<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 30, 1999
METROMEDIA INTERNATIONAL GROUP, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 1-5706 58-0971455
--------------- ------------ ------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
ONE MEADOWLANDS PLAZA, EAST RUTHERFORD, NEW JERSEY 07073-2137
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 531-8000
--------------------------
<PAGE>
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1999, Metromedia International Group, Inc.
(the "Company") completed its merger with PLD Telekom Inc., a Delaware
corporation ("PLD"), pursuant to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of May 18, 1999, among the Company, Moscow Communications,
Inc. and PLD. A copy of the press release announcing the completion of the
merger is attached as Exhibit 99.1 hereto and is incorporated herein by
reference.
PLD is a major provider of high quality, long distance and
international telecommunications services in the former Soviet Union. Its five
principal business units are PeterStar, which provides integrated local, long
distance and international telecommunications in St. Petersburg through a fully
digital fiber optic network; Teleport-TP, which provides international
telecommunications services from Moscow and operates a pan-Russian
satellite-based long distance network; Baltic Communications Limited, which
provides dedicated international telecommunications services in St. Petersburg;
ALTEL, which is the principal provider of cellular service in the republic of
Kazakhstan; and BELCEL, which provides the only national cellular service in
Belarus.
Pursuant to the Merger Agreement, the Company's wholly owned
subsidiary, Moscow Communications, Inc., was merged with and into PLD and each
share of PLD common stock was converted into the right to receive 0.6353
shares of the Company's common stock. The Company issued a total of
24,107,595 shares of common stock in the merger. Following consummation of
the merger, PLD became a wholly owned subsidiary of the Company. Upon
effectiveness of the merger, the shares of common stock of PLD were de-listed
from the Nasdaq National Market System and the Toronto Stock Exchange.
In connection with the merger, each share of Series II and
Series III convertible preferred stock of PLD (a total of 446,884 shares) was
called for redemption on November 1, 1999 at a redemption price equal to Cdn.
$1.00 per share, payable in cash.
Each outstanding option and warrant to acquire
shares of PLD Common Stock was assumed by the Company and automatically
converted into an option or warrant to purchase, on the same terms and
conditions as were applicable under such options or warrants, shares of common
stock of the Company in the following amount and at the following exercise
price:
(i) the number of shares of common stock of the Company that can
be purchased upon exercise of an option or warrant assumed
by the Company shall be equal to the product of (x) the
number of shares of PLD common stock formerly subject to
such option or warrant and (y) 0.6353.
(ii) the exercise price per share of common stock of the Company
under the option or warrant assumed by the Company shall be
equal to (x) the exercise price per share of PLD common
stock under the option or warrant divided by (y) 0.6353.
Fractional shares of any assumed option or warrant resulting from any
adjustment described above will be eliminated.
Pursuant to the Merger Agreement, the Company increased the
size of its Board of Directors from 9 members to 11 members and the Board of
Directors elected Mr. James R.S. Hatt and Mr. I. Martin Pompadur, two PLD
designees (Mr. Pompadur being a designee of News Corporation Limited), to serve
on the Board.
In connection with the merger, the holders of all of PLD's 14%
Senior Discount Notes due 2004 ($123,000,000 in aggregate principal amount) and
<PAGE>
3
$25,000,000 in aggregate principal amount of PLD's 9% Convertible Subordinated
Notes due 2006 (together, the "PLD Notes") exchanged their PLD Notes and all
accrued but unpaid interest on these notes through the date of the merger for
$210,631,000 in aggregate principal amount at maturity of 10.5% Senior Discount
Notes due 2007 of the Company. The terms of such notes are described in greater
detail under Item 5 below. The Company also purchased the remaining $1,500,000
in aggregate principal amount of PLD's 9% Convertible Subordinated Notes at a
purchase price of 101% of the principal amount of such notes plus accrued but
unpaid interest on such notes through the date of the merger. In connection
with this exchange, all security interests in PLD's assets securing payments
due under the PLD Notes, including approximately $15 million held in a cash
collateral account, and all guarantees of the PLD Notes, were terminated and
released in full. Following the exchange, the PLD Notes were repaid by PLD,
using funds drawn under a revolving intercompany note from the Company, and
the indentures and other agreements relating to such notes were terminated.
Also in connection with the merger, PLD repaid The
Travelers Insurance Company and The Travelers Indemnity Company (together,
"Travelers") approximately $8.6 million of amounts due under the revolving
credit and warrant agreement dated November 26, 1997 between PLD and
Travelers (the "Old Travelers Agreement"). PLD and Travelers also entered
into an amended and restated revolving credit note agreement (the "New
Travelers Agreement") pursuant to which PLD has agreed to repay Travelers the
remaining $4,920,000 due under the Old Travelers Agreement on August 30,
2000. In addition, Travelers received at the closing of the merger 100,000
shares of PLD common stock (which were converted in the merger into shares of
common stock of the Company at the 0.6353 exchange ratio) and 10-year
warrants to purchase 700,000 shares of common stock of the Company at an
exercise price to be determined in December 2000 that will be between $10 and
$15 per share. However, if the amount outstanding under the New Travelers
Agreement has not been fully repaid by August 30, 2000, the exercise price of
the warrants will be reset to $.01 per share. Travelers retained its existing
security interests in certain of PLD's assets. The performance by PLD of its
obligations under the New Travelers Agreement is guaranteed by the Company
and certain subsidiaries of PLD.
Also in connection with the consummation of the merger, PLD
repaid all its outstanding loans, including interest (or approximately
$6 million), to News American Incorporated ("News") under the revolving
credit agreement with News, dated as of September 30, 1998, as modified,
between News and PLD.
PLD also purchased the remaining shares of Technocom
Limited that it did not already own from Technocom's existing minority
shareholders for an aggregate purchase price of approximately $12.6 million.
Technocom is now a wholly owned subsidiary of PLD.
The Company and PLD also terminated a bridge loan agreement
pursuant to which the Company had agreed to extend certain revolving bridge
loans to PLD to fund PLD's ongoing operations during the period from the
execution of the Merger Agreement to the consummation of the merger.
The amounts borrowed were repaid by PLD, and the shares of Technocom Limited
securing the performance by PLD of its obligations under this agreement were
released from pledge.
PLD used funds held in the cash collateral account
referred to above, working capital and borrowings from the Company
under a revolving intercompany note to make all the payments described above.
<PAGE>
4
The press release filed as an exhibit to this report includes
"safe harbor" language, pursuant to the Private Securities Litigation Reform Act
of 1995, indicating that certain statements about the Company's business
contained in the press release are "forward-looking" rather than "historic." The
press release also states that a more thorough discussion of factors affecting
the Company's operating results are included in the Company's Annual Report on
Form 10-K/A for the fiscal year ended December 31, 1998, its Quarterly Report on
Form 10-Q/A for the quarter ended June 30, 1999, and other reports filed by the
Company with the Securities and Exchange Commission.
ITEM 5. OTHER EVENTS
On September 30, 1999, in connection with the merger with PLD,
the Company issued $210,631,000 in aggregate principal amount at maturity of its
10 1/2% Senior Discount Notes due 2007 (the "Metromedia Notes") to the holders
of PLD Notes pursuant to an Agreement to Exchange and Consent, dated as of May
18, 1999, by and among the Company, PLD and such holders.
The terms of the Metromedia Notes are set forth in an
Indenture, dated as of September 30, 1999, between the Company and U.S. Bank
Trust National Association as Trustee. The description of the Indenture and the
Metromedia Notes contained in this report is qualified in its entirety by
reference to the Indenture and the Metromedia Notes copies of which are attached
as Exhibit 99.2 hereto and incorporated herein by reference.
The Metromedia Notes will mature on September 30, 2007. The
Metromedia Notes were issued at a discount to their aggregate principal amount
at maturity and will accrete in value until March 30, 2002 at the rate of
10 1/2% per year, compounded semi-annually to an aggregate principal amount at
maturity of $210,631,000. The Metromedia Notes will not accrue interest in cash
before March 30, 2002. After this date, the Metromedia Notes will pay interest
at the rate of 10 1/2% per year, payable semi-annually in cash and in arrears to
the holders of record on March 15 or September 15 immediately preceding the
interest payment date on March 30 and September 30 of each year, commencing
September 30, 2002. The interest on the Metromedia Notes will be computed on the
basis of a 360-day year comprised of twelve months.
The Metromedia Notes are general senior unsecured obligations
of the Company, rank senior in right of payment to all existing and future
subordinated indebtedness of the Company, rank equal in right of payment to all
existing and future indebtedness of the Company and will be effectively
subordinated to all existing and future secured indebtedness of the Company to
the extent of the assets securing such indebtedness and to all existing and
future indebtedness of the Company's subsidiaries.
<PAGE>
5
The Metromedia Notes will be redeemable at the sole option of
the Company on and after March 30, 2002 only at a redemption price equal to
their principal amount plus accrued and unpaid interest, if any, to but
excluding the date of redemption.
Upon the occurrence of a change of control of the Company (as
such term is defined in the Indenture), the holders of the Metromedia Notes will
be entitled to require the Company to repurchase such holders' Notes at a
repurchase price equal to 101% of the accreted value of the Metromedia Notes (if
such repurchase is before March 30, 2002) or 101% of the principal amount of
such Notes plus accrued and unpaid interest to the date of repurchase (if such
repurchase is after March 30, 2002).
The Indenture for the Metromedia Notes limits the ability of
the Company and certain of its subsidiaries to, among other things, incur
additional indebtedness or issue capital stock or preferred stock, pay dividends
on, and repurchase or redeem their capital stock or subordinated obligations,
invest and sell assets and subsidiary stock, engage in transactions with
affiliates and incur additional liens. The Indenture for the Metromedia Notes
also limits the ability of the Company to engage in consolidations, mergers and
transfers of substantially all of its assets and also contains limitations on
restrictions on distributions from its subsidiaries.
The Company has registered a new series of Metromedia Notes
under the Securities Act of 1933, as amended, and has launched an exchange offer
for the exchange of all of its outstanding Metromedia Notes for such new series
of Metromedia Notes which have been registered.
ITEM 7. EXHIBITS
(a) Financial Statements of Business Acquired.
The required financial statements of PLD are attached
hereto as APPENDIX A.
(b) Pro Forma Financial Information.
The required pro forma financial information for the
merger is attached hereto as APPENDIX B.
(c) Exhibits.
<PAGE>
6
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
23.1 Consent of KPMG LLP.
23.2 Consent of KPMG LLP.
99.1 Press Release, dated September 30,
1999.
99.2 Indenture, dated as of September 30,
1999, between Metromedia International
Group, Inc. and U.S. Bank National
Association as Trustee.
</TABLE>
<PAGE>
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
METROMEDIA INTERNATIONAL GROUP, INC.
Date: October 13, 1999 By: /s/ Silvia Kessel
---------------------------------------------
Name: Silvia Kessel
Title: Chief Financial Officer, Executive Vice
President, Treasurer and Director
<PAGE>
8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE NO.
<S> <C> <C>
23.1 Consent of KPMG LLP.
23.2 Consent of KPMG LLP.
99.1 Press Release, dated September 30, 1999.
99.2 Indenture, dated as of September 30, 1999,
between Metromedia International Group, Inc.
and U.S. Bank National Association as
Trustee.
</TABLE>
<PAGE>
APPENDIX A
PLD TELEKOM INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ITEM PAGE
- - ---- ----
<S> <C>
Independent auditors' report................................ F-2
Consolidated balance sheets as of December 31, 1998 and
1997...................................................... F-4
Consolidated statements of operations for the years ended
December 31, 1998, 1997 and 1996.......................... F-5
Consolidated statements of shareholders' equity for the
years ended December 31, 1998, 1997 and 1996.............. F-6
Consolidated statements of cash flows for the years ended
December 31, 1998, 1997 and 1996.......................... F-7
Notes to consolidated financial statements.................. F-9
Consolidated Condensed Balance Sheets as of June 30, 1999
(Unaudited) and December 31, 1998......................... F-36
Consolidated Condensed Statements of Operations (Unaudited)
for the three and six months ended June 30, 1999 and 1998. F-37
Consolidated Condensed Statements of Cash Flows (Unaudited)
for the six months ended June 30, 1999 and 1998........... F-38
Notes to Consolidated Condensed Financial Statements
(Unaudited) for the three and six months ended
June 30, 1999............................................. F-39
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
PLD Telekom Inc.:
We have audited the accompanying consolidated balance sheets of PLD Telekom
Inc. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PLD Telekom
Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in note
1 to the consolidated financial statements, the Company has suffered recurring
losses, has a working capital deficiency, and does not presently have sufficient
funds on hand to meet its current debt obligations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are described in note 1. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
KPMG LLP
New York, New York
March 30, 1999
F-2
<PAGE>
AUDITORS' REPORT
Shareholders and Board of Directors
PLD Telekom Inc.:
We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of PLD Telekom Inc. and subsidiaries for the
year ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations of the
Company and subsidiaries and their cash flows for the year ended December 31,
1996 in accordance with United States generally accepted accounting principles.
KPMG LLP
Chartered Accountants
Toronto, Canada
March 21, 1997
F-3
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (note 7)........................ $ 4,579 $ 17,256
Trade receivables, net of allowance of $3,809 and $3,226,
respectively........................................... 14,905 17,078
Other receivables and prepaids............................ 4,609 8,615
Inventory................................................. 4,152 2,802
Due from related parties (note 13(c))..................... 9,152 6,320
--------- --------
Total current assets................................... 37,397 52,071
Escrow funds (note 9)....................................... 14,908 33,868
Property and equipment, net (note 4)........................ 168,937 134,998
Telecommunications licenses (note 3), net of amortization of
$37,737 and $26,294, respectively......................... 77,359 81,837
Due from related parties (note 13(c))....................... 2,011 3,011
Other investments (note 5).................................. 5,183 4,036
Goodwill, net of amortization of $1,656 and $575,
respectively (notes 3(a) and (c))......................... 36,368 12,709
Other assets (note 6)....................................... 9,945 13,056
--------- --------
Total assets...................................... $ 352,108 $335,586
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings (note 8)............................ 18,124 20,320
Accounts payable.......................................... 10,293 11,692
Accrued liabilities....................................... 4,463 4,882
Taxes payable............................................. 3,664 944
Due to related parties (note 13(d))....................... 4,639 5,336
Deferred revenues......................................... 2,869 3,128
Customer deposits......................................... 4,271 3,070
Current portion of long-term debt......................... 5,073 4,085
--------- --------
Total current liabilities......................... 53,396 53,457
Long-term debt (note 9)..................................... 151,814 133,516
Minority interest........................................... 22,021 21,382
Commitments and contingencies (note 14).....................
Shareholders' equity (notes 9 and 10):
Preferred stock, par value $.01 per share.
Authorized 100,000,000 shares; issued and outstanding
446,884 shares......................................... 4 4
Common stock, par value $.01 per share.
Authorized 100,000,000 shares; issued and outstanding
37,846,789 shares in 1998 and 33,324,290 shares in
1997................................................... 378 333
Additional paid-in capital.................................. 244,419 204,007
Accumulated deficit......................................... (119,924) (77,113)
--------- --------
Total shareholders' equity........................ 124,877 127,231
--------- --------
Total liabilities and shareholders' equity........ $ 352,108 $335,586
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Telecommunications (note 13(a))....................... $ 143,474 $ 112,468 $ 60,562
Finance lease income................................ 1,886 1,956 1,404
----------- ----------- -----------
145,360 114,424 61,966
Operating expenses:
Direct costs (excludes depreciation)................ 45,348 39,186 21,709
General and administrative.......................... 57,672 38,716 24,791
Depreciation........................................ 14,745 10,433 5,226
Amortization........................................ 11,326 7,867 4,883
Taxes other than income taxes....................... 6,321 6,204 2,490
----------- ----------- -----------
Total operating expenses.................... 135,412 102,406 59,099
----------- ----------- -----------
Operating income............................ 9,948 12,018 2,867
Other income/(expense):
Share of loss from equity investments, after
amortization of licenses of $0, $0, and $2,477,
respectively..................................... (958) (537) (2,692)
Interest and other income........................... 2,384 3,614 4,859
Interest expense.................................... (21,953) (17,846) (9,973)
Amortization of deferred financing costs............ (1,779) (1,152) (684)
Foreign exchange loss............................... (5,322) (274) (648)
Other expense (note 16)............................. (5,881) 749 --
----------- ----------- -----------
Loss before income taxes and minority
interest.................................... (23,561) (3,428) (6,271)
Income taxes (note 11)................................ 9,864 7,739 3,669
----------- ----------- -----------
Loss before minority interest.................. (33,425) (11,167) (9,940)
Minority interest..................................... 9,386 9,399 2,521
----------- ----------- -----------
Net loss....................................... $ (42,811) $ (20,566) $ (12,461)
=========== =========== ===========
Net loss per common share:
Basic............................................... $ (1.21) $ (0.64) $ (0.39)
=========== =========== ===========
Diluted............................................. $ (1.21) $ (0.64) $ (0.39)
=========== =========== ===========
Weighted average common shares outstanding............ 35,274,151 32,061,070 31,579,201
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
---------------- ----------------------
NUMBER NUMBER ADDITIONAL
OF OF PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------ ---------- --------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995....... 446,884 $31 31,507,034 $ 179,887 -- (44,086) 135,832
Exercise of options................ -- -- 189,000 991 -- -- 991
Issuance of warrants (note 9)...... -- -- -- -- 13,592 -- 13,592
Net loss for the year.............. -- -- -- -- -- (12,461) (12,461)
------- --- ---------- --------- ------- -------- -------
Balance at December 31, 1996....... 446,884 31 31,696,034 180,878 13,592 (56,547) 137,954
Increase in par value from none to
$.01 (note 10)................... -- -- -- (180,561) 180,561 -- --
Change in par value of preferred
stock (note 10).................. -- (27) -- -- 27 -- --
Common stock cancellations......... -- -- (150) -- -- -- --
Exercise of options and warrants... -- -- 312,166 3 1,736 -- 1,739
Issuance of shares (note 3(c))..... -- -- 1,316,240 13 7,668 -- 7,681
Issuance of warrants (note 8(a))... -- -- -- -- 423 -- 423
Net loss for the year.............. -- -- -- -- -- (20,566) (20,566)
------- --- ---------- --------- ------- -------- -------
Balance at December 31, 1997....... 446,884 4 33,324,290 333 204,007 (77,113) 127,231
Common stock cancellations......... -- -- -- -- -- -- --
Exercise of options and warrants... -- -- -- -- -- -- --
Issuance of shares (notes 3(a),
3(f) and 3(g))................... -- -- 4,522,499 45 39,174 -- 39,219
Issuance of warrants (notes 8(a)
and 10(c))....................... -- -- -- -- 449 -- 449
Non-cash compensation expense (note
12).............................. -- -- -- -- 789 -- 789
Net loss for the year.............. -- -- -- -- -- (42,811) (42,811)
------- --- ---------- --------- ------- -------- -------
Balance at December 31, 1998....... 446,884 $ 4 37,846,789 $ 378 244,419 (119,924) 124,877
======= === ========== ========= ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(42,811) $(20,566) $(12,461)
Adjustments to reconcile net loss to net cash provided
by/(used in) operating activities:
Depreciation and amortization.......................... 27,850 19,452 10,793
Accrued interest on senior discount notes.............. 17,183 14,260 7,349
Minority interest...................................... 9,386 9,399 2,521
Write-off of minority shareholder receivable........... 2,000 -- --
Provision for finance lease receivable................. 3,203 -- --
Write-down of asset.................................... 2,000 -- --
Gain on sale of SPMMTS................................. -- (1,001) --
Deferred revenue....................................... (259) 2,050 (898)
Share of loss of equity investments.................... 958 537 2,692
Other.................................................. 789 -- 300
Changes in operating assets and liabilities, net of
effects of acquisitions:
Decrease/(increase) in trade receivables............. 2,173 (6,550) (2,478)
Decrease/(increase) in other receivables and
prepaids.......................................... 4,009 (5,093) 1,827
Increase in inventory................................ (1,350) (962) (392)
Change in amounts due from or to related parties..... (4,529) 386 (4,743)
(Decrease)/increase in accounts payable, accrued
liabilities, customer deposits, and other current
liabilities....................................... (683) (1,119) 11,108
-------- -------- --------
Net cash provided by operating activities......... 19,919 10,793 15,618
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (39,538) (38,990) (43,201)
Proceeds from sale of SPMMTS.............................. -- 17,180 --
Escrow funds.............................................. 18,960 7,116 (40,984)
Purchase of 30% investment in Technocom................... -- (25,608) --
Teleport-TP finance lease and advances.................... -- -- 3,916
Cash paid for acquisition................................. (500) -- --
Investments in Baltic Communications Limited, J.V.
Technopark Limited and Teleport-TP, net of cash
acquired............................................... -- -- (7,515)
Other investments......................................... -- 181 (140)
Other assets.............................................. 297 (747) (267)
-------- -------- --------
Net cash used in investing activities............. (20,781) (40,868) (88,191)
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt borrowings/(repayments)................... $ (4,900) $(10,929) $(6,550)
Proceeds from issuance of 12% Revolving Credit Notes...... -- 15,420 --
Repayment of credit notes................................. (2,000) -- --
Proceeds from issuance of 14% Senior Discount Notes....... -- -- 87,697
Proceeds from issuance of 9% Convertible Subordinated
Notes.................................................. -- -- 26,500
Long-term debt repayment.................................. (5,074) -- --
Deferred financing costs.................................. -- -- (9,224)
Proceeds from issuance of common stock.................... -- 1,739 991
Cash dividends paid to minority shareholders.............. (3,000) (1,000) --
Loans from shareholders................................... 3,500 -- (1,843)
Related company advances.................................. -- -- --
Due to equipment supplier................................. -- -- --
Recapitalization of PeterStar............................. -- 1,427 --
Other financing........................................... (341) -- --
-------- -------- -------
Net cash (used in)/provided by financing
activities...................................... (11,815) 6,657 97,571
-------- -------- -------
(Decrease)/increase in cash and cash
equivalents..................................... (12,677) (23,418) 24,998
Cash and cash equivalents at beginning of year.............. 17,256 40,674 15,676
-------- -------- -------
Cash and cash equivalents at end of year.................... $ 4,579 $ 17,256 40,674
======== ======== =======
Supplementary disclosures:
Non-cash investing and financing activities:
Issuance of warrants................................... $ 449 $ 423 $ --
======== ======== =======
Acquisition of equipment under capital lease........... $ 4,019 $ -- $ --
======== ======== =======
Issued shares for acquired businesses.................. $ 39,219 $ -- $ --
======== ======== =======
Supplier financing..................................... $ 7,037 $ 11,302 $ --
======== ======== =======
Issuance of common stock for a portion of purchase
price of Technocom................................... $ -- $ 7,681 $ --
======== ======== =======
Interest paid............................................... $ 5,574 $ 3,381 $ 2,425
======== ======== =======
Income taxes paid........................................... $ 6,690 $ 7,424 $ 3,678
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) ORGANIZATION AND GOING CONCERN
Business, Operations, Future Activities and Russian Business Environment
The Company was previously incorporated under the laws of Ontario, Canada.
Effective February 28, 1997, PLD Telekom Inc. ("PLD" or the "Company") was
incorporated in the United States as a Delaware corporation. Through its
majority-owned and controlled subsidiaries, the Company is a provider of local,
long distance and international telecommunications services in the former Soviet
Union.
The Company's telecommunications businesses are at various stages of
development and are growing rapidly in an emerging economy which, by its nature,
has an uncertain economic, political and regulatory environment. The general
risks of operating businesses in the former Soviet Union include the possibility
for rapid change in government policies, economic conditions, the tax regime and
foreign currency regulations.
Ultimate recoverability of the Company's investments is dependent upon its
ability to achieve and maintain profitability, which is dependent to a certain
extent on the stabilization of the economies of the former Soviet Union, the
ability to maintain the necessary telecommunications licenses and the ability to
obtain adequate financing to meet capital commitments.
In recent years, Russia has undergone fundamental political and economic
change. As a result, operations carried out in Russia involve significant risks
which are not typically associated with many other world markets. Instability in
the market reform process could subject the Company to unpredictable changes in
the basic business environment in which it currently operates. Uncertainties
regarding the political, legal, tax or regulatory environment including the
potential for adverse and retroactive changes in any of these, could
significantly affect the Company's ability to operate commercially. Management
is unable to estimate what changes may occur or the resulting effects of any
such changes on the Company's financial position or future results from
operations.
In 1998, the effects of adverse economic conditions in Russia included a
national liquidity crisis, devaluation of the rouble, higher interest rates, and
reduced opportunity for refinancing or refunding of maturing debts. In order to
partially address this situation, the Russian government announced policies
intended to address the structural weaknesses in the Russian economy and
financial sector.
While the policies are intended to alleviate the economic crisis in Russia,
the immediate effects could include slower economic growth or decline, a
reduction in the availability of credit and the ability to service debt, an
increase in interest rates, changes and increases in taxes, an increased rate of
inflation or hyperinflation, further devaluation of the rouble, and restriction
on convertibility of the rouble and movements of hard currency, an increase in
the number of bankruptcies of entities (including bank failures), labor unrest
and strikes resulting from the possible increase in unemployment, and political
unrest. These conditions and future policy changes could have a material adverse
effect on the operations of the Company and the realization and settlement of
its assets and liabilities.
The accompanying financial statements reflects management's assessment of
the impact of this economic situation on the financial position of the Company.
Actual results could differ from management's current assessments and such
differences could be material. In addition, the effect on the Company's
financial position of future developments and access to further financial
information concerning the Company's customers, suppliers, financiers, and
others and their ability to continue to transact with the Company cannot
presently be determined. The financial statements therefore may not include all
adjustments that might ultimately result from these adverse conditions.
F-9
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Going Concern
The Company has suffered recurring losses and has a working capital
deficiency. Additionally, as discussed in note 8(a), the Company has
approximately $13.4 million of Series A and Series B revolving credit notes due
to two related holders (hereinafter defined as the "Travelers Parties")
outstanding. $1.1 million of these notes were due to be repaid by September 30,
1998 and the remaining approximately $12.3 million of the notes were due to have
been repaid by December 31, 1998. The Travelers Parties have given the Company a
series of payment deferrals since December 31, 1998 with respect to these notes,
the last of which was given on February 28, 1999 and defers payment of the notes
to April 30, 1999. The Company does not presently have sufficient funds on hand
to make such payments and management is actively engaged in pursuing ways to
settle the Company's obligations to the Travelers Parties. In this context, the
Company is currently exploring a range of financing alternatives. Historically,
sources of financing have included private placements of common and preferred
shares and debt, asset and investment sales, shareholder loans and bank lines of
credit supported by shareholder guarantees. While management believes that, as
long as progress towards settlement of such obligations is being made, the
Travelers Parties will be willing to agree to additional payment deferrals,
there can be no assurance that they will not demand payment in full of the
Series A and Series B notes. The Company's failure to make payment in full could
result in a cross-default under and acceleration of the Senior Discount Notes
and the Convertible Subordinated Notes, which have an aggregate principal amount
of $149.5 million (see note 9). This in turn could require the Company to resort
to extraordinary measures, including making sales of assets under distressed
conditions or ultimately seeking the protection of the bankruptcy courts.
In addition, should the minority shareholders in Technocom, who have the
right to put their Technocom shares to the Company from mid-1999 onwards (as
described in note 3(c)), elect to exercise these rights, then the Company's
inability to meet its obligations would be exacerbated. The Company is engaged
in efforts to address this issue, including through reaching some accommodation
with the minority shareholders regarding their put options. In the event that no
solution can be found, then this in turn could require the Company to resort to
extraordinary measures as outlined above.
These factors raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are summarized as follows:
(a) Basis of Presentation
The accompanying consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States
(U.S. GAAP).
The consolidated financial statements include the accounts of the Company
and its majority-owned and controlled subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation. Investments in
affiliates in which the Company has significant influence, but does not exercise
control, are accounted for under the equity method. Investments of the Company
over which significant influence is not exercised are carried under the cost
method.
(b) Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. At December 31, 1998
and 1997, the Company's cash equivalents consist of term deposits of
approximately $1.4 million and $7.2 million, respectively.
F-10
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Investments
Management determines the appropriate classification of its investments at
the time of purchase and classifies them as trading, available-for-sale or
held-to-maturity in accordance with the provisions of Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in
Debt and Equity Securities." At December 31, 1998 and 1997, the Company's
investments which are held in escrow, consist of U.S. Treasury Bonds with a
carrying value of $14.9 million and $33.9 million, respectively, and have been
classified as available-for-sale. In accordance with SFAS 115, the Company
carries its available-for-sale investments at fair value, with unrealized gains
and losses reported as a separate line item in shareholders' equity. Due to the
short maturity period (1998 -- maturing on January 5, 1999 and 1997 -- maturing
on January 7, 1998), the carrying value of these investments approximates its
fair market value at December 31, 1998 and 1997.
(d) Revenue Recognition
The Company records telecommunication revenues as earned, at the time
services are provided.
(e) Inventory
Inventory is stated at the lower of average cost or net realizable value
and is composed of telephony products held for resale to customers.
(f) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Telecommunications equipment............................. 10 years
Buildings................................................ 28.5 years
Leasehold improvements................................... 10 years
Office furniture and equipment (including computer
equipment)............................................. 3-5 years
Software................................................. 5 years
</TABLE>
Interest cost incurred during the period of construction of property and
equipment is capitalized. The interest cost capitalized in 1998 and 1997
amounted to and $1.3 million and $0.9 million, respectively.
(g) Intangible Assets
Telecommunications licenses are being amortized on a straight-line basis
over the terms of the licenses.
Goodwill represents the excess of the purchase price over the fair values
of the net assets acquired and is being amortized on a straight-line basis over
periods ranging from ten to twenty years.
Deferred financing costs represent costs incurred to issue debt. Deferred
financing costs are capitalized and amortized over the term of the related debt.
(h) Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, escrow funds, trade and other receivables, amounts due
from or to related parties, bank indebtedness and accounts payable approximate
fair value due to their short maturities. The fair value of long-term debt is
based on discounted cash flow analysis.
F-11
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(i) Reporting Currency and Foreign Currency Translation
The statutory accounts of the Company's consolidated subsidiaries are
maintained in accordance with local accounting regulations and are stated in
local currencies.
Local statements are adjusted to U.S. GAAP and then translated into U.S.
dollars in accordance with Statement of Financial Accounting Standards No. 52
(SFAS 52), "Foreign Currency Translation."
Under SFAS 52, the financial statements of foreign entities in highly
inflationary economies are measured in all cases using the U.S. dollar as the
functional currency. U.S. dollar transactions are shown at their historical
value. Monetary assets and liabilities denominated in local currencies are
translated into U.S. dollars at the prevailing period-end exchange rate. All
other assets and liabilities are translated at historical exchange rates.
Results of operations have been translated using the monthly average exchange
rates. Translation differences resulting from the use of these different rates
are included in the accompanying consolidated statements of operations.
(j) Income Taxes
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. 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. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income or expense in the period it occurs.
(k) Net Loss Per Common Share
Basic Earnings (Loss) per Share (EPS) is computed by dividing income or
loss by the weighted average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution from the exercise or conversion of
securities into common stock, such as stock options, at the beginning of the
period being reported on.
Net loss and weighted average shares outstanding used for computing diluted
loss per common share were the same as that used for computing basic loss per
common share for each of the years ended December 31, 1998, 1997 and 1996.
The Company had potentially dilutive common stock equivalents of
19,629,601, 11,715,914 and 10,285,080 for the years ended December 31, 1998,
1997 and 1996, respectively, which were not included in the computation of
diluted net loss per common share because they were antidilutive for the periods
presented.
(l) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the year. Actual results
could differ from those estimates.
(m) Equity Compensation
The Company accounts for its stock option plan in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 123 which allows entities to
continue to apply the provisions of Accounting Principles Board ("APB") Opinion
No. 25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair-value-based
F-12
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
method, as defined in SFAS No. 123, had been applied. The Company has elected to
apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure
required by SFAS No. 123. See Note 12.
(n) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Long-lived assets and certain identifiable intangibles are reviewed by the
Company for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount to
undiscounted future net cash flows expected to be generated by the assets. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
(o) Comprehensive Income
SFAS 130, "Reporting Comprehensive Income," was issued in June 1997. SFAS
130 establishes standards for reporting and display of comprehensive income and
its components in a full set of general purpose financial statements. SFAS 130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in an annual
financial statement that is displayed with the same prominence as other
financial statements. The Company adopted SFAS 130 as of January 1, 1998. For
the years ended December 31, 1998, 1997 and 1996 comprehensive loss was equal to
consolidated net loss reported on the consolidated statement of operations. As
SFAS 130 only requires additional disclosures in the Company's consolidated
financial statements, its adoption did not have any impact on the Company's
consolidated financial position or results of operations.
(p) Segments
SFAS No. 131 (SFAS 131), "Disclosure about Segments of an Enterprise and
Related Information," was issued in June 1997. SFAS 131 establishes standards
for the manner in which public companies should report information about
operating segments in annual financial statements and requires that those
companies report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company adopted SFAS 131 for its annual reporting in 1998.
(q) Reclassifications
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
(3) BUSINESSES AND ACQUISITIONS
The Company's key interests at December 31, 1998 include a 71% equity
interest in PeterStar Company Limited ("PeterStar"); a 50% equity interest in
ALTEL, formerly known as BECET International ("ALTEL"); an approximate 80%
equity interest in Technocom Limited ("Technocom"), which holds an approximate
49% equity interest in Teleport-TP ("Teleport-TP"); and a 50% interest in
BELCEL. The Company also owns 100% of Baltic Communications Limited ("BCL") and
100% of CPY Yellow Pages Limited ("Yellow Pages").
(a) PeterStar
PeterStar is a joint stock company registered in 1992 under the laws of the
Russian Federation to provide international and domestic telecommunications
services for St. Petersburg. In November 1994, PeterStar was
F-13
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
granted a new license to provide these services for a further ten years. The
license was reissued in June 1996 and requires that at least 74,200 lines be
introduced by June 1999. At December 31, 1998, PeterStar had 168,166 lines in
place.
