<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10 - QSB
X Quarterly report under Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the quarterly period ended: June 30, 1997
-------------
--- Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission File number 0 - 25314
AMERICAN COMMUNICATIONS SERVICES, INC.
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1947746
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
131 NATIONAL BUSINESS PARKWAY, ANNAPOLIS JUNCTION, MD 20701
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(Address of Principle Executive Offices)
(301) 617-4200
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(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the last 90 days.
YES X NO
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of August 11, 1997, Common
Stock, Par Value $0.01 - 36,210,387 ------------------------------
- -----------------------------------
Transitional Small Business Disclosure Format:
YES NO X
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AMERICAN COMMUNICATIONS SERVICES, INC.
FORM 10 - QSB
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
----------------------------- PAGE
NUMBER
------
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - December 31, 1996
and June 30, 1997 3
Condensed Consolidated Statements of Operations - Three and Six
Months Ended June 30, 1996 and 1997 5
Condensed Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1996 and 1997 6
Notes to Unaudited Condensed Consolidated Interim
Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and reports on Form 8-K 19
Signatures 21
</TABLE>
PAGE 2
<PAGE> 3
Part I
Financial Information
Item 1 - Financial Statements
American Communications Services, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
(UNAUDITED)
<S> <C> <C>
Assets
Current Assets
Cash and Cash equivalents $ 78,618,544 $ 8,499,115
Restricted cash 2,342,152 5,156,258
Accounts receivable, net 2,429,077 6,653,925
Other current assets 1,202,711 1,461,345
------------- -------------
Total current assets 84,592,484 21,770,643
------------- -------------
Networks, furniture and equipment, gross 144,403,123 219,933,362
(less: Accumulated depreciation) (8,320,372) (17,029,394)
------------- -------------
136,082,751 202,903,968
Deferred financing fees 8,380,283 10,340,377
Goodwill (net of accumulated amortization) -- 7,748,679
Other assets 982,649 617,309
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Total assets $ 230,038,167 $ 243,380,976
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Liabilities, Redeemable Stock, Options and
Warrants and Stockholders' Equity
Current Liabilities
Accounts payable $ 33,587,407 $ 28,621,966
Accrued liabilities 4,132,132 5,097,044
Notes payable - current portion 872,031 1,325,532
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Total current liabilities 38,591,570 35,044,542
------------- -------------
Long Term Liabilities
Notes payable 209,538,226 223,753,180
Other Long Term Liabilities -- 808,781
Dividends payable 6,945,943 --
------------- -------------
Total liabilities 255,075,739 259,606,503
------------- -------------
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements
PAGE 3
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American Communications Services, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
(UNAUDITED)
<S> <C> <C>
Liabilities, Redeemable Stock, Options
and Warrants and Stockholders' Equity (continued)
Redeemable stock, options and warrants 2,000,000 2,000,000
------------- -------------
Stockholders' Equity
Preferred stock, $1.00 par value, 186,664
shares authorized and designated as 9% Series A-1
Convertible Preferred Stock, 186,664 and 0
shares, respectively, issued and outstanding 186,664 --
Preferred stock, $1.00 par value, 277,500
shares designated as 9%
Series B Convertible Preferred Stock, authorized,
277,500 and 0, respectively, issued and outstanding 277,500 --
Common Stock, $0.01 par value,
75,000,000 shares authorized, 6,784,996
and 35,926,902 shares, respectively, issued
and outstanding 67,850 359,269
Additional paid-in-capital 54,870,194 113,564,536
Accumulated deficit (82,439,780) (132,149,332)
------------- -------------
Total stockholders' equity/(deficit) (27,037,572) (18,225,527)
------------- -------------
Total Liabilities, Redeemable Stock,
Options and Warrants and
Stockholders' Equity/(deficit) $ 230,038,167 $ 243,380,976
------------- -------------
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements
PAGE 4
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American Communications Services, Inc.
