bank USA HSBC Bank USA
140 Broadway, 12th Floor 140 Broadway, 12th Floor
New York, NY 10005-1180 New York, NY 10005-1180
By Facsimile:
(212) 658-6425
Confirm by Telephone:
(212) 658-6433
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions other than as set forth above, will not
constitute a valid delivery.
The undersigned acknowledges that he or she has received and reviewed
the Prospectus, dated , 1999 (the "Prospectus"), of Worldwide Fiber
Inc., a company organized under the laws of Alberta, and this Letter of
Transmittal, which together constitute the Company's offer (the "Exchange
Offer") to exchange up to $500,000,000 aggregate principal amount of the
Company's 12% Senior Notes Due 2009 (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of the Company's issued and outstanding 12% Senior
Notes Due 2009 (the "Old Notes"), which have not been so registered.
For each Old Note accepted for exchange, the registered holder of such
Old Note (collectively with all other registered holders of Old Notes, the
"Holders") will receive a New Note having a principal amount equal to that of
the surrendered Old Note. Registered holders of New Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive interest accruing from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid, from ,
1999. Old Notes accepted for exchange will cease to accrue interest from and
after the date of consummation of the Exchange Offer. Accordingly, Holders whose
Old Notes are accepted for exchange will not receive any payment in respect of
accrued interest on such Old Notes otherwise payable on any interest payment
date the record date for which occurs on or after consummation of the Exchange
Offer.
This Letter of Transmittal is to be completed by a Holder of Old Notes
either if certificates are to be forwarded herewith or if a tender of
certificates for Old Notes, if available, is to be made by book-entry transfer
to the account maintained by the Exchange Agent at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedures set forth in
"The Exchange Offer--Acceptance of Old Notes for Exchange; Delivery of New
Notes" section of the Prospectus. Holders of Old Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility (a "Book-Entry
Confirmation") and all other documents required by this Letter of Transmittal to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned
desires to take with respect to the Exchange Offer.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated below. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the Holder of such Old Notes nor any such other
person has an arrangement or understanding with any person to participate in a
distribution of such New Notes and that neither the Holder of such Old Notes nor
any such other person is an "affiliate" (as defined in Rule 405 under the
Securities Act) of the Company.
The undersigned also acknowledges that this Exchange Offer is being
made in reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for resale, resold and otherwise transferred by
a Holder thereof (other than a Holder that 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
Holder's business and such Holder has no arrangement with any person to
participate in a distribution of such New Notes. However, the SEC 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 SEC would make a similar determination
with respect to the Exchange Offer as in other circumstances. If the undersigned
is not a broker-dealer, the undersigned represents that it is not engaged in,
and does not intend to engage in, a distribution of New Notes and has no
arrangement or understanding to participate in a distribution of New Notes. If
any Holder is an affiliate of the Company, is engaged in or intends to engage
in, or has any arrangement or understanding with any person to participate in, a
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such Holder could not rely on the applicable interpretations of the staff of the
SEC and must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction. If the
undersigned is a broker-dealer that will receive New Notes for its own account
in exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. However, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter of Transmittal and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal of Tenders" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" herein, please issue the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) in the name
of the undersigned or, in the case of a book-entry delivery of Old Notes, please
credit the account indicated below maintained at the Book-Entry Transfer
Facility. Similarly, unless otherwise indicated under the box entitled "Special
Delivery Instructions" herein, please send the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
to the undersigned at the address shown in the box herein entitled "Description
of Old Notes Delivered."
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX BELOW ENTITLED "DESCRIPTION OF
OLD NOTES DELIVERED" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO
HAVE TENDERED OLD NOTES AS SET FORTH IN SUCH BOX.
List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the certificate numbers and principal
amount of Old Notes should be listed on a separate signed schedule affixed
hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES DELIVERED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name(s) and Address of Registered Holder(s) Aggregate Principal Amount
(Please fill-in, if blank) Certificate Number(s)* Principal Amount Tendered**
- ------------------------------------------------ ------------------------- -------------------- -------------------
- ------------------------------------------------ ------------------------- -------------------- -------------------
- ------------------------------------------------ ------------------------- -------------------- -------------------
- ------------------------------------------------ ------------------------- -------------------- -------------------
- ------------------------------------------------ ------------------------- -------------------- -------------------
- ------------------------------------------------ ------------------------- -------------------- -------------------
- ------------------------------------------------ ------------------------- -------------------- -------------------
- ------------------------------------------------ ------------------------- -------------------- -------------------
Totals:
- ------------------------------------------------ ------------------------- -------------------- -------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered ALL of the Old Notes represented by the listed certificates. See
Instruction 2. Old Notes tendered hereby must be in denominations of
principal amount of $1,000 and any integral multiple thereof. See
Instruction 1.