In October 1992, the Company acquired a 50% interest in PeterStar for
consideration of $19.8 million. An additional 9% interest was acquired in March
1994 for consideration of $8.2 million and an additional 1% interest was
acquired in April 1996 for $1.8 million. All of the consideration through April
1996 has been allocated to telecommunications licenses. The Company's interest
in PeterStar is owned by its wholly owned subsidiary, NWE Capital (Cyprus)
Limited ("NWE Cyprus"), a company incorporated in Cyprus.
Effective September 30, 1998 the Company acquired an additional 11%
interest in PeterStar by acquiring 100% of the shares of PLD Holdings Limited, a
Bermuda company and the owner of that 11% interest, from News America
Incorporated ("News") -- which had acquired the interest from Cable and Wireless
plc. News is the owner, through an affiliate, of 38% of the Company's Common
Stock. The acquisition was accounted for by the purchase method of accounting.
The total consideration for the acquisition, including acquisition costs, was
approximately $33.9 million (the Company issued 3,826,041 shares of its common
stock with a market value of $8.73 per share) and was allocated to
telecommunication licenses, goodwill and purchase of minority interests in the
amounts $3.4 million, $24.7 million and $5.8 million, respectively. The goodwill
will be amortized on a straight-line basis over 20 years and the
telecommunication license will be amortized over its remaining term, which
expires in 2004.
(b) ALTEL
ALTEL provides cellular services pursuant to a 15-year license to operate a
cellular telephony system in Kazakhstan until February 2009. The Company's 50%
interest in ALTEL is owned by its wholly owned subsidiary, Wireless Technology
Corporations Limited ("WTC"), a company incorporated in the territory of the
British Virgin Islands, which in turn is owned by NWE Cyprus. In connection with
the acquisition of ALTEL, the Company was committed to provide financing of up
to $3.0 million to fund a number of special telecommunications projects
undertaken by the Ministry of Communications in Kazakhstan. Such amount, which
was paid in 1995, has been treated as additional cost of the Company's
investment in ALTEL.
(c) Technocom
The Company subscribed for preferred shares of Technocom, a company
incorporated in the Republic of Ireland, in the amount of $40.0 million, of
which $20.0 million was subscribed for on acquisition in 1994 and the remaining
$20.0 million was subscribed for in June 1996 from the proceeds of the financing
described in note 9. The preferred shares entitle the Company to the first $20.0
million of Technocom's dividend distributions. After receipt of such preference
dividends, all the preferred shares will be converted into a single ordinary
share of Technocom. The carrying value of the Company's investment in
Teleport-TP and minority interest were each increased by a total of $10.0
million in 1995/1996 to reflect the minority interest's ultimate share in the
preferred equity.
On November 26, 1997, PLD acquired an additional 59 ordinary shares of
Technocom increasing its ownership from 50.1% to 80.4%. The total consideration
for the acquisition was $32.5 million, plus acquisition costs of approximately
$840,000 and was allocated to telecommunications licenses, goodwill, and
purchase of minority interest in the amounts of $16.0 million, $11.1 million,
and $6.2 million, respectively. Approximately $24.8 million was paid in cash and
the remainder in shares of PLD common stock (1,316,240 shares of common stock
with a fair market value of $5.85 per share, which cannot be sold until the year
2000). The cash element of the transaction was funded with escrowed funds and
with the proceeds from the Company's 12% Revolving Credit Notes (see note 8).
F-14
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, on November 26, 1997, the Company restructured certain "put
and call" arrangements with the other two shareholders of Technocom. Under these
arrangements, as originally structured, the remaining ordinary shares of
Technocom held by these shareholders (29 shares, or approximately 14.6% of the
total ordinary shares outstanding, and 10 shares, or approximately 5% of the
total ordinary shares outstanding) were to have been independently valued in
1999 and the Company had the right to call, and the other two shareholders had
the right to put, their respective interests at the per share value established
by the valuation. The arrangements were restructured as a part of the
transaction whereby PLD acquired an additional interest in Technocom from such
shareholders, and PLD requested, and the shareholders agreed to, such
restructuring in consideration for PLD agreeing to acquire part of their
interests.
These arrangements were restructured as follows. In the case of the holder
of the 29 shares, while the date on which the put or call could be exercised did
not change, the valuation procedure was eliminated and the "put and call" price
for its interest was set at a fixed $17.5 million. In the case of the holder of
the 10 shares, 2 of its remaining 10 ordinary shares were made subject to a new
put and call arrangement which would come into effect in 1998, with the "put and
call" price to be $1.0 million or, at the holder's option, that number of shares
of common stock which results from dividing $1.0 million by the lower of $5.85
and the average closing price of such shares over the preceding 10 trading days.
The remaining 8 ordinary shares continue to be subject to the existing put and
call arrangements in 1999, except that the valuation will be made by the Company
and the amount paid pursuant to the exercise of either the put or the call
cannot exceed $9.6 million or be less than $6.7 million.
Both of the other two shareholders of Technocom provide services to
Technocom and PLD under management contracts with Technocom (see note 13(d)).
On December 20, 1996, Technocom acquired 55.5% of the outstanding shares of
J.V. Technopark Limited ("Technopark") from the minority shareholders of
Technocom for $3.0 million. Technopark is incorporated in Russia and owns a 7.5%
equity interest in Teleport-TP and commercial property in Moscow. The
acquisition of Technopark has been accounted for using the purchase method.
(d) Teleport-TP
The Company currently controls 56% of the voting interests in Teleport-TP
through its ownership of Technocom (see note 3(c)), which has a 49.3% equity
interest in Teleport-TP. The Company originally acquired a 41.8% equity
investment in Teleport-TP through its acquisition of 50.8% of the outstanding
common stock of Technocom. In May 1996, Technocom acquired an additional 3.3%
indirect equity interest in Teleport-TP for cash consideration of $2.0 million,
substantially all of which was allocated to Teleport-TP's telecommunications
licenses. The additional interest was acquired through a company controlled by a
minority shareholder of Technocom.
Teleport-TP is a Russian joint stock company which holds four principal
operating licenses. The first license expires in November 2004 and authorizes
Teleport-TP to provide long distance and international telecommunications
services to private networks within Moscow and, to a limited extent, elsewhere
in the Russian Federation. Teleport-TP is required by the terms of the license
to have at least 10,500 subscribers (which is 70% of the maximum number of
subscribers permitted under the license) in place by October 1999. Under the
terms of the license agreement, there are no penalties should Teleport-TP not
attain the required number of lines.
The second license expires in October 2004 and permits the operation of
1,000 international leased circuits for the transmission of television and
telecommunications services. The third license, which expires in January 2002,
permits the provision of data services with interconnection to the public
network and requires capacity for 70,000 subscribers by December 2000. The
fourth license, which expires in May 2001, is an
F-15
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
overlay license which permits Teleport-TP to offer local, long distance and
international voice and data services which are interconnected to the public
telephone network in 40 regions across Russia.
As a result of the acquisition of Technopark, the Company consolidated
Teleport-TP's balance sheet at December 31, 1996. The results of operations of
Teleport-TP have been included in the consolidated statements of operations from
January 1, 1997.
Condensed financial information of Teleport-TP for the year ended December
31, 1996 is as follows:
<TABLE>
<CAPTION>
1996
--------------
(IN THOUSANDS)
<S> <C>
Telecommunications revenues................................. $11,104
Cost of sales............................................... 6,534
-------
Gross profit......................................... 4,570
-------
Operating expenses:
General and administrative.................................. 2,617
Other taxes................................................. 592
Depreciation of assets under capital lease.................. 1,016
Other depreciation and amortization......................... 200
-------
4,425
-------
Operating income..................................... 145
Interest on capital lease................................... (531)
Other interest and financing charges, net................... 251
-------
Earnings/(loss) before income taxes.................. (135)
Income taxes................................................ --
-------
Net loss............................................. $ (135)
=======
Technocom's interest therein................................ (75)
Amortization of excess purchase price....................... (2,477)
-------
Share of Teleport-TP loss............................ $(2,552)
=======
</TABLE>
Teleport-TP's revenues for the years ended December 31, 1996 include sales
to its minority shareholder of $4.6 million, making Teleport-TP to some extent
economically dependent on its minority shareholder.
Teleport-TP's cost of sales for the year ended December 31, 1996 includes
costs of $2.9 million charged by a company controlled by one of the minority
shareholders of Technocom.
General and administrative expenses for the year ended December 31, 1996
include costs of $576,000 related to marketing services provided by a company
controlled by one of the minority shareholders of Technocom.
(e) BCL
Effective April 1, 1996, the Company acquired all of the outstanding shares
of BCL from Cable & Wireless and its Russian partners for cash consideration of
$3.0 million, plus acquisition costs of $253,000. BCL is a Russian joint stock
company which provides international direct dial, international pay phone and
private line services to a corporate customer base in St. Petersburg. BCL's
results of operations are included in the consolidated financial statements from
the date of acquisition.
The acquisition has been accounted for using the purchase method.
F-16
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(f) Ultra Pass Systems Limited
During the second quarter of 1998, the Company purchased 98% of the
authorized and issued share capital of Ultra Pass Systems Limited ("Ultra
Pass"), from the shareholders of Ultra Pass. In consideration for the purchase
of the Ultra Pass shares, the Company issued 196,458 of shares of its Common
Stock, par value $0.01 per share, having an aggregate market value of
approximately $1.8 million and paid $500,000 in cash. The acquisition has been
accounted for by the purchase method of accounting and the purchase price has
been allocated to licenses and software in the amounts of $0.8 million and $1.5
million, respectively.
(g) CommStruct International Byelorussia BV
Effective September 30, 1998 the Company acquired a 50% interest in BELCEL,
a mobile telephone business in the Republic of Belarus, together with certain
intercompany indebtedness, from Cable and Wireless plc. The Company acquired its
50% interest in BELCEL by acquiring all of the shares of CommStruct
International Byelorussia BV (CIBBV), a corporation organized under the laws of
the Netherlands, which owned such 50% interest. The acquisition was accounted
for by the purchase method of accounting. The total consideration for the
acquisition was 500,000 shares of common stock valued at approximately $4.4
million, which has been allocated as follows:
<TABLE>
<S> <C>
Fixed assets................................................ $1,211
Investment in and advances to BELCEL........................ 3,184
Current assets.............................................. 81
Current liabilities......................................... (111)
------
$4,365
======
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Telecommunications equipment:
Installed................................................. $152,454 $123,902
Uninstalled............................................... 33,649 10,396
Buildings................................................... 6,114 5,434
Office furniture and equipment (including computer
equipment)................................................ 7,524 6,129
Leasehold improvements...................................... 6,734 6,082
Advances to equipment suppliers............................. 3,124 4,252
Motor vehicles.............................................. 1,248 1,925
-------- --------
Total property and equipment...................... 210,847 158,120
Less: accumulated depreciation.............................. (41,910) (23,122)
-------- --------
Property and equipment, net....................... $168,937 $134,998
======== ========
</TABLE>
Property and equipment at December 31, 1998 and 1997 includes
telecommunications equipment with a cost of $17.6 million, $16.5 million,
respectively which has been pledged under the terms of long-term installment
purchase agreements (see note 9).
F-17
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) OTHER INVESTMENTS
Other investments at December 31, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
1998 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Equity investment in BELCEL(a).............................. $2,830 $ --
Equity investment in MTR-Sviaz(b)........................... 1,752 3,128
Equity investment in Rosh Telecom........................... 92 542
Investment in Gorizont-RT, at cost.......................... 224 224
Other investments, at cost.................................. 285 142
------ ------
Total............................................. $5,183 $4,036
====== ======
</TABLE>
(a) Equity Investment in BELCEL
As discussed in note 3(g), the Company acquired a 50% interest in BELCEL, a
mobile telephone business in Belarus, together with certain intercompany
indebtedness, from Cable and Wireless plc. The Company acquired its 50% interest
in BELCEL by acquiring all of the shares of CIBBV, a corporation organized under
the laws of the Netherlands, which owned such 50% interest. BELCEL is accounted
for using the equity method.
(b) Equity Investment in MTR-Sviaz
Technocom has a 49% equity interest in a Russian joint stock company,
MTR-Sviaz, which is a joint venture with Mosenergo, the Moscow city power
utility, to modernize and commercialize a portion of Mosenergo's internal
telecommunications network. MTR-Sviaz holds two operating licenses and commenced
operations in late 1996. The first license authorizes MTR-Sviaz to provide local
and long distance leased line services within the city and region of Moscow.
Under the second license, MTR-Sviaz is authorized to provide local telephone
services through interconnection (via the Mosenergo network) with the public
switched telephone network within the city and region of Moscow. During 1998 and
1997, Technocom leased telecommunications equipment and access rights with a net
book value of $4.0 million and $4.7 million, respectively, to MTR-Sviaz under
finance leases. For the years ended December 31, 1998 and 1997, the Company
recorded finance lease income of $1.7 million and $2.0 million, respectively,
related to these leases. At December 31, 1998 and 1997, the investment in
MTR-Sviaz is composed of a finance lease receivable of $3.6 million and $4.5
million, offset by the Company's share of losses of MTR-Sviaz of $1.9 million
and $1.4 million, respectively.
Future minimum lease payments receivable from MTR-Sviaz, by year and in the
aggregate, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1999........................................................ $2,530
2000........................................................ 1,704
2001........................................................ 547
2002........................................................ 547
2003........................................................ 547
Thereafter.................................................. 1,411
------
Total minimum lease payments......................... 7,286
Amounts representing interest............................... (3,667)
------
Present value of minimum lease payments..................... $3,619
======
</TABLE>
F-18
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Investment in St. Petersburg Intercity & International Telephone (SPMMTS)
The Company held a 10.4% equity interest (13.9% voting interest) in SPMMTS,
a privatized Russian company which operates the long distance and international
gateway in St. Petersburg. In June 1997, the Company sold its investment in
SPMMTS for proceeds of $17.2 million. A gain of $1.0 million is included within
other expense in the consolidated statement of operations.
(6) OTHER ASSETS
Other assets at December 31, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred financing costs, net of accumulated amortization of
$3,615 and $1,836......................................... $ 6,482 $ 7,811
Deferred charges............................................ -- 861
Other....................................................... 3,463 4,384
------- -------
$ 9,945 $13,056
======= =======
</TABLE>
(7) CASH AND CASH EQUIVALENTS
The Company's cash and cash equivalents at December 31, 1998 and 1997
consist of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents on deposit:
In Russia and Kazakhstan.................................. $ 3,468 $ 7,611
Outside Russia and Kazakhstan............................. 1,111 9,645
------- -------
$ 4,579 $17,256
======= =======
</TABLE>
(8) SHORT-TERM BORROWINGS
The Company's short-term borrowings at December 31, 1998 and 1997 consist
of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
12% Revolving Credit Notes(a)............................... $13,420 $15,420
Notes payable(b)............................................ 4,704 4,000
Bank loan facility(c)....................................... -- 900
------- -------
$18,124 $20,320
======= =======
</TABLE>
(a) 12% Revolving Credit Notes
In November 1997, the Company issued $12.3 million in Series A secured
revolving credit notes (the "Series A Notes"), and $3.1 million in Series B
revolving credit notes (the "Series B Notes"), to The Travelers Insurance
Company and The Travelers Indemnity Company (collectively, the "Travelers
Parties"). Both the Series A Notes and the Series B Notes are secured by the
Company's inventory and accounts receivable. In addition, the Series A Notes are
secured by 28 of the 59 Technocom ordinary shares acquired (see note 3(c)). In
addition to issuing the Series A and Series B Notes, the Company also issued to
the Travelers Parties a total of 423,000 warrants to purchase Common Stock at
$8.625 at any time up to
F-19
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2008 (the "Travelers Warrants"). These warrants have been valued at
$423,000 and were amortized over the original term of the revolving credit
notes.
Both the Series A and B Notes bear interest at an annual rate of 12%,
payable monthly in cash. This interest rate increased from 12% to 15% on June 1,
1998 as the Company did not raise $20.0 million in additional equity by May 31,
1998. The Series A and Series B Notes were required to be amortized starting in
July 1998.
Pursuant to the terms of the Series A Notes and the Series B Notes, the
Company had the option of making certain "targeted reductions in commitment"
with respect to such Notes commencing in July 1998, or of issuing additional
warrants to purchase shares of the Company's Common Stock (the "Additional
Warrants") at an exercise price of $8.625 each, expiring on December 31, 2008.
The Company elected not to make any such "targeted reductions in commitment"
and, as a result, issued a total of 182,000 Additional Warrants to the Travelers
Parties. These warrants have been valued at $182,000 and were amortized over the
remaining original term of the debt.
The Company made required amortization payments due with respect to the
Series B Notes on July 31 and August 31, 1998. The $1.1 million balance due on
the Series B Notes was payable in full on September 30, 1998 but, as a result of
News issuing a guarantee in respect of the amount due, the maturity date was
deferred by the Travelers Parties to December 31, 1998.
The $1.0 million required payments due on the Series A Notes on October 31
and November 30, 1998 were also deferred by the Travelers Parties to December
31, 1998, also as a result of News issuing guarantees in respect of these
amounts due.
On December 31, 1998 the Series A Notes matured and the balance due became
payable in full. Taking into account the amounts deferred, the total due under
the Series A and Series B Notes as of that date was $13.42 million.
Under the terms of the Revolving Credit Agreement, if the Series A and
Series B Notes are not repaid in full when due, the exercise price of all
warrants issued to the holders of the Series A and Series B Notes are reset at
$0.01 per share. In addition, on December 31, 1998 and on the last day of each
succeeding month until the Revolving Credit Notes have been repaid in full, the
holders of the Series A Notes are entitled to receive 70,000 additional warrants
to purchase shares of the Company's Common Stock and the holders of the Series B
Notes are entitled to receive 32,000 additional warrants to purchase shares of
the Company's Common Stock, in each case at a price of $0.01 per share. All such
warrants, referred to as "Default Warrants", are to have an expiration date ten
years after their respective dates of issue.
The Travelers Parties have given the Company a series of payment deferrals
since December 31, 1998 with respect to the amounts due under the Series A and
Series B Notes, the last of which was given on February 28, 1999 and defers
payment of the Notes to April 30, 1999. At the same time, the Travelers Parties
have expressly reserved their rights to claim all of the Default Warrants to
which they would be entitled under the formula described above, and also to
claim that the exercise price of the Travelers Warrants and the Additional
Warrants has been reset at $0.01 per share.
On the basis that the Travelers Parties have only reserved their rights in
relation to the Default Warrants and the reset of the exercise price of the
Travelers Warrants and the Additional Warrants, the Company has taken the
position that: (i) the Default Warrants need not be recognized since they have
not been issued; and (ii) revaluation of the Travelers Warrants and Additional
Warrants to reflect an exercise price of $0.01 per share is not required.
F-20
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) Notes Payable
Notes payable at December 31, 1998 include a promissory note issued to
Scientific Atlanta, Inc. for $1.2 million on May 20, 1998, in settlement for
equipment and services, and due on November 20, 1999.
Also included are notes payable totalling $3.5 million issued to News in
November and December 1998.
On November 30, 1998 (but effective September 30, 1998), the Company
entered into a revolving credit agreement with News (the "News Revolving Credit
Agreement") under which News agreed to advance up to $8.1 million to the
Company. On March 22, 1999, News increased the amount it would advance to $9.1
million. Each advance under the News Revolving Credit Agreement bears interest
at an annual rate of 20% and is repayable on June 30, 1999. Advances are
evidenced by notes which, together with interest thereon, are convertible at
News' option into shares of Common Stock of the Company at conversion rates
determined as of the date of issue of the applicable note. In addition, in the
event that News guarantees obligations of the Company, a note is issued
reflecting the Company's reimbursement obligation should such guarantee be
called. Amounts so guaranteed are treated as advances under the News Revolving
Credit Agreement, meaning that they count with respect to the $9.1 million
ceiling on total advances. In addition, in the event a guarantee is called, the
Company will owe interest on its reimbursement obligation at the annual rate of
20% calculated from the date payment by News is made under its guarantee. Notes
issued in respect of reimbursement obligations, together with interest thereon,
are also convertible into shares of Common Stock at conversion rates determined
as of their date of issue. News can cease making advances at any time and for
any reason. Currently, however, the full amount available under the News
Revolving Credit Agreement has been advanced or applied in respect of News'
guarantees. Of the total, notes aggregating $3.1 million have been issued in
respect of guarantees of the Series A and Series B Notes as described in (a)
above.
Notes payable at December 31, 1997 consisted of a promissory note issued to
Scientific Atlanta on June 10, 1997. The promissory note, in settlement of
equipment and services, was paid on June 10, 1998.
(c) Bank Loan Facility
At December 31, 1998, the Company had no bank loan facility. In December
1997, PeterStar entered into a $2.0 million, one-year loan facility with BNP
Dresdner Bank for the purchase of telecommunications equipment. Interest was
charged on borrowed amounts at three-month LIBOR plus 2.5% per annum. The
amounts drawn on the loan facility at December 31, 1997 were $900,000. The bank
indebtedness was guaranteed by the Company.
(9) LONG-TERM DEBT
The Company's long-term debt at December 31, 1998 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
14% Senior Discount Notes(a)................................ $112,897 $ 95,714
9% Convertible Subordinated Notes(a)........................ 26,500 26,500
Supplier financing(b)....................................... 9,233 11,302
Obligation under capital lease(b)........................... 3,184 --
-------- --------
Total............................................. $151,814 $133,516
======== ========
</TABLE>
(a) 14% Senior Discount Notes and 9% Convertible Subordinated Notes
On June 12, 1996, the Company completed a $149.5 million private placement
consisting of: (i) 123,000 Units consisting of $123.0 million 14% Senior
Discount Notes ("Senior Notes") due 2004 and ten-year
F-21
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Warrants ("Placement Warrants") to purchase a total of 4,182,000 shares of
Common Stock ("Placement Warrant Shares") at a price of $6.60 per share; and
(ii) $26.5 million 9% Convertible Subordinated Notes ("Convertible Notes") due
2006, convertible into Common Stock of the Company at a price of $6.90 per
share. The Placement Warrants became separable from the Senior Notes on December
10, 1996.
The 123,000 Units were issued at a discount for gross proceeds of $87.7
million, of which $13.6 million was allocated to the Placement Warrants and
$74.1 million was allocated to the Senior Notes for accounting purposes. The
Senior Notes had a zero coupon until December 1, 1998. After such date, the
notes require semi-annual cash interest payments on June 1 and December 1. The
difference between the carrying value and the principal amount of $123.0 million
is being charged to earnings on an effective yield basis which, together with
cash interest payments, results in an effective yield of 16.8%.
The Convertible Notes require semi-annual cash interest payments on June 1
and December 1.
The terms of the Senior Notes required the Company to raise additional
equity of at least $20.0 million by May 31, 1998. The Company did not raise the
additional equity, and as a result, the interest rate on the Senior Notes
increased from 14% to 14.5% as of June 1, 1998, and will remain at 14.5% until
the end of the semi-annual interest period in which such an offering is
completed.
The Company is party to a Registration Rights Agreement pursuant to which
the Senior Notes were to have been exchanged for registered securities and the
Convertible Notes registered for the shelf by October 1996. Failure to cause the
registration to become effective in October 1996 resulted in additional interest
payable at a rate of $0.01 per week per $1,000 of accreted value of the Senior
Notes and principal amount of the Convertible Notes, increasing by $0.01 per
week for each 90-day period that the securities were not registered.
On July 30, 1998, the Securities and Exchange Commission declared effective
the registration statements relating to: (i) the exchange offer (the "Exchange
Offer") pursuant to which the outstanding Senior Notes (the "Outstanding Senior
Notes") would be exchanged for identical Senior Notes which had been registered
under the Securities Act of 1933 (the "Exchange Notes"); (ii) the resale by the
holders thereof of the Convertible Notes and the shares of Common Stock issuable
upon the conversion thereof; and (iii) the resale by the holders thereof of the
Placement Warrants and the Placement Warrant Shares. As a result of the
effectiveness of the registration statement relating to the Convertible Notes
and the Common Stock issuable upon conversion thereof, additional interest
ceased to be payable with respect to the Convertible Notes on July 30, 1998.
The Exchange Offer with respect to the Senior Notes commenced on August 28,
1998 and was completed at the close of business on October 9, 1998, with the
holders of 100% of the Outstanding Senior Notes tendering such Notes for
Exchange Notes. Upon completion of the Exchange Offer, the Exchange Notes were
issued in exchange for such Outstanding Senior Notes, in the form of a global
Exchange Note held through the facilities of the Depository Trust Company. As a
result of the completion of the Exchange Offer, additional interest ceased to be
payable with respect to the Senior Notes on October 9, 1998.
All, or a portion, of the Senior Notes are redeemable at the option of the
Company after June 13, 2001 at 108% of the principal amount plus accrued and
unpaid interest, reducing to 104% for the year commencing June 1, 2002 and 100%
on or after June 1, 2003.
The Convertible Notes are redeemable at the option of the Company on or
after June 1, 2000 under certain conditions at a redemption price equal to the
principal amount plus accrued and unpaid interest.
The Senior Notes and the Convertible Notes were issued under the terms of
Indentures dated May 31, 1996. Pursuant to the Indentures, the Company has
pledged its investments in NWE Cyprus (which holds the Company's interests in
WTC and Yellow Pages, together with a 60% interest in PeterStar), WTC (which
holds the Company's interest in ALTEL), BCL, a wholly-owned special purpose
leasing subsidiary
F-22
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
incorporated in Cyprus, a wholly-owned special purpose subsidiary incorporated
in Delaware (since mid-1998), and the Company's investment in preferred stock of
Technocom. In addition, each of these subsidiaries (except Technocom) have
guaranteed the Senior Notes and the Convertible Notes.
A portion of the net proceeds of $105.0 million (after agent's commission
and expenses) was used to meet the Company's $20.0 million commitment to
Technocom (see note 3(c)) and to repay a revolving credit facility in the amount
of $22.5 million. Under the terms of the Indentures, $46.0 million was deposited
into an escrow account which is invested in eligible cash equivalents, as
defined by the Indentures. The escrow funds are also pledged as security for the
Company's obligations under the Indentures. Escrow funds may be disbursed for
purposes of making qualifying investments of up to $9.0 million in
telecommunications companies operating in Russia or Kazakhstan, or for purposes
of investing in telecommunications equipment through the Company's special
purpose leasing subsidiary, which then leases that equipment to the Company's
operating subsidiaries. Investments in leases are also pledged as security under
the Indentures and all payments received under the terms of the leases are
required to be deposited into a separate escrow account, to be used to purchase
additional telecommunications equipment for lease. On or after November 30,
1998, the Company must also maintain sufficient funds in the escrow accounts to
meet the next interest payment due on both the Senior Notes and Convertible
Notes.
In 1997, based upon the Company's experience in operating under the terms
of the Indentures since they were first executed in June 1996, the Company made
the determination to solicit the holders of the Senior Notes and the Convertible
Notes with a view to making certain amendments to the Indentures governing such
Notes, intended to give the Company more flexibility in conducting its business
and also to clarify certain provisions of those Indentures.
Under each of the Indentures, the consents of holders of not less than a
majority in principal amount at stated maturity of each of the Senior Notes and
the Convertible Notes are required to authorize their amendment.
On March 4, 1998, the Company mailed to the holders of record on March 3,
1998 of the Senior Notes and the Convertible Notes a consent solicitation
statement (the "Consent Solicitation"). Pursuant to the Consent Solicitation,
the Company offered to each holder of the Senior Notes who consented to the
amendment of the Senior Note Indenture, a five-year warrant to purchase 1.8
shares of Common Stock at a price of $6.90 per share for each $1,000 in unpaid
principal amount at stated maturity of the Senior Notes held by such holder, and
to each holder of the Convertible Notes who consented to the amendment of the
Convertible Note Indenture a five-year warrant to purchase 2 shares of Common
Stock at a price of $6.90 per share for each $1,000 in unpaid principal amount
of the Convertible Notes held by such holder.
As of close of business on March 18, 1998, when the solicitation period
ended, parties holding 100% in principal amount at stated maturity of the Senior
Notes and 85.7% in principal amount at stated maturity of the Convertible Notes
had consented to the amendments. Pursuant to such consents, The Bank of New
York, as trustee under the Indentures, the Company and certain other parties
executed a supplemental indenture bringing the amendments to the Indentures and
certain related documents into effect. This supplemental indenture incorporated
a range of amendments to the Indentures of June 1996, the most important of
which -- from an operational perspective -- was to broaden the range of
transactions by which the Company can use escrowed funds in order to make
telecommunications assets available to its operating companies. The Company has
recognized $266,800 in deferred financing costs as a result of the issuance of
warrants, which is being amortized over the remaining life of the Senior Notes
and Convertible Notes.
At December 31, 1998 and 1997, the fair value of the Convertible Notes and
Senior Notes approximates $76.9 million and their carrying value respectively.
F-23
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) Supplier Financing and Obligation Under Capital Lease
Amounts payable under the terms of the supplier financing and capital lease
arrangements are as follows (see note 4):
<TABLE>
<CAPTION>
YEAR AMOUNT
- - ---- --------------
(IN THOUSANDS)
<S> <C>
1999........................................................ $ 6,332
2000........................................................ 6,395
2001........................................................ 4,647
2002........................................................ 1,958
2003........................................................ 855
-------
20,187
Less: amounts representing interest......................... (2,697)
-------
17,490
Current portion............................................. 5,073
-------
Long-term portion........................................... $12,417
=======
</TABLE>
The above amounts have been calculated using interest rates of 5.5% to
8.5%.
(10) SHAREHOLDERS' EQUITY
(a) Common Stock
On February 28, 1997, as a result of the Company's continuance as a
Delaware corporation, the authorized capital stock was changed from an unlimited
number of common shares without nominal or par value to 100,000,000 common
shares with a par value of $.01 per share. As a result of the change in the par
value, the Common Stock was decreased by $180.6 million and additional paid-in
capital was increased by the same amount.
(b) Preferred Stock
The Company had the following preferred shares issued and outstanding at
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
NUMBER OF
SHARES 1998 1997
--------- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Series II................................................... 405,217 $ 4 $ 4
Series III.................................................. 41,667 -- --
--- ---
$ 4 $ 4
=== ===
</TABLE>
In addition, the capital stock was also changed from an unlimited number of
preferred shares issuable in series to 100,000,000 preferred shares with a par
value of $.01 per share issuable in series. As a result of the change in par
value, the preferred stock has been reflected at its par value in the 1997 and
1998 consolidated financial statements.
The Series II and III preferred shares, issued at a price of Cdn.$1 (US
$0.74) per share, are redeemable at the option of the Company at Cdn.$1 per
share. The shares do not pay dividends and holders thereof do not have voting
rights.
F-24
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Shares Reserved
In addition to stock options outstanding (see note 12), the Company has
reserved 4,182,000 common shares for issuance on exercise of the Placement
Warrants and 3,840,580 common shares on conversion of outstanding Convertible
Notes (see note 9). In addition, at December 31, 1998, the Company has 400,000
warrants outstanding to purchase common shares of the Company at a
weighted-average exercise price of $6.69 of which 250,000 warrants at an
exercise price of Cdn.$11.31 were granted to Cable and Wireless plc in 1994 (and
purchased by News in August 1998), and 100,000 warrants at an exercise price of
US$4.70 were granted in 1996 to the agent in relation to the debt financing
described in note 9. All these warrants expire five years after the date of
grant.
In connection with the issuance of the Series A and Series B Notes in
November 1997 (see note 8(a)), the Company issued to the Travelers Parties a
total of 423,000 warrants to purchase Common Stock at $8.625 at any time up to
December 31, 2008. In addition, between July and November 1998, the Company
elected to issue an additional 182,000 warrants to the Travelers Parties, on the
same terms as those issued in November 1997, instead of making certain targeted
amortization payments on the Series A and Series B Notes.
At the end of March of 1998, in connection with the Consent Solicitation
(see note 9(a)), the Company issued a total of 123,000 five-year warrants to
purchase 1.8 shares of Common Stock at $6.90 per share to the holders of the
Senior Notes, and a total of 22,700 five-year warrants to purchase 2 shares of
Common Stock at a price of $6.90 per share to the holders of the Convertible
Notes. If all these warrants are exercised, the Company will issue a total of
266,800 shares of Common Stock.
(11) INCOME TAXES
The geographic components of loss before income taxes and minority interest
are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
United States...................................... $(42,187) $(35,163) $ --
Canada............................................. -- -- (20,829)
Russia and Kazakhstan.............................. 18,144 31,735 14,558
Other.............................................. 482 -- --
-------- -------- --------
$(23,561) $ (3,428) $ (6,271)
======== ======== ========
</TABLE>
F-25
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes, which relates substantially to current
income taxes in the Company's Russian and Kazakh businesses, differs from the
United States (34% -- February 28, 1997 to December 31, 1997 and 35% in 1998)
and Canadian (44% -- January 1, 1995 to February 27, 1997) Federal and
state/provincial statutory tax rates as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory rates....... $(8,246) $ (1,166) $ (2,760)
Add/(deduct) the tax effect of:
Non-deductible amortization of licenses and
goodwill....................................... 3,886 2,561 3,238
Other non-deductible expenses..................... 4,181 2,273 1,753
Concessions on capital expenditures............... (726) (3,854) (1,000)
Differences in Russian and Kazakh statutory tax
rates.......................................... (997) (210) (1,696)
Exchange differences.............................. (7,661) -- --
State tax, net of federal benefit................. (2,787) -- --
Other............................................. 452 -- --
Change in valuation allowance related to deferred
tax assets..................................... 21,762 8,135 4,134
------- -------- --------
Provision for income tax....................... $ 9,864 $ 7,739 $ 3,669
======= ======== ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Share issue costs......................................... $ -- $ --
Operating loss carryforwards.............................. 24,368 8,929
Capital loss carryforwards................................ -- --
Basis in assets........................................... 920 --
Other..................................................... 82 --
Expenses not yet deducted for Russian and Kazakh tax
purposes............................................... 19,736 18,646
-------- --------
45,106 27,575
Less: valuation allowance................................... (30,008) (8,246)
-------- --------
Net deferred tax assets................................ 15,098 19,329
-------- --------
Deferred tax liabilities:
Debt issue costs.......................................... -- (1,160)
Expenses not currently deducted for book purposes......... (14,622) (705)
Tax on revenues not yet realized for Russian tax
purposes............................................... (31) (17,464)
Fixed assets, principally due to difference in
depreciation........................................... (476) --
-------- --------
Deferred tax liabilities............................... (15,129) (19,329)
-------- --------
$ (31) $ --
======== ========
</TABLE>
At December 31, 1998 and 1997, the Company had operating loss carryforwards
for United States (U.S.) federal income tax purposes of approximately $56.2
million and $24.1 million, respectively. In assessing the realizability of the
deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of the deferred tax assets
F-26
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning in making these assessments. As a result of various sales of
company stock and issuances of new stock, a change in ownership for Federal
income tax purposes may have occurred. This would subject the future use of the
Company's Federal net operating loss to an annual limitation.