Condensed Consolidated Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 1,609,621 $ 11,615,836 $ 2,426,260 $ 19,792,511
Operating Expenses
Network, development and operations 388,347 9,357,277 2,342,861 18,026,390
Selling, general and administrative 7,735,834 15,893,562 10,386,097 29,818,429
Non-cash compensation expense (454,339) 584,458 1,531,426 824,002
Depreciation and amortization 1,685,765 5,338,596 2,315,769 9,456,250
------------ ------------ ------------ ------------
Total Operating Expenses 9,355,607 31,173,893 16,576,153 58,125,071
Non-operating income/expenses
Interest and other income (2,970,916) (193,620) (3,632,229) (1,077,691)
Interest and other expense 4,141,366 6,287,621 7,641,990 12,420,763
------------ ------------ ------------ ------------
Net loss before minority interest 8,916,436 25,652,058 18,159,654 49,675,632
Minority interest (154,671) -- (256,745) --
------------ ------------ ------------ ------------
Net loss 8,761,765 25,652,058 17,902,909 49,675,632
------------ ------------ ------------ ------------
Preferred stock dividends/accretion 1,061,344 106,201 2,016,833 1,094,839
------------ ------------ ------------ ------------
Net loss to common stockholders 9,823,109 25,758,259 19,919,742 50,770,471
------------ ------------ ------------ ------------
Net loss per common/common ($1.49) ($0.92) ($3.03) ($2.82)
equivalent share ------------ ------------ ------------ ------------
Average number of common/common
equivalent shares outstanding 6,605,501 28,025,238 6,572,061 17,994,161
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements
PAGE 5
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American Communications Services, Inc.
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months ended
June 30, 1996 June 30, 1997
------------- -------------
<S> <C> <C>
Cash Flow from Operating Activities
Net Loss $ (17,902,909) $ (49,675,632)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 2,294,569 9,456,250
Interest deferral and accretion 7,573,427 12,239,366
Amortization of deferred financing fees 668,317 473,666
Provision for doubtful accounts 151,934 859,621
Loss attributable to minority interest (324,012) --
Noncash compensation 1,531,426 824,002
Changes in operating assets and liabilities
Restricted cash related to
operating activities -- (2,814,106)
Trade accounts receivable (330,530) (5,084,469)
Other current assets (458,272) (258,634)
Other assets (107,574) 365,340
Accounts payable 16,271,487 (4,162,403)
Other accrued liabilities (1,666,634) 964,912
------------- -------------
Net cash provided by (used in) operating activities 7,701,229 (36,812,087)
------------- -------------
Cash flows from investing activities
Restricted cash related to network activities (890,152) --
Purchase of furniture and equipment (1,538,943) (4,911,864)
Network development costs (41,660,076) (68,301,375)
------------- -------------
Net cash (used in) investing activities (44,089,171) (73,213,239)
------------- -------------
Cash flows from financing activities
Issuance of notes payable and warrants 66,234,486 1,737,297
Issuance of common stock -- 40,702,000
Issuance of Series B Preferred Stock 274,682
Payment of notes payable -- (238,291)
Payment of dividends -- (290,193)
Payment of deferred financing fees (3,459,582) (3,299,499)
Warrant and stock option exercises 279,233 1,294,583
------------- -------------
Net cash flow provided by financing activities 63,328,819 39,905,897
------------- -------------
Net increase/(decrease) in cash and cash equivalents 26,940,877 (70,119,429)
Cash and cash equivalents - beginning of period $ 107,175,104 $ 78,618,544
------------- -------------
Cash and cash equivalents - end of period $ 134,115,981 $ 8,499,115
============= =============
Supplemental disclosure of cash flow information
Dividends declared with preferred stock $ 2,016,833 $ 1,094,839
============= =============
(Decrease) in accrued redeemable warrant cost $ (504,554) $ --
============= =============
(Increase) in goodwill $ -- $ (8,118,632)
============= =============
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements
PAGE 6
<PAGE> 7
AMERICAN COMMUNICATIONS SERVICES, INC.
Notes to Unaudited Condensed Consolidated Interim
Financial Statements
BUSINESS AND ORGANIZATION
American Communications Services, Inc. (ACSI or the Company) provides a broad
range of integrated local voice and data communications services primarily to
commercial customers in mid-sized markets in the southern United States. The
Company manages and operates its own local fiber optic networks.