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution______________________________________________
Account Number _________________________ Transaction Code Number _____
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name of Registered Holder__________________________________________________
Window Ticket Number (if any)______________________________________________
Date of Execution of Notice of Guaranteed Delivery_________________________
Name of Institution Which Guaranteed Delivery______________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number _________________________ Transaction Code Number _____
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE ADDITIONAL COPIES
OF THE PROSPECTUS AND ANY AMENDMENTS OR SUPPLEMENTS THERETO. (UNLESS
OTHERWISE SPECIFIED, 10 ADDITIONAL COPIES WILL BE FURNISHED.)
Name_______________________________________________________________________
Address____________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------- -----------------------------------------------------
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if certificates for Old To be completed ONLY if certificates for Old
Notes not exchanged and/or New Notes are to be issued Notes not exchanged and/or New Notes are to be sent
in the name of someone other than the person or to someone other than the person or persons whose
persons whose signature(s) appear(s) on this Letter of signature(s) appear(s) on this Letter of
Transmittal below or if Old Notes delivered by Transmittal below or to such person or persons at
book-entry transfer which are not accepted for an address other than shown in the box entitled
exchange are to be returned by credit to an account "Description of Old Notes Delivered" on this Letter
maintained at the Book-Entry Transfer Facility other of Transmittal above.
than the account indicated above.
Issue New Notes and/or Old Notes to: Mail New Notes and/or Old Notes to:
Name:__________________________________________________ Name:__________________________________________________
(Please Type or Print) (Please Type or Print)
Address:_______________________________________________ Address:_______________________________________________
_______________________________________________________ _______________________________________________________
(Zip Code) (Zip Code)
|_| Credit unexchanged Old Notes delivered by
book-entry transfer to the Book-Entry Transfer
Facility account set forth below.
_______________________________________________________
(Book-Entry Transfer Facility Account)
- -------------------------------------------------------- -----------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE
COMPLETING ANY BOX ABOVE
PLEASE SIGN HERE
(All Tendering Holders Must Complete This Letter of Transmittal
And The Accompanying Substitute Form W-9)
Dated: , 1999
X_______________________________________________________________________________
X_______________________________________________________________________________
(Signature(s)
Area Code and Telephone Number:_________________________________________________
If a Holder is tendering any Old Notes, this letter must be signed by the
Holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes or by
any person(s) authorized to become Holder(s) by endorsements and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, officer or other person acting in a fiduciary or representative
capacity, please set forth full title. See Instruction 3.
Name:___________________________________________________________________________
________________________________________________________________________________
(Please Type or Print)
Capacity (full title):__________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Telephone:______________________________________________________________________
SIGNATURE GUARANTEE (If required by Instruction 3)
Signature(s) Guarantees by an Eligible Institution:_____________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Name and Firm)
Dated: _____________________________________________, 1999
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER TO EXCHANGE
THE 12% SENIOR NOTES DUE 2009 OF WORLDWIDE FIBER INC., WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL
OF THE OUTSTANDING 12% SENIOR NOTES DUE 2009 OF WORLDWIDE FIBER INC.
1. DELIVERY OF THIS LETTER AND OLD NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter of Transmittal is to be completed by Holders of Old Notes
either if certificates are to be forwarded herewith or if tenders are to be made
pursuant to the procedures for delivery by book-entry transfer set forth in "The
Exchange Offer--Acceptance of Old Notes for Exchange; Delivery of New Notes"
section of the Prospectus. Certificates for all physically tendered Old Notes,
or Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile hereof
or Agent's Message in lieu hereof) and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at the address set
forth herein on or prior to the Expiration Date, or the tendering holder must
comply with the guaranteed delivery procedures set forth below. Old Notes
tendered hereby must be in denominations of principal amount of $1,000 and any
integral multiple thereof.