At December 31, 1996, the Company had operating loss carryforwards for
Canadian income tax purposes of approximately $36.0 million and allowable
capital loss carryforwards of approximately $19.0 million. Upon the Company's
emigration to the United States in February 1997, the Company was deemed to
dispose of all its assets at fair value. As a result, a substantial portion of
the operating and capital loss carryforwards were utilized. Remaining losses do
not carry over for U.S. tax purposes.
(12) EQUITY COMPENSATION PLAN
The Company has an Equity Compensation Plan (the "Plan"), which was
approved by the shareholders at the Annual Meeting in June of 1997. The Plan
amends and supersedes in its entirety the PLD Telekom Inc. Stock Option Plan
(the "Prior Plan"). No further grants will be made under the Prior Plan
following the adoption of the Plan and grantees under the Prior Plan have the
option of continuing to have existing grants covered by the terms of the Prior
Plan, or having these grants instead covered by the terms of the Plan.
Pursuant to the Plan, the Company's Board of Directors may grant stock
options, stock appreciation rights, restricted stock and performance units to
directors, officers and key employees of, and certain consultants and advisors
to, the Company and its subsidiaries. The Plan is administered by a committee of
the Board of Directors of the Company consisting solely of "outside directors"
and to date awards under the Plan have been limited to stock options.
The exercise price of each option is generally equal to the fair market
value of the shares of PLD's Common Stock on the date of grant. The maximum term
for which options are exercisable is ten years. Options shall become exercisable
in accordance with such terms and conditions, consistent with the Plan, as may
be determined by the committee. However, stock options granted to Non-Employee
Directors are immediately exercisable.
On November 12, 1998 the Company's Board of Directors, wishing to further
incentivise management in light of the severe economic crisis in Russia and its
effect on the Company's share price, approved the granting of a total of
4,487,000 new stock options. 650,000 of these options were in respect of new PLD
employees and 3,837,000 were granted simultaneously with the cancellation of
3,837,000 options granted previously to existing employees and directors of the
Company. The options were granted with exercise prices of $3.00, $4.00 and $5.00
per share, as summarized in the table below. Options granted at $3.00 per share
vested immediately, options granted at $4.00 per share vest on November 12, 1999
and options granted at $5.00 per share vest on November 12, 2000. The market
price for the Company's shares on November 12, 1998 was $2.4375. The effect of
the cancellation and reissuance of these shares was to reduce the weighted
average exercise price of the Company's outstanding employee stock options to
$3.70 from $6.41 at the end of 1997.
The per share weighted-average fair value of stock options granted during
1998, 1997 and 1996 was $1.27, $2.51 and $2.11, respectively, on the date of
grant using the Black Scholes option-pricing model with the following
weighted-average assumptions: 1998 -- risk-free interest rate of 4.8%, expected
life of six years and expected volatility of 60%; 1997 -- risk-free interest
rate of 6.5%, expected life of six years and expected volatility of 40%; 1996
- - -- risk-free interest rate of 6.5%, expected life of five years and expected
volatility of 30%.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
recognizes compensation expense related to stock option grants only when the
fair market value of the related stock exceeds the exercise
F-27
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
price on the date of grant. Had the Company determined compensation cost based
on the fair value at the date of grant for its stock options under SFAS 123, the
Company's loss would have been increased to $44.9 million ($1.27 per share),
$22.9 million ($0.71 per share) and $13.6 million ($0.43 per share) for the
years ended December 31, 1998, 1997 and 1996, respectively. The pro forma loss
for the year reflects only options granted since January 1, 1995. Therefore, the
full impact of calculating compensation cost for stock options under SFAS 123 is
not reflected in the pro forma loss for the year because compensation cost is
reflected over the options' vesting period and compensation cost for options
granted prior to January 1, 1995 is not considered.
During 1998, the Company granted 790,000 options for which the exercise
price on the date of grant was less than the fair market value of the related
stock. As a result, total non-cash compensation expense of $1.1 million will be
recognized over the vesting periods of the options, of which $0.8 million was
expensed during the year.
Changes in stock options outstanding are as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES EXERCISE PRICES
---------------- ----------------
<S> <C> <C>
Outstanding at December 31, 1995..................... 981,500 $6.61
Granted.............................................. 1,010,000 $7.38
Exercised............................................ (189,000) $5.25
Canceled............................................. (120,000) $5.93
---------- -----
Outstanding at December 31, 1996..................... 1,682,500 $7.25
Granted.............................................. 1,405,000 $5.27
Exercised............................................ (302,166) $5.68
Canceled............................................. (15,000) $5.25
---------- -----
Outstanding at December 31, 1997..................... 2,770,334 $6.41
Granted.............................................. 5,832,000 $4.54
Exercised............................................ -- $ --
Canceled............................................. (3,975,334) $6.83
---------- -----
Outstanding at December 31, 1998..................... 4,627,000 $3.70
========== =====
</TABLE>
At December 31, 1997 and 1996, the number of options exercisable was
1,395,331 and 382,500 and the weighted-average exercise price of those options
was $6.67 and $7.92, respectively.
The following table summarizes information about the stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ -----------------------
WEIGHTED-
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED-
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF AT CONTRACTUAL EXERCISE AT EXERCISE
EXERCISE PRICES 12/31/98 LIFE PRICE 12/31/98 PRICE
- - --------------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 3.00 2,615,327 9.9 $3.00 2,615,327 $3.00
4.00 1,263,335 9.9 4.00 -- 4.00
5.00 608,338 9.9 5.00 -- 5.00
6.25 -- 10.12 140,000 1.0 8.51 110,000 8.71
</TABLE>
(13) RELATED PARTY TRANSACTIONS
(a) PeterStar has entered into a barter agreement with an indirect minority
shareholder under which the two parties have exchanged services valued at $2.7
million, $3.4 million and $3.0 million during 1998, 1997
F-28
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and 1996, respectively. The amounts are recorded in the consolidated statements
of operations as telecommunications revenues and direct costs. During 1998,
PeterStar paid $1.2 million to an indirect minority shareholder for certain of
these services.
During 1998, PeterStar entered into a series of agreements with an indirect
minority shareholder under which PeterStar exchanged telecommunications
equipment for telecommunications and other facility infrastructures. The total
value of equipment exchanged during 1998 is $2.6 million. The infrastructure
received under this exchange has been valued at the same amount. As a result of
this arrangement PeterStar will be the sole provider of telecommunications
services to one of the districts of St. Petersburg.
During 1998, PeterStar paid a total of $1.2 million on behalf of an
indirect minority shareholder. This amount has been capitalized as a prepayment
in relation to the purchase of an exchange building.
(b) Direct costs for the years ended December 31, 1998, 1997 and 1996
include $4.4 million, $4.2 million and $3.3 million, respectively, paid to the
other shareholder of ALTEL in relation to the carriage of traffic over the
public telephone network. Balances outstanding of $0.5 million and $0.8 million
as of December 31, 1998 and 1997, respectively, in relation to these charges,
are included in due to related parties.
(c) Amounts due from related parties at December 31, 1998 include $4.7
million principal and interest due from MTR-Sviaz in relation to a finance lease
(see note 5(b)), $2.6 million due from a minority shareholder of PeterStar under
short- and long-term loans, and $2.9 million due from a company controlled by a
minority shareholder of Technocom for telecommunications services.
Amounts due from related parties at December 31, 1997 include $2.5 million
principal and interest due from MTR-Sviaz in relation to a finance lease (see
note 5(b)), $1.6 million and $3.0 million due from a minority shareholder of
PeterStar under short- and long-term loans, respectively, and $2.2 million due
from a company controlled by a minority shareholder of Technocom for
telecommunications services.
(d) Amounts due to related parties at December 31, 1998 include a loan due
to the minority shareholder of Teleport-TP in the amount of $0.1 million, trade
payables of Teleport-TP in the amount of $3.2 million due to a company
controlled by one of the minority shareholders of Technocom, and payments due to
MTR-Sviaz for telephone services and connection charges in the amount of $0.2
million.
Amounts due to related parties at December 31, 1997 include a loan due to
the minority shareholder of Teleport-TP in the amount of $0.5 million, trade
payables of Teleport-TP in the amount of $3.2 million due to a company
controlled by one of the minority shareholders of Technocom, a loan due to a
company controlled by a minority shareholder of Technocom in the amount of $0.3
million, payments due to MTR-Sviaz for telephone services and connection charges
in the amount of $0.3 million, and an amount due to a company controlled by one
of the minority shareholders of Technocom for equipment received from them in
the amount of $0.2 million.
In 1998, 1997 and 1996, Technocom paid a total of $0.4 million, $0.2
million and $0.2 million, respectively, pursuant to two management contracts
with its two minority shareholders for provision of the services of two
directors of Technocom.
(e) The Company guaranteed telephone billing system lease payments of an
indirect shareholder of PeterStar totaling $2.5 million. Lease payments of $0.1
million were due quarterly until July 1998. At December 31, 1995, full provision
was made for all amounts paid to date under the guarantee and for all future
amounts. The balances of $0 and $0.4 million remaining under the lease as of
December 31, 1998 and 1997 are included in other current liabilities.
(f) General and administrative expenses for the years ended December 31,
1998, 1997 and 1996 include consulting fees of $5.6 million, $1.7 million and
$42,000, respectively, charged by a minority shareholder of PeterStar.
F-29
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(g) The Company paid certain costs on behalf of, and made certain loans to,
PeterStar, resulting in an intercompany balance of approximately $27.0 million
at December 31, 1996. During 1997, an agreement was reached with the minority
shareholders to recapitalize PeterStar. The recapitalization of PeterStar in an
amount of $13.8 million was completed during September 1997, with such funds
being used to repay an equal amount of these advances. Negotiations with the
minority shareholders of PeterStar as to the repayment of the remaining
intercompany balance due to the Company were concluded in March 1998 and
resulted in a further reduction of approximately $5.3 million in PeterStar's
liability. The effect of this settlement was to increase minority interest
expense by approximately $2.1 million in 1997.
(h) Consulting fees of $0.4 million, $0.1 million, and $0.1 million for the
years December 31, 1998, 1997 and 1996, respectively, were charged to ALTEL by
the other shareholder of ALTEL. There was no balance outstanding as of December
31, 1998 and 1997 in relation to these charges.
(i) See also notes 3(a), (c), (d), (e), (g), 5(b) and 8(b).
(14) COMMITMENTS AND CONTINGENCIES
(a) Currency Licenses
Under applicable Russian currency control regulations, the Company's
Russian subsidiaries are required to have certain licenses from the Central Bank
of Russia to enable them to make payments of and accept receipts of hard
currency. While PeterStar, BCL and Teleport-TP have or have applied for all the
necessary licenses, failure to receive the remaining licenses could result in
fines and penalties. Management does not believe such fines and penalties would
be material.
(b) Russian and Kazakh Taxation
Certain of the Company's Russian and Kazakh subsidiaries have accrued
profits and other taxes based on interpretations of the law which may ultimately
be disputed by the Russian and Kazakh taxation authorities. The exposure to
additional profits and other taxes, fines and penalties is not determinable,
although the Company believes such amounts will not be material.
The Russian taxation system is relatively new and is characterized by
numerous taxes and frequently changing legislation, which may be applied
retroactively and is often unclear, contradictory, and subject to
interpretation. Often, differing interpretations exist among numerous taxation
authorities and jurisdictions.
Taxes are subject to review investigation by a number of authorities, who
are enabled by law to impose severe fines, penalties and interest charges.
Generally, tax filings are subject to inspection for a period of six years. The
occurrence of a review does not preclude subsequent review.
These facts may create tax risks in Russia substantially more significant
than in other countries. Management believes that it has adequately provided for
tax liabilities based on its interpretation of tax legislation. However, the
relevant authorities may have differing interpretations and the effects could be
significant.
(c) Purchase Commitments
At December 31, 1998, PeterStar has commitments of approximately $3.4
million under long-term installment purchase agreements. The related contracts
provide for financing of the amounts over approximately five years.
F-30
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(d) Transponder Capacity
Teleport-TP currently utilizes capacity on three Intelsat satellites for
the provision of its international and domestic long distance services, pursuant
to rolling fifteen year contracts with Intelsat. These agreements require
quarterly payments of $1.3 million for the remainder of their terms.
(e) Management Services
On January 1, 1998, ALTEL entered into an agreement with its other
shareholder, by which the shareholder would provide certain consulting services,
management support services and personnel expertise. Payments under this
agreement are 300,000 tenge per month ($3,580 at the December 31, 1998 exchange
rate) plus 1% of monthly gross revenues. The contract is for a one year term,
automatically renewable for successive one year periods unless terminated by
either party.
(f) Motorola, USA
Motorola, USA is the major supplier of ALTEL's network equipment. Under the
supply contract, ALTEL files preliminary purchase orders for the delivery of
equipment with a prepayment of 5% of the cost of the purchase order. Once a
purchase order is presented, ALTEL may be exposed to potential liabilities to
Motorola, USA in the amount of $1.2 million as at December 31, 1998.
(g) Operating Leases
As of December 31, 1998, the Company had long-term operating leases
primarily involving business facilities and equipment. The leases have varying
terms and contain renewal options. Future minimum lease payments under
non-cancelable operating leases consist of the following as of December 31, 1998
(in thousands):
<TABLE>
<S> <C>
1999........................................................ $1,524
2000........................................................ 1,376
2001........................................................ 1,040
2002........................................................ 886
2003........................................................ 872
Thereafter.................................................. 2,720
------
Total future minimum lease payments....................... $8,418
------
</TABLE>
Rent expense for the years ended December 31, 1998, 1997 and 1996 was $0.8
million, $0.6 million and $0.4 million, respectively.
(h) The Company periodically guarantees certain obligations of its
subsidiaries. As of December 31, 1998, the only guarantee that is currently
outstanding is to Siemens in the amount of $1.6 million relating to equipment
purchased by Technocom.
F-31
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(15) CANADIAN ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in accordance
with U.S. GAAP which, in the case of the Company, conform with Canadian GAAP,
except as follows:
(a) Net loss for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net loss for the year, as reported................. $(42,811) $(20,566) $(12,461)
Non-cash interest on Convertible Notes............. (781) (508) (252)
-------- -------- --------
Net loss for the year under Canadian GAAP.......... $(43,592) $(21,074) $(12,713)
======== ======== ========
</TABLE>
Under Canadian GAAP, the Convertible Notes are a compound financial
instrument and the debt and equity elements of the instrument are separately
accounted for. For Canadian GAAP purposes, $13.9 million of the Convertible
Notes were classified as equity and $12.6 million were classified as debt on
issuance. Additional interest expense is charged to the consolidated statements
of operations to accrete the debt portion to the principal amount of $26.5
million at maturity which, together with cash interest payments, results in an
effective yield of 22.3%. Accordingly, long-term debt at December 31, 1998 and
1997 would amount to $139.5 million and $120.3 million, respectively, and
shareholders' equity would amount to $137.2 million and $140.4 million,
respectively, under Canadian GAAP.
Effective December 31, 1996, the Company changed its Canadian GAAP policy
with respect to pre-operating costs. Such costs may not be capitalized under
U.S. GAAP and, therefore, all such costs have been retroactively expensed for
Canadian GAAP purposes. The change in accounting policy decreased the Canadian
GAAP loss in 1995 by $636,000. The deficit at December 31, 1995 was increased by
$2.2 million.
Effective December 31, 1998, the Company adopted new Canadian accounting
standards for cash flow statements for Canadian GAAP purposes. These new
standards are substantially the same as U.S. GAAP reporting requirements for all
periods.
(16) OTHER EXPENSE
At the end of 1998, as a result of the economic conditions in Russia, the
Company re-evaluated certain assets. As a result, the Company: (a) determined
that $1.7 million of costs relating to transactions the Company no longer
intends to pursue, should be written off; and (b) recorded a $2.0 million
valuation allowance related to a receivable from the minority shareholder of
PeterStar. Such receivable arose in the 1997 recapitalization of PeterStar (see
note 13(g)), at which time the Company advanced the minority shareholder the
funds for its pro rata contribution. In addition, during February 1999 the
Company entered into a transaction whereby it exchanged its ownership interest
in a company whose sole asset was a cargo ship, with a carrying value of $3.0
million, for a 37% interest in an entity that is developing a telemedicine
business in the former Soviet Union. The Company has determined that the
ownership interest has a fair value of approximately $1.0 million and, as a
result, has written down the carrying value of the asset exchanged to that
amount.
F-32
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(17) CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data for the
years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 QUARTERS ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operating revenues................... $35,166 $ 39,240 $ 37,583 $ 33,371
Operating income..................... 7,199 5,922 1,366 (4,539)
Interest and other income............ 871 946 298 269
Interest expense..................... (5,190) (5,359) (5,714) (5,690)
Income taxes......................... 2,997 2,174 2,490 2,203
Minority interest.................... 3,665 3,869 1,203 649
Net loss for the period.............. (4,509) (5,358) (11,934) (21,010)
======= ======== ======== ========
Net loss per common share............ $ (0.14) $ (0.16) $ (0.33) $ (0.56)
======= ======== ======== ========
</TABLE>
Adjustments recorded in the fourth quarter of 1998, resulting principally
from the economic condition in Russia, are described in Note 16.
<TABLE>
<CAPTION>
1997 QUARTERS ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operating revenues.................... $23,891 $26,389 $29,534 $34,610
Operating income...................... 2,481 2,634 2,872 4,031
Interest and other income............. 1,394 1,260 625 335
Interest expense...................... (4,269) (4,120) (4,457) (5,000)
Income taxes.......................... 1,074 2,366 2,048 2,251
Minority interest..................... 1,766 1,457 1,391 4,785
Net loss for the period............... (4,342) (3,725) (5,377) (7,122)
======= ======= ======= =======
Net loss per common share............. $ (0.14) $ (0.12) $ (0.17) $ (0.22)
======= ======= ======= =======
</TABLE>
Minority interest for the fourth quarter of 1997 includes $2.1 million in
connection with the settlement reached with the minority shareholders of
PeterStar (see note 13(g)).
(18) OPERATIONS BY GEOGRAPHIC AREA AND INDUSTRY SEGMENT
The Company is a major provider of local, long distance and international
telecommunications services in the Russian Federation and the former Soviet
Union. The activities of the Company are primarily segmented by reference to the
businesses of its principal operating subsidiaries.
PeterStar provides integrated local, long distance and international
telecommunications services in St. Petersburg, Russia, through a fully digital
fiber optic network.
Technocom, through Teleport-TP, provides dedicated international
telecommunications services to customers in Moscow and operates a satellite
based pan-Russian long-distance network.
ALTEL is currently the major provider of national cellular service in
Kazakhstan.
BCL provides dedicated international telecommunications services in St.
Petersburg, Russia.
Other activities of the Company relate principally to its corporate head
office in New York, its operations center in London, and to smaller, less
significant businesses primarily in their start-up phase.
The Company's main financial criteria for assessing the importance and
performance of its segments are by reference to revenues, earnings/(loss) before
income taxes and minority interest, and total assets.
F-33
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Company's operations by geographic region is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Russia........................................... $105,527 $ 84,412 $ 42,661
Kazakhstan....................................... 39,548 30,012 19,305
Other............................................ 285 0 0
-------- -------- --------
Total revenues........................... $145,360 $114,424 $ 61,966
======== ======== ========
Earnings/(loss) before income taxes and minority
interest:
Russia........................................... $ 5,054 $ 21,603 $ 9,615
Kazakhstan....................................... 13,090 10,132 4,943
North America.................................... (42,187) (35,163) (20,829)
Other............................................ 482 0 0
-------- -------- --------
Total earnings/(loss) before income taxes
and minority interest.................. $(23,561) $ (3,428) $ (6,271)
======== ======== ========
Total assets:
Russia........................................... $249,658 $216,107
Kazakhstan....................................... 59,008 58,249
North America.................................... 38,793 61,230
Other............................................ 4,649 0
-------- --------
Total assets............................. $352,108 $335,586
======== ========
</TABLE>
F-34
<PAGE>
PLD TELEKOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Company's operations by segment is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
PeterStar........................................ $ 72,371 $ 54,536 $ 32,542
Technocom........................................ 22,180 20,980 4,706
ALTEL............................................ 39,548 30,012 19,305
BCL.............................................. 9,854 7,602 5,304
Other............................................ 1,407 1,294 109
-------- -------- --------
Total revenues........................... $145,360 $114,424 $ 61,966
======== ======== ========
Earnings/(loss) before income taxes and minority
interest:
PeterStar........................................ $ 21,401 $ 25,739 $ 8,846
Technocom........................................ (16,420) (4,831) (152)
ALTEL............................................ 13,090 10,132 4,943
BCL.............................................. 395 1,191 1,031
Corporate........................................ (42,982) (35,673) (20,971)
Other............................................ 955 14 32
-------- -------- --------
Total earnings/(loss) before income taxes
and minority interest.................. $(23,561) $ (3,428) $ (6,271)
======== ======== ========
Total assets:
PeterStar........................................ $132,814 $ 89,196
Technocom........................................ 106,055 117,987
ALTEL............................................ 59,008 58,249
BCL.............................................. 6,883 6,723
Corporate........................................ 36,491 61,467
Other............................................ 10,857 1,964
-------- --------
Total assets............................. $352,108 $335,586
</TABLE>
F-35
<PAGE>
PLD TELEKOM INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998
------------- ------------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 7,882 $ 4,579
Trade receivables, net of allowances...................... 14,094 14,905
Other receivables and prepaids............................ 4,377 4,609
Inventory................................................. 3,557 4,152
Due from related parties.................................. 9,607 9,152
----------- ---------
Total current assets.............................. 39,517 37,397
Escrow funds................................................ 15,220 14,908
Property and equipment, net................................. 172,171 168,937
Telecommunications licenses, net............................ 71,867 77,359
Due from related parties.................................... -- 2,011
Other investments........................................... 8,607 5,183
Goodwill, net............................................... 35,364 36,368
Other assets................................................ 8,414 9,945
----------- ---------
Total assets...................................... $ 351,160 $ 352,108
=========== =========
Current liabilities:
Short-term borrowings..................................... 24,074 18,124
Accounts payable.......................................... 11,462 10,293
Accrued liabilities....................................... 3,651 3,996
Accrued interest.......................................... 13,480 467
Taxes payable............................................. 6,516 3,664
Due to related parties.................................... 4,561 4,639
Deferred revenues......................................... 2,440 2,869
Customer deposits......................................... 3,907 4,271
Current portion of long-term debt......................... 6,209 5,073
----------- ---------
Total current liabilities......................... 76,300 53,396
Long-term debt.............................................. 150,095 151,814
Minority interest........................................... 23,108 22,021
Shareholders' equity:
Preferred stock, par value $0.01 per share,
authorized -- 100,000,000, issued and
outstanding -- 446,884................................. 4 4
Common stock, par value $0.01 per share,
authorized -- 100,000,000, issued and
outstanding -- 37,846,789.............................. 378 378
Additional paid-in capital................................ 245,332 244,419
Accumulated deficit....................................... (144,057) (119,924)
----------- ---------
Total shareholders' equity........................ 101,657 124,877
----------- ---------
Total liabilities and shareholders' equity........ $ 351,160 $ 352,108
=========== =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-36
<PAGE>
PLD TELEKOM INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Telecommunications.................. $ 27,375 $ 38,813 $ 56,091 $ 73,532
Finance lease income................ 599 427 1,237 874
----------- ----------- ----------- -----------
27,974 39,240 57,328 74,406
Operating expenses:
Direct costs (excludes
depreciation).................... 9,080 12,164 17,483 22,960
General and administrative.......... 10,930 12,524 24,084 22,224
Depreciation........................ 5,072 3,534 9,901 6,633
Amortization........................ 3,300 2,866 6,619 5,558
Taxes other than income taxes....... 841 2,230 2,366 3,910
----------- ----------- ----------- -----------
29,223 33,318 60,453 61,285
----------- ----------- ----------- -----------
Operating (loss)/income.......... (1,249) 5,922 (3,125) 13,121
Other income/(expense):
Share of loss from equity
investments...................... (89) (48) (430) (258)
Interest and other income........... 230 946 489 1,817
Interest expense.................... (6,798) (5,359) (13,769) (10,549)
Amortization of deferred financing
costs............................ (299) (400) (598) (801)
Foreign exchange gain/(loss)........ 327 (373) (127) (489)
Gain/(loss) on disposal of
investments and property and
equipment........................ 270 (3) 237 (3)
----------- ----------- ----------- -----------
(Loss)/earnings before income
taxes and minority interest.... (7,608) 685 (17,323) 2,838
Income taxes........................ 2,080 2,174 4,723 5,171
----------- ----------- ----------- -----------
Loss before minority interest.... (9,688) (1,489) (22,046) (2,333)
Minority interest..................... 908 3,869 2,087 7,534
----------- ----------- ----------- -----------
Net loss......................... $ (10,596) $ (5,358) $ (24,133) $ (9,867)
=========== =========== =========== ===========
Net loss per common share:
Basic............................... $ (0.28) $ (0.16) $ (0.64) $ (0.30)
=========== =========== =========== ===========
Diluted............................. $ (0.28) $ (0.16) $ (0.64) $ (0.30)
=========== =========== =========== ===========
Weighted average common shares
outstanding......................... 37,846,789 33,520,748 37,846,789 33,422,519
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-37
<PAGE>
PLD TELEKOM INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(24,133) $(9,867)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 17,118 12,992
Share of loss of equity investments.................... 430 258
Non-cash interest expense.............................. 10,832 8,091
Deferred revenues...................................... (429) (814)
Minority interest...................................... 2,087 7,534
Other.................................................. 171 400
Changes in operating assets and liabilities, net of
effects of acquisitions:
Decrease/(increase) in trade receivables, net of
allowances.......................................... 811 (1,937)
(Increase)/decrease in other receivables and
prepaids............................................ 232 118
Decrease/(increase) in inventory..................... 595 (186)
Change in due from or to related parties............. (522) (3,671)
Increase/(decrease) in accounts payable, accrued
liabilities, customer deposits, taxes payable and
other current liabilities........................... 6,430 (4,956)
-------- -------
Net cash provided by operating activities......... 13,622 7,962
Cash flows from investing activities:
Capital expenditures...................................... (13,191) (12,308)
Escrow funds.............................................. (312) 12,210
Cash paid for acquired business........................... -- (500)
Investments and other assets.............................. (988) 196
-------- -------
Net cash used in investing activities............. (14,491) (402)
Cash flows from financing activities:
Registration costs........................................ -- (141)
Short-term debt borrowings/(repayments)................... 3,000 (7,402)
Long-term debt repayments................................. (778) --
Cash dividends paid to minority shareholders.............. (1,000) (1,250)
Loans from shareholders................................... 2,950 --
-------- -------
Net cash provided by/(used in) financing
activities...................................... 4,172 (8,793)
-------- -------
Increase/(decrease) in cash and cash equivalents............ 3,303 (1,233)
Cash and cash equivalents, beginning of period.............. 4,579 17,256
-------- -------
Cash and cash equivalents, end of period.................... $ 7,882 $16,023
======== =======
Supplemental disclosures:
Non-cash investing and financing activities:
Supplier financing................................... $ -- $ 7,457
======== =======
Issued shares for acquired business.................. $ -- $ 1,750
======== =======
Interest paid............................................. $ 1,285 $ 3,018
======== =======
Income taxes paid......................................... $ 3,124 $ 5,387
======== =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-38
<PAGE>
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation. The accompanying consolidated condensed
financial statements are unaudited and have been prepared by PLD Telekom Inc.
(the "Company") pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"). In the opinion of management, the consolidated
condensed financial statements include all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation. Certain information and
footnote disclosures generally included in consolidated financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations. Results for
interim periods are not necessarily indicative of the results for a full year.
These consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
Going Concern
The Company has suffered recurring losses and has a working capital
deficiency. Additionally, the Company has $13.42 million of Series A and Series
B revolving credit notes (the "Revolving Credit Notes") due to The Travelers
Insurance Company and The Travelers Indemnity Company (hereinafter defined as
the "Travelers Parties") outstanding. $1.1 million of the Revolving Credit Notes
were due to have been repaid by September 30, 1998 and the remaining $12.32
million were due to have been repaid by December 31, 1998. The Travelers Parties
have given the Company a series of payment deferrals since December 31, 1998
with respect to the Revolving Credit Notes. The Company does not presently have
sufficient funds on hand to pay its indebtedness to the Travelers Parties.
In addition, the minority shareholders in Technocom have the right to put
their Technocom shares to the Company from mid-1999 onwards.
As noted below (see note 2) on May 18, 1999, the Company entered into an
agreement (the "Merger Agreement") with Metromedia International Group, Inc.
("MMG").
In connection with the merger ("the Merger"), the Travelers Parties have
reached agreement with MMG on the partial repayment of the Revolving Credit
Notes upon the closing of the Merger and the amendment and restatement of the
associated Revolving Credit Agreement and the Revolving Credit Notes (as so
amended, the "Amended and Restated Notes") issued thereunder. Under the terms of
the agreement between the Travelers Parties and MMG, the Travelers Parties will
be paid an aggregate of $8.5 million upon the closing of the Merger, and the
balance of $4.92 million will be evidenced by the Amended and Restated Notes. In
addition, the guarantees given by News America with respect to $3.1 million of
the amounts due to the Travelers Parties will be released. Finally, the
Travelers Parties have agreed to exchange all warrants held by them to purchase
Common Stock of the Company for a combination of shares of Common Stock of the
Company and warrants to purchase shares of common stock of MMG.
As part of the transactions contemplated by the Merger, agreement has been
reached with Plicom and Elite, the minority shareholders of Technocom, to amend
the current put and call arrangements with the Company in relation to their
interests in Technocom. Pursuant to such agreements, upon the closing of the
Merger, Plicom shall receive $8.75 million in full payment for its remaining
14.57% interest in Technocom and Elite shall receive $3.85 million in full
payment for its remaining 5.03% interest in Technocom.
While agreements have been reached with substantially all of the holders of
the Company's outstanding Senior Notes and Convertible Notes, the Travelers
Parties and the minority shareholders of Technocom on a restructuring of the
Company's obligations to such parties, those agreements are conditioned upon the
closing of the Merger. If the Merger did not close, the Company would remain
obligated to pay interest on the Senior
F-39
<PAGE>
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Notes and Convertible Notes and there can be no assurance that the Travelers
Parties would not demand payment in full of the Company's obligations to them.
The Company's failure to make interest payments on the Senior Notes and
Convertible Notes could result in a default under and acceleration of those
Notes. In addition, the Company's failure to make payment in full to the
Travelers Parties could result in a cross-default under and acceleration of the
Senior Notes and Convertible Notes. The manner in which the Company currently
intends to deal with these and other commitments depends on the consummation of
the Merger. If the Merger is not consummated, then the Company could be required
to resort to extraordinary measures, including making sales of assets under
distressed conditions or ultimately seeking protection of the bankruptcy courts.
The Company believes that certain assets, notably its interests in PeterStar and
ALTEL, are readily saleable, but that, given that they would be sold under
distressed conditions, the Company would be unlikely to receive full value for
either of them. Any such events would have a material adverse effect on the
Company and raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated condensed financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
(b) Net loss per share. Basic EPS is computed by dividing income or loss
by the weighted average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock at the beginning of the period presented. Potentially dilutive common
stock equivalents totalling 19,614,595 and 13,234,380 at June 30, 1999 and 1998,
respectively, have not been included in the computation of diluted net loss per
common share because they were antidilutive for the periods presented.
(c) Comprehensive income. For the three and six months ended June 30, 1999
comprehensive loss was equal to consolidated net loss reported on the
consolidated condensed statement of operations.
(d) New pronouncements. The American Institute of Certified Public
Accountants issued Statement of Position No. 98-1 (SOP 98-1) "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use," and
Statement of Position No. 98-5 (SOP 98-5) "Reporting on the Costs of Start-Up
Activities" in 1998. SOP 98-1 requires that certain costs related to the
development or purchase of internal-use software be capitalized and amortized
over the estimated useful life of the software. SOP 98-5 requires costs of
start-up activities and organization costs to be expensed as incurred. The
Company was required to adopt both new statements in the first quarter of 1999.
The adoption of these statements did not have a material effect on the Company's
consolidated condensed financial statements for the six months ended June 30,
1999.
(e) Reclassifications. Certain reclassifications have been made to the
prior year's consolidated condensed financial statements to conform to the
current year's presentation.
(2) RECENT DEVELOPMENTS
On May 18, 1999 the Company entered into the Merger Agreement with MMG,
pursuant to which the Company would merge with a newly formed, wholly owned
subsidiary of MMG.
Upon consummation of the Merger, the Company will become a wholly owned
subsidiary of MMG, and the holders of shares of Common Stock of the Company will
receive shares of MMG on the basis of an exchange ratio determined in the manner
set forth in the Merger Agreement.
The Company's Series II and Series III Preferred Shares will be redeemed
for cash for a redemption price of Cdn. $1.00 per share. Outstanding options and
warrants to acquire the Company's Common Stock will be converted into options
and warrants of MMG on the basis of the exchange ratio, and any of the
Convertible Notes still outstanding will be assumed by MMG and will be
convertible into common stock of MMG also on the basis of the exchange ratio.
F-40
<PAGE>
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
In connection with the Merger Agreement, MMG has entered into a bridge loan
agreement with the Company pursuant to which MMG has agreed to lend the Company
up to $7.0 million, secured by an approximately 58% interest in the Company's
subsidiary Technocom, at an annual interest rate of 10% to fund its ongoing
operations during the period from the execution of the Merger Agreement to the
date that the Merger is consummated (or the Merger Agreement is terminated). In
addition, substantially all of the holders of the Senior and Convertible Notes
have agreed to defer until the date of closing of the Merger the payment of
interest on such Notes coming due during the period between the signing of the
Agreements to Exchange and Consent and the date of the closing of the Merger,
and the Travelers Parties and News America have agreed not to exercise any
rights they have under their respective Revolving Credit Agreements with the
Company until the closing of the Merger.