BASIS OF PRESENTATION AND RELATED MATTERS
Effective December 31, 1996, the Company changed its fiscal year from a twelve
month period ended June 30, to a twelve month period ended December 31. The
consolidated financial statements include the accounts of ACSI and its
majority-owned subsidiaries. All of the Company's subsidiaries are wholly owned
with the exception of the Louisville, Fort Worth, El Paso, Greenville and
Columbia subsidiaries, in which the Company has a 92.75% ownership interest.
All material intercompany accounts and transactions have been eliminated in
consolidation.
In the opinion of management, the accompanying unaudited interim financial
information reflects all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation thereof. Certain information and footnote
disclosure normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to instructions, rules and regulations prescribed by the Securities
and Exchange Commission. Although the Company believes that the disclosures
provided are adequate to make the information presented not misleading, these
unaudited interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996. Operating results for the three and six months
periods ended June 30, 1997 are not necessarily indicative of the results
expected for the full year.
SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents and Restricted Cash
Pursuant to SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", the Company's short and long-term debt securities and
marketable equity securities are accounted for at market value. The fair market
value of short- and long-term investments is determined based on quoted market
prices for those investments. The Company's marketable securities have been
classified as available for sale and are recorded at current market value with
an offsetting adjustment to stockholders' equity (deficit).
The Company's investments consist of commercial paper, U.S. Government
Securities and money market instruments, all with original maturities of 90
days or less. The fair market value of such securities approximates amortized
cost. At December 31, 1996 and June 30, 1997, cash equivalents consists of
government securities and overnight investments.
The Company has provided performance bonds and letters of credit in various
cities in connection with its operations, resulting in a restriction of cash
amounting to $2,342,152 and $5,156,258 at December 31, 1996 and June 30, 1997,
respectively. The face amount of all bonds and letters of credits was
approximately $6,200,000 as of December 31, 1996, and 8,072,000 as of June 30,
1997.
PAGE 7
<PAGE> 8
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Networks, Equipment and Furniture
Networks, equipment and furniture are stated at cost less accumulated
depreciation and amortization. Costs capitalized during the network development
stage include expenses associated with network engineering, design and
construction, negotiation of rights-of-way, obtaining legal and regulatory
authorizations and the amount of interest costs associated with the network
development.
Provision for depreciation of networks, equipment and furniture is computed
using the straight-line method over the estimated useful lives of the assets
beginning in the month a network is substantially complete and available for
use and equipment and furniture are acquired.
The estimated useful lives of the Company's principal classes of assets are as
follows:
<TABLE>
<S> <C>
Networks:
Fiber optic cables and installation costs 20 years
Telecommunications equipment 3-7 years
Interconnection and collocation costs 3-10 years
Leasehold improvements Life of lease
Furniture and fixtures 5 years
Capitalized network development costs 3-20 years
</TABLE>
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" on
January 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed 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 of an asset to future net cash flows expected
to be generated by the asset. 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. Adoption of this statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
Deferred Financing Fees
Deferred financing fees include commitment fees and other costs related to
certain debt financing transactions and are being amortized using the effective
interest method over the initial term of the related debt.
Revenue Recognition
Revenue is recognized as services are provided. Billings to customers for
services in advance of providing such services are deferred and recognized as
revenue when earned. The Company also enters into managed services agreements
with certain customers. Under such agreements the Company provides use of
Company owned equipment, collocation and network access services. Revenue is
recognized on a monthly basis as these services are provided to the customer.
Earnings (Loss) Per Common Share
The computation of earnings (loss) per common share is based upon the weighted
average number of common shares outstanding. The effect of including common
stock options and warrants as common stock equivalents would be anti-dilutive
and is excluded from the calculation of loss per common share.
Income Taxes
Deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of assets and liabilities and loss
carryforwards and tax credit carryforwards for which income tax benefits are
expected to be realized in future years. A valuation allowance is established
to reduce deferred tax assets if it is more likely than not that all, or some
portion, of such deferred tax assets will not be realized. The effect on
deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date.