Holders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution,
(ii) on or prior to 5:00 p.m., New York City time, on the Expiration Date, the
Exchange Agent must receive 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
telegram, telex, 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 this
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or Book-Entry Confirmation, as the case may
be, and any other documents required by this Letter of Transmittal, are
deposited by the Eligible Institution within three NYSE trading days after the
date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter of Transmittal, the Old Notes and
all other required documents is at the election and risk of the tendering
Holders, but delivery will be deemed made only upon actual receipt or
confirmation by the Exchange Agent. If Old Notes are sent by mail, it is
suggested that the mailing be registered mail, properly insured, with return
receipt requested, and made sufficiently in advance of the Expiration Date to
permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on
the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate
are to be tendered, the tendering Holder(s) should fill in the aggregate
principal amount of Old Notes to be tendered in the box above entitled
"Description of Old Notes -- Principal Amount Tendered." A reissued certificate
representing the balance of
<PAGE>
-2-
nontendered Old Notes will be sent to such tendering Holder, unless otherwise
provided in the appropriate box of this Letter of Transmittal, promptly after
the Expiration Date. See Instruction 4. All of the Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
3. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS, GUARANTEE OF
SIGNATURES.
If this Letter of Transmittal is signed by the Holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint
owners, all of such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this letter as there are different registrations of certificates.
When this Letter of Transmittal is signed by the Holder or Holders of
the Old Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If however, the New Notes are
to be issued, or any untendered Old Notes are to be reissued, to a person other
than the Holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificates(s) must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
Holder or Holders of any certificate(s) specified herein, such certificate(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name or names of the Holder or Holders appear(s) on the
certificate(s) and signatures on such certificate(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal or any certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FINANCIAL INSTITUTION
(INCLUDING MOST BANKS, SAVINGS AND LOAN ASSOCIATIONS AND BROKERAGE HOUSES) THAT
IS A PARTICIPANT IN THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM, THE NEW
YORK STOCK EXCHANGE MEDALLION SIGNATURE PROGRAM OR THE STOCK EXCHANGES MEDALLION
PROGRAM (EACH, AN "ELIGIBLE INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF
OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) WHO HAS NOT COMPLETED
THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER, OR (II) FOR THE ACCOUNT OF AN ELIGIBLE
INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
<PAGE>
-3-
Tendering Holders of Old Notes should indicate in the applicable box
the name and address to which New Notes issued pursuant to the Exchange Offer
and/or substitute certificates evidencing Old Notes not exchanged are to be
issued or sent, if different from the name or address of the person signing this
Letter of Transmittal. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Holders tendering Old Notes by book-entry transfer may request that
Old Notes not exchanged be credited to such account maintained at the Book-Entry
Transfer Facility as such Holder may designate hereon. If no such instructions
are given, such Old Notes not exchanged will be returned to the name and address
of the person signing this Letter of Transmittal.
5. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than the
Holder of the Old Notes tendered hereby, or if tendered Old Notes are registered
in the name of any person other than the person signing this Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
transfer of Old Notes to the Company or its order pursuant to the Exchange
Offer, the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed to such
tendering Holder and the Exchange Agent will retain possession of an amount of
New Notes with a face amount equal to the amount of such transfer taxes due by
such tendering Holder pending receipt by the Exchange Agent of the amount of
such taxes.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter of
Transmittal.
6. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
7. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders of Old Notes, by execution of this Letter of
Transmittal, shall waive any right to receive notice of the acceptance of their
Old Notes for exchange.
Although the Company intends to notify Holders of defects or
irregularities with respect to tenders of Old Notes, neither the Company, the
Exchange Agent nor any other person shall incur any liability for failure to
give any such notice.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any Holder whose Old Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
9. WITHDRAWAL OF TENDERS.
Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M.,
New York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth above. Any such notice of withdrawal must specify the
name of the person having tendered the Old Notes to be withdrawn, identify the
Old Notes to be withdrawn (including the principal amount of such Old Notes),
and (where certificates for Old Notes have been transmitted) specify the name in
which such Old Notes are registered, if different from that of the withdrawing
<PAGE>
-4-
Holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the release of such certificates
the withdrawing Holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution unless such Holder is an Eligible
Institution in which case such guarantee will not be required. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer 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 notices will
be determined by the Company, whose determination will 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 Holder thereof without cost to such Holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such 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 set forth in "The Exchange Offer--Procedures for Tendering Old Notes"
section of the Prospectus at any time on or prior to the Expiration Date.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus, this Letter of Transmittal and other
related documents may be directed to the Exchange Agent at the address indicated
above.