The consummation of the Merger is subject to a number of conditions,
including the approval of the Merger by the shareholders of the Company and of
MMG, the receipt of various governmental clearances and consents, the absence of
any material adverse change in the Company's or MMG's respective businesses and
operations and other customary closing conditions. In addition, it is subject
to: (a) the completion of an exchange of the Senior and Convertible Notes for
New MMG Notes; (b) amendment and restatement of the Revolving Credit Agreement
with the Travelers Parties; (c) completion of the modified put and call
arrangements with the minority stockholders of Technocom; (d) modification of
the Revolving Credit Agreement with News America; and (e) completion of all
arrangements for the Merger by no later than October 31, 1999.
(3) FUTURE ACTIVITIES
The Company's telecommunications businesses are developing in an emerging
economy which, by its nature, has an uncertain economic, political and
regulatory environment. The general risks of operating businesses in the former
Soviet Union include the possibility for rapid change in government policies,
economic conditions, the tax regime and foreign currency regulations. In
addition, Teleport-TP's satellite-based long distance network is at an early
stage of its operations and is therefore subject not only to the general risks
and uncertainties of operating in Russia, but also those involved in the
launching of a new telecommunications service. In addition, this national
long-distance service is being developed in various regions of Russia and its
implementation and results of operations will therefore be affected by, among
other things, the often uncertain economic conditions and growth rates in such
regions.
Ultimate recoverability of the Company's investments in its operating
subsidiaries, PeterStar Company Limited ("PeterStar"), Baltic Communications
Limited ("BCL"), ALTEL, formerly known as BECET International ("ALTEL"), and
Teleport-TP and its investee companies, is dependent upon each of these
subsidiaries and investees achieving and maintaining profitability, which is
dependent to a certain extent on the stabilization of the economies of the
former Soviet Union, the ability to maintain the necessary telecommunications
licenses and the ability to obtain adequate financing to meet capital
commitments.
(4) RESTRICTED CASH
Pursuant to the terms of the Company's $149.5 million private placement
completed on June 12, 1996, $15.2 million remained in escrow on June 30, 1999.
These funds may only be used for certain specified purposes, principally for the
purchase of telecommunications equipment and the payment of interest on the
Company's Senior Notes.
(5) LONG-TERM DEBT AND SHORT-TERM BORROWINGS
Under the terms of the Company's $123.0 million Senior Note offering in
June 1996, the Company was required to raise $20.0 million in an equity
financing by May 31, 1998. The Company did not do so, and as a
F-41
<PAGE>
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
result the interest rate on the Senior Notes increased from 14% to 14.5% as of
June 1, 1998, and will remain at 14.5% until the end of the semi-annual interest
period in which such an offering is completed.
In connection with the Merger, the Company and MMG have entered into
Agreements to Exchange and Consent with substantially all of the holders of the
Company's outstanding Senior Notes and Convertible Notes with respect to the
exchange of such Notes for New MMG Notes upon the closing of the Merger. In
connection with such agreements, the holders of substantially all of the Senior
Notes and Convertible Notes have agreed to defer until the date of closing of
the Merger, the payment of interest on such Notes coming due during the period
between the signing of the Agreements to Exchange and Consent and the date of
closing of the Merger or termination of the Merger Agreement. The implementation
of these agreements is conditioned upon the closing of the Merger.
The obligation to raise $20.0 million in equity by May 31, 1998 was also a
requirement under the terms of the $12.32 million Series A and $3.1 million
Series B Revolving Credit Notes issued to the Travelers Parties in November 1997
in connection with the Company's additional investment in Technocom. As a result
of the Company's not raising such equity, the annual interest rate on the Series
A and B Notes increased from 12% to 15% as of June 1, 1998.
The Company was obliged to make required amortization payments in respect
of the Series B Notes of $1.0 million on each of July 31 and August 31, and a
final payment of $1.1 million on September 30, 1998. In relation to the Series A
Notes, the Company was obliged to make a required amortization payment of $1.0
million on October 31, a further payment of $1.0 million on November 30 and a
final payment of $10.32 million on December 31, 1998.
The Company made the required payments due with respect to the Series B
Notes on July 31 and August 31 and by agreement with the holders of the Series B
Notes, the final payment of $1.1 million due on September 30 was deferred to
December 31, 1998. Payment of this amount was guaranteed by News America, which
owns approximately 38% of the Company's Common Stock.
By agreement with the holders of the Series A and Series B Notes, the $1.0
million required payments due on the Series A Notes on October 31 and November
30 were also deferred to December 31, 1998, and these amounts were also
guaranteed by News America.
In addition to the required amortization payments called for under the
terms of the Revolving Credit Notes, the Company did not effect certain
voluntary amortization (or "targeted reduction in commitment") payments in
respect of the Revolving Credit Notes of $0.5 million on July 31, $0.5 million
on August 31, $1.0 million on September 30, $1.5 million on October 31, and $1.5
million on November 30, 1998, which resulted in the issuance of a total of
182,000 warrants to the Travelers Parties to acquire shares of Common Stock of
the Company at an exercise price of $8.625 per share (the "Additional
Warrants").
On December 31, 1998 the Series A Notes and the amounts deferred under the
Series B Notes would have matured and the balance due would have become payable
in full. Taking into account the amounts deferred, the total that would have
been due under the Series A and Series B Notes as of that date was $13.42
million, of which $3.1 million was guaranteed by News America as described
above. Prior to December 31, 1998, the Travelers Parties issued a deferral of
the payment of the amounts due to January 15, 1999. The Travelers Parties then
gave the Company a further series of payment deferrals with respect to the
amounts due under the Series A and Series B Notes, the last of which was given
on May 10, 1999 and deferred payment of the Notes to May 31, 1999. In connection
with the Merger, the Travelers Parties agreed to a restructuring of the
Company's obligations to them, as described below, which included a further
deferral to the date of closing of the Merger or termination of the Merger
Agreement. The Company has continued to make monthly interest payments due on
the Revolving Credit Notes on a current basis.
F-42
<PAGE>
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Under the terms of the Revolving Credit Agreement, if the Series A and
Series B Notes were not repaid in full when due, the exercise price of all
warrants issued to the holders of the Series A and Series B Notes would have
been reset at $0.01 per share. In addition, in the event of such non payment, on
December 31, 1998 and on the last day of each succeeding month until the
Revolving Credit Notes were repaid in full, the holders of the Series A Notes
would have been entitled to receive 70,000 additional warrants to purchase
shares of the Company's Common Stock and the holders of the Series B Notes would
have been entitled to receive 32,000 additional warrants to purchase shares of
the Company's Common Stock, in each case at a price of $0.01 per share. All such
warrants, referred to as "Default Warrants", would have had an expiration date
ten years after their respective dates of issue.
The Travelers Parties had expressly reserved their rights to claim all of
the Default Warrants to which they would be entitled under the formula described
above, and also to claim that the exercise price of the initial 423,000 warrants
issued to the Travelers Parties and the Additional Warrants had been reset at
$0.01 per share. Management of the Company believes that the Travelers Parties
had no basis for such claims and, if asserted, they would not have been
successful.
In connection with the Merger, the Travelers Parties have reached agreement
with MMG on the partial repayment of the Revolving Credit Notes upon the closing
of the Merger and the amendment and restatement of the Revolving Credit
Agreement and the Revolving Credit Notes (as so amended, the "Amended and
Restated Notes") issued thereunder. Under the terms of this agreement, the
Travelers Parties will be paid an aggregate of $8.5 million upon the closing of
the Merger, and the balance of $4.92 million will be evidenced by the Amended
and Restated Notes. In addition, the guarantees of News America described above
will be released. Finally, the Travelers Parties have agreed to exchange all
warrants held by them to purchase Common Stock of the Company for a combination
of shares of Common Stock of the Company and warrants to purchase shares of
common stock of MMG. These agreements with the Travelers Parties are conditioned
upon the completion of the Merger.
Pursuant to an amendment to a supply contract between PLD Capital Asset
(U.S.) Inc., a wholly owned subsidiary of the Company, and Siemens, which was
originally entered into in August 1997, the Company has restructured the amount
outstanding as of June 30, 1999 of $1.1 million, whereby $0.7 million has been
deferred for payment during the period June 30, 2000 to December 31, 2003.
(6) CONTINGENCIES
(a) Under applicable Russian currency control regulations, the Company's
Russian subsidiaries are required to have certain licenses from the Central Bank
of Russia to enable them to make payments of and accept receipts of hard
currency. While PeterStar, BCL and Teleport-TP have or have applied for all the
necessary licenses, failure to receive the remaining licenses could result in
fines and penalties. Management does not believe that such fines and penalties
would be material.
(b) Certain of the Company's subsidiaries have accrued profits and other
taxes based on interpretations of the law which may ultimately be disputed by
the local taxation authorities. The exposure to additional profits and other
taxes, fines and penalties is not determinable, although the Company believes
such amounts will not be material.
(c) At June 30, 1999, PeterStar had commitments of approximately $1.4
million related to the acquisition of telecommunications equipment. The
PeterStar supply contracts provide for financing of these amounts over
approximately five years.
(d) Teleport-TP currently utilizes capacity on three Intelsat satellites
for the provision of its international and domestic long distance services,
pursuant to rolling fifteen year contracts with Intelsat. These agreements
require quarterly payments of $1.1 million for the remainder of their terms.
F-43
<PAGE>
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(e) The Company periodically guarantees certain obligations of its
subsidiaries. As of June 30, 1999, the only guarantee that is currently
outstanding is to Siemens in the amount of $1.4 million relating to equipment
purchased by Technocom.
(7) OPERATIONS BY GEOGRAPHIC AREA AND INDUSTRY SEGMENT
The Company is a major provider of local, long distance and international
telecommunications services in the Russian Federation and the former Soviet
Union. The activities of the Company are primarily segmented by reference to the
businesses of its principal operating subsidiaries.
PeterStar provides integrated local, long distance and international
telecommunications services in St. Petersburg, Russia, through a fully digital
fiber optic network.
Technocom, through Teleport-TP, provides dedicated international
telecommunications services to customers in Moscow and operates a satellite
based pan-Russian long-distance network.
ALTEL is currently the major provider of national cellular service in
Kazakhstan.
BCL provides dedicated international telecommunications services in St.
Petersburg, Russia.
Other activities of the Company relate principally to its corporate head
office in New York, its operations center in London, and to smaller, less
significant businesses primarily in their start-up phase.
The Company's main financial criteria for assessing the importance and
performance of its segments are by reference to revenues, earnings/(loss) before
income taxes and minority interest, and total assets.
A summary of the Company's operations by segment is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
PeterStar................................. $13,818 $20,281 $27,723 $37,750
Technocom................................. 4,650 5,512 9,034 11,336
ALTEL..................................... 5,839 10,128 13,760 19,677
BCL....................................... 2,289 2,780 4,710 5,104
Other..................................... 1,378 539 2,101 539
------- ------- ------- -------
Total revenues.................... $27,974 $39,240 $57,328 $74,406
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------- --------------------
1999 1998 1999 1998
-------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Earnings/(loss) before income taxes and
minority interest:
PeterStar.............................. $ 5,024 $ 8,049 $ 8,623 $ 15,407
Technocom.............................. (2,385) (4,502) (6,658) (4,477)
ALTEL.................................. (342) 3,541 1,184 6,887
BCL.................................... 29 257 202 501
Corporate.............................. (10,527) (8,161) (21,612) (17,169)
Other.................................. 593 1,501 938 1,689
-------- ------- -------- --------
Total (loss)/earnings before
income taxes and minority
interest..................... $ (7,608) $ 685 $(17,323) $ 2,838
======== ======= ======== ========
</TABLE>
F-44
<PAGE>
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
<S> <C> <C>
Total assets:
PeterStar................................................. $136,458 $132,814
Technocom................................................. 103,288 106,055
ALTEL..................................................... 56,299 59,008
BCL....................................................... 6,953 6,883
Corporate................................................. 31,062 36,491
Other..................................................... 17,100 10,857
-------- --------
Total assets...................................... $351,160 $352,108
======== ========
</TABLE>
A summary of the Company's operations by geographic region is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Russia................................ $ 21,051 $ 29,112 $ 41,845 $ 54,729
Kazakhstan............................ 5,839 10,128 13,760 19,677
Other................................. 1,084 -- 1,723 --
-------- -------- -------- --------
Total revenues................ $ 27,974 $ 39,240 $ 57,328 $ 74,406
======== ======== ======== ========
Earnings/(loss) before income taxes and
minority interest:
Russia................................ $ 2,697 $ 4,088 $ 2,100 $ 11,715
Kazakhstan............................ (342) 3,541 1,184 6,887
North America......................... (9,802) (6,474) (20,146) (15,294)
Other................................. (161) (470) (461) (470)
-------- -------- -------- --------
Total (loss)/earnings before
income taxes and minority
interest.................... $ (7,608) $ 685 $(17,323) $ 2,838
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
<S> <C> <C>
Total assets:
Russia.................................................... $250,557 $249,658
Kazakhstan................................................ 59,299 59,008
North America............................................. 30,787 38,793
Other..................................................... 10,517 4,649
-------- --------
Total assets...................................... $351,160 $352,108
======== ========
</TABLE>
(8) RESTATEMENT
The Company has restated its consolidated interest expense for the six
months ended June 30, 1999, in order to reflect additional interest of $0.7
million related to the beneficial conversion feature of two notes issued to News
America Inc. during the three months ended March 31, 1999 and recognized in that
period. The effect of this restatement has been to increase consolidated
interest expense from $13.0 million to $13.8 million and net loss per share from
$0.62 to $0.64 for the six months ended June 30, 1999.
F-45
<PAGE>
APPENDIX B
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combining Balance Sheet of Metromedia
International Group as of June 30, 1999 and Unaudited Pro Forma Combining
Statements of Operations for the six months ended June 30, 1999 and the year
ended December 31, 1998 illustrate the effect of the merger and the
restructuring of PLD Telekom's obligations and purchase of the Technocom Limited
minority interests. The Unaudited Pro Forma Combining Balance Sheet assumes that
the transactions referred to above are completed as of June 30, 1999 and the
Unaudited Pro Forma Combining Statements of Operations assumes that the
transactions referred to above have been completed as of the beginning of the
periods presented.
Under the terms of the transaction, the holders of PLD Telekom common stock
will receive shares of Metromedia International Group common stock on the basis
of an exchange ratio that values each share of PLD Telekom common stock at $3.50
per share if the average Metromedia International Group price per share is
between $5.25 and $6.25 at closing. If the average price of Metromedia
International Group common stock exceeds $6.25 per share, each share of PLD
Telekom common stock will be exchanged for .56 shares of Metromedia
International Group common stock, not to exceed $4.48 per share of Metromedia
International Group common stock. If the average price of Metromedia
International Group common stock is less than $5.25 per share, each share of PLD
Telekom common stock will be exchangeable for .6667 shares of Metromedia
International Group common stock, subject to termination and "top-up" rights.
We have prepared these Unaudited Pro Forma Combining Financial Statements
using the actual exchange ratio of .6353 and a stock price of $4.3125. See
"About our Merger with PLD Telekom."
ACCOUNTING TREATMENT
We will record the merger as a purchase transaction. For accounting
purposes, Metromedia International Group will be deemed to be the surviving
corporation in the merger.
The pro forma adjustments are based upon currently available information and
upon assumptions that management of each of Metromedia International Group and
PLD Telekom believes are reasonable. We will account for the merger based upon
the estimated fair market value of the net tangible and intangible assets
acquired at the date of acquisition. The adjustments included in the Unaudited
Pro Forma Combining Financial Statements represent the preliminary determination
of these adjustments based upon available information. We cannot assure you that
the actual adjustments will not differ significantly from the pro forma
adjustments reflected in the pro forma financial information.
The Unaudited Pro Forma Combining Financial Statements are not necessarily
indicative of either future results of operations or results that might have
been achieved if the foregoing transactions had been consummated as of the
indicated dates. The Unaudited Pro Forma Combining Financial Statements should
be read in conjunction with the historical financial statements of Metromedia
International Group and PLD Telekom, together with the related notes thereto. We
have incorporated those historical financial statements in this document by
reference.
B-1
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
UNAUDITED PRO FORMA COMBINING BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------------------------------------
PRO FORMA
MERGER AND
DEBT METROMEDIA
METROMEDIA PLD RESTRUCTURING PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
----------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents.............................. $ 101,948 $ 7,882 $ (6,741)(1) $ 95,384
(8,500)(1)
(12,595)(1)
(304)(1)
(1,526)(1)
15,220 (2)
Accounts receivable.................................... 39,256 14,094 -- 53,350
Inventories............................................ 56,356 3,557 -- 59,913
Other current assets................................... 9,592 13,984 (3,014)(3) 20,562
----------- ---------- ----------------- -----------
Current assets..................................... 207,152 39,517 (17,460) 229,209
Escrow funds........................................... -- 15,220 (15,220)(2) --
Investments in and advances to Joint Ventures.......... 156,199 8,607 -- 164,806
Property, plant and equipment, net..................... 34,209 172,171 -- 206,380
Intangibles............................................ 157,743 107,231 (35,364)(1) 310,937
81,327 (1)
Other assets........................................... 4,229 8,414 (5,884)(1) 6,759
----------- ---------- ----------------- -----------
Total assets....................................... $ 559,532 $ 351,160 $ 7,399 $ 918,091
----------- ---------- ----------------- -----------
----------- ---------- ----------------- -----------
Accounts payable and accrued expenses.................. $ 83,838 $ 35,109 $ 7,000 (1) $ 112,791
(12,549)(1)
(582)(1)
(11)(1)
(14)(3)
Short-term debt........................................ 886 30,283 (6,450)(1) 8,299
(13,420)(1)
(3,000)(3)
Other current liabilities.............................. -- 10,908 -- 10,908
----------- ---------- ----------------- -----------
Current liabilities................................ 84,724 76,300 (29,026) 131,998
Long-term debt......................................... 43,773 150,095 (138,251)(1) 218,586
4,920 (1)
158,049 (1)
Other liabilities...................................... 4,807 -- -- 4,807
----------- ---------- ----------------- -----------
Total liabilities.................................. 133,304 226,395 (4,308) 355,391
----------- ---------- ----------------- -----------
Minority interest...................................... 30,318 23,108 -- 53,426
Stockholders' equity:
7 1/4% cumulative convertible preferred stock........ 207,000 -- -- 207,000
Preferred stock...................................... -- 4 (4)(1) --
Common stock......................................... 69,162 378 (378)(1) 93,270
24,108 (1)
Paid-in surplus........................................ 1,012,987 245,332 (245,332)(1) 1,102,243
79,858 (1)
2,031 (1)
5,484 (1)
1,883 (1)
Accumulated deficit.................................... (887,674) (144,057) 144,057 (1) (887,674)
Accumulated other comprehensive loss................... (5,565) -- -- (5,565)
----------- ---------- ----------------- -----------
Total stockholders' equity............................. 395,910 101,657 11,707 509,274
----------- ---------- ----------------- -----------
Total liabilities and stockholders' equity......... $ 559,532 $ 351,160 $ 7,399 $ 918,091
----------- ---------- ----------------- -----------
----------- ---------- ----------------- -----------
</TABLE>
See accompanying notes to unaudited pro forma combining financial statements.
B-2
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------------------------
PRO FORMA
MERGER AND
METROMEDIA DEBT METROMEDIA
HISTORICAL PLD RESTRUCTURING PRO FORMA
(13) HISTORICAL ADJUSTMENTS COMBINED
------------- ---------- ---------------- -----------
<S> <C> <C> <C> <C>
Revenues............................................... $ 132,647 $ 57,328 $ -- $ 189,975
Cost and expenses:
Cost of sales and operating expenses................. 79,572 17,483 -- 97,055
Selling, general and administrative.................. 60,602 26,450 -- 87,052
Depreciation and amortization........................ 8,587 16,520 (1,004)(7) 28,169
4,066 (8)
------------- ---------- ------- -----------
Operating loss......................................... (16,114) (3,125) (3,062) (22,301)
Other income (expense):
Interest expense..................................... (6,929) (14,367) 11,880 (4) (15,754)
(8,369)(4)
1,289 (5)
1,014 (6)
(258)(6)
(14)(11)
Interest income...................................... 4,246 489 (669)(10) 4,052
(14)(11)
Equity in losses of unconsolidated investees......... (5,933) (430) -- (6,363)
Other................................................ (2,794) 110 -- (2,684)
------------- ---------- ------- -----------
Loss before income tax expense and minority interest... (27,524) (17,323) 1,797 (43,050)
Income tax expense..................................... (205) (4,723) -- (4,928)
Minority interest...................................... 4,852 (2,087) -- 2,765
------------- ---------- ------- -----------
Net loss............................................... (22,877) (24,133) 1,797 (45,213)
Cumulative convertible preferred stock dividend
requirement.......................................... (7,504) -- -- (7,504)
------------- ---------- ------- -----------
Net loss attributable to common stockholders........... $ (30,381) $ (24,133) $ 1,797 $ (52,717)
------------- ---------- ------- -----------
------------- ---------- ------- -----------
Weighted average number of common shares-- Basic
(12)................................................. 69,137 37,847 93,245
------------- ---------- -----------
------------- ---------- -----------
Loss per common share--Basic:
Net loss attributable to common stockholders........... $ (0.44) $ (0.64) $ (0.57)
------------- ---------- -----------
------------- ---------- -----------
</TABLE>
See accompanying notes to unaudited pro forma combining financial statements.
B-3
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------
PRO FORMA
MERGER AND
METROMEDIA DEBT METROMEDIA
HISTORICAL PLD RESTRUCTURING PRO FORMA
(13) HISTORICAL ADJUSTMENTS COMBINED
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues...................................................... $ 240,292 $ 145,360 $ -- $ 385,652
Cost and expenses:
Cost of sales and operating expenses........................ 155,916 45,348 -- 201,264
Selling, general and administrative......................... 153,327 63,993 -- 217,320
Depreciation and amortization............................... 20,588 26,071 (1,080)(7) 53,712
8,133 (8)
Nonrecurring charge......................................... 40,317 -- 40,317
------------- ----------- ------------- -----------
Operating income (loss)....................................... (129,856) 9,948 (7,053) (126,961)
Other income (expense):
Interest expense............................................ (16,331) (23,732) 20,760 (4) (33,906)
(16,738)(4)
35 (5)
2,617 (6)
(517)(6)
Interest income............................................. 12,746 2,384 (1,309)(10) 13,821
Equity in losses of unconsolidated investees................ (18,151) (958) -- (19,109)
Other......................................................... 5,390 (11,203) -- (5,813)
------------- ----------- ------------- -----------
Loss before income tax benefit (expense) and minority
interest.................................................... (146,202) (23,561) (2,205) (171,968)
Income tax benefit (expense).................................. 358 (9,864) -- (9,506)
Minority interest............................................. 9,858 (9,386) (2,038)(9) (1,566)
------------- ----------- ------------- -----------
Loss from continuing operations............................... (135,986) (42,811) (4,243) (183,040)
Cumulative convertible preferred stock dividend requirement... (15,008) -- -- (15,008)
------------- ----------- ------------- -----------
Loss from continuing operations attributable to common
stockholders................................................ $ (150,994) $ (42,811) $ (4,243) $(198,048)
------------- ----------- ------------- -----------
------------- ----------- ------------- -----------
Weighted average number of common
shares--Basic (12).......................................... 68,955 35,274 93,063
------------- ----------- -----------
------------- ----------- -----------
Loss per common share--Basic:
Loss from continuing operations attributable to common
stockholders................................................ $ (2.19) $ (1.21) $ (2.13)
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
See accompanying notes to unaudited pro forma combining financial statements.
B-4
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS
- ------------------------
(1) Reflects the acquisition by Metromedia International Group of PLD Telekom at
June 30, 1999 as follows:
(i) the issuance of 24.108 million common shares of Metromedia
International Group at a price of $4.3125 at September 27, 1999. Each
share of outstanding PLD Telekom common stock will be converted into
.6353 shares of Metromedia International Group common stock in
accordance with the exchange ratio contained in the merger agreement;
(ii) the exchange by holders of PLD Telekom's 14.0% senior discount notes
due 2004 with carrying value of $111,751,000 and 9.0% convertible
subordinated notes with a carrying value of $25,000,000 together with
accrued interest payable of $12,549,000 (together, the PLD notes) for
Metromedia International Group's 10.5% senior discount notes due 2007
with a value of $158,049,000. Under the terms of the transactions,
holders of PLD Telekom's 14.0% senior discount notes will receive
Metromedia International Group 10.5% senior discount notes with an
accreted value of $123.0 million and holders of PLD Telekom's 9.0%
convertible subordinated notes will receive Metromedia International
Group 10.5% senior discount notes with an accreted value of $22.5
million. Additionally, the holders of the PLD Telekom 14.0% senior
discount notes and 9.0% convertible subordinated notes will receive
Metromedia International Group 10.5% senior discount notes with an
accreted value of $12.549 million as payment for accrued interest
payable on such notes.
(iii) the repayment of $1.5 million of 9% convertible subordinated notes at
101% of face value and the related accrued interest of $11,000 for
$1,526,000.
(iv) the repayment of $6.45 million of News America notes payable and
$582,000 of interest payable for $6.741 million. Under the terms of the
transaction, News America has agreed to retroactively reduce the
interest rate it has charged to PLD Telekom from 20% per year to 10%
per year, thereby resulting in a reduction of the accrued interest
payable;
(v) the purchase of the equity interests of the two minority shareholders
of Technocom Limited. Under the terms of the transaction, the minority
shareholders of Technocom Limited have agreed to sell their interests
in Technocom Limited to PLD Telekom for a purchase price of
$12,595,000;
(vi) the payment of $8.5 million of $13.42 million of the loans owed to
Travelers. Under the terms of the transaction, Travelers has agreed to
accept $8.5 million of the principal amount owed by PLD Telekom at
closing and to defer repayment of the remaining $4.92 million of
principal amount owed by PLD Telekom until August 30, 2000;
(vii) the redemption of PLD Telekom's Series II and Series III preferred
stock for cash;
(viii) the value of warrants to purchase 700,000 shares of Metromedia
International Group common stock issued to Travelers in exchange for
outstanding warrants. Such value has been determined using the
Black-Scholes method assuming 72.5% volatility, a risk free interest
rate of 5.2% and an average exercise period of 10 years;
(ix) the value of options exchanged for outstanding PLD Telekom options.
Such value has been determined using the Black-Scholes method assuming
72.5% volatility, a risk free interest rate of 5.07% and an average
exercise period of 3 years;
B-5
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS (CONTINUED)
(x) the value of warrants exchanged for outstanding PLD Telekom warrants.
Such value has been determined using the Black-Scholes method assuming
72.5% volatility, a risk free interest rate of 5.02% and average
exercise period of 21 months;
(xi) estimated transaction costs; and
(xii) the elimination of historical net assets acquired comprised of PLD
Telekom's historical stockholders' equity, historical debt and related
interest either repaid or refinanced in the merger reduced by goodwill
and deferred financing fees (in thousands, except per share
information).
<TABLE>
<S> <C> <C>
Issuance of Common Stock
PLD Telekom shares outstanding at June 30, 1999
adjusted for 100,000 shares to be issued to
Travelers........................................... 37,947
Number of shares issued to acquire PLD Telekom........ 24,108
Per share price....................................... $ 4.3125
---------
Value of shares issued.................................. $ 103,966
Value of debt exchanged................................. 158,049
Partial repayment of 9% convertible subordinated 1,526
notes.................................................
Repayment of News America notes payable and interest.... 6,741
Payment for minority interests of Technocom Limited..... 12,595
Partial repayment of loans owed to Travelers............ 8,500
Payment for PLD Telekom preferred stock................. 304
Value of warrants issued to Travelers................... 2,031
Value of options exchanged.............................. 5,484
Value of warrants exchanged............................. 1,883
Estimated transaction costs............................. 7,000
---------
Purchase price.......................................... 308,079
Less Net Assets Acquired
PLD Telekom Historical Stockholders' Equity........... 101,657
PLD Telekom Historical Debt and Related Interest
Repaid or Refinanced................................ 166,343
PLD Telekom Historical Goodwill....................... (35,364)
PLD Telekom Historical Deferred Financing Fees........ (5,884)
---------
226,752
---------
Excess of cost over historical net assets acquired...... $ 81,327
---------
---------
</TABLE>
For illustrative purposes, Metromedia International Group has made a
preliminary allocation of excess cost over estimated net assets acquired to
goodwill as PLD Telekom's assets and liabilities are estimated to
approximate fair value. The final allocation of purchase price to assets and
liabilities acquired will depend upon the final purchase price as determined
by the final exchange ratio and the amount of debt and related interest to
be repaid or refinanced and the final estimates of fair values of assets and
liabilities of PLD Telekom at the closing date. Metromedia International
Group will undertake a study to determine the fair values of assets and
liabilities acquired and will allocate the purchase price accordingly.
Metromedia International Group believes that the carrying value of current
assets and current liabilities approximates fair value and that the excess
of cost over historical net assets acquired will be allocated to property
and
B-6
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS (CONTINUED)
equipment, telecommunication licenses, other identifiable intangibles and
goodwill. However, there can be no assurance that the actual allocation
will not differ significantly from the pro forma allocation.
(2) Reflects removal of restrictions on escrowed funds in connection with the
exchange of the PLD Telekom notes.
(3) Reflects elimination of bridge loan provided to PLD Telekom by Metromedia
together with accrued interest.
(4) Reflects the elimination of historical interest expense attributable to the
PLD notes and the recording of interest expense for the Metromedia
International Group 10.5% senior discount notes.
(5) Reflects the elimination of historical interest expense attributable to the
News America notes payable.
(6) Reflects the elimination of interest expense attributable to the $13.42
million of Travelers' 12.0% revolving credit notes and accrual of interest
on $4.92 million of Travelers' notes at 10.5%.
(7) Reflects the elimination of amortization of historical PLD Telekom
goodwill.
(8) Reflects amortization expense of the excess of cost over historical net
assets acquired in the merger by use of the straight-line method over 10
years. Should the allocation of such excess of cost over historical net
assets acquired differ significantly as described in note 1 above,
amortization expense could increase since the lives of assets other than
goodwill may be shorter.
(9) Reflects reversal of minority interest income recorded by PLD Telekom as
a result of the allocation of a portion of the 1998 net loss of Technocom
Limited to the minority. In connection with the acquisition of the minority
interest, the pro-forma assumes that the minority interest was acquired at
the beginning of the period (January 1, 1998). As such, the entry reflects
the reversal of the 1998 credit for allocation of losses to the minority
interest. As of December 31, 1998, the minority interest was fully depleted
and no such allocation of the Technocom Limited loss has been made
subsequent to December 31, 1998.
(10) Reflects elimination of interest income on cash used in connection with
payments of certain PLD Telekom debt and purchase of minority interests of
Technocom Limited.
(11) Reflects elimination of interest income and expense on bridge financing
facility provided to PLD Telekom by Metromedia International Group.
(12) The average common shares outstanding used in calculating pro forma loss
per common share from continuing operations are calculated assuming that
the estimated number of shares of Metromedia International Group common
stock to be issued in the merger were outstanding from the beginning of the
periods presented. Options and warrants to purchase shares of common stock
as well as shares of common stock issuable upon conversion of Metromedia
International Group's convertible preferred stock were not included in
computing pro forma diluted earnings per common share because their
inclusion would result in a smaller loss per common share.
(13) Ningbo Ya Mei Telecommunications, Ltd., one of Metromedia International
Group's two telecommunications joint ventures in Ningbo Municipality,
China, has received a letter from China Unicom stating that the supervisory
department of the Chinese government had requested that China Unicom
terminate the project with Ningbo Ya Mei. China Unicom subsequently
informed Metromedia International Group that the notification also applies
to Metromedia International
B-7
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS (CONTINUED)
Group's other joint venture in Ningbo Municipality. The notification from
China Unicom requested that negotiations begin immediately regarding the
amounts to be paid to Ningbo Ya Mei, including return of investment made
and appropriate compensation and other matters related to the winding up of
the joint venture's activities as a result of this notice. Negotiations
regarding the terms of the termination have begun and are continuing. The
content of the negotiations includes determining the investment principal
of Metromedia International Group's Ningbo joint ventures, appropriate
compensation and other matters related to termination of contracts. The
letter further stated that due to technical reasons which were not
specified, the cash distribution plan for the first half of 1999 had not
been decided, and that China Unicom also expected to discuss this subject
with Ningbo Ya Mei. As a result, Metromedia International Group cannot
currently determine the amount of compensation that its Ningbo joint
ventures will receive.
While there can be no assurance that China Unicom will provide similar
letters to Metromedia International Group's other two sino-sino-foreign
telephony-related joint ventures, Metromedia International Group expects
that these joint ventures will also be the subject of project termination
negotiations. Metromedia International Group cannot yet predict the effect
on it of the Ningbo joint ventures' negotiations and the expected winding
up of Metromedia International Group's other two telephony-related joint
ventures, but Metromedia International Group believes such negotiations, if
adversely concluded, or the failure to make scheduled cash distributions,
could have a material adverse effect on its financial position and results
of operations. Depending on the amount of compensation it receives,
Metromedia International Group will record a non cash charge equal to the
difference between the sum of the carrying values of its investment and
advances made to joint ventures plus goodwill less the cash compensation it
receives from the joint ventures which China Unicom has paid. Metromedia
International Group's investment in and advances to joint ventures and
goodwill balance at June 30, 1999 were approximately $71 million and $67
million, respectively. No adjustment has been made to the unaudited pro
forma combined financial statements to writedown goodwill relating to
Metromedia International Group's telecommunications joint ventures in
China.
B-8
<PAGE>
Exhibit 23.1
Independent Auditors' Consent
-----------------------------
The Board of Directors
PLD Telekom Inc.:
We consent to the incorporation by reference in the registration statement (No.