PAGE 8
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SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassifications
Certain reclassifications have been made to the June 30, 1996 consolidated
financial statements to conform to the June 30, 1997 presentation. Such
reclassifications had no effect on net loss or total stockholders' equity
(deficit).
Stock Option Plan
Prior to July 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On July 1, 1996, the Company adopted SFAS No. 123, "Accounting
for Stock Based Compensation", which permits entities to recognize as expense
over the vesting period the fair value of all stock based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply
the provisions of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosure for employee stock option grants as if the
fair-value based method defined in SFAS No. 123 had been applied. The Company
has elected to continue to apply the provisions of APB Opinion No. 25.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the
consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results may differ from those
estimates.
Concentration of Credit Risk
The Company receives a significant portion of its revenues from a small number
of major customers, particularly the long distance telecommunications companies
that service the Company's markets. The Company provides managed services to
certain Internet service providers. Such companies operate in a highly
competitive and uncertain environment.
FINANCING ACTIVITIES
To date, the Company has funded the construction of its networks and its
operations with external financings, as described below.
AT&T Credit Facility.
In October 1994, the Company entered into the AT&T Credit Facility pursuant to
which AT&T Credit Corporation has agreed to provide up to $31.2 million in
financing for the development and construction of fiber optic local networks by
five of the Company's subsidiaries. In connection with each loan made under the
AT&T Credit Facility, AT&T Credit Corporation purchased 7.25% of the capital
stock of the funded subsidiary, and ACSI pledged the other shares and the
assets of the subsidiary to AT&T Credit Corporation as security for the loan.
As of June 30, 1997, an aggregate of $31.2 million had been borrowed under
these agreements. Principal amounts payable on the AT&T Credit Facility during
1997 are approximately $872,000.
The Company has entered into negotiations with AT&T Capital Corporation to
roll-up the five existing loan agreements comprising the AT&T Credit Facility
into one loan agreement to be entered into with the Company, and to be secured
by the existing assets of the Company (including the stock, but not the assets,
of certain of the Company's subsidiaries) (the "New AT&T Facility"). The
Company expects the New AT&T Facility to otherwise be on terms substantially
similar to those of the existing AT&T Credit Facility. The maximum aggregate
amount of credit available under the proposed New AT&T Facility will not exceed
$35.0 million as defined by the Company's existing indentures. On June 26,
1997, each of the Company's Subsidiaries that are parties to the AT&T Credit
Facility entered into an agreement with AT&T Credit Corporation to waive, for a
period of 90 business days commencing on the date thereof, compliance by such
subsidiaries with certain covenants contained therein. Such covenants are not
expected to be included in the New AT&T Facility.
PAGE 9
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FINANCING ACTIVITIES (CONTINUED)
9% Series A Convertible Preferred Stock
In October 1994, the Company completed the private placement of 186,664 shares
of its 9% Series A Convertible Preferred Stock, par value $1.00 per share
(which was later exchanged for Series A-1 Preferred Stock that was converted
into 7,466,560 shares of Common Stock simultaneous with the completion of the
Offering) with accompanying warrants to purchase an aggregate of 2,674,506
shares of Common Stock, for an aggregate consideration of $16.8 million (before
deduction of estimated offering expenses), including the conversion of $4.3
million of outstanding debt. Of the warrants sold in October 1994, warrants to
acquire 1,491,222 shares of Common Stock were exercised by a principal
stockholder for an aggregate exercise price of approximately $100,000.
The Series A Preferred Stock was converted into an aggregate of 7,350,160
shares of common stock simultaneous with the completion of the April Offering
discussed below.
9% Series B Convertible Preferred Stock
In June 1995, the Company completed a private placement of 227,500 shares of
its Series B Preferred Stock with accompanying warrants to purchase an
aggregate of 1,584,303 shares of Common Stock, for an aggregate consideration
of $22.8 million. In addition, in November 1995, the Company completed a
private placement of 50,000 shares of its Series B Preferred Stock together
with the exercise of accompanying warrants to purchase 214,286 shares of Common
Stock to a principal stockholder for an aggregate consideration of $4.7
million. The Series B Preferred Stock was converted into an aggregate of
9,910,704 shares of Common Stock simultaneous with the completion of the April
Offering discussed below.