<PAGE>
-5-
IMPORTANT TAX INFORMATION
Under current United States federal income tax law, a Holder of New
Notes is required to provide the Company (as payor) with such Holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9 or otherwise
establish a basis for exemption from backup withholding to prevent backup
withholding on any New Notes delivered pursuant to the Exchange Offer and any
payments received in respect of the New Notes. If a Holder of New Notes is an
individual, the TIN is such holder's social security number. If the Company is
not provided with the correct taxpayer identification number, a Holder of New
Notes may be subject to a $50 penalty imposed by the Internal Revenue Service.
Accordingly, each prospective Holder of New Notes to be issued pursuant to
Special Issuance Instructions should complete the attached Substitute Form W-9.
The Substitute Form W-9 need not be completed if the box entitled Special
Issuance Instructions has not been completed.
Certain Holders of New Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Exempt prospective Holders of New Notes should indicate
their exempt status on Substitute Form W-9. A foreign individual may qualify as
an exempt recipient by submitting to the Company, through the Exchange Agent, a
properly completed Internal Revenue Service Form W-8 (which the Exchange Agent
will provide upon request) signed under penalty of perjury, attesting to the
Holder's exempt status. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Company is required to withhold 31%
of any payment made to the Holder of New Notes or other payee. Backup
withholding is not an additional United States federal income tax. Rather, the
United States federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on any New Notes delivered pursuant to
the Exchange Offer and any payments received in respect of the New Notes, each
prospective Holder of New Notes to be issued pursuant to Special Issuance
Instructions should provide the Company, through the Exchange Agent, with
either: (i) such prospective Holder's correct TIN by completing the form below,
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
prospective Holder is awaiting a TIN) and that (A) such prospective Holder has
not been notified by the Internal Revenue Service that he or she is subject to
backup withholding as a result of a failure to report all interest or dividends
or (B) the Internal Revenue Service has notified such prospective Holder that he
or she is no longer subject to backup withholding; or (ii) an adequate basis for
exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The prospective Holder of New Notes to be issued pursuant to Special
Issuance Instructions is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the prospective
record owner of the New Notes. If the New Notes will be held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance regarding which number to report.
<PAGE>
<TABLE>
<CAPTION>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE IMPORTANT TAX INFORMATION)
PAYOR'S NAME: HSBC Bank USA
- --------------------------------------- ------------------------------------- -------------------------------------
PART I--PLEASE PROVIDE YOUR TIN IN
THE BOX AT RIGHT OR INDICATE THAT TIN: _______________________________
YOU APPLIED FOR A TIN AND CERTIFY Social Security Number or
BY SIGNING AND DATING BELOW. Employer Identification Number
TIN Applied for
---------------------------------------------------------------------------
<S> <C>
Substitute PART 2--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
Form W-9 (1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me);
Department of the Treasury (2) I am not subject to backup withholding either because: (a) I am
Internal Revenue Service exempt from backup withholding, or (b) I have not been notified by
the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to report all interest
Payor's Request for Taxpayer or dividends, or (c) the IRS has notified me that I am no longer
Identification Number ("TIN") subject to backup withholding; and
and Certification (3) any other information provided on this form is true and correct.
Signature:________________________________ Date:___________________
- --------------------------------------- ---------------------------------------------------------------------------
</TABLE>
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not been
notified by the IRS that you are no longer subject to backup withholding.
NOTE: FAILURE BY A PROSPECTIVE HOLDER OF NEW NOTES TO BE ISSUED PURSUANT TO
THE SPECIAL ISSUANCE INSTRUCTIONS ABOVE TO COMPLETE AND RETURN THIS
FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF THE NEW NOTES DELIVERED
TO YOU PURSUANT TO THE EXCHANGE OFFER AND ANY PAYMENTS RECEIVED BY YOU
IN RESPECT OF THE NEW NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
- ------------------------------------------ -------------------------------------
Signature Date
- --------------------------------------------------------------------------------
NOTICE OF GUARANTEED DELIVERY
WORLDWIDE FIBER INC.