333-88187) on Form S-8, in the registration statement (No. 333-02301) on Form
S-8, in the registration statement (No. 333-07387) on Form S-8, in the
registration statement (No. 333-13763) on Form S-8, and in the registration
statement (No. 333-88191) on Form S-3 of Metromedia International Group, Inc. of
our report dated March 30, 1999, with respect to the consolidated balance sheets
of PLD Telekom Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the years then ended, which report appears in the Form 8-K of
Metromedia International Group, Inc. dated October 13, 1999.
Our report dated March 30, 1999 contains an explanatory paragraph that states
PLD Telekom Inc. has suffered recurring losses, has a working capital
deficiency, and does not presently have sufficient funds on hand to meet its
current debt obligations. These factors raise substantial doubt about PLD
Telekom Inc.'s ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
KPMG LLP
New York, New York
October 7, 1999
<PAGE>
Exhibit 23.2
Independent Auditors' Consent
-----------------------------
The Board of Directors
PLD Telekom Inc.:
We consent to the incorporation by reference in the registration statement (No.
333-88187) on Form S-8, in the registration statement (No. 333-02301) on Form
S-8, in the registration statement (No. 333-07387) on Form S-8, in the
registration statement (No. 333-13763) on Form S-8, and in the registration
statement (No. 333-88191) on Form S-3 of Metromedia International Group, Inc. of
our report dated March 21, 1997, with respect to the consolidated statements of
operations, shareholders' equity, and cash flows of PLD Telekom Inc. and
subsidiaries for the year ended December 31, 1996, which report appears in the
Form 8-K of Metromedia International Group, Inc. dated October 13, 1999.
KPMG LLP
Chartered Accountants
Calgary, Canada
October 7, 1999
<PAGE>
9
Exhibit 99.1
FOR IMMEDIATE RELEASE
METROMEDIA INTERNATIONAL GROUP
AND PLD TELEKOM INC. COMPLETE MERGER
Company Announces James Hatt as New President and Chief Executive
Officer of Metromedia International Telecommunications, Inc.
NEW YORK, September 30, 1999--Metromedia International Group, Inc. (AMEX:MMG),
a global communications company, and PLD Telekom Inc. (NASDAQ:PLDI) today
announced the completion of the merger of the two companies, following the
approvals by their respective shareholders.
Under the terms of the merger, the holders of PLD Telekom common stock will
receive 0.6353 shares of MMG common stock in exchange for each share of PLD
Telekom common stock. PLD Telekom shares will be de-listed immediately upon the
effectiveness of the merger and trading in such shares will cease. As a result
of the consummation of the merger, News America Incorporated, a wholly owned
subsidiary of News Corporation Limited and holder of 38% of PLD Telekom's common
stock, now owns approximately 10% of MMG common stock.
Stuart Subotnick, President and Chief Executive Officer of Metromedia
International Group, said, "The completion of the acquisition with PLD Telekom
exemplifies our commitment to building a global communications company. The
combination of their assets with our services will enable us to provide the
communications links to deliver voice, data and video services in the emerging
markets in which MMG owns and operates its communications and media businesses."
In connection with the completion of the merger, Metromedia International Group,
Inc. also announced today that it has named James Hatt, formerly President and
Chief Executive Officer of PLD Telekom Inc., as the new President and Chief
Executive Officer of Metromedia International Telecommunications, Inc., a
Metromedia International Group subsidiary. Mr. Hatt succeeds Richard H. Sherwin,
who has resigned from Metromedia International Group, Inc. to pursue other
interests. The change becomes effective immediately.
"We are grateful to Dick Sherwin for establishing Metromedia's strong beachhead
in Eastern Europe and the former Soviet Union in radio, cable,
telecommunications and paging operations. His vision has been fundamental in
guiding the growth of MITI's
<PAGE>
10
joint ventures and we wish him the very best in his next endeavor."
Mr. Subotnick continued. "In moving forward to position ourselves primarily
as a telecommunications company with both infrastructure and 'last mile'
capabilities, we are delighted that James Hatt, with a career that has been
devoted to building telecommunications businesses in emerging countries around
the world, is assuming a leadership role in our combined company."
Mr. Hatt's telecommunications career spans two decades, including senior
positions at Cable and Wireless plc, where he played a key role in a number of
privatizations and new franchise activities. He is a graduate of both the
University of London and Cambridge University in the United Kingdom.
MMG shares to be issued upon effectiveness of the merger will be issued as soon
as practicable thereafter. Street-name holders of PLD Telekom common stock
should contact their brokers to inquire about access to their MMG shares, but
are not expected to have access to such shares for over one week after the
completion of the merger. Shareholders of record who are in possession of stock
certificates will receive materials with instructions explaining how to obtain
their MMG shares; these materials are expected to be mailed on or before
October 8, 1999.
PLD Telekom will operate as a wholly owned subsidiary of Metromedia
International Group, Inc.
ABOUT METROMEDIA INTERNATIONAL GROUP
Metromedia International Group, Inc. is a global communications and media
company. Through its wholly owned subsidiary, Metromedia International
Telecommunications, Inc., the Company owns and operates communications and media
businesses in Eastern Europe, the republics of the former Soviet Union and other
emerging markets. These businesses include wireless and wired cable television
stations; FM radio stations; radio paging operations; and a variety of telephone
operations including GSM cellular, international toll calling, fixed wireless
local loop and trunk mobile radio. Through its approximately 58% ownership of
Metromedia China Corporation, MITI operates ventures supporting Public Switched
Telephone Networks and GSM systems in China. The Company has received
notification that a department of the Chinese government had requested
termination of two of its four joint telecommunications projects.
<PAGE>
11
ABOUT PLD TELEKOM
PLD Telekom Inc. is a major provider of high quality local, long distance and
international telecommunications services in the former Soviet Union. Its five
principal business units are PeterStar, which provides integrated local, long
distance and international telecommunications in St. Petersburg through a fully
digital fiber optic network; Teleport-TP, which provides international
telecommunications services from Moscow and operates a pan-Russian
satellite-based long distance network; Baltic Communications Limited (BCL),
which provides dedicated international telecommunications services in St.
Petersburg; ALTEL, which is the principal provider of cellular service in the
Republic of Kazakhstan; and BELCEL, which provides the only national cellular
service in Belarus.
THIS NEWS RELEASE CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH RISKS AND
UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, GENERAL ECONOMIC AND BUSINESS
CONDITIONS, COMPETITION, CHANGES IN TECHNOLOGY AND METHODS OF MARKETING, AND
VARIOUS OTHER FACTORS BEYOND THE CONTROL OF METROMEDIA INTERNATIONAL GROUP, INC.
AND PLD TELEKOM INC. THIS ALSO INCLUDES SUCH FACTORS AS ARE DESCRIBED FROM TIME
TO TIME IN THE SEC REPORTS FILED BY METROMEDIA INTERNATIONAL GROUP, INC., AND
PLD TELEKOM INC., INCLUDING THEIR MOST RECENTLY FILED FORMS 10-K/A AND
FORM 10-Q/A.
Investor Relations: Ellen Strahs Fader, Vice President, Investor Relations
Metromedia International Group, Inc.
(212) 606-4389
Maxwell Abbott, Vice President, Investor Relations
PLD Telekom Inc.
(212) 527-3800
<PAGE>
Exhibit 99.2
EXECUTION COPY
METROMEDIA INTERNATIONAL GROUP, INC.
$210,631,376
SERIES A AND SERIES B
10 1/2% SENIOR DISCOUNT NOTES DUE 2007
INDENTURE
Dated as of September 30, 1999
U.S. BANK TRUST NATIONAL ASSOCIATION
as Trustee
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE......................................................1
SECTION 1.1 DEFINITIONS.........................................................................1
SECTION 1.2 OTHER DEFINITIONS..................................................................20
SECTION 1.3 TRUST INDENTURE ACT DEFINITIONS....................................................20
SECTION 1.4 RULES OF CONSTRUCTION..............................................................21
ARTICLE 2
THE NOTES......................................................................................21
SECTION 2.1 FORM AND DATING....................................................................21
SECTION 2.2 EXECUTION AND AUTHENTICATION.......................................................22
SECTION 2.3 REGISTRAR AND PAYING AGENT.........................................................23
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST................................................23
SECTION 2.5 HOLDER LISTS.......................................................................24
SECTION 2.6 TRANSFER AND EXCHANGE..............................................................24
SECTION 2.7 REPLACEMENT NOTES..................................................................37
SECTION 2.8 OUTSTANDING NOTES..................................................................38
SECTION 2.9 TREASURY NOTES.....................................................................38
SECTION 2.10 TEMPORARY NOTES...................................................................38
SECTION 2.11 CANCELLATION......................................................................39
SECTION 2.12 DEFAULTED INTEREST................................................................39
SECTION 2.13 CUSIP NUMBERS.....................................................................40
ARTICLE 3
REDEMPTION AND PREPAYMENT......................................................................40
SECTION 3.1 NOTICES TO TRUSTEE................................................................40
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED.................................................40
SECTION 3.3 NOTICE OF REDEMPTION..............................................................41
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION....................................................42
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.......................................................42
SECTION 3.6 NOTES REDEEMED IN PART............................................................42
SECTION 3.7 OPTIONAL REDEMPTION...............................................................43
SECTION 3.8 MANDATORY REDEMPTION..............................................................43
SECTION 3.9 OFFER TO PURCHASE BY APPLICATION OF
EXCESS PROCEEDS...................................................................43
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ARTICLE 4
COVENANTS......................................................................................45
SECTION 4.1 PAYMENT OF NOTES..................................................................45
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY...................................................46
SECTION 4.3 REPORTS...........................................................................46
SECTION 4.4 COMPLIANCE CERTIFICATE............................................................47
SECTION 4.5 TAXES.............................................................................48
SECTION 4.6 STAY, EXTENSION AND USURY LAWS....................................................48
SECTION 4.7 RESTRICTED PAYMENTS...............................................................48
SECTION 4.8 LIMITATION ON RESTRICTIONS ON
DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES......................................................................51
SECTION 4.9 LIMITATION ON THE INCURRENCE OF
INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK...................................................................51
SECTION 4.10 LIMITATION ON THE INCURRENCE OF
INDEBTEDNESS BY THE PLD COMPANIES.................................................53
SECTION 4.11 LIMITATION ON ASSET SALES.........................................................55
SECTION 4.12 LIMITATION ON TRANSACTIONS WITH
AFFILIATES........................................................................57
SECTION 4.13 LIMITATION ON LIENS...............................................................58
SECTION 4.14 CORPORATE EXISTENCE...............................................................58
SECTION 4.15 CHANGE OF CONTROL.................................................................58
SECTION 4.16 PAYMENTS FOR CONSENT..............................................................60
SECTION 4.17 MONEY FOR PAYMENTS TO BE HELD IN TRUST.,..........................................60
SECTION 4.18 ADDITIONAL PLD ASSETS...................,.........................................61
SECTION 4.19 LIMITATION ON SALE AND LEASEBACK
TRANSACTIONS......................................................................62
ARTICLE 5
SUCCESSORS.....................................................................................62
SECTION 5.1 MERGER, CONSOLIDATION, OR SALE OF ASSETS..........................................62
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED.................................................63
ARTICLE 6
DEFAULTS AND REMEDIES..........................................................................64
SECTION 6.1 EVENTS OF DEFAULT.................................................................64
SECTION 6.2 ACCELERATION......................................................................66
SECTION 6.3 OTHER REMEDIES....................................................................66
SECTION 6.4 WAIVER OF PAST DEFAULTS...........................................................66
SECTION 6.5 CONTROL BY MAJORITY...............................................................67
SECTION 6.6 LIMITATION ON SUITS...............................................................67
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SECTION 6.7 RIGHTS OF HOLDERS OF NOTES TO
RECEIVE PAYMENT...........................................................68
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.......................................................68
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.................................................68
SECTION 6.10 PRIORITIES.......................................................................69
SECTION 6.11 UNDERTAKING FOR COSTS............................................................69
ARTICLE 7
TRUSTEE........................................................................................70
SECTION 7.1 DUTIES OF TRUSTEE................................................................70
SECTION 7.2 RIGHTS OF TRUSTEE................................................................71
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.....................................................72
SECTION 7.4 TRUSTEE'S DISCLAIMER.............................................................72
SECTION 7.5 NOTICE OF DEFAULTS...............................................................73
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE
NOTES.....................................................................73
SECTION 7.7 COMPENSATION AND INDEMNITY.......................................................73
SECTION 7.8 REPLACEMENT OF TRUSTEE...........................................................74
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.................................................76
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION....................................................76
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS
AGAINST COMPANY...........................................................76
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE.............................................................76
SECTION 8.1 DISCHARGE OF LIABILITY ON NOTES;
DEFEASANCE................................................................76
SECTION 8.2 CONDITIONS TO DEFEASANCE.........................................................77
SECTION 8.3 APPLICATION OF TRUST MONEY.......................................................79
SECTION 8.4 REPAYMENT TO COMPANY.............................................................79
SECTION 8.5 INDEMNITY FOR U.S. GOVERNMENT
OBLIGATIONS...............................................................80
SECTION 8.6 REINSTATEMENT....................................................................80
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER...............................................................80
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF NOTES..............................................80
SECTION 9.2 WITH CONSENT OF HOLDERS OF NOTES.................................................81
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT..............................................83
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS................................................83
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES.................................................84
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC..................................................84
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ARTICLE 10
SATISFACTION AND DISCHARGE.....................................................................84
SECTION 10.1 SATISFACTION AND DISCHARGE OF INDENTURE..........................................84
SECTION 10.2 APPLICATION OF TRUST MONEY.......................................................85
ARTICLE 11
MISCELLANEOUS..................................................................................86
SECTION 11.1 TRUST INDENTURE ACT CONTROLS....................................................86
SECTION 11.2 NOTICES.........................................................................86
SECTION 11.3 COMMUNICATION BY HOLDERS OF NOTES
WITH OTHER HOLDERS OF NOTES..............................................87
SECTION 11.4 CERTIFICATE AND OPINION AS TO
CONDITIONS PRECEDENT.....................................................87
SECTION 11.5 STATEMENTS REQUIRED IN CERTIFICATE
OR OPINION...............................................................88
SECTION 11.6 RULES BY TRUSTEE AND AGENTS.....................................................88
SECTION 11.7 NO PERSONAL LIABILITY OF DIRECTORS,
OFFICERS, EMPLOYEES AND
SHAREHOLDERS.............................................................88
SECTION 11.8 GOVERNING LAW...................................................................89
SECTION 11.9 CONSENT TO JURISDICTION AND SERVICE.............................................89
SECTION 11.10 NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS..............................................................89
SECTION 11.11 SUCCESSORS......................................................................89
SECTION 11.12 SEVERABILITY....................................................................90
SECTION 11.13 COUNTERPART ORIGINALS...........................................................90
SECTION 11.14 TABLE OF CONTENTS, HEADINGS, ETC................................................90
EXHIBIT A
(Face of Note)
.............................................................................................A-1
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
.............................................................................................B-1
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE...............................................................C-1
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CROSS-REFERENCE TABLE*
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Trust Indenture Act Section
Indenture Section
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310(a)(1).............................................................................................7.10
(a)(2)................................................................................................7.10
(a)(3)................................................................................................N.A.
(a)(4)................................................................................................N.A.
(a)(5)................................................................................................7.10
(b)...................................................................................................7.10
(c)...................................................................................................N.A.
311(a)................................................................................................7.11
(b)...................................................................................................7.11
(i)(c)................................................................................................N.A.
312(a).................................................................................................2.5
(b)...................................................................................................12.3
(c)...................................................................................................12.3
313(a).................................................................................................7.6
(b)(2).................................................................................................7.7
(c)..............................................................................................7.6; 12.2
(d)....................................................................................................7.6
314(a)...........................................................................................4.3; 12.2
(c)(1)................................................................................................12.4
(c)(2)................................................................................................12.4
(c)(3)................................................................................................N.A.
(e)...................................................................................................12.5
(f)...................................................................................................N.A.
315(a).................................................................................................7.1
(b)..............................................................................................7.5; 12.2
(A)(c).................................................................................................7.1
(d)....................................................................................................7.1
(e)...................................................................................................6.11
316(a)(last sentence)..................................................................................2.9
(a)(1)(A)..............................................................................................6.5
(a)(1)(B)..............................................................................................6.4
(a)(2)................................................................................................N.A.
(b)....................................................................................................6.7
(c)....................................................................................................9.4
317(a)(1)..............................................................................................6.8
(a)(2).................................................................................................6.9
(b)....................................................................................................2.4
318(a)................................................................................................12.1
(b)...................................................................................................N.A.
(c)...................................................................................................12.1
</TABLE>
N.A. means not applicable
*This Cross-Reference Table is not, for any purposes, part of the Indenture.
<PAGE>
INDENTURE, dated as of September 30, 1999 by and between
Metromedia International Group, Inc., a Delaware corporation (the "Company") and
U.S. Bank Trust National Association, a national banking association, 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 Series
A 10 1/2% Senior Discount Notes due 2007 (the "Series A Notes") and the Series B
10 1/2% Senior Discount Notes due 2007 (the "Series B Notes" and, together with
the Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS
"Accreted Value" means as of the date of determination prior
to March 30, 2002, with respect to any Note, the sum of (i) the initial offering
price of this Note and (ii) the portion of the excess of the principal amount of
such Note over such initial offering price which shall have been accreted
thereon through such date, such amount to be so accreted on a daily basis at the
rate of 10 1/2% per annum, compounded semi-annually on each Interest Payment
Date from the Issue Date through the date of determination, computed on the
basis of a 360 day year of twelve 30-day months. The Accreted Value of any Note
on or after March 30, 2002 shall be 100% of the principal amount at Stated
Maturity thereof.
"Additional PLD Assets" means at least $15,000,000 worth of
assets which would be classified as "property and equipment" on PLD Telekom's
consolidated balance sheet and which will be acquired by one of the PLD
Companies in the period between May 18, 1999 through the second anniversary of
the Issue Date, and shall specifically include capacity in transatlantic and
European cables.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling, controlled by or under direct or indirect
common control with this specified Person. For purposes of this definition,
"control" when used with respect to any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of this Person, whether through the ownership of voting securities, by
agreement or otherwise; and the terms "controlling," "controlled by" and "under
common control with" have the meanings correlative to the foregoing; provided,
that the ability to vote 10% or more of the Voting Stock of this Person will
constitute "control" under this Indenture.
"Agent" means any Registrar, Paying Agent or co-registrar.
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2
"Agreement to Exchange and Consent" means the Agreement to
Exchange and Consent, dated as of May 18, 1999, by and among the Company, PLD
Telekom and certain holders of notes of PLD Telekom named on the signature pages
thereof.
"ALTEL" means ALTEL, a Kazakh closed joint stock company
(known until May, 1998 as BECET International).
"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 that apply to such transfer or exchange.
"Asset Sale" means any sale, issuance, conveyance, transfer,
lease or other disposition, directly or indirectly, in one or a series of
transactions, of: (i) any Capital Stock of any Subsidiary, (ii) all or
substantially all of the properties and assets of any division or line of
business of the Company or its Subsidiaries, or (iii) any other properties and
assets of the Company or any of its Subsidiaries other than in the ordinary
course of business; provided, however, that the term "Asset Sale" will not
include any sale or transfer of properties and assets (A) by the Company to any
of its Restricted Subsidiaries or by any of its Restricted Subsidiaries to the
Company or any other Restricted Subsidiary, (B) that constitute obsolete
equipment in the ordinary course of business, (C) the Fair Market Value of which
in the aggregate does not exceed $10 million in any transaction or series of
related transactions, (D) that is made in accordance with the provisions of
Section 4.7 herein, (E) which constitutes the granting of any Permitted Lien or
(vi) that are transferred in exchange for Related Assets.
"Attributable Indebtedness" means with respect to any Sale and
Leaseback Transaction of any Person, as at the time of determination, the
greater of (i) the capitalized amount in respect of such transaction that would
appear on the balance sheet of such Person in accordance with GAAP and (ii) the
present value (discounted at a rate consistent with accounting guidelines, as
determined in good faith by such Person) of the payments during the remaining
term of the lease (including any period for which such lease has been extended
or may, at the option of the lessor, be extended) or until the earliest date on
which the lessee may terminate such lease without penalty or upon payment of a
penalty (in which case the rental payments shall include such penalty).
"Average Life to Stated Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (A) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
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
<PAGE>
3
making of such payment, by (ii) the then outstanding aggregate principal amount
of this Indebtedness.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the board of directors or other
governing body of the Company or, if the Company is owned or managed by a single
entity, the board of directors or other governing body of such entity, or, in
either case, any committee thereof duly authorized to act on behalf of such
board or governing body.
"Board Resolution" means a duly authorized resolution of the
Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Contribution" means any contribution to the equity of
the Company from a direct or indirect parent of the Company for which no
consideration other than the issuance of common stock with no redemption rights
and no special preferences, privileges or voting rights is given.
"Capital Lease Obligations" means any obligation of a Person
and its Subsidiaries on a consolidated basis under any capital lease of real or
personal property that is required to be classified and accounted for as a
capital lease obligation for financial reporting purposes in accordance with
GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents,
however designated and whether or not voting, of corporate stock, including each
class of common stock and Preferred Stock of that Person, and (ii) with respect
to any Person that is not a corporation, any and all partnership, membership or
other Equity Interest of that Person.
"Cash Equivalents" means (i) securities issued or directly and
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof, having maturities of not more than one year from the
date of acquisition, (ii) marketable general obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc., (iii) certificates of deposit, time deposits,
Eurodollar time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof issued
by any commercial bank the long-term debt of which is rated at the time of
acquisition thereof at least "A" or the equivalent thereof by Standard & Poor's
<PAGE>
4
Rating Group, or "A" or the equivalent thereof by Moody's Investors Service,
Inc., and having capital and surplus in excess of $500 million, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (i), (ii) and (iii) entered into with any bank
meeting the qualifications specified in clause (iii) above, (v) commercial paper
rated at the time of acquisition thereof at least "A-2" or the equivalent
thereof by Standard & Poor's Rating Group or "P-2" or the equivalent thereof by
Moody's Investors Service, Inc., or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of investments, and in either case maturing within 270
days after the date of their acquisition, and (vi) interests in any investment
company which invests solely in instruments of the type specified in clauses (i)
through (v) above.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, exchange or other transfer other than by way of
merger or consolidation, in one or a series of related transactions, by the
Company of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to any Person within the meaning of
sections 13(d) and 14(d) of the Exchange Act, other than a Wholly Owned
Subsidiary of the Company; (ii) a merger or consolidation in which the
shareholders of the Company immediately prior to the merger or consolidation do
not hold a majority of the voting power of the Company immediately after the
merger or consolidation; (iii) any person within the meaning of sections 13(d)
and 14(d) of the Exchange Act, other than one or more Permitted Holders becomes
the beneficial owner, directly or indirectly, of more than 50% of the total
voting power of all classes of Voting Stock of the Company or its successor (for
the purposes of this definition, beneficial ownership has the meaning given to
such term in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
will be deemed to have beneficial ownership of all shares that such Person has
the right to acquire, whether this right is exercisable immediately or only
after the passage of time); (iv) the first day on which a majority of the
members of the Board of Directors are not Continuing Directors; or (v) the
liquidation or dissolution of, or the adoption by the stockholders of a plan for
the liquidation or dissolution of, the Company, other than in a transaction
which complies with the provisions set forth in Article 5 herein; PROVIDED,
however, that the sale or disposition or other transfer in one or a series of
related transactions of (x) all or substantially all of the assets or Voting
Stock of Snapper, Inc. ("Snapper") or (y) all or any portion of the PLD Assets
will not be deemed to be a Change of Control under this Indenture. Any Asset
Sale of any of the PLD Assets shall be governed by the conditions set forth in
Section 4.11 herein.
"Company" means Metromedia International Group, Inc., a
Delaware corporation, and any and all successors thereto.
"Consolidated Income Tax Expense" for any period means the
aggregate amounts of the provisions of income taxes of the Company and its
<PAGE>
5
Subsidiaries for this period calculated on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" for any Person means, without
duplication, for any period, the sum of: (i) the interest expense of such Person
and its Subsidiaries for such period, on a consolidated basis in accordance with
GAAP, including without limitation: (A) amortization of debt discount, (B) the
net costs associated with Interest Rate Agreements and Currency Hedging
Agreements, (C) the interest portion of any deferred payment obligation, and (D)
accrued interest, plus (ii) the interest component of Capital Lease Obligations
paid, accrued, and/or scheduled to be paid or accrued by such Person and its
Consolidated Subsidiaries, plus (iii) the aggregate amount for such period of
cash dividends paid on any Disqualified Capital Stock or Preferred Stock of such
Person and its Consolidated Subsidiaries, in each case, on a consolidated basis
in accordance with GAAP.
"Consolidated Leverage Ratio" means, as to any Person, the
ratio of: (i) the total consolidated Indebtedness of the Company and its
Consolidated Subsidiaries as of the date of calculation (the "Determination
Date") to (ii) two times the Consolidated Operating Cash Flow of the Company and
its consolidated Subsidiaries for the most recent two fiscal quarters for which
financial information is available (the "Reference Period") immediately
preceding the Determination Date. For purposes of this definition, the
Consolidated Operating Cash Flow will be calculated in accordance with GAAP and
on a pro forma basis to: (i) include the results of any Person that is a
Consolidated Subsidiary on the Determination Date or that would become a
Consolidated Subsidiary in connection with the transaction that requires the
determination of the Consolidated Operating Cash Flow, (ii) exclude any Person
that is not a Consolidated Subsidiary on the Determination Date or that would
cease to be a Consolidated Subsidiary in connection with the transaction that
requires the determination of the Consolidated Operating Cash Flow, and (iii)
include or exclude, as the case may be, the results of any operating business
acquired or disposed of by the Company or a Consolidated Subsidiary of the
Company in the Reference Period.
"Consolidated Net Income" means, for any period, the net
income (loss) of the Company and its Consolidated Subsidiaries determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income: (i) any net income (loss) of any Person if such
Person is not a Subsidiary, except that (A) subject to the limitations contained
in (iv) below, the Company's equity in the net income of any such Person for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such period
to the Company or a Subsidiary of the Company as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Restricted Subsidiary, to the limitations contained in clause (iii) below) and
(B) the Company's equity in a net loss of any such Person (other than an
Unrestricted Subsidiary) for such period shall be included in
<PAGE>
6
determining such Consolidated Net Income to the extent such loss has been funded
with cash from the Company or a Restricted Subsidiary; (ii) any net income
(loss) of any Person acquired by the Company or a Subsidiary of the Company in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject to
the limitations contained in (iv) below, the Company's equity in the net income
of any such Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash that could have been
distributed by such Restricted Subsidiary during such period to the Company or
another Restricted Subsidiary as a dividend (subject, in the case of a dividend
or other distribution to another Restricted Subsidiary, to the limitation
contained in this clause) and (B) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income; (iv) any gain (loss) realized upon the sale or other
disposition of any property, plant or equipment of the Company or its
Consolidated Subsidiaries (including pursuant to any Sale and Leaseback
Transaction) which is not sold or otherwise disposed of in the ordinary course
of business and any gain (loss) realized upon the sale or other disposition of
any Capital Stock of any Person; (v) any extraordinary gain or loss and (vi) the
cumulative effect of a change in accounting principles.
"Consolidated Operating Cash Flow" means, with respect to any
period, the Consolidated Net Income for this period increased, to the extent
that any of the following items were deducted in calculating the Consolidated
Net Income but without duplication, by: (i) the Consolidated Income Tax Expense
for this period, (ii) the Consolidated Interest Expense for this period, whether
paid or accrued and whether or not capitalized, and (iii) depreciation,
amortization, minority interest and any other non-cash items for this period
other than any non-cash item which requires the accrual of, or reserve for, cash
charges for any future period, of the Company and any of its Consolidated
Subsidiaries.
"Consolidated Subsidiary" means, for any Person, each
Restricted Subsidiary of such Person (whether now existing or hereafter created
or acquired) the financial statements of which are consolidated for financial
statement reporting purposes with the financial statements of such Person in
accordance with GAAP.
"Continuing Director" means (i) any of the persons that serve
as directors on the Board of Directors on the Issue Date and (ii) any new
director whose election or appointment to the Board of Directors or whose
nomination for election by the stockholders of the Company was approved by the
Continuing Directors then in office; provided that Continuing Directors shall in
no event, whether pursuant to clause (i) or (ii), include the persons nominated
by News America Incorporated to serve as directors under the Agreement and Plan
of Merger, dated as of May 18,
<PAGE>
7
1999, by and among the Company, Moscow Communications, Inc. and PLD
Telekom.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.2 herein or such other address as
to which the Trustee may give notice to the Company.
"Credit Facility" means one or more credit agreements, loan
agreements or similar facilities, secured or unsecured, entered into from time
to time by the Company or any of its Restricted Subsidiaries, and including any
related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified, restated, refinanced or replaced from time to time.
"Cumulative Consolidated Operating Cash Flow" and "Cumulative
Consolidated Interest Expense" means, on any date of determination, the
cumulative Consolidated Operating Cash Flow and Consolidated Interest Expense,
as the case may be, realized during the period commencing on the Issue Date and
ending on the last day of the most recent fiscal quarter immediately preceding
the date of determination for which consolidated financial information is
available.
"Currency Hedging Agreement" means, with respect to any
Person, any foreign exchange contract, currency swap agreement or other similar
agreement as to which such Person is a party or beneficiary and entered into for
hedging purposes only.
"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 2.6 hereof, 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, but may bear the Private Placement Legend, if
applicable.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.3
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 Capital Stock" means, with respect to any
Person, any Capital Stock of such Person which by its terms or by the terms of
any security into which it is convertible or for which it is exchangeable or
upon the happening of any event or the passage of time (i) matures or becomes
mandatorily redeemable pursuant
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8
to a sinking fund obligation or otherwise, (ii) becomes exchangeable for
Indebtedness at the option of the holder of this Indebtedness or (iii) becomes
redeemable at the option of the holder of this Capital Stock, in whole or in
part, in each case on or before the Stated Maturity of the Notes, provided,
that: (A) only the portion of Capital Stock which so matures or becomes so
redeemable or exchangeable on or before the Stated Maturity of the Notes will be
deemed to be Disqualified Capital Stock, and (B) any Capital Stock that would
not constitute Disqualified Capital Stock but for its provisions giving its
holders the right to require this Person to repurchase or redeem such Capital
Stock upon the occurrence of any "asset sale" or "change of control" occurring
before the Stated Maturity of the Notes will not constitute Disqualified Capital
Stock if the "asset sale" or "change of control' provisions applicable to this
Capital Stock are no more favorable to the holders of this Capital Stock than
the provisions of the covenants under Sections 4.11 and 4.15 herein and if these
provisions specifically provide that this Person will not repurchase or redeem
this Capital Stock pursuant to these provisions before the repurchase by the
Company of the Notes as are required to be repurchased under the covenants under
Sections 4.11 and 4.15 herein.
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended (or any successor Act), and the rules and regulations promulgated
thereunder (or respective successor thereto).
"Exchange Notes" means the Series B Notes issued in the
Registered Exchange Offer pursuant to Section 2.6(f) hereof.
"Exchange Offer Registration Statement" has the meaning set
forth in the Agreement to Exchange and Consent.
"Exchanging Dealer" means any Holder that is a broker or
dealer registered as such under the Exchange Act and elects to exchange for
Unrestricted Notes any Restricted Notes that it acquired for its own account as
a result of market-making activities or other trading activities (but not
directly from the Company or an Affiliate of the Company).
"Existing Indebtedness" of a Person means Indebtedness of such
Person in existence on the Issue Date, until these amounts are repaid.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be reasonably expected to be obtained in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to buy.
The Fair Market Value of
<PAGE>
9
any asset or property will be determined by the Board of Directors acting in
good faith and will be evidenced by a resolution of the Board of Directors.
"GAAP" means generally accepted accounting principles 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 approved by a significant segment
of the accounting profession, which are in effect on the Issue Date.
"Global Note Legend" means the legend set forth in Section
2.6(g)(ii), which is required to be placed on all Global Notes issued under this
Indenture.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with this Indenture and bearing the Global
Note Legend.
"Government Securities" means securities that are (i) direct
obligations (or certificates representing an ownership interest in such
obligations) of the United States of America (including any agency or
instrumentality thereof) of the payment of which the full faith and credit of
the United States of America is pledged, (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America or (iii) obligations of a
Person the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any other
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay or advance or supply funds for the purchase or
payment of, such Indebtedness of such other Person, whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise, or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect of such Indebtedness, in whole
or in part; provided, however, that the term "Guarantee" will not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under any Interest Rate Agreement or Currency Hedging
Agreement.
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10
"Holder" means a Person in whose name a Note is registered on
the Registrar's or any co-registrar's books.
"Incur" means create, incur, assume, suffer to exist or
otherwise become liable for; provided, however, that any Indebtedness or
Capital Stock of a Person existing at the time such Person becomes a
Restricted Subsidiary, whether by merger, consolidation, acquisition or
otherwise, will be deemed to be Incurred by such Restricted Subsidiary at the
time it becomes a Restricted Subsidiary. "Incurrence" will have a correlative
meaning.
"Indebtedness" means at any time (without duplication), with
respect to any Person, whether recourse is to all or a portion of the assets of
such Person, and whether or not contingent, (i) any obligation of such Person
for money borrowed, (ii) any obligation of such Person evidenced by bonds,
debentures, notes, Guarantees or other similar instruments, including, without
limitation, any such obligations incurred in connection with the acquisition of
property, assets or businesses, excluding trade accounts payable made in the
ordinary course of business, (iii) any reimbursement obligation of such Person
with respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of such Person, (iv) any obligation of such Person issued
or assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or liabilities or obligations arising in the ordinary
course of business, which in either case are not more than 60 days overdue or
which are being contested in good faith), (v) any Capital Lease Obligation of
such Person, (vi) the maximum fixed redemption or repurchase price of
Disqualified Capital Stock of such Person and, to the extent held by other
Persons, the maximum fixed redemption or repurchase price of Disqualified
Capital Stock of such Person's Restricted Subsidiaries at the time of
determination, (vii) the notional amount of any interest hedging obligations or
exchange rate obligations of such Person at the time of determination, (viii)
any Attributable Indebtedness with respect to any Sale and Leaseback Transaction
to which such Person is a party and (ix) any obligation of the type referred to
in clauses (i) through (viii) of this definition of another Person and all
dividends and distributions of another Person the payment of which, in either
case, such Person has guaranteed or is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise. For purposes of the preceding
sentence, the maximum fixed repurchase price of any Disqualified Capital Stock
that does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were repurchased on any date on which Indebtedness shall be
required to be determined pursuant hereto; provided that if such Disqualified
Capital Stock is not then permitted to be repurchased, the repurchase price
shall be the book value of such Disqualified Capital Stock. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability of any guarantees at such date; provided that for purposes of
calculating the amount of the Notes outstanding at any date, such amount shall
be the Accreted Value thereof as of such date unless cash interest has commenced
to
<PAGE>
11
accrue pursuant to the terms of the Notes, in which case the amount of the Notes
outstanding will be determined pursuant to the terms of the Notes.