2005 Senior Discount Notes (2005 Notes)
On November 14, 1995, the Company completed an offering of 190,000 Units (the
"Units") consisting of $190,000,000 principal amount of 13% Senior Discount
Notes due 2005 (the "2005 Notes") and warrants to purchase 2,432,000 shares of
the Company's common stock at a price of $7.15 per share (the "2005 Warrants").
The 2005 Notes will accrete at a rate of 13% compounded semi-annually to an
aggregate principal amount of $190,000,000 by November 1, 2000. Thereafter,
interest on the 2005 Notes will accrue at the annual rate of 13% and will be
payable in cash semi-annually on November 1 and May 1, commencing May 1, 2001.
The Company received net proceeds of approximately $96,105,000 from the sale of
the Units. The value ascribed to the 2005 Warrants was $8,684,000.
2006 Senior Discount Notes (2006 Notes)
On March 21, 1996, the Company completed an offering of $120,000,000 of 12 3/4%
Senior Discount Notes due 2006 (the "2006 Notes") resulting in net proceeds of
approximately $61,800,000. The 2006 Notes will accrete at a rate of 12 3/4%
compounded semi-annually, to an aggregate principal amount of $120,000,000 by
April 1, 2001. Thereafter, interest on the 2006 Notes will accrue at the annual
rate of 12 3/4% and will be payable in cash semi-annually on April 1 and
October 1, commencing on October 1, 2001. The 2006 Notes will mature on April
1, 2006.
PAGE 10
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FINANCING ACTIVITIES (CONTINUED)
Common Equity (April Offering)
On April 15, 1997, the Company consummated the issuance and sale of 5,060,000
shares of Common Stock (inclusive of the May 14, 1997 exercise by the
underwriters of their overallotment option) at a price per share of $5.00 in an
underwritten public offering, and the issuance and sale directly to certain of
its principal stockholders of 3,600,000 shares of Common Stock at a purchase
price of $4.70 per share (together, the "April Offering"). Total net proceeds
to the Company from the April Offering were approximately $40 million.
In addition, the Company recently completed additional financings, described
below.
14 3/4% Redeemable Preferred Stock (Unit Offering)
On July 10, 1997, the Company consummated the private placement of 75,000
units, (the "Unit Offering"), consisting of its 14 3/4% Redeemable Preferred
Stock due 2008 (the "Redeemable Preferred Stock") and warrants to purchase
shares of common stock. The Company received net proceeds of approximately $67
million from the sale of these units. Each unit includes a warrant to purchase
80.318 shares of ACSI common stock subject to an increase of 22.645 additional
shares of common stock in the event that the Company fails to raise net
proceeds of at least $50 million through the issuance and sale of its qualified
capital stock on or before December 31, 1998. Dividends on the Redeemable
Preferred Stock will accrue from the date of issuance, are cumulative and will
be payable in arrears on March 31, June 30, September 30 and December 31,
commencing September 30, 1997. Dividends may be paid, at the Company's option,
on any dividend payment date either in cash or by the issuance of additional
shares of preferred stock, provided however, that after June 30, 2002, to the
extent and for so long as the Company is not precluded from paying cash
dividends on the Redeemable Preferred Stock by the terms of any then
outstanding indebtedness or any other agreement or instrument to which the
Company is subject, the Company shall pay the dividends in cash. The company is
required to redeem all the Redeemable Preferred Stock outstanding on June 30,
2008 at a redemption price equal to 100.00% of the liquidation preference
thereof, plus, without duplication, accrued and unpaid dividends to the date of
redemption.
2007 Senior Notes (2007 Notes)
On July 18, 1997, the Company completed the private placement of $220 million
of 13 3/4% Senior Notes due 2007. The Company received net proceeds of
approximately $209 million from the sale of the 2007 Notes, of which,
approximately $70 million has been placed in escrow solely to fund the first
five interest payments or otherwise for the benefit of the holders of the 2007
Notes. The 2007 Notes bear interest at 13 3/4% compounded semi-annually in
arrears, payable on January 15 and July 15 each year, commencing on January 15,
1998. The notes mature on July 15, 2007. The 2007 Notes will not be redeemable
at the option of the Company prior to July 15, 2002, except that any time prior
to July 15, 2000, the Company may redeem up to 35% of the aggregate principal
amount of the 2007 Notes with the net proceeds from one or more equity
offerings of the Company, at a redemption price equal to 113.75% of the
aggregate principal amount thereof on the date of the redemption, subject to
other conditions.