OFFER TO EXCHANGE ITS 12% SENIOR NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS 12% SENIOR NOTES DUE 2009
PURSUANT TO THE PROSPECTUS, DATED , 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
As set forth in the Prospectus dated __________, 1999 (the "Prospectus")
under the caption "The Exchange Offer -- Guaranteed Delivery Procedures" and the
accompanying Letter of Transmittal (the "Letter of Transmittal") and Instruction
1 thereto, this form, or one substantially equivalent hereto, must be used to
accept the Exchange Offer if certificates representing the 12% Senior Notes due
2009 (the "Old Notes") of Worldwide Fiber Inc., a company organized under the
laws of Alberta (the "Company"), are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis or time
will not permit a Holder's certificates or other required documents to reach the
Exchange Agent on or prior to the Expiration Date. Such form may be delivered by
hand or transmitted by telegram, telex, facsimile transmission or mail to the
Exchange Agent and must include a guarantee by an Eligible Institution unless
such form is submitted on behalf of an Eligible Institution. Capitalized terms
used and not defined herein have the respective meanings ascribed to them in the
Prospectus.
The Exchange Agent is
HSBC Bank USA
By Registered or Certified Mail: By Hand or Overnight Courier:
HSBC Bank USA HSBC Bank USA
By Facsimile:
(212) 658-6425
Confirm by Telephone:
(212) 658-6433
Delivery of this instrument to an address or transmission via facsimile
number other than the ones above will not constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies & Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus
and the accompanying Letter of Transmittal, receipt of which is hereby
acknowledged, the undersigned hereby tenders to Worldwide Fiber Inc., a company
organized under the laws of Alberta (the "Company"), $________ principal amount
of Old Notes, pursuant to the guaranteed delivery procedures set forth in the
Prospectus and accompanying Letter of Transmittal.
Certificate Numbers of Old Notes Principal Amount Tendered
(if available)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If Old Notes will be tendered by book-entry transfer to the Depositary
Trust Company, provide account number.
Account No. ___________________________
The undersigned authorizes the Exchange Agent to deliver this Notice of
Guaranteed Delivery to the Company and HSBC Bank USA, as Trustee with respect to
the Old Notes tendered pursuant to the Exchange Offer.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
- --------------------------------------------------------------------------------
SIGN HERE
- --------------------------------------------------------------------------------
Signature(s) of Registered Holder(s) or Authorized Signatory
- --------------------------------------------------------------------------------
Name(s) of Registered Holder(s)
(Please Type or Print)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
Zip Code
- --------------------------------------------------------------------------------
Area code and Telephone Number
Dated: , 1999
- --------------------------------------------------------------------------------
<PAGE>
GUARANTEE
(Not to be Used for Signature Guarantees) The undersigned, a member firm of
a registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
in the United States, hereby (a) represents that the above-named person(s) has a
net long position in the Old Notes tendered hereby within the meaning of Rule
14e-4 under the Securities Exchange Act of 1934, as amended, (b) represents that
such tender of Old Notes complies with Rule 14e-4 and (c) guarantees delivery to
the Exchange Agent of certificates representing the Old Notes tendered hereby,
in proper form for transfer, or confirmation of book-entry transfer of such Old
Notes into the Exchange Agent's account at a Book-Entry Transfer Facility (as
defined in the Prospectus), in each case together with a properly completed and
duly executed Letter of Transmittal with any required signature guarantees and
any other documents required by the Letter of Transmittal, within three New York
Stock Exchange trading days after the date hereof.
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------- ---------------------------------------------------
Name of Firm Title
- --------------------------------------------------- ---------------------------------------------------
Authorized Signature Name (Please Type or Print)
Dated:_____________________________________________
- ---------------------------------------------------
Address
- ---------------------------------------------------
Area Code and Telephone Number
- ---------------------------------------------------- --- ---------------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OLD NOTES WITH THIS FORM.
CERTIFICATES FOR OLD NOTES MUST BE SENT WITH YOUR LETTER OF TRANSMITTAL.