"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.
"Interest Payment Date" shall have the meaning assigned to
such term in the Notes.
"Interest Rate Agreement" means, with respect to any Person,
any interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement to which such Person is a party or
beneficiary.
"Investment" means, with respect to any Person, all
investments by such Person in other Persons, including Affiliates, in the form
of direct or indirect loans, including Guarantees of Indebtedness or other
obligations, advances or capital contributions, 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. Investments will not include
commissions, travel and similar advances to directors, officers and employees
made in the ordinary course of business. If the Company or any of its Restricted
Subsidiaries sells or otherwise disposes of any Equity Interests or any direct
or indirect Subsidiary such that, after giving effect to that sale or
disposition, that Person is no longer a Subsidiary of the Company or its
Restricted Subsidiaries, the Company will be deemed to have made an Investment
on the date of such sale or disposition equal to the Fair Market Value of the
Equity Interests of that Subsidiary not sold or disposed of.
"Issue Date" means the date of first issuance of the Notes
under the Indenture.
"Joint Venture" means a Telecommunications Company of which
less than 50 percent of the Voting Stock is held by PLD Telekom, provided that
the Telecommunications Business of such Telecommunications Company is
principally conducted in the Russian Federation, Kazakhstan, Belarus or any
other country in the Commonwealth of Independent States.
"Leasing Company" means a special purpose Cypriot or U.S.
corporation which is a Wholly Owned Subsidiary of the Company organized for the
limited purpose of acquiring Telecommunications Assets and leasing these
<PAGE>
12
Telecommunications Assets to direct or indirect Subsidiaries of PLD Telekom
pursuant to Telecommunications Asset Agreements and/or making investments in a
Telecommunications Company primarily engaged or proposing to engage in the
Telecommunications Business in the Russian Federation, Kazakhstan, Belarus or
any other country in the Commonwealth of Independent States.
"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 Registered Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind in respect of this
asset, including any conditional sale or other title retention agreement or
lease in the nature of a Lien.
"Net Cash Proceeds," with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale.
"Net Proceeds" from an Asset Sale means cash or Cash
Equivalent payments received, including any cash or Cash Equivalent payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring person of Indebtedness or other obligations relating to the properties
or assets that are the subject of such Asset Sale or received in any other
noncash form from such Asset Sale, in each case net of: (i) all legal,
accounting, investment banking, title and recording tax expenses, commission and
other fees and expenses incurred, and all federal, state, provincial, foreign
and local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Sale, (ii) all payments made on any Indebtedness which
is secured by any assets subject to such Asset Sale, in accordance with the
terms of any Lien upon such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Sale, or by applicable law be repaid
out of the proceeds from such Asset Sale, (iii) all distributions and other
payments required to be made to minority interest holders in Subsidiaries or
joint ventures as a result of such Asset Sale, (iv) the deduction of appropriate
amounts to be provided by the seller as a
<PAGE>
13
reserve against any liabilities associated with the assets disposed of in such
Asset Sale and retained by the Company or any Restricted Subsidiary after such
Asset Sale, and (v) employee severance and termination costs.
"Note Custodian" means the Person specified in Section 2.3
hereof as the Note Custodian with respect to the Global Notes or any successor
entity thereto appointed as Note Custodian hereunder and having become such
pursuant to the applicable provision of this Indenture.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Officer" means the President, the Chief Executive Officer,
any Executive Vice President and the Chief Financial Officer of the Company.
"Officers' Certificate" means a certificate signed by any two
of the Chairman of the Board of Directors, the President, any Vice President,
the Treasurer or the Secretary of the Company.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee and that meets the requirements of
Section 11.5 hereof. The counsel may be an employee of, or counsel to, the
Company, any Subsidiary of the Company, any Affiliate of the Company or the
Trustee.
"pari passu Indebtedness" means Indebtedness of the Company
ranking pari passu in right of payment with the Notes.
"Participant" means, with respect to the Depositary, a Person
who has an account with the Depositary.
"Permitted Holder" means Metromedia Company, a Delaware
general partnership, its Related Parties and any Person controlling, controlled
by, or under common control with, Metromedia Company.
"Permitted Liens" means: (x) any Lien existing on the date of
this Indenture, (y) any Lien arising in connection with court judgements, taxes,
workmen's compensation, zoning restrictions, easements and rights of way that do
not materially impair operation of the business, performance bids, contracts,
leases, statutory obligations, surety and appeal bonds, letters of credit and
other obligations Incurred in the ordinary course of business, and (z) any Lien
securing obligations in connection with Indebtedness permitted under clauses
(c), (e), (f), (h) and (i) (with respect to clause (i) herein, to the extent the
Indebtedness to which the Permitted Refinancing Indebtedness relates was
secured) under Section 4.9 herein.
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14
"Permitted Refinancing Indebtedness" means any amendments,
supplements, modifications, deferrals, renewals, extensions, substitutions,
refundings, defeasance, refinancings or replacements (collectively, a
"refinancing") of any Indebtedness, including successive refinancings, so long
as: (i) the borrower under these refinancings is the Company or, if not the
Company, the same as the borrower or its successor of the Indebtedness being
refinanced, (ii) the aggregate principal amount or accreted value of the new
Indebtedness does not exceed the sum of: (A) the aggregate principal amount or
accreted value being refinanced, (B) the accrued interest represented thereby,
(C) the amount of expenses of the Company or the borrower Incurred in connection
with such refinancing, and (D) the lesser of (x) the stated amount of any
premium or other payment required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness being refinanced and (y) the amount of
premium actually paid at such time to refinance the Indebtedness, and (iii) in
the case of any refinancing of Subordinated Indebtedness, such new Indebtedness
is made subordinated to the Notes at least to the same extent as the
Indebtedness being refinanced and such refinancing does not reduce the Average
Life to Stated Maturity or the Stated Maturity of such Subordinated
Indebtedness.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, incorporated or unincorporated
association, joint-stock company, trust, unincorporated organization, government
or other agency or political subdivision thereof or any other entity.
"Pivotel Assets" means the Pivotel telecommunications switches
and nodes located in New York, USA, and London, England, capacity in
transatlantic and European cables, upgraded switches in St. Petersburg and
Moscow and related telecommunications equipment.
"PLD Assets" means all of the assets (including shares of
Capital Stock of any Subsidiary and of ALTEL) owned by PLD Telekom, ALTEL or any
direct or indirect Subsidiary of PLD Telekom on the Issue Date, accounts
receivable generated by such assets and the Additional PLD Assets.
"PLD Companies" means PLD Telekom Inc., its direct and
indirect Subsidiaries (including, without limitation, PeterStar Company Limited,
Baltic Communications Limited, Technocom Limited and CPY Yellow Pages Limited)
and ALTEL.
"PLD Company Permitted Liens" means: (x) any Lien existing on
the date hereof, (y) any Lien arising in connection with court judgments, taxes,
workmen's compensation, zoning restrictions, easements and rights of way that do
not materially impair operation of the business, performance bids, contracts,
leases, statutory allegations, surety and appeal bonds, letters of credit and
other obligations incurred in the ordinary course of business, and (z) any Lien
securing obligations in
<PAGE>
15
connection with Indebtedness permitted under clauses (b), (c), (d), (f) and (g)
(with respect to clause (g) herein, to the extent the Indebtedness to which the
Permitted Refinancing Indebtedness relates was secured) under Section 4.10
hereof.
"PLD Telekom" means PLD Telekom Inc., a Delaware corporation.
"Preferred Stock" means any Equity Interest of any class or
classes of a Person (however designated) which is preferred as to payments of
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution, over Equity Interests of any other class of such
Person.
"Private Placement Legend" means the legend set forth in
Section 2.6(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means an underwritten sale of Capital
Stock, excluding Disqualified Capital Stock, of the Company with gross proceeds
to the Company of at least $25 million.
"Purchase Money Obligation" of any Person means any
Indebtedness that is secured by a Lien on assets related to the business of such
Person and any additions, replacements, modifications and accessions of such
assets, which are purchased by such Person at any time after the Issue Date;
provided that: (i) the security agreement or conditional sale or other title
retention contract pursuant to which the Lien on such assets is created is
entered into within 180 days after the purchase or substantial completion of the
construction of such assets and is at all times confined solely to the assets so
purchased or acquired, any additions, replacements, modifications and accessions
to such assets and any proceeds and products from such assets, (ii) at no time
will the aggregate principal amount of the outstanding Indebtedness secured by
the Lien be increased except in connection with the purchase of additions and
accessions to such assets and except in respect of commitment or facility fees
or other similar fees and other similar obligations in respect of the Incurrence
of such Indebtedness, and (iii) either: (A) the aggregate outstanding principal
amount of Indebtedness secured by the Lien, determined on a per asset basis in
the case of any additions and accessions, will not at the time the security
agreement or other contract pursuant to which the Lien is created is entered
into exceed 90% of the purchase price to such Person of the assets subject to
the Lien, or (B) the Indebtedness secured by the Lien will be with recourse
solely to the assets so purchased or acquired, any additions, replacements,
modifications and accessions to these assets and any proceeds and products from
these assets.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A under the Securities Act.
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16
"Qualified Capital Stock" means any and all Capital Stock of a
Person other than Disqualified Capital Stock.
"Qualified Joint Venture" means a Joint Venture in which PLD
Telekom owns directly or indirectly Voting Stock and any future Joint Venture in
which PLD Telekom owns 20% or more of the Voting Stock.
"Record Date" for the interest payable on any Interest Payment
Date means March 15 or September 15 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Registered Exchange Offer" has the meaning set forth in the
Agreement to Exchange and Consent.
"Registration Statement" means either the Exchange Offer
Registration Statement or the Shelf Registration Statement.
"Related Assets" means any asset or property used by or in or
in connection with a Related Business.
"Related Business" means when used in reference to any Person,
that this Person is engaged primarily in the business of, or providing services
related to the business of, (i) the transmission of voice, video or data,
including but not limited to, local and long-distance wireline and wireless
telephone services and internet services, (ii) multi-channel television
services, including wireline and wireless cable television service, (iii)
broadcast radio, (iv) paging, (v) lawn and garden products and related services
and (vi) in the case of clauses (i) through (v) above, the construction of any
related facilities or any businesses reasonably related thereto, which
determination will be made in good faith by the Board of Directors.
"Related Parties" means (i) any officer or other member of
management employed by Metromedia Company or any Subsidiary as of the Issue
Date; (ii) family members or relatives of the persons described in clause (i);
(iii) any trusts created for the sole benefit of the persons described in clause
(i) or (ii); or (iv) in the event of the incompetence or death of any of the
persons described in clause (i), such person's estate, executor, administrator,
committee or other personal representatives or beneficiaries.
"Responsible Officer," when used with respect to the Trustee,
means the President, the Chairman of the Board or any officer within the
Corporate Trust Administration of the Trustee (or any successor group of the
Trustee) or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
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17
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a global note 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 aggregate principal amount of the Notes sold in a private placement
under the Securities Act.
"Restricted Note" means either a Restricted Definitive Note or
a Restricted Global Note.
"Restricted Subsidiary" means (i) Metromedia International
Telecommunications, Inc., Snapper Inc. and all other direct or wholly owned
subsidiaries of Metromedia International Group that are incorporated in any
State of the United States, (ii) Paging One Services, GmbH (Austria), Romsat
Cable TV & Radio, SA (Romania) and Radio Balaton Juventus, Kft. (Hungary), to
the extent each of these entities constitutes Subsidiaries, and (iii) each of
the PLD Companies.
"Sale and Leaseback Transaction" means with respect to any
Person, any direct or indirect arrangement pursuant to which property is sold or
transferred by such Person or a Restricted Subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by such Person
or one of its Restricted Subsidiaries.
"SEC" means the Securities Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended
(or any successor Act), and the rules and regulations promulgated thereunder (or
respective successor thereto).
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Agreement to Exchange and Consent.
"Significant Subsidiary" means any Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Special Record Date" for the payment of any defaulted
interest means a date fixed by the Company pursuant to Section 2.12 hereof.
"Stated Maturity" means, when used with respect to any
Indebtedness or any installment of interest on any Indebtedness, the date
specified in such Indebtedness as the fixed date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing the Indebtedness. The
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18
Stated Maturity will not include any provision for the contingent obligation to
repay, redeem or repurchase the interest or repurchase the interest or principal
of such Indebtedness before the date originally scheduled for their payment.
"Strategic Investor" means any Person that is, or a controlled
Affiliate of any Person that is, engaged principally in a Related Business.
"Subordinated Indebtedness" means any Indebtedness of the
Company or any Restricted Subsidiary, whether outstanding on the Issue Date or
thereafter Incurred, which expressly is subordinate or junior in right of
payment to the Notes pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled, without regard to the occurrence of any
contingency, to vote in the election of directors, managers, trustees or similar
governing body of this corporation, association or other business entity is at
the time owned or controlled, directly or indirectly, by (i) this Person, (ii)
this Person and one or more Subsidiaries of this Person or (iii) one or more
Subsidiaries of this Person. Unless otherwise specified herein, each reference
to a Subsidiary will refer to a Subsidiary of the Company.
"Telecommunications Assets" means, with respect to any Person,
assets, including, without limitation, rights of way, trademarks and licenses
and licenses to use copyrighted material, that are utilized by such Person,
directly or indirectly, in a Telecommunications Business. Telecommunications
Assets also include stock, joint venture or partnership interest in another
Person, provided that substantially all of the assets of such other Person
consist of Telecommunications Assets. The determination of what constitutes
Telecommunications Assets will be made by the Board of Directors.
"Telecommunications Asset Agreement" means a lease or
installment sale agreement where title is transferred to the buyer pursuant to
which a Leasing Company leases or sells, in a transaction in which the monetary
consideration is paid immediately or is payable over time, Telecommunications
Assets that consist of equipment and rights acquired in connection with the
lease or sale thereof, including, without limitation, software licenses, to a
Restricted Subsidiary or Qualified Joint Venture in the Russian Federation,
Kazakhstan, Belarus or any other country in the Commonwealth of Independent
States.
"Telecommunications Business" means the business of (i)
transmitting, or providing services relating to the transmission of, voice,
video or data through owned or leased transmission facilities, (ii) creating,
developing or marketing communications related network equipment, software and
other devices for the use described in clause (i) above or (iii) evaluating,
participating or pursuing any other
<PAGE>
19
activity or opportunity that is related to those specified in (i) or (ii) above
and includes, without limitation, any business in which PLD Telekom and its
direct and indirect Subsidiaries are currently engaged; provided that, the
determination of what constitutes a Telecommunications Business shall be made in
good faith by the Board of Directors.
"Telecommunications Company" means any Person substantially
all of the assets of which consist of Telecommunications Assets.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA, except as set forth in Section 9.3.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"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 in
the form of Exhibit A 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 behalf of, and registered in the name
of, the Depositary or its nominee, representing a series of Notes that do not
bear the Private Placement Legend.
"Unrestricted Note" means an Unrestricted Definitive Note or
an Unrestricted Global Note or both.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that is not a Restricted Subsidiary, (ii) any Subsidiary of the Company
which at the time of determination is designated an Unrestricted Subsidiary by
the Board of Directors in the manner set forth in Section 4.7 hereof and (iii)
any Subsidiary of an Unrestricted Subsidiary.
"Voting Stock" of a Person means securities of any class or
classes of Capital Stock in such Person entitling the holders thereof, whether
at all times or at the times that such class of Capital Stock has voting power
by reason of the happening of any contingency, to vote in the election of
members of the board of directors or comparable body of such Person.
"Wholly Owned Subsidiary" of the Company means a Restricted
Subsidiary of the Company, all of the outstanding Capital Stock of which (other
than directors' qualifying shares and shares that, under applicable law, are
required to be
<PAGE>
20
held by third persons) shall at the time be owned by the Company or one or more
Wholly Owned Subsidiaries.
SECTION 1.2 OTHER DEFINITIONS
Defined in Term Section
<TABLE>
<S> <C>
"Affiliate Transaction" ...................................................4.12
"Asset Sale Offer" ........................................................4.11
"Authentication Order" .....................................................2.2
"Change of Control Offer" .................................................4.15
"Change of Control Payment" ...............................................4.15
"Change of Control Payment Date".......................................... 4.15
"Designation" ..............................................................4.7
"Event of Default" .........................................................6.1
"Excess Proceeds" .........................................................4.11
"Offer Amount " ............................................................3.9
"Offer Period" .............................................................3.9
"Paying Agent " ............................................................2.3
"Permitted Indebtedness"................................................... 4.9
"Purchase Date" ............................................................3.9
"Registrar " ...............................................................2.3
"Restricted Payments" ......................................................4.7
"Revocation" ...............................................................4.7
</TABLE>
SECTION 1.3 TRUST INDENTURE ACT DEFINITIONS
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:
"Commission" means the SEC;
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"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 on the Notes.
<PAGE>
21
All other terms used but not otherwise defined 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 1.4 RULES OF CONSTRUCTION
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 or
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.1 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
or agreements to which the Company is subject. Each Note shall be dated the date
of its authentication. The Notes shall be in denominations of $100 and integral
multiples of $1 above $100.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent
<PAGE>
22
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 aggregate principal amount 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, repurchases 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 Note Custodian, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.6 hereof.
SECTION 2.2 EXECUTION AND AUTHENTICATION.
Two Officers or one Officer and the Secretary or an Assistant
Secretary of the Company shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer, Secretary or Assistant Secretary 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 Trustee's signature shall be conclusive evidence
that the Note has been authenticated under this Indenture.
The Trustee shall, upon receipt of a written order of the
Company signed by two Officers or one Officer and the Secretary or an Assistant
Secretary of the Company (an "Authentication Order"), authenticate Notes for
original issue up to $210,631,376 in aggregate principal amount. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Notes whenever the Trustee
may do so. Each
<PAGE>
23
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, the Company or an Affiliate of the Company.
SECTION 2.3 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("the Registrar") 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. The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, and such agreement shall
incorporate the provisions of the TIA and implement the provisions of this
Indenture that relate to such Agent. 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 Note Custodian with respect to the
Global Notes.
The Trustee is authorized to enter into a letter of
representations with DTC in the form provided to the Trustee by the Company and
to act in accordance with such letter.
SECTION 2.4 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 will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
redemption or purchase of the Notes or for the payment of principal of, or
premium, if any, or interest on the Notes, and will notify the Trustee of any
default by the Company in providing the Paying Agent with sufficient funds to
redeem or purchase the Notes or make any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all such money held by
it to the Trustee and to account for any funds disbursed. The Company at any
time may require a Paying Agent to pay all such 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
<PAGE>
24
money it delivered to the Trustee. 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 2.5 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 Section 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, and
the aggregate principal amount of Notes held by, each Holder, and the Company
shall otherwise comply with TIA Section 312(a).
SECTION 2.6 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, by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Company for Definitive
Notes if (i) the Company delivers to the Trustee a 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 Registrar. 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 2.7 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 2.6 or Section 2.7 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 2.6(a); however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.6(b), (c), (d) or (f) hereof.
<PAGE>
25
(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 and therein 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 2.6(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
2.6(b)(i) above, the transferor of such beneficial interest must
deliver to the Depositary 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 (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to
be credited with such increase or (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 (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 a Registered Exchange Offer by the Company in
accordance with Section 2.6(f) hereof, the requirements of this
Section 2.6(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
<PAGE>
26
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 2.6(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 2.6(b)(ii) above and
the Registrar receives from the transferor a certificate in the form of
Exhibit B hereto, including the certifications in item (1) 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 transferred to a Person who takes delivery
thereof in the form of a beneficial interest in a Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.6(b)(ii) above and:
(A) such exchange or transfer is
effected pursuant to the Registered Exchange Offer in accordance with
the Agreement to Exchange and Consent 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, makes the certification required
by the Letter of Transmittal or via the Depositary's book-entry system;
(B) such transfer is effected pursuant
to the Shelf Registration Statement in accordance with the Agreement to
Exchange and Consent;
(C) such transfer is effected by an
Exchanging Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Agreement to Exchange and Consent; 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
<PAGE>
27
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 (3)(c) or (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Company or the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Company or the Registrar, as
applicable, 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 2.2 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.
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
<PAGE>
28
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; or
(E) 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,
upon confirmation of such receipt by the Registrar, the Trustee shall cause the
aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.6(h) hereof, and the Company shall execute and
the Trustee, upon receipt of an Authentication Order in accordance with Section
2.2 hereof, 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 2.6(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 direct Participant. The Trustee shall make
available for delivery 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 2.6(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 Registered Exchange Offer in accordance with
the Agreement to Exchange and Consent and the holder of such beneficial
interest in the case of an exchange, or the transferee, in the case of
a transfer, makes the certifications required by Section 4.4 of the
Agreement to Exchange and Consent and in the Letter of Transmittal;
(B) such transfer is effected pursuant
to the Shelf Registration Statement in accordance with the Agreement to
Exchange and Consent;
<PAGE>
29
(C) such transfer is effected by an
Exchanging Dealer pursuant to the Exchange Offer Registration
Statement; 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 an Unrestricted
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
(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 an Unrestricted 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 (3)(c) or (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Company or the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Company or the Registrar, as
applicable, 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 2.6(b)(ii) hereof, the Trustee shall cause the
aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.6(h) hereof, and the Company shall
execute and the Trustee shall authenticate and make available for
delivery 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 2.6(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 make
available for delivery 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 2.6(c)(iii)
shall not bear the Private Placement Legend.
<PAGE>
30
(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR
BENEFICIAL INTERESTS.
(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;
(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 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; or
(E) 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;
upon confirmation of such receipt by the Registrar, the
Trustee shall cause the aggregate principal amount of the applicable Global Note
to be increased accordingly pursuant to Section 2.6(h) hereof.
(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:
<PAGE>
31
(A) such exchange or transfer is
effected pursuant to the Registered Exchange Offer in accordance with
the Agreement to Exchange and Consent and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer, makes the
certification required under Section 4.4 of the Agreement to Exchange
and Consent and in the Letter of Transmittal;
(B) such transfer is effected pursuant
to the Shelf Registration Statement in accordance with the Agreement to
Exchange and Consent;
(C) such transfer is effected by an
Exchanging Dealer pursuant to the Exchange Offer Registration
Statement; 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 (3)(c) or (4) thereof; and, in each
such case set forth in this subparagraph (D), if the Company
or Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Company or Registrar, as applicable, 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 confirmation by the Registrar of satisfaction of the
conditions of any of the subparagraphs in this Section 2.6(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
<PAGE>
32
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 in a Global Note is effected pursuant to this
subparagraph or to subparagraphs (ii)(B) or (ii)(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 2.2 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate 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 2.6(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 his 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 2.6(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 under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof;
(C) 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; or
(D) 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.
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(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 Registered Exchange Offer in accordance with
the Agreement to Exchange and Consent and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer, makes the
certification required by Section 4.4 of the Agreement to Exchange and
Consent and in the Letter of Transmittal;
(B) any such transfer is effected
pursuant to the Shelf Registration Statement in accordance with the
Agreement to Exchange and Consent;
(C) any such transfer is effected by an
Exchanging Dealer pursuant to the Exchange Offer Registration
Statement; 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 (3)(c) or (4) thereof; and, in each such case set
forth in this subparagraph (D), if the Company or Registrar so
requests, an Opinion of Counsel in form reasonably acceptable
to the Company or Registrar, as applicable, 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.
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34
(f) REGISTERED EXCHANGE OFFER.
Upon the consummation of the Registered Exchange Offer in
accordance with the Agreement to Exchange and Consent, the Company shall issue
and, upon receipt of an Authentication Order in accordance with Section 2.2
hereof, the Trustee shall authenticate (i) one or more Unrestricted Global Notes
in an aggregate principal amount equal to the aggregate principal amount of the
beneficial interests in the Restricted Global Notes tendered for acceptance by
Persons that make the certifications required by Section 4.4 of the Agreement to
Exchange and Consent and in the Letter of Transmittal or via the Depositary's
book-entry system, and accepted for exchange in the Registered Exchange Offer
and (ii) Definitive Notes in an aggregate principal amount equal to the
aggregate principal amount of the Restricted Definitive Notes tendered for
acceptance by Persons that make the certifications required by Section 4.4 of
the Agreement to Exchange and Consent and in the Letter of Transmittal, and
accepted for exchange in the Registered 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, upon receipt of an Authentication Order
in accordance with Section 2.2 hereof, shall authenticate and make available for
delivery 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 HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, OR (2) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
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35
AVAILABLE) AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES."
(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 2.6 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(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 2.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
(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.
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36
(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND
EXCHANGES.
(i) To permit registrations of transfers and
exchanges, the Company shall, subject to the other provisions of this
Section 2.6, 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 for any
registration of transfer or exchange (except as otherwise expressly
permitted herein), but the Company or the Registrar may require a
Holder to furnish appropriate endorsements and transfer documents and
to pay a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.6, 3.9, 4.11, 4.15
and 9.5 hereof, which the Company shall pay).
(iii) Neither the Trustee nor the Registrar shall 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) None of the Company, the Trustee and the
Registrar shall 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 Business Days before the day of the mailing of a notice of
redemption or repurchase under Section 3.3 or 4.15 hereof, as
applicable, and ending at the close of business on such day, (B) to
register the transfer of or to exchange any Note so selected for
redemption or repurchase in whole or in part, except the unredeemed
portion of any Note being redeemed or repurchased 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 shall
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, premium, if any, and interest on such Note and for all
other purposes, and none of the Trustee, any Agent or the Company shall
be affected by notice to the contrary.
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(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.2
hereof.
(viii) All certifications, certificates and Opinions
of Counsel required to be submitted to the Registrar pursuant to this
Section 2.6 to effect a registration of transfer or exchange may be
submitted by facsimile.
(ix) Each Holder of a Note agrees to indemnify the
Trustee and the Registrar against any liability that may result from
the transfer, exchange or assignment of such Holder's Note in violation
of any provision of this Indenture and/or applicable United States
federal or state securities law.
(x) Neither the Trustee nor the Registrar shall have
any obligation or duty to monitor, determine or inquire as to
compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any
interest in any Note (including any transfers between or among
Participants or beneficial owners of interests in any Global Note)
other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if
and when expressly required by the terms of, this Indenture, and to
examine the same to determine substantial compliance as to form with
the express requirements hereof.
SECTION 2.7 REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or if the
Company and the Trustee receive evidence to their 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
Company, 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 require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto, and may charge for its expenses (including the fees and expenses of the
Trustee and reasonable attorney's fees and 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.
If any mutilated, lost, stolen or destroyed Note has become or
is about to become due and payable, the Company, in its sole discretion, may,
instead of issuing a new Note, pay such Note.
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38
SECTION 2.8 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 2.8 as not outstanding. Except as set forth in Section 2.9 hereof,
a Note does not cease to be outstanding because the Company or an Affiliate of
the Company holds the Note.
If a Note is replaced pursuant to Section 2.7 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 entire principal amount of, premium, if any, and
accrued interest, if any, on, any Note is considered paid under Section 4.1
herein, 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 the entire principal amount of, premium, if any, and accrued
but unpaid interest, if any, on, 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 2.9 TREASURY NOTES
In determining whether the Holders of the required aggregate
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 the Trustee knows are so owned
shall be so disregarded. Notwithstanding the foregoing, Notes that the Company
or any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company offers to purchase or
acquires pursuant to an exchange offer, tender offer or otherwise shall not be
deemed to be owned by the Company or any such Person until legal title to such
Notes passes to the Company or such Person, as the case may be.
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
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39
temporary Notes and as shall be reasonably acceptable to the Trustee. Without
unreasonable delay, the Company shall prepare and the Trustee, upon receipt of
an Authentication Order in accordance with Section 2.2 hereof, shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11 CANCELLATION
Holders shall surrender Notes for cancellation to the Trustee.
The Company at any time may deliver Notes to the Trustee for cancellation. The
Registrar and Paying Agent, the Company and its Subsidiaries shall forward to
the Trustee any Notes surrendered to them for registration of transfer,
exchange, replacement, cancellation 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 (subject
to the record retention requirements of the Exchange Act). Certification of the
destruction of all canceled Notes shall be delivered to the Company. 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 4.1 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, with the Trustee's
consent, which shall not be unreasonably withheld, 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. The defaulted interest shall be considered paid upon
deposit with the Trustee or the Paying Agent of an amount of money equal to the
aggregate amount proposed to be paid in respect of such defaulted interest, and
interest on such defaulted interest shall thereafter cease to accrue from that
date. The Company may make payment of any defaulted interest in any other lawful
manner not inconsistent with the requirements of any securities exchange or
other trading market on which the securities of the Company are listed or
traded, and upon such notice as may be required by such exchange or trading
market, if, after written notice given by the Company to the Trustee of the
proposed payment, such manner of payment shall be deemed practicable by the
Trustee.
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SECTION 2.13 CUSIP NUMBERS
The Company in issuing the Notes may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use CUSIP numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or the
omission of such numbers. The Company will promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.1 NOTICES TO TRUSTEE
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 herein, 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 aggregate principal
amount of Notes to be redeemed, (iv) the redemption price and (v) the CUSIP
numbers of the Notes to be redeemed.
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed at any time,
the Trustee shall select the outstanding Notes to be redeemed or purchased among
the Holders of the outstanding Notes in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance
with any other method as the Trustee in its sole discretion considers 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 $100 or an integral multiple
of $1 above $100; except that if all of the Notes of a Holder are to be
redeemed, the entire outstanding amount of
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Notes held by such Holder, even if not a multiple of $100, 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 3.3 NOTICE OF REDEMPTION
Subject to the provisions of Section 3.9 herein, 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 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 and the amount, if any, of accrued
and unpaid interest and premium, if any, on such Notes as of the redemption
date;
(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 for, and any accrued and unpaid
interest and premium, if any, on such Notes;
(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 aggregate principal amount of Notes to be redeemed
and the information to be stated in such notice as provided in the preceding
paragraph; provided further that
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such Officers' Certificate may be delivered to the Trustee on a date later than
permitted under this Section 3.3 if such later date is acceptable to the
Trustee. If the Trustee is not the Registrar, the Company shall, concurrently
with any such request, cause the Registrar to deliver to the Trustee a
certificate (upon which the Trustee may rely) setting forth the name of, the
address of, and the aggregate principal amount of Notes held by, each Holder.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.3 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.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE
Prior to 12:00 noon New York City time on the redemption date,
the Company shall deposit with the Trustee or with the Paying Agent in
immediately available funds money sufficient to pay the redemption price of, and
accrued and unpaid interest, if any, and premium, if any, 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 and unpaid interest, if any, and premium, if any, 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 a 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 4.1 hereof.
SECTION 3.6 NOTES REDEEMED IN PART
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.2 hereof, 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.
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SECTION 3.7 OPTIONAL REDEMPTION
(a) The Notes shall not be redeemable at the Company's option
prior to March 30, 2002. Thereafter, the Notes shall be subject to redemption at
any time at the sole option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at a redemption price equal to the
principal amount of the Notes, plus accrued and unpaid interest, if any, and
premium, if any, thereon, to but excluding the date of redemption (subject to
the right of Holders of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date).
(b) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Section 3.1 through 3.6 herein.
SECTION 3.8 MANDATORY REDEMPTION
The Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
SECTION 3.9 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS
In the event that, pursuant to Section 4.11 hereof, the
Company shall be required to commence 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 applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.11 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 a 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
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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 3.9 and Section 4.11 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the Purchase Date and the purchase price
and accrued and unpaid interest, if any, and premium, if any, on, such Notes as
of 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 to the Asset Sale Offer shall cease to
accrue interest after the Purchase Date;
(e) 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;
(f) 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 expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
aggregate 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;
(g) 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 $100,
or integral multiples $1 above $100, shall be purchased); and
(h) 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); provided, however,
that no Note shall be issued in a principal amount of less than $100.
On or before 12:00 noon New York City time on the Purchase
Date, the Company shall, to the extent lawful, accept for payment, on a pro rata
basis to the
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45
extent necessary, the Offer Amount or portions thereof properly tendered
pursuant to the Asset Sale Offer, or if less than the Offer Amount has been
tendered, all Notes tendered, and shall deliver, or cause to be delivered, to
the Trustee all Notes or portions thereof so accepted together with 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 3.9 and
Section 4.11 and setting forth the name of each Holder that tendered Notes and
the principal amount of the Notes, as the case may be, or portions thereof
tendered by each such Holder. 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 receipt of an Authentication Order in accordance with Section
2.2 hereof, 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 3.9, any
purchase pursuant to this Section 3.9 shall be made pursuant to the provisions
of Sections 3.1 through 3.6 hereof.
ARTICLE 4
COVENANTS
SECTION 4.1 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 12:00 noon 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.
Notwithstanding anything to the contrary in this Indenture,
the Company may, to the extent it is required to do so by law, deduct or
withhold income or other similar taxes imposed by the United States of America
from principal or interest payments hereunder.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to the
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46
then applicable interest rate on the Notes to the extent lawful; 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 period) at the same rate to the extent lawful.
SECTION 4.2 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 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 2.3 herein.
SECTION 4.3 REPORTS
(a) Whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company shall furnish to the
Trustee and the Holders of the Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Company and its consolidated Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants, and (ii) all current reports that would be required to be filed
with the SEC on Form 8-K if the Company were required to file such reports, in
each case within the time periods specified in the SEC's rules and regulations.
In addition, following the consummation of the
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47
Registered Exchange Offer contemplated by the Agreement to Exchange and Consent,
whether or not required by the rules and regulations of the SEC, the Company
shall file a copy of all such information and reports with the SEC for public
availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company shall at all times comply with TIA Section 314(a).
(b) For so long as any Series A Notes remain outstanding (and
regardless of the penultimate sentence of paragraph (a) above), the Company
shall furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
SECTION 4.4 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 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.
(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 4.3(a) hereof 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 herein, 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.
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48
(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 4.5 TAXES
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.
SECTION 4.6 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 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 4.7 RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividends on, or make any distribution on or in respect of Capital Stock of the
Company or any of its Restricted Subsidiaries (other than dividends or
distributions payable solely in Qualified Capital Stock or options, warrants or
other rights to acquire Qualified Capital Stock); (ii) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the Company; (iii)
make any principal payment on or purchase, redeem, defease or otherwise acquire
or retire for value, before any scheduled principal payment or maturity, any
Subordinated Indebtedness; or (iv) make any Investment in any Person (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, and after giving
effect thereto:
(A) at the time of and after giving effect to any such
Restricted Payment, no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
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49
(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 period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage
Ratio test under Section 4.9 herein; and
(C) on a pro forma basis, such Restricted Payment, together
with the aggregate amount of all other Restricted Payments made by the Company
and its Restricted Subsidiaries on or after the Issue Date (the amount expended
for that purpose if other than cash being the Fair Market Value of the property)
does not exceed, without duplication, the sum of: (i) 100% of the Cumulative
Consolidated Operating Cash Flow of the Company and its Consolidated
Subsidiaries LESS a minority equity interest in such Consolidated Operating Cash
Flow in the event a minority interest has not already been deducted from the
Consolidated Operating Cash Flow, LESS 150% of the Cumulative Consolidated
Interest Expense; PLUS (ii) 100% of the aggregate Net Cash Proceeds received by
the Company on and after the Issue Date from the issue or sale of Qualified
Capital Stock or any options, warrants or rights to purchase Qualified Capital
Stock from the Company to the extent such Net Cash Proceeds are not utilized to
Incur Indebtedness pursuant to clause (d) of Section 4.9, PLUS (iii) 100% of the
aggregate Net Cash Proceeds received upon the exercise of any options, warrants
or rights to purchase Qualified Capital Stock of the Company; PLUS (iv) 100% of
the aggregate Net Cash Proceeds received from the conversion or exchange of debt
securities or Disqualified Capital Stock into Qualified Capital Stock of the
Company plus, to the extent such debt securities or Disqualified Capital Stock
were issued after the Issue Date, the Net Cash Proceeds from their original
issuance; PLUS (v) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment, an amount equal to the lesser of (x) the cash
return of capital resulting from sale proceeds, dividends, distributions,
interest payments, return of capital or principal, management fees or other
transfers of assets to the Company or any of its Restricted Subsidiaries or (y)
the initial amount of such Investment; LESS (vi) any amounts paid or payments
made pursuant to any of clauses (2), (3), (5) and (6) of Section 4.7(b) below.
(b) So long as no Default of Event of Default has occurred and
is continuing or would be caused as a result of such payments, the foregoing
provisions will not prohibit: (1) the payment of any dividend within 60 days
after the date of declaration, if, at said date of declaration, such dividend
would have complied with the conditions set forth in section 4.7(a)(C) above;
(2) the repurchase, redemption, or other acquisition or retirement for value of
any shares of any class of Qualified Capital Stock of the Company in exchange
for, or out of the Net Cash Proceeds of, a substantially concurrent sale of
Qualified Capital Stock of the Company; (3) the repurchase, redemption,
defeasance, retirement, refinancing, acquisition for value or payment of
principal of any Subordinated Indebtedness in exchange for, or out of the Net
Cash Proceeds of, a substantially concurrent sale of Permitted Refinancing
Indebtedness; (4) the payment of any dividend or other distribution by a
Restricted
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50
Subsidiary of the Company to holders of its Equity Interests on a pro rata
basis; (5) the repurchase, redemption or other acquisition or retirement for
value of any Qualified Capital Stock of the Company or any of its Restricted
Subsidiaries held by a member of the Company's or such Restricted Subsidiary's
management, provided that the aggregate amount of such repurchases in any
calendar year shall not exceed $1 million in any twelve-month period, plus the
aggregate cash proceeds provided to the Company during such period from any
reissuance of Qualified Capital Stock to management; (6) Investments in any
Person engaged, or to be engaged, principally in a Related Business on the date
of such Investments; (7) Investments by Restricted Subsidiaries which are
lessees or buyers of Telecommunications Assets under Telecommunications Assets
Agreements in transactions in which the monetary consideration for such
Telecommunications Assets is paid immediately or is payable over time, PROVIDED
that such Investments shall be made as a sublease or installment sale of the
Telecommunications Assets subject to the Telecommunications Asset Agreement to
which such Restricted Subsidiary is party as lessee or buyer; (8) payments made
under any tax sharing agreement between or among the Company and its Restricted
Subsidiaries; (9) payments of dividends on the Company's convertible preferred
stock in an aggregate amount not to exceed $15.1 million in any calendar year;
and (10) payments to Metromedia Company and any of its Affiliates for reasonable
legal, tax, accounting, financial advisory and other management services in the
ordinary course of business, subject to the approval of the disinterested
members of the Board of Directors.
(c) 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 the Company (or
such Restricted Subsidiary, as the case may be) pursuant to the Restricted
Payment.
(d) The Board of Directors may designate any Subsidiary of the
Company (including newly created or newly formed Subsidiaries) to be an
Unrestricted Subsidiary (a "Designation") unless this Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any of its Restricted Subsidiaries that
is not a Subsidiary of the Subsidiary to be so designated; PROVIDED, HOWEVER,
that either (1) the Subsidiary to be so designated has total consolidated assets
of $1.0 million or less or (2) if this Subsidiary has consolidated assets
greater than $1.0 million, then the Restricted Payments to or with respect to
this Subsidiary would be permitted under this Section 4.7.
(e) In the event of any such Designation, all outstanding
Investments owned by the Company and its Restricted Subsidiaries in the
Subsidiary so designated will be deemed to be an Investment made as of the time
of such Designation and will reduce the amount available for Restricted Payments
under Section 4.7(a) or 4.7(b), as applicable. All such outstanding Investments
will be
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51
deemed to constitute Restricted Payments in an amount equal to the Fair Market
Value of such Investments at the time of such Designation.
(f) The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to this designation (1) the Company could Incur at least
$1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio
test set forth under Section 4.9 hereof and (2) no default under this Indenture
shall have occurred and be continuing. Any designation by the Board of Directors
will be evidenced to the Trustee by promptly filing with the Trustee a copy of
the Board Resolution giving effect to such Designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
SECTION 4.8 LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
RESTRICTED SUBSIDIARIES
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer 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 to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits; (b) pay any Indebtedness owed to the Company or any of
its Restricted Subsidiaries; (c) sell, lease or transfer any of its properties
or assets to the Company or any of its Restricted Subsidiaries.
However, the foregoing restrictions shall not apply to
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness of the Company and its Subsidiaries as in effect on the Issue Date;
(b) any applicable law and regulations; (c) any agreement in effect at the time
of the acquisition of any Person by the Company or any of its Restricted
Subsidiaries, which agreement was not entered into in connection with, as a
result of, or in anticipation of, such acquisition; (d) any agreement entered
into in connection with Permitted Liens; (e) any agreement for the sale of
assets; (f) any agreement that extends, renews, refinances or replaces the
agreements containing the encumbrances or restrictions in the foregoing clauses
(a) through (e) above, provided that such provisions are no less favorable to
the Company.
SECTION 4.9 LIMITATION ON THE INCURRENCE OF INDEBTEDNESS AND
ISSUANCE OF PREFERRED STOCK
Subject to the provisions of Section 4.10 herein, the Company
shall not, and shall not permit any of its Restricted Subsidiaries to, directly
or indirectly, Incur any additional Indebtedness or issue or Incur any
Disqualified Capital Stock and the Company shall not permit any of its
Restricted Subsidiaries to issue or Incur any shares of Preferred Stock;
provided, however, that the Company and its Restricted
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52
Subsidiaries may Incur additional Indebtedness or issue or Incur shares of
Disqualified Stock or Preferred Stock if on the date of issuance or Incurrence
the Consolidated Leverage Ratio at the end of the Company's most recently ended
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 Preferred Stock is issued or
Incurred would have been equal to or less than 5.5 to 1.0 (if the Reference
Period ends prior to June 30, 2002), or less than 5.0 to 1.0 (if the Reference
Period ends on or subsequent to June 30, 2002), 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 Capital Stock or
Preferred Stock had been issued or Incurred, as the case may be, at the
beginning of the Reference Period and, to the extent provided in the definition
of Consolidated Leverage Ratio herein, determined after giving effect to the use
of the proceeds from such Incurrence of Indebtedness or issuance or Incurrence
of Disqualified Capital Stock or Preferred Stock.
Notwithstanding the foregoing, except with respect to the PLD
Companies, the provisions of the paragraph set forth immediately above will not
prohibit the Incurrence of any of the following items of Indebtedness
(collectively, the "Permitted Indebtedness"):
(a) the Incurrence by the Company of Indebtedness represented
by the Notes and the Exchange Notes;
(b) the Incurrence by the Company or any of its Restricted
Subsidiaries of Existing Indebtedness;
(c) the Incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness consisting of Capital Lease Obligations, Purchase
Money Obligations or other obligations Incurred for the purpose of financing all
or any part of the purchase price, development, acquisition, delivery,
construction or improvement of real or personal property, tangible or
intangible, used or to be used in a Related Business (including Capital Stock of
a Person engaged in a Related Business) or a Credit Facility entered into or
debt securities issued for the purpose of providing such financing, PROVIDED
that such Indebtedness (inclusive of the interest portion thereof and reasonable
costs of financing) does not exceed the lesser of Fair Market Value or the
purchase price and related costs of design, development, acquisition, delivery
(including carriage, insurance, customs duties, value-added taxes and other
importation fees and expenses), construction or improvement of such assets or
property at the time of such incurrence;
(d) the Incurrence by the Company of Indebtedness in an
aggregate principal amount not to exceed two (2) times the sum of the Net Cash
Proceeds received by the Company after the date of this Indenture in connection
with any Public Equity Offerings or sale of Capital Stock (other than
Disqualified Capital
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53
Stock) to any Strategic Investor to the extent that such Net Cash Proceeds have
not been used to make Restricted Payments pursuant to Section 4.7(a)(C)(ii) and
Section 4.7(b)(2) hereof, provided that such Indebtedness does not mature prior
to six (6) months following the Stated Maturity of the Notes;
(e) the incurrence by the Company or any of its Subsidiaries
of any Indebtedness entered into in the ordinary course of business (i) pursuant
to Interest Rate Agreements entered into to protect the Company or any of its
Subsidiaries against fluctuations in interest rates in respect of Indebtedness
of the Company or any of its Subsidiaries so long as the notional principal
amount of such Interest Rate Agreements does not exceed the aggregate principal
amount of such Indebtedness then outstanding or (ii) under any Currency Hedging
Agreements entered into to protect the Company or any of its Subsidiaries
against fluctuations in the value of any currency and not for speculative
purposes;
(f) ordinary course performance bonds, letters of credit and
appeal and surety bonds entered into not in connection with borrowed money;
(g) inter-company Indebtedness owed to the Company or any of
its Restricted Subsidiaries or any Guarantee by the Company or any of its
Restricted Subsidiaries of any Indebtedness permitted to be Incurred hereunder;
(h) the Incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness, so long as the aggregate principal
amount of such Indebtedness does not exceed $200 million at any one time
outstanding; and
(i) Permitted Refinancing Indebtedness of any of the
Indebtedness permitted by clauses (b-h) above.
In the event that Indebtedness meets the criteria of more than
one of the types of Indebtedness described in clauses (a) through (i) above, the
Company may, in its sole discretion, classify such Indebtedness as having been
Incurred under one of these clauses and, except as specifically provided
otherwise, will only be required to include the amount and type of such
Indebtedness as having been Incurred pursuant to such clause.
SECTION 4.10 LIMITATION ON THE INCURRENCE OF INDEBTEDNESS BY THE PLD COMPANIES
Notwithstanding the provisions of Section 4.9 herein, none of
the PLD Companies shall directly or indirectly Incur any additional Indebtedness
or any Guarantees of any Indebtedness.
The foregoing limitations shall not, however, prohibit:
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54
(a) Existing Indebtedness of the PLD Companies;
(b) the Incurrence by the PLD Companies of Indebtedness
consisting of Capital Lease Obligations, Purchase Money Obligations, or other
obligations Incurred for the purpose of financing all or any part of the
purchase price, development, acquisition, delivery, construction or improvement
of real or personal property, tangible or intangible, used or to be used in a
Related Business (other than any business specified in clause (v) of the
definition of Related Business) or a Credit Facility entered into or debt
securities issued for the purpose of providing such financing, PROVIDED that
such Indebtedness (inclusive of the interest portion thereof and reasonable
costs of financing) does not exceed the lesser of Fair Market Value or the
purchase price and related costs of design, development, acquisition, delivery
(including carriage, insurance, customs duties, value-added taxes and other
importation fees and expenses), construction or improvement of such assets or
property at the time of such Incurrence;
(c) the Incurrence by the PLD Companies of any Indebtedness
entered into in the ordinary course of business (i) pursuant to Interest Rate
Agreements entered into to protect the PLD Companies against fluctuations in
interest rates in respect of Indebtedness of any of the PLD Companies so long as
the notional principal amount of such Interest Rate Agreements does not exceed
the aggregate principal amount of such Indebtedness then outstanding or (ii)
under any Currency Hedging Agreements entered into to protect the PLD Companies
against fluctuations in the value of any currency and not for speculative
purposes;
(d) ordinary course performance bonds, letters of credit and
appeal and surety bonds entered into not in connection with borrowed money;
(e) Indebtedness between any of the PLD Companies or any
Guarantee by any PLD Company of any Indebtedness permitted to be Incurred by any
other PLD Company hereunder;
(f) the Incurrence by the PLD Companies of additional
Indebtedness, so long as the aggregate principal amount of such Indebtedness
does not exceed $25.0 million at any one time outstanding; and
(g) Permitted Refinancing Indebtedness of any of the
Indebtedness permitted by clauses (a) through (f) above.
In the event that Indebtedness meets the criteria of more than
one of the types of Indebtedness described in clauses (a) through (g) above, the
Company may, in its sole discretion, classify such Indebtedness as having been
Incurred under one of these clauses and, except as specifically provided
otherwise, will only be required to include the amount and type of such
Indebtedness as having been Incurred pursuant to such clause.
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55
SECTION 4.11 LIMITATION ON ASSET SALES
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, engage in any Asset Sale,
unless (i) the Company (or such Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value (including as to the value of all non-cash consideration) of the
assets or Capital Stock subject to such Asset Sale and (ii) at least 80% of the
consideration therefor is in the form of cash and/or Cash Equivalents paid at
the closing of such transaction. To the extent that the Company or any of its
Restricted Subsidiaries receives securities or other noncash property or assets
as proceeds of an Asset Sale, such securities or other noncash proceeds shall
not be treated as Net Proceeds of an Asset Sale unless and until the Company or
its Restricted Subsidiary, as the case may be, receives cash or Cash Equivalents
from a sale, repayment, exchange or other return of capital on, such securities
or other noncash property and then only to the extent of the cash or Cash
Equivalents received.
(b) In the event of an Asset Sale involving PLD Assets, the
Company shall, after applying the Net Proceeds therefrom to repay and
permanently reduce other Existing Indebtedness that by its terms requires such
repayment from such Asset Sale, use 50% of the Net Proceeds allocable to the PLD
Assets involved in such Asset Sale to make an offer to purchase the Notes at a
repurchase price in cash equal to 100% of their Accreted Value on the repurchase
date if such repurchase date is before March 30, 2002, or 100% of the principal
amount at Stated Maturity of the Notes, plus accrued but unpaid interest, if
any, to the repurchase date if the repurchase date is after March 30, 2002;
provided, however, that the Company shall not be required to make an offer to
purchase the Notes under this Section 4.11 in an amount less than $10 million;
provided, further, that to the extent that 50% of the Net Proceeds of an Asset
Sale of PLD Assets are not equal to or do not exceed $10 million, such amount
shall constitute "Excess Proceeds". Once such Excess Proceeds exceed $10
million, the Company shall use such Excess Proceeds to make an offer to
repurchase the Notes at 100% of their Accreted Value if the repurchase date is
before March 30, 2002 or 100% of the principal amount at the Stated Maturity of
the Notes, plus accrued but unpaid interest, if any, to the repurchase date if
the repurchase date is after March 30, 2002.
(c) The Company or a Restricted Subsidiary will be permitted
to apply the Net Proceeds from an Asset Sale or the Net Proceeds from an Asset
Sale of PLD Assets that remain following the offer to purchase Notes with
proceeds from an Asset Sale of PLD Assets described in clause (b) above, to (i)
repay the Notes, any Existing Indebtedness (or any Permitted Refinancing
Indebtedness thereof) or any PARI PASSU Indebtedness if required by the terms
thereof or (ii) reinvest in assets of a Related Business, provided that (A) in
the case of an Asset Sale of PLD Assets, the Net Proceeds remaining after the
offer to purchase Notes with proceeds from an Asset Sale of PLD Assets described
in clause (b) above, if any, must be applied within 365
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56
days of the date of their receipt and (B) in the case of an Asset Sale of assets
other than PLD Assets, the Net Proceeds therefrom must be applied within 2 years
of the date of their receipt.
(d) To the extent that the Net Proceeds from an Asset Sale are
not so applied within the periods described in (i) and (ii) of clause (c) above
in this Section 4.11, the remaining Net Proceeds shall constitute Excess
Proceeds. When the aggregate amount of Excess Proceeds equals or exceeds $10.0
million (after application of Excess Proceeds to repurchase Notes as described
above in this Section 4.11), the Company shall make a pro rata offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount or Accreted Value of the Notes that may be purchased out of the Excess
Proceeds, at a purchase price in cash in an amount equal to 100% of the Accreted
Value thereof on the repurchase date if such date is before March 30, 2002, or
equal to 100% of the principal amount at Stated Maturity thereof, plus accrued
and unpaid interest thereon to the date of purchase if such date is after March
30, 2002 (subject to the right of Holders of record on the relevant Record Date
to receive interest due on the relevant Interest Payment Date), in accordance
with the procedures set forth in Section 3.9 of this Indenture. To the extent
that any Excess Proceeds remain after consummation of such Asset Sale Offer, the
Company may use such Excess Proceeds for other general corporate purposes not
otherwise prohibited by this Indenture. If the aggregate principal amount (or
Accreted Value, as applicable) of Notes tendered into such Asset Sale Offer by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be repurchased on a pro rata basis in proportion to the respective
principal amounts at Stated Maturity (or Accreted Values as applicable) of the
Notes in accordance with Section 3.9 of this Indenture. If the aggregate
principal amount (or Accreted Value, as applicable) of Notes tendered into such
Asset Sale Offer by Holders thereof is less than the amount of Excess Proceeds,
the Company may use such remaining Excess Proceeds for other general corporate
purposes not otherwise prohibited by this Indenture. Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero for
purposes of the second sentence of this paragraph.
(e) The amount of any Indebtedness (as shown on the Company's
(or such Restricted Subsidiary's, as the case may be) most recent balance sheet
or in the notes to such balance sheet) that is assumed by the transferee of any
such assets pursuant to an agreement that immediately releases the Company and
all of its Restricted Subsidiaries from all liability in respect thereof will be
deemed to be cash and/or Cash Equivalents for purposes of this Section 4.11, but
will not be treated as Net Proceeds of an Asset Sale.
(f) To the extent that the provisions of any securities laws
or regulations shall conflict with this Section 4.11, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section 4.11 by virtue thereof.
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SECTION 4.12 LIMITATION ON 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,
exchange or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or render any services to, or enter into or make or
amend any transaction, contract, agreement, understanding, loan, advance or
Guarantee with, or for the benefit of, any Affiliate of the Company (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are not materially less favorable, in the aggregate, to the
Company or the relevant Restricted Subsidiary, as applicable, than those that
would have been obtained at the time of the transaction in a comparable
transaction by the Company or such Restricted Subsidiary, as applicable, on an
arm's- length basis with a Person who is not an Affiliate of the Company and
(ii) with respect to any Affiliate Transaction or series of related Affiliate
Transactions (A) involving aggregate consideration in excess of $5.0 million,
the Company delivers to the Trustee a resolution of the Board of Directors
certifying that such Affiliate Transaction is approved by a majority of the
disinterested members of the Board of Directors and that such Affiliate
Transaction complies with clause (i) above and (B) involving aggregate
consideration in excess of $10.0 million, the Company delivers to the Trustee a
written opinion from an investment banking firm as to the fairness to the
Company or the relevant Restricted Subsidiary, as applicable, of such Affiliate
Transaction from a financial point of view.
Notwithstanding the foregoing, the following items shall not
be deemed to be Affiliate Transactions: (i) (a) the entering into, maintaining
or performance of any employment contract, collective bargaining agreement,
benefit plan, program or arrangement, related trust agreement or any other
similar arrangement for or with any employee, officer or director heretofore or
hereafter entered into in the ordinary course of business, including vacation,
health, insurance, deferred compensation, retirement, savings or other similar
plans, (b) the payment of compensation, performance of indemnification or
contribution obligations, or an issuance, grant or award of stock, options, or
other equity-related interests or other securities, to employees, officers or
directors in the ordinary course of business, (c) any transaction with an
officer or director of the Company or any of its Subsidiaries in the ordinary
course of business not involving more than $100,000 in any one case and in an
aggregate amount not to exceed $2.0 million, or (d) advances to employees of the
Company or any of its Subsidiaries in the ordinary course of business in an
aggregate amount not to exceed $2.0 million, (ii) transactions solely between or
among the Company and its Restricted Subsidiaries or among Restricted
Subsidiaries, (iii) payment of reasonable and customary fees to directors who
are not employees of the Company, (iv) any sale or other issuance of Equity
Interests (other than Disqualified Capital Stock) of the Company to Affiliates
of the Company, (v) Affiliate Transactions in effect or approved by the Board of
Directors on the Issue Date, including any replacements or amendments thereto
(provided that the terms of such replacements or amendments are not materially
less favorable to the Company than
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the terms of such agreement prior to such amendment), (vi) transactions with any
Persons engaged in a Related Business that is an Affiliate solely because the
Company has a direct or indirect equity interest in such a Person, and (vii) any
transaction that is permitted under Section 4.7 hereof.
SECTION 4.13 LIMITATION ON LIENS
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur, assume, suffer to
exist or affirm any Lien of any kind (other than Permitted Liens and PLD Company
Permitted Liens) upon any of their property or assets, now owned or hereafter
acquired, or upon any income or profits therefrom unless contemporaneously
therewith effective provision is made to secure all Indebtedness due under this
Indenture and the Notes on an equal and ratable basis with the obligations so
secured by such Lien with a Lien on the same properties and assets securing the
obligations secured by such Lien for so long as such obligations are so secured.
In addition to the foregoing, none of the PLD Companies shall directly or
indirectly Incur, assume, suffer to exist or affirm any Lien of any kind (except
for any PLD Company Permitted Liens) upon any PLD Asset, including Additional
PLD Assets, or upon any income or profits therefrom unless contemporaneously
therewith effective provision is made to secure all Indebtedness due under this
Indenture and the Notes on an equal and ratable basis with the obligations so
secured by such Lien with a Lien on the same properties and assets securing the
obligations secured by such Lien for so long as such obligations are so secured.
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 CHANGE OF CONTROL
(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 $100 or an integral multiple of $1 above $100) of such Holder's Notes
pursuant to
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the offer described below (the "Change of Control Offer") at a purchase price in
cash equal to 101% of the Accreted Value of the Notes to the date of repurchase
if such date is on or before March 30, 2002 or 101% of the aggregate principal
amount at Stated Maturity of such Notes to the repurchase date if such date is
after March 30, 2002 plus accrued and unpaid interest thereon to the date of
repurchase (the "Change of Control Payment") (subject to the right of Holders of
record on the relevant Record Date to receive interest due on the relevant
Interest Payment Date), provided, however, that the Company shall not be
obligated to repurchase Notes pursuant to this covenant in the event that it has
exercised its rights to redeem all of the Notes as described in Section 3.7
hereof. Within 30 days following any Change of Control, the Company will mail a
notice to each Holder (with a copy to the Trustee) stating (1) that a Change of
Control has occurred and that the Holder has the right to require the Company to
repurchase his or her Notes at a purchase price equal to the Change of Control
Payment and in accordance with the procedures required by this Indenture and
described in such notice, (2) the date of the repurchase, which shall be no
earlier than 30 days nor later than 60 days from the date the Change of Control
notice is mailed (the "Change of Control Payment Date"), and (3) the procedures
that the Company determines shall be followed by the Holders of Notes to have
their Notes repurchased.
The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with any of the
provisions of this Section 4.15, the Company shall comply with the applicable
securities laws and regulations and will be deemed not to have breached its
obligations under this Section 4.15 by virtue thereof.
(b) On the Change of Control Payment Date, the Company will,
to the extent lawful, (1) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee, the Notes so accepted together with an Officers' Certificate
stating the Accreted Value or aggregate principal amount at Stated Maturity of
the Notes or portions thereof being repurchased by the Company. The Paying Agent
shall promptly mail or deliver to each Holder of Notes so tendered the Change of
Control Payment for such Notes, and upon written direction of the Company, the
Trustee shall promptly authenticate and mail or deliver (or cause to be
transferred by book entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of Notes surrendered, if any; provided that each such
new Note shall be in a principal amount of $100 or an integral multiple of $1
above $100. 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.
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(c) Notwithstanding anything to the contrary set forth in this
Section 4.15, the Company shall not be required to make a Change of Control
Offer upon the occurrence of 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 Section 4.15, and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16 PAYMENTS FOR CONSENT
Neither the Company nor any of its Restricted Subsidiaries
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any 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 or is paid to all Holders of the Notes that consent, waive or agree
to amend such terms or provisions of this Indenture or the Notes in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
SECTION 4.17 MONEY FOR PAYMENTS TO BE HELD IN TRUST
If the Company shall at any time act as its own Paying Agent,
it shall, on or before each due date of the principal, premium or interest with
respect to the Notes, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal, premium or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided, and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Notes, it shall, on or before each due date of the principal, premium or
interest with respect to the Notes, deposit with a Paying Agent a sum in same
day funds (or New York Clearing House funds if such deposit is made prior to the
date on which such deposit is required to be made) sufficient to pay the
principal, premium or interest so becoming due (or at the option of the Company,
payment of interest may be mailed by check to the Holders of the Notes at their
respective addresses set forth in the register of Holders of Notes; provided
that all payments with respect to Notes represented by one or more permanent
Global Notes shall be paid by wire transfer of immediately available funds to
the account of the Depositary) such sum to be held in trust for the benefit of
the Persons entitled to such principal, premium or interest and (unless such
Paying Agent is the Trustee) the Company shall promptly notify the Trustee of
such action or any failure so to act.
The Company shall cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will:
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(a) hold all sums held by it for the payment of the principal
of, premium, if any, or interest on Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee written notice of any default by the
Company (or any other obligor upon the Notes) in the making of any payment of
principal, premium or interest;
(c) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all respects
with the provisions of this Indenture relating to the duties, rights and
obligations of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal, premium or
interest with respect to a Note and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company at the written request of the Company or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, 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, shall at the
expense of the Company cause notice to be promptly sent to each Holder that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification, any unclaimed
balance of such money then remaining shall be repaid to the Company.
SECTION 4.18 ADDITIONAL PLD ASSETS
The Company agrees that (i) from May 18, 1999 through the
second anniversary of the Issue Date, the PLD Companies will acquire the
Additional PLD Assets, whether or not using Purchase Money Obligations. To the
extent the
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Company acquired Pivotel Assets or properties prior to such date, without using
Purchase Money Obligations, such assets shall constitute Additional PLD Assets.
SECTION 4.19 LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into any Sale and
Leaseback Transaction with respect to any property or assets unless: (a) the
consideration received at the time of the Sale and Leaseback Transaction is at
least equal to the Fair Market Value of the property or assets; (b) the sale or
transfer of such property or assets to be leased is treated as an Asset Sale and
complies with Section 4.11 hereof and (c) the Company or such Restricted
Subsidiary would be entitled to Incur additional Indebtedness under Section 4.9
hereof.
The foregoing restrictions shall not apply to any Sale and
Leaseback Transaction if: (i) the lease is for a period, including renewal
rights, not in excess of three years; (ii) the transaction is solely between the
Company and any of its Restricted Subsidiaries or one of its Restricted
Subsidiaries and any other Restricted Subsidiaries; and (iii) the transaction is
consummated within 180 days of the acquisition by the Company or any of its
Subsidiaries of the property or assets or entered into within 180 days after the
purchase or substantial completion of the construction of such property or
assets or 270 days in the event that the only condition delaying such
consummation of the purchase or the completion of the construction is the
receipt of applicable regulatory approvals.
ARTICLE 5
SUCCESSORS
SECTION 5.1 MERGER, CONSOLIDATION, OR SALE OF ASSETS
(a) The Company shall not, directly or indirectly, consolidate
with or merge with or into (whether or not the Company is the surviving
corporation), or sell, assign, transfer, convey, lease or otherwise dispose of
all or substantially all of its properties or assets, in one or more related
transactions, to another Person unless: (i) the Company is the surviving
corporation or the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, assignment, transfer,
conveyance, lease or other disposition shall have been made is a corporation
organized and existing under the laws of the United States of America, any state
thereof or the District of Columbia; (ii) the Person formed by or surviving any
such consolidation or merger (if other than the Company) or the Person to which
such sale, assignment, transfer, conveyance, lease or other disposition shall
have been made expressly assumes all the obligations of the Company under the
Notes and this Indenture pursuant to a supplemental indenture executed and
delivered to the Trustee,
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in a form reasonably satisfactory to the Trustee; (iii) 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
before and immediately after giving effect on a pro forma basis to such
transaction; (iv) except in the case of a transaction with a Wholly Owned
Subsidiary of the Company, the Company or the Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, conveyance, lease or other disposition shall have been
made is, immediately after giving effect to such transaction and after giving
pro forma effect thereto and any related financing transactions as if the same
had occurred at the beginning of the applicable period, permitted to Incur at
least $1.00 of additional Indebtedness pursuant to the first paragraph of
Section 4.9 hereof; and (v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture and the Notes.
(b) For purposes of this Article 5, the transfer (by
assignment, sale or otherwise) of all or substantially all of the properties and
assets of one or more of the Company's 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.
(c) Notwithstanding (a) and (b) above, any of the Company's
Restricted Subsidiaries may consolidate with, merge into or transfer all or part
of its properties and assets to the Company or one of its Wholly Owned
Subsidiaries if no other parties are either directly or indirectly involved in
such transaction. Notwithstanding clauses (a) and (b) above, the Company may
merge with an Affiliate with no Indebtedness, incorporated solely for the
purpose of reincorporating the Company in another jurisdiction in the United
States of America, any state of the United States of America or the District of
Columbia to realize tax or other benefits.
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.1
hereof, the successor Person formed by such 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 (so that from and after the date of
such consolidation, merger or transfer, the provisions of this Indenture
referring to the "Company" shall refer instead to the successor Person and not
to the Company), and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
herein 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.
Notwithstanding the foregoing, the Company shall not be released
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from the obligation to pay the principal of, accrued and unpaid interest, if
any, on, and premium, if any, on, the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT
The following events shall constitute "Events of Defaults" for
purposes of this Indenture:
(i) a default for 30 days in the payment when
due of interest on any Note;
(ii) a default in the payment when due of the
principal of, or premium, if any, on the Notes, whether at Stated
Maturity, upon optional redemption, a required repurchase, declaration
or otherwise;
(iii) the failure by the Company or any of its
Restricted Subsidiaries to comply with its obligations under Article 5
hereof;
(iv) the failure by the Company or any of its
Restricted Subsidiaries to comply for 30 days after receiving notice
from the Holders of at least 25% in aggregate principal amount at
Stated Maturity (or Accreted Value, as applicable) of the outstanding
Notes or from the Trustee on behalf of Holders of such Notes with any
of the Company's or the Restricted Subsidiary's obligations under
Sections 4.7 through 4.13, 4.15 and 4.17 through 4.19 hereof, in each
case, other than a failure to repurchase Notes which will constitute an
Event of Default under clause (ii) above;
(v) the failure by the Company or any of its
Restricted Subsidiaries to comply for 60 days after receiving notice
thereof from the Holders of at least 25% in aggregate principal amount
at Stated Maturity (or Accreted Value, as applicable) of the
outstanding Notes or from the Trustee on behalf of such Holders with
any of its other obligations and duties under this Indenture or the
Notes;
(vi)(a) the failure to pay, waive or cure the failure
to pay, within any applicable grace period, after final maturity, any
Indebtedness 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 the Company or any of its Restricted
Subsidiaries (or the payment of which is Guaranteed by the Company or
any of its Restricted
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Subsidiaries) whether such Indebtedness or Guarantee now exists, or is
created after the Issue Date, or (b) a default under any such mortgage,
indenture or other instrument evidencing such Indebtedness, which
default results in the acceleration of such Indebtedness prior to its
express maturity and, in each of (a) or (b) above, the amount of any
such Indebtedness, together with the amount of any other such
Indebtedness or the maturity of which has been so accelerated, exceeds
$15.0 million;
(vii) the entry against the Company or any of its
Significant Subsidiaries of any final judgment or decree not subject to
appeal for the payment of money in excess of $15.0 million (net of
applicable insurance coverage which is acknowledged in writing by the
insurer), which judgments are not paid, vacated, discharged or stayed
for a period of 60 days after they become final and non-appealable;
(viii) the Company or any of its Significant
Subsidiaries:
(a) commences a voluntary case under any
Bankruptcy Law,
(b) consents to the entry of an order
for relief against it in an involuntary case under any Bankruptcy Law,
(c) consents to the appointment of a
custodian of it or for all or substantially all of its property,
(d) makes a general assignment for the
benefit of its creditors, or
(e) generally is not paying its debts as
they become due; or
(ix) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(a) is for relief against the Company or
any of its Significant Subsidiaries;
(b) appoints a custodian of the Company
or any of its Significant Subsidiaries or for all or substantially all
of the property of the Company or any of its Significant Subsidiaries;
or
(c) orders the liquidation of the
Company or any of its Significant Subsidiaries;
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and the order or decree remains unstayed and in effect for 60 consecutive days.
SECTION 6.2 ACCELERATION
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount at Stated Maturity
(or Accreted Value, as applicable) of the then outstanding Notes may declare all
the Notes to be due and payable immediately by sending to the Company a notice
of acceleration. Notwithstanding the foregoing, if an Event of Default specified
in clause (viii) or (ix) of Section 6.1 hereof occurs with respect to the
Company, any of its Restricted Subsidiaries that constitutes a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, 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 6.3 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 6.4 WAIVER OF PAST DEFAULTS
Holders of not less than a majority in aggregate principal
amount at Stated Maturity (or Accreted Value, as applicable) of the then
outstanding Notes (or, with respect to a provision of this Indenture that may
only be amended by the Holders of not less than 66 2/3% in aggregate principal
amount at Stated Maturity (or Accreted Value, as applicable) of the then
outstanding Notes, the Holders of not less than 66 2/3% in aggregate principal
amount at Stated Maturity (or Accreted Value, as applicable) of the then
outstanding Notes) by written 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 Default or Event of
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Default in the payment of the principal of, premium or interest on, the Notes
(including in connection with an offer to purchase). Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture, but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.
SECTION 6.5 CONTROL BY MAJORITY
Holders of Notes may not enforce this Indenture or the Notes
except as provided herein. Subject to Section 7.1(e) hereof, Holders of a
majority in aggregate principal amount at Stated Maturity (or Accreted Value, as
applicable) 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 the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture or
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 deemed proper by the Trustee that is not
inconsistent with such direction.
SECTION 6.6 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 aggregate principal amount
at Stated Maturity (or Accreted Value, as applicable) 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 60-day period the Holders of a majority in
aggregate principal amount at Stated Maturity (or Accreted Value, as applicable)
of the then outstanding Notes do not give the Trustee a direction inconsistent
with the request.
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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 6.7 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 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 6.8 COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.1(i) or (ii)
hereof 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 (i)
the whole amount of principal of, premium and interest remaining unpaid on the
Notes and interest on overdue principal and, to the extent lawful, interest and
(ii) 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 6.9 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 participate as a member, voting or otherwise,
of any official committee of creditors appointed in such matter 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 7.7 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 7.7 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
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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 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 6,
it shall pay out the money in the following order:
FIRST: to the Trustee, its agents and counsel for amounts due
under Sections 6.8 and 7.7 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 and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal, premium 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 6.11 does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.7 hereof, or a suit by Holders of more
than 10% in aggregate principal amount at Stated Maturity (or Accreted Value, as
applicable) of the then outstanding Notes.
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ARTICLE 7
TRUSTEE
SECTION 7.1 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 man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the occurrence and 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 similar documents) or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee
shall examine the certificates (or similar documents) and opinions to
determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein or otherwise
verify the contents thereof).
(c) The Trustee may not be relieved from liabilities for its
own grossly negligent action, its own grossly 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 7.1;
(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 grossly 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 6.5 hereof.
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(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), (c) and (e) of this Section 7.1.
(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 or to perform any
duty under this Indenture at the request of any Holders, unless such Holders
shall have offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense including reasonable attorneys' fees that
might be incurred by it in compliance with such request or direction.
(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 7.2 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 any such
document. The Trustee shall receive and retain financial reports and statements
of the Company as provided herein, but it shall have no duty to review or
analyze such reports or statements to determine compliance with covenants or
other obligations of the Company.
(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 of its selection and the 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 such attorney
or 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.
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(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) Prior to the occurrence of an Event of Default hereunder
and after the curing of all Events of Default which may have occurred, the
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, order, approval, bond or other paper or document unless
requested in writing to do so by the Holders representing more than 25% in
aggregate principal amount at Stated Maturity (or Accreted Value, as applicable)
of Notes then outstanding; PROVIDED, HOWEVER, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it by
the terms of this Indenture, the Trustee may require indemnity reasonably
satisfactory to it against such cost, expense or liability as a condition to so
proceeding.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company 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 7.4 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.
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SECTION 7.5 NOTICE OF DEFAULTS
(a) The Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Responsible Officer of the Trustee has
actual knowledge thereof or unless written notice of any event which is in fact
such a Default or Event of Default is received by the Trustee at the Corporate
Trust Office of the Trustee, and such notice references the Notes and this
Indenture.
(b) If a Default or Event of Default occurs and is continuing
and if it is known to the Trustee in accordance with the provisions of paragraph
(a) of this Section 7.5, 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 of principal of, premium, if
any, or interest on any Note (including any failure to redeem Notes called for
redemption or any failure to repurchase Notes that are tendered pursuant to an
Asset Sale Offer and that are required to be repurchased by the terms of this
Indenture), 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 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES
Within 60 days after each May 15th beginning with the May 15th
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 Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA Section 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, commencing at the time this
Indenture is qualified under the TIA, filed with the SEC and each stock exchange
on which the Notes are listed in accordance with TIA Section 313(d). The Company
shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.7 COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee from time to time such
compensation for its services hereunder as the parties shall agree from time to
time. 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
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reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee and hold it harmless
for, from and 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 7.7) 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 gross 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 or delayed.
The obligations of the Company under this Section 7.7 shall
survive the satisfaction and discharge of this Indenture or the resignation or
removal of the Trustee.
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 satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1 (viii) or (ix) 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 Section
313(b)(2) to the extent applicable.
SECTION 7.8 REPLACEMENT OF TRUSTEE
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.8.
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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 Notes of a majority in aggregate principal amount at Stated Maturity
(or Accreted Value, as applicable) 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 performing the services
of Trustee hereunder.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the "retiring Trustee"), the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in aggregate principal amount at Stated Maturity (or
Accreted Value, as applicable) of the then outstanding Notes may appoint a new
successor Trustee to replace the successor Trustee appointed by the Company.
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 Notes of at least 10% in aggregate principal amount
at Stated Maturity (or Accreted Value, as applicable) 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 of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10 hereof, such Holder of a Note 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 of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the retiring Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.7 hereof. Notwithstanding
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replacement of the Trustee pursuant to this Section 7.8, the Company's
obligations under Section 7.7 hereof shall continue for the benefit of the
retiring Trustee.
SECTION 7.9 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 or the District of Columbia or a subsidiary of a
bank holding corporation that is authorized under such laws to exercise
corporate trustee powers, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100.0 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 Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE
(a) When (i) the Company delivers to the Trustee all
outstanding Notes (other than Notes replaced pursuant to Section 2.7) for
cancellation or (ii) all outstanding Notes have become due and payable, whether
at maturity or upon redemption and the Company has irrevocably deposited with
the Trustee or a Paying Agent funds sufficient to pay at maturity or upon
redemption or otherwise, as applicable, all outstanding Notes (other than Notes
replaced pursuant to Section 2.7), including interest thereon to maturity or
such redemption date, and if in either case the Company pays all other sums
payable hereunder by the Company, then this Indenture shall, subject to Sections
8.1(c) and 8.6, cease to be of further effect. The
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Trustee shall acknowledge satisfaction and discharge of this Indenture on demand
of the Company (accompanied by an Officers' Certificate and an Opinion of
Counsel stating that all conditions precedent specified herein relating to the
satisfaction and discharge of this Indenture have been complied with) and at the
cost and expense of the Company.
(b) Subject to Sections 8.1(c), 8.2 and 8.6, the Company at
any time may terminate (i) all its obligations under the Notes and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.2, 4.3, 4.5, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.17, 4.18 and
5.1(a)(iv) and the operation of Sections 6.1(iv), 6.1(v), 6.1(vi), 6.1(vii),
6.1(viii) with respect to Significant Subsidiaries, and 6.1(ix) with respect to
Significant Subsidiaries and 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 6.1(iii), 6.1(iv) or 6.1(v) ("covenant defeasance option"), but, except
as specified above, the remainder of this Indenture and the Notes shall be
unaffected thereby. The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment
of the Notes may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Notes may not
be accelerated because of an Event of Default specified in Sections 6.1(iii),
6.1(iv), 6.1(v), 6.1(vi), 6.1(vii), 6.1(viii) (but only with respect to a
Significant Subsidiary) or 6.1(ix) (but only with respect to a Significant
Subsidiary) or because of the failure of the Company to comply with Section
5.1(a)(iv).
Upon satisfaction of the conditions set forth herein and upon
request of the Company (and at the Company's expense), the Trustee shall
acknowledge in writing the discharge of those obligations that the Company
terminates.
(c) Notwithstanding the provisions of Sections 8.1(a) and (b),
the Company's obligations under Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.5
and 8.6 shall survive until the Notes have been paid in full. Thereafter, the
Company's obligations in Sections 7.7 and 8.5 shall survive.
SECTION 8.2 CONDITIONS TO DEFEASANCE.
The Company may exercise its legal defeasance option or its
covenant defeasance option only if:
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(i) the Company irrevocably deposits in trust with the Trustee
for the benefit of the Holders money in U.S. dollars or U.S. Government
Obligations or a combination thereof for the payment of principal of, premium,
if any, on and interest on the Notes to maturity or redemption, as the case may
be and to pay any amounts due the Trustee under this Indenture and, in addition,
the Company specifies in such Officers' Certificate whether the Notes are being
defeased to maturity or to a particular redemption date;
(ii) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their opinion
that the payments of principal and interest when due and without reinvestment on
the deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will be
sufficient to pay principal of, premium, if any, and interest when due on all
the outstanding Notes to maturity or on the applicable redemption date, as the
case may be;
(iii) 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 with respect to this Indenture resulting from the Incurrence of
Indebtedness, all or a portion of which will be used to defease the Notes
concurrently with such Incurrence);
(iv) such legal defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a Default under this Indenture
or any other material agreement or instrument to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
(v) the Company shall have delivered to the Trustee an Opinion
of Counsel, subject to such qualifications and exceptions as the Trustee deems
appropriate, to the effect that (A) the Notes and (B) assuming no intervening
bankruptcy of the Company between the date of deposit and the 91st day following
the deposit and that no Holder of the Notes is an insider of the Company, 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;
(vi) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company required to register under the
Investment Company Act of 1940;
(vii) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling,
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or (ii) since the date of this Indenture 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 Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such legal defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such legal defeasance had not occurred;
(viii) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States to the effect that the Holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such covenant
defeasance had not occurred; and
(ix) the Company delivers to the Trustee an Officers'
Certificate stating that all conditions precedent to the defeasance and
discharge of the Notes and this Indenture as contemplated by this Article VIII
have been complied with and an Opinion of Counsel stating that the Trustee on
behalf of the Holders will have a valid and perfected exclusive security
interest in the trust funds and that the conditions precedent provided for in
clauses (vii) and (viii), as applicable, of this Section 8.2 have been complied
with.
SECTION 8.3 APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to this Article 8. The Trustee
or Paying Agent shall apply the deposited money and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of
principal of, and premium, if any, on and interest on the Notes.
SECTION 8.4 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly turn over to
the Company upon request any excess money or Notes held by them upon payment of
all the obligations under this Indenture.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal of or interest on the Notes that remains
unclaimed for two years, and, thereafter, Holders of Notes entitled to the money
must look solely to the Company for payment as general unsecured creditors and
all liability of the Trustee or such Paying Agent with respect to such money
shall cease.
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SECTION 8.5 INDEMNITY FOR U.S. GOVERNMENT OBLIGATIONS.
The Company shall pay and shall indemnify the Trustee and any
Paying Agent against any tax, fee or other charge imposed on or assessed against
deposited money and/or U.S. Government Obligations or the principal and interest
received on such money or U.S. Government Obligations.
SECTION 8.6 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with this Article 8 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 obligations of the Company under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article 8; provided, however, that if the Company has made any payment of
interest or premium on or principal of any Notes because of the reinstatement of
its obligations under this Indenture and the Notes, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF NOTES
Notwithstanding Section 9.2 hereof, 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, omission, 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 the Holders of the Notes by a successor to the Company pursuant to Article 5
hereof;
(d) 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 rights hereunder of any Holder of Notes;
<PAGE>
81
(e) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA;
(f) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon the
Company;
(g) to provide for the issuance of the Unrestricted Notes
under the Registered Exchange Offer contemplated by the Agreement to Exchange
and Consent;
(h) to secure the Notes; or
(i) to effect any change to the transfer and exchange
restrictions and security delivery procedures contained in Article 2 in order to
conform with changes in any applicable law or Applicable Procedures.
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 Sections 7.2 and 9.6 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 9.2 WITH CONSENT OF HOLDERS OF NOTES
Except as provided below in this Section 9.2, the Company and
the Trustee, may amend or supplement this Indenture (including Section 3.9 and
4.11 hereof) and the Notes with the consent of the Holders of a majority in
aggregate principal amount at Stated Maturity (or Accreted Value, as applicable)
of the then outstanding Notes 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 6.4 and 6.7 hereof, any 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
noncompliance with any provision of this Indenture or the Notes may be waived
with the consent of the Holders of a majority in aggregate principal amount at
Stated Maturity (or Accreted Value, as applicable) of the then outstanding Notes
voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes).
Notwithstanding the foregoing, without the consent of Holders
of at least 662/3% in aggregate principal amount at Stated Maturity (or Accreted
Value, as applicable) of the then outstanding Notes voting as a single class,
the Company and
<PAGE>
82
the Trustee may not: (i) modify the provisions (including the defined terms used
therein) of Section 4.15 hereof in a manner adverse to the Holders or (ii)
release or modify a Lien granted to the Holders of the Notes.
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 Sections 7.2 and
9.6 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 9.2 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof. The Company shall notify the Holders of any amendment to the
Indenture after it has become effective, which notice shall briefly describe the
amendment. Notwithstanding the foregoing, the Company's failure to give such
notice to all Holders of the Notes or any defect in such notice will not impair
or affect the validity of the amendment.
After an amendment, supplement or waiver under this Section
9.2 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 the provisions of this Section 9.2
and Sections 6.4 and 6.7 hereof, the Holders of a majority in aggregate
principal amount at Stated Maturity (or Accreted Value, as applicable) of the
Notes then outstanding voting as a single class may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, notwithstanding anything to the contrary in this Indenture,
without the consent of each Holder affected, an amendment or waiver under this
Section 9.2 may not (with respect to any Notes held by a non-consenting Holder):
(a) extend the Stated Maturity on any Note, or reduce the
principal thereof or reduce the rate or extend the time for payment of interest
thereon or reduce any premium payable upon the redemption at the option of the
Company thereof, or change the coin or currency in which, any Note or any
premium or the interest thereon is payable, or impair the right to receive
payment of principal or interest on the Notes on or after the due dates for
these payments or to institute suit for the
<PAGE>
83
enforcement of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption at the option of the Company, on or after the redemption
date);
(b) reduce the percentage in principal amount at Stated
Maturity (or Accreted Value, as applicable) of Notes outstanding whose Holders
must consent to an amendment, supplement or waiver provided for in this
Indenture;
(c) modify any of the waiver provisions or the provisions
under this Section 9.2 requiring the consent of each Holder for certain
amendments, except to increase any required percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Note affected thereby; or
(d) cause the Notes to become subordinate in right of payment
to any other Indebtedness.
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment or supplement to this Indenture or the Notes
shall be set forth in an amended or supplemental indenture that complies with
the TIA as then in effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder. An amendment or waiver shall
become effective upon receipt by the Trustee of the requisite number of written
consents under Section 9.1 or 9.2 as applicable.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders of Notes entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who held
Notes at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date.
<PAGE>
84
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, 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 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If such amendment or supplement does adversely affect such rights, duties,
liabilities or immunities, the Trustee may, but need not, sign it. 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 7.1 hereof) shall be fully
protected in relying upon an Officer's Certificate and an Opinion of Counsel
pursuant to Sections 11.4 and 11.5 hereof as conclusive evidence that such
amended or supplemental indenture is authorized or permitted by this Indenture,
that it is not inconsistent herewith and that such amended or supplemental
indenture is the legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, subject to customary exceptions.
ARTICLE 10
SATISFACTION AND DISCHARGE
SECTION 10.1 SATISFACTION AND DISCHARGE OF INDENTURE
This Indenture shall be discharged and will 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 such
Trustee for cancellation have become due and payable by reason of the
making of a notice of redemption, repurchase or otherwise or will
become due and payable
<PAGE>
85
within one year, and the Company has irrevocably deposited or caused to
be deposited with such Trustee as trust funds in trust an amount of
money sufficient to pay and discharge the entire Indebtedness on such
Notes not theretofore delivered to the Trustee for cancellation for
principal, premium, accrued interest to the date of maturity,
redemption or repurchase;
(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 will not result in a breach or violation of or constitute
a default under, any other instrument to which the Company is a party
or by which the Company 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 written
instructions to the Trustee under this Indenture to apply the deposited
money toward the payment of such Notes at maturity or the redemption
date, as the case may be.
In addition, the Company must deliver an Officers' Certificate
and an Opinion of Counsel to the Trustee stating that all conditions precedent
to satisfaction and discharge have been satisfied.
SECTION 10.2 APPLICATION OF TRUST MONEY
Subject to the provisions of the last paragraph of Section
4.17 hereof, all money deposited with the Trustee pursuant to Section 10.1
hereof 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 or
Government Securities in accordance with Section 10.1 hereof 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 10.1 hereof, provided that if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or
Government Securities held by the Trustee or Paying Agent.
<PAGE>
86
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 TRUST INDENTURE ACT CONTROLS
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 11.2 NOTICES
Any notice or communication by the Company or the Trustee to
the other is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
Metromedia International Group, Inc.
One Meadowlands Plaza
East Rutherford, N.J. 070706
Attention: Arnold L. Wadler, Esq.
Fax: (201) 551-2803
With a copy (which shall not constitute notice) to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Douglas A. Cifu, Esq.
Fax: (212) 757-3990
If to the Trustee:
U.S. Bank Trust National Association
180 East 5th Street
St. Paul, MN 55105
Attention: Corporate Trust Department/Corporate Finance
Fax: (651) 244-0711
The Company or the Trustee, by notice to the other, may
designate additional or different addresses for subsequent notices or
communications.
<PAGE>
87
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 receipt is acknowledged by the sender's
telecopier, 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 Section 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, except that any notice or communication to the Trustee shall be
deemed to have been duly given to the Trustee when received at the Corporate
Trust Office of the Trustee.
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 11.3 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 11.4 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, except with respect to the initial
authentication of Notes on the date of 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 11.5 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 or complied with; and
<PAGE>
88
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied or complied with.
SECTION 11.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(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 or they have made such examination or investigation as is necessary to
enable each to express an informed opinion as to whether or not such covenant or
condition has been satisfied or complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied or complied with.
SECTION 11.6 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 11.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
SHAREHOLDERS
No past, present or future director, officer, employee,
incorporator, agent or shareholder of the Company, as such, shall have any
liability for any obligations of the Company 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.
<PAGE>
89
SECTION 11.8 GOVERNING LAW
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT 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 11.9 CONSENT TO JURISDICTION AND SERVICE
To the fullest extent permitted by applicable law, the Company
hereby irrevocably submits to the jurisdiction of any Federal or State court
located in the Borough of Manhattan in The City of New York, New York in any
suit, action or proceeding based on or arising out of or relating to this
Indenture or any Notes or Exchange Notes, and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in any such court. The
Company irrevocably waives, to the fullest extent permitted by law, any
objection which they may have to the laying of the venue of any such suit,
action or proceeding brought in such a court and any claim that any suit, action
or proceeding brought in such a court has been brought in an inconvenient forum.
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 any jurisdiction to 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 or as otherwise permitted by law. 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
process, 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 respective obligations
under this Indenture, to the extent permitted by law.
SECTION 11.10 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 11.11 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.
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90
SECTION 11.12 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.
SECTION 11.13 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 11.14 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.
Dated as of September 30, 1999
METROMEDIA INTERNATIONAL GROUP, INC.
By: /s/ Silvia Kessel
-----------------------------------------
Name: Silvia Kessel
Title: Executive Vice President,
Chief Financial Officer and Treasurer
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By: /s/ Richard Prokosch
-----------------------------------------
Name: Richard Prokosch
Title:
<PAGE>
EXHIBIT A
(Face of Note)
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
CUSIP
---------------------
[Series A] [Series B] 10 1/2% Senior Discount Notes due 2007
No. / / $/ /
------------- ---------
METROMEDIA INTERNATIONAL GROUP, INC. promises to pay to
[Insert if a Global Note: Cede & Co.][Insert if a Definitive Note:___________]
or registered assigns, the principal sum of ________________ Dollars ($________)
on September 30, 2007.
Interest Payment Dates: March 30 and September 30.
Record Dates: March 15 and September 15.
METROMEDIA INTERNATIONAL GROUP, INC.
By:
--------------------------------------------
Name:
Title:
By:
--------------------------------------------
Name:
Title:
This is one of the Notes referred to in the within-mentioned Indenture:
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By: Dated:
------------------ ------------------
Name:
Title:
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL NOTE]
[Series A] [Series B] 10 1/2% Senior Discount Notes due 2007
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. Interest
Metromedia International Group, Inc., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"), promises to pay
interest on the principal amount of this Note at the rate per annum shown above
from September 30, 2002 until maturity.
The Company shall pay interest semiannually on March 30 and
September 30 of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each, an "Interest Payment Date"), commencing September
30, 2002. Interest on the Notes shall accrue from the most recent date to which
interest has been paid on the Notes or, if no interest has been paid, from March
30, 2002. The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to the then applicable interest rate on the Notes to the extent lawful; 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 period) at the same rate to the extent lawful. Interest shall
be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment
The initial Accreted Value shall increase at the rate of 10
1/2% per annum, compounded semi-annually, until March 30, 2002, to an aggregate
principal amount for all the Notes on March 30, 2002 of $210,631,376.
By at least 12:00 noon (New York City time) on the date on
which any principal of, premium, if any, or interest on any Note is due and
payable, the Company shall irrevocably deposit with the Paying Agent money in
immediately available funds sufficient to pay such principal, premium, if any,
and/or interest then due. The Company shall pay interest (except defaulted
interest) to the Persons who are registered Holders of Notes at the close of
business on the Record Date even if such Notes are canceled, repurchased or
redeemed after the Record Date and on or before the Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. Holders must surrender Notes to the Paying Agent to collect principal
payments. The Company shall pay principal and interest in money
<PAGE>
of the United States that at the time of payment is legal tender for payment of
public and private debts. The Notes shall be payable as to principal, premium,
if any, and interest at the office or agency of the Company maintained for such
purpose within or outside of 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 kept by the Registrar,
PROVIDED that payment by wire transfer of immediately available funds shall be
required with respect to principal of, interest and premium, if any, 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.
3. Paying Agent and Registrar
Initially, U.S. Bank Trust National Association, a national
banking association (the "Trustee"), will act as Trustee, Paying Agent and
Registrar. The Company may appoint and change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
4. Indenture
The Company issued the Notes under an Indenture dated as of
September 30, 1999 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "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 (15
U.S.C. section 77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). The Notes are subject to all such terms, and Holders are referred to the
Indenture and the Act for a statement of those 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 Notes are
obligations of the Company limited to $210,631,376 in aggregate principal
amount.
The Notes are senior unsecured obligations of the Company that
will rank pari passu in right of payment to all existing and future senior
Indebtedness of the Company and senior to all existing and future subordinated
Indebtedness of the Company. The Indenture imposes certain limitations on: the
Incurrence of Indebtedness by the Company, its Restricted Subsidiaries and the
PLD Companies, the payment of dividends and other distributions on the Capital
Stock of the Company and its Restricted Subsidiaries, the purchase or redemption
of Capital Stock of the Company and Capital Stock of such Restricted
Subsidiaries, the Incurrence of Liens by the Company or its Restricted
Subsidiaries, the sale or transfer of assets and Capital Stock by the Company or
its Restricted Subsidiaries, the ability of the Company and its Restricted
Subsidiaries to engage in Sale and Leaseback Transactions, the acquisition of
additional PLD Assets and transactions with
<PAGE>
Affiliates. In addition, the Indenture limits the ability of the Company and its
Restricted Subsidiaries to restrict distributions and dividends from Restricted
Subsidiaries.
5. Redemption
Except as set forth below, the Notes will not be redeemable at
the option of the Company prior to March 30, 2002. Thereafter, the Notes shall
be redeemable, at the Company's sole option, in whole or in part, at any time
upon not less than 30 nor more than 60 days prior notice mailed by first-class
mail to each Holder's registered address, at a redemption price equal to the
principal amount of the Notes, plus accrued and unpaid interest, if any, and
premium, if any, thereon, to but excluding the date of redemption (subject to
the right of Holders of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date).
In the case of any partial redemption, selection of the Notes
for redemption will be made by the Trustee in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate, although no Notes of $100 in principal amount or less shall be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof shall be issued in the name of the Holder thereof upon
cancellation of the original Note.
6. Repurchase Provisions
(a) Upon a Change of Control, each Holder of Notes shall have
the right to require the Company to repurchase all or any part (equal to $100 or
an integral multiple of $1 above $100) of such Holder's Notes at a purchase
price in cash equal to 101% of the Accreted Value of the Notes to the date of
repurchase if such date is on or before March 30, 2002 or 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase if such date is after March 30, 2002 (subject to the right of
Holders of record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date) and, in each case, subject to the terms of the
Indenture.
(b) Subject to the terms and conditions set forth in the
Indenture, if the Company or a Restricted Subsidiary consummates any Asset Sale
permitted by the Indenture, when the aggregate amount of Excess Proceeds equals
or exceeds $10,000,000, the Company shall make a pro rata Asset Sale Offer for
all outstanding Notes up to a maximum principal amount at Stated Maturity or
Accreted Value, as applicable (expressed as a multiple of $100), of Notes that
may be purchased out of such Excess Proceeds, at a purchase price in cash equal
to 100% of the Accreted
<PAGE>
Value of such Notes on the Purchase Date if such date is on or before March 30,
2002, or 100% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the Purchase Date if such date is after March 30, 2002, in
each case, in accordance with the terms and procedures set forth in Sections 3.9
and 4.11 of the Indenture.
7. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in
denominations of $100 and an integral multiple of $1 above $100. The transfer of
Notes may be registered and Notes may be exchanged in accordance with the
Indenture. The Registrar, the Trustee and the Company may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Company and the Registrar need not register the transfer or exchange of (i) any
Notes or portion thereof selected for redemption (except, in the case of a Note
to be redeemed in part, the portion of the Note not to be redeemed) for a period
beginning 15 days before a selection of Notes to be redeemed and ending on the
date of such selection or (ii) any Notes for the period between a Record Date
and the corresponding Interest Payment Date.
8. Persons Deemed Owners
The registered Holder of this Note on the Registrar's books
may be treated as its owner for all purposes under the Indenture.
9. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
10. Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the Notes
and the Indenture if the Company deposits with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be.
<PAGE>
11. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in aggregate principal amount at Stated
Maturity (or Accreted Value, as applicable) of the then outstanding Notes voting
as a single class and (ii) any 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 noncompliance with any provision of the Indenture or
the Notes may be waived with the consent of the Holders of a majority in
aggregate principal amount at Stated Maturity (or Accreted Value, as applicable)
of the then outstanding Notes voting as a single class. Subject to certain
exceptions set forth in the Indenture, without the consent of any Holder, the
Company and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, omission, 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 the Holders of the
Notes by a successor to the Company, to add additional covenants or surrender
rights and powers conferred on the Company, or to comply with any request of the
SEC in connection with qualifying the Indenture under the Act, to make any
change that does not adversely affect the rights of any Holder, to provide for
the issuance of Unrestricted Notes under the Registered Exchange Offer, to
secure the Notes or to effect any change to the transfer and exchange
restrictions and security delivery procedures in order to conform with changes
in applicable law or Applicable Procedures.
12. Defaults and Remedies
Under the Indenture, Events of Default include (i) a default
for 30 days in the payment when due of interest on any Note; (ii) a default in
the payment when due of principal of, or premium, if any, on the Notes at
maturity, upon required repurchase, upon redemption, upon declaration or
otherwise; (iii) the failure by the Company or any of its Restricted
Subsidiaries to comply with its obligations under Article 5 of the Indenture,
(iv) the failure by the Company or any of its Restricted Subsidiaries to comply
for 30 days after receiving notice from the Holders of at least 25% in aggregate
principal amount at Stated Maturity (or Accreted Value, as applicable) of the
outstanding Notes or from the Trustee on behalf of such Holders with any of its
obligations under Sections 4.7 through 4.13, 4.15 and 4.17 through 4.19 of the
Indenture, in each case, other than a failure to repurchase Notes which will
constitute an Event of Default under clause (ii) above, (v) the failure by the
Company or any of its Restricted Subsidiaries to comply for 60 days after
receiving notice thereof from the Holders of at least 25% in aggregate principal
amount at Stated Maturity (or Accreted Value, as applicable) of the outstanding
Notes or from the Trustee, on behalf of such Holders, with any of its other
obligations and duties under the Indenture or the Notes, (vi) a default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or
<PAGE>
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is Guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the Issue Date, which default results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the amount of any such Indebtedness, together with the amount of any other
such Indebtedness or the maturity of which has been so accelerated, exceeds
$15.0 million, (vii) the entry against the Company or any of its Significant
Subsidiaries of any final judgment or decree not subject to appeal for the
payment of money in excess of $15.0 million (net of applicable insurance
coverage which is acknowledged in writing by the insurer), which judgments are
not paid, vacated, discharged or stayed for a period of 60 days after they
become final and non-appealable or (viii) certain events of bankruptcy,
insolvency or reorganization of the Company or a Significant Subsidiary.
However, a default under clauses (iv) and (v) will not constitute an Event of
Default until the Trustee or the Holders of more than 25% in aggregate principal
amount at Stated Maturity (or Accreted Value, as applicable) of the outstanding
Notes notify the Company of the default and the Company does not cure such
default within the time specified in clauses (iv) and (v) hereof after receipt
of such notice.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount at Stated Maturity
(or Accreted Value, as applicable) of the outstanding Notes by notice to the
Company and the Trustee may declare the principal of and accrued and unpaid
interest, if any, on all the Notes to be due and payable immediately. Certain
events of bankruptcy or insolvency are Events of Default which will result in
the Notes being due and payable immediately upon the occurrence of such Events
of Default.
Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate principal amount at
Stated Maturity (or Accreted Value, as applicable) of the Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing Default or Event of Default (except a Default
or Event of Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
13. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may make
loans to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not the Trustee.
<PAGE>
14. No Recourse Against Others
An incorporator, director, officer, employee, stockholder or
controlling person, as such, of the Company 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. By
accepting a Note, each Holder waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Notes.
15. Authentication
This Note shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent acting on its behalf) manually
authenticates this Note.
16. 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
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
17. 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 has directed the Trustee to 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.
18. Governing Law
This Note shall be governed by, and construed in accordance
with, the laws of the State of New York but 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.
19. Miscellaneous
The Company will furnish to any Holder upon written request
and without charge to the Holder a copy of the Indenture which has in it the
text of this Note.
Requests may be made to:
<PAGE>
Metromedia International Group, Inc.
One Meadowlands Plaza
East Rutherford, NJ 07073-2137
Attention of: Arnold L. Wadler, Esq.
Fax: (201) 531-2803
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- ----------------------------------------------------------------------
(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
Tax Identification No:
---------------------
SIGNATURE GUARANTEE:
-------------------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements include
membership or participation in the
Security Transfer Agent Medallion
Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition
to, or in substitution for, STAMP, all
in accordance with the Securities
Exchange Act of 1934, as amended.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.11 or 4.15 of the Indenture, check the box below:
/ / Section 4.11 / / Section 4.15
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.11 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:
---------------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements include
membership or participation in the
Security Transfer Agent Medallion
Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition
to, or in substitution for, STAMP, all
in accordance with the Securities
Exchange Act of 1934, as amended.
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1)
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>
Amount of Amount of Principal Amount
decrease in increase in of this Global Signature of
Principal Principal Amount Note following authorized officer
Amount of this of this Global such decrease of Trustee or
Date of Exchange Global Note Note (Or Increase) Note Custodian
- ---------------- -------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------
(1) THIS SHOULD BE INCLUDED ONLY IF THE NOTE IS ISSUED IN GLOBAL FORM.
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Metromedia International Group, Inc.
One Meadowlands Plaza
East Rutherford, NJ 07073-2137
Attention: General Counsel
U.S. Bank Trust National Association
Attention:
Re: 10 1/2% Senior Discount Notes due 2007
Reference is hereby made to the Indenture, dated as of
September 30, 1999 (the "Indenture"), between Metromedia International Group,
Inc., as issuer (the "Company") and U.S. Bank Trust National Association, 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 Series A Note[s] or interest in such Series A Note[s] specified in
Annex A hereto, in the principal amount of $____________ in such Series A
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 A
RESTRICTED 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
<PAGE>
Restricted Global Note and/or the Definitive Note and in the Indenture and the
Securities Act.
(2) /_/ CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
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, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). 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 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.
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
<PAGE>
(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.
(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 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.
<PAGE>
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:
---------------------------
<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 a Restricted Global Note (CUSIP __)
(b) /_/ a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) /_/ a beneficial interest in:
(i) /_/ a Restricted Global Note (CUSIP ___), or
(ii) /_/ an Unrestricted Global Note (CUSIP ___); or
(b) /_/ a Restricted Definitive Note; or
(c) /_/ an Unrestricted Definitive Note,
in each case, in accordance with the terms of the Indenture.
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Metromedia International Group, Inc.
One Meadowlands Plaza
East Rutherford, NJ 07073-2137
Attention: General Counsel
U.S. Bank Trust National Association
Attention:
Re: 10 1/2% Senior Discount Notes due 2007
Reference is hereby made to the Indenture, dated as of
September 30, 1999 (the "Indenture"), between Metromedia International Group,
Inc., as issuer (the "Company") and U.S. Bank Trust National Association, 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 that (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.
<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 that (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 that (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 that (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.
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
<PAGE>
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
a Restricted Global Note with an equal principal amount, the Owner hereby
certifies that (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 Owner]
By:
-----------------------------
Name:
Title:
Dated:
------------------