PAGE 11
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's condensed Consolidated Financial Statements and Notes thereto
included herewith, and with the Company's Management Discussion and Analysis of
Financial Condition and Results of Operations and audited financial statements
and notes thereto for the years ended June 30, 1995 and 1996 and for the six
months ended December 31, 1996.
OVERVIEW
American Communications Services, Inc. ("ACSI" or the "Company") provides a
broad range of integrated local voice and data communications services
primarily to commercial customers in mid-sized markets in the southern United
States. As a competitive local exchange carrier ("CLEC"), the Company has
constructed its own local fiber optic networks in 31 markets, expects to have
operational networks in approximately 35 markets by the end of 1997 and expects
to offer services on its own networks or on a resale basis in up to 50 markets
by the end of 1998. The Company uses its owned facilities and leases network
capacity from others to provide long distance carriers, Internet service
providers ("ISPs") and business, government and institutional end-users with an
alternative to the incumbent local phone companies for high quality voice,
data, video transport and other telecommunications services. The Company
believes that its customers choose ACSI's telecommunications services because
of the reliability and breadth of the Company's services, discounted pricing
relative to the incumbent local exchange carrier ("ILEC") and a high level of
customer service.
From the formation of the Company through 1996, the Company derived
substantially all of its revenues from the sale of dedicated services to
interexchange carriers ("IXCs") and ISPs. Since the passage of the
Telecommunications Act of 1996 (the "Federal Telecommunications Act"), however,
the Company has enhanced its product offerings to meet the needs of commercial
end-users, and is aggressively expanding the sales and marketing capabilities
necessary to deliver these products to such customers. Specifically, the
Company introduced local switched voice services, including local exchange
services (dial tone) in late 1996, and has also added capabilities to provide
other enhanced services such as high speed video conferencing, frame relay,
asynchronous transfer mode ("ATM") and Internet access.
The Company currently provides a wide range of local telecommunications
services including dedicated and private line, local switched voice services,
high-speed data services and Internet services. The Company's SONET-based local
fiber optic networks and its coast-to-coast leased high broadband backbone data
network ("ACSINet") are designed to support this wide range of enhanced
communications services, provide increased network reliability and reduce costs
for its customers, as follows:
Dedicated Services. The Company's special access services, switched transport
services and private line services provide high capacity non-switched
interconnections: (1) between points of presence ("POPs") of the same IXC; (2)
between POPs of different IXCs; (3) between large business and government
end-users and their selected POPs; (4) between an IXC POP and an ILEC central
office, or between two such central offices; and (5) between different
locations of business or government end-users. During 1996, such dedicated
services provided substantially all of the Company's revenues.
Local Switched Voice Services. The Company began offering local switched voice
services (including dial tone) in late 1996. As of June 30, 1997, the Company
offered such local switched services using its own facilities in 8 markets and
offered such services on a resale basis in a total of 24 markets for switched
services. This compares to 5 markets for switched services using its own
facilities, and no markets for resale services at March 31, 1997. The Company
expects to offer facilities-based services in 16 of the markets in which it has
operational local networks by the end of 1997, and it expects to offer local
services on a resale basis in additional markets.
Data Services. During 1996, the Company deployed ACSINet and as of June 30,
1997 had a total of 44 data POPs as compared to 30 data POPs as of March 31,
1997. ACSI provides a full range of high-speed data services over this network,
including Internet connectivity, frame relay, ATM and managed services (such as
network design, configuration and installation) to businesses, government,
health care providers, educational institutions and ISPs for local and wide
area network solutions.
PAGE 12
<PAGE> 13
Internet Services. On January 17, 1997, the Company acquired 100% of the
outstanding capital stock of Cybergate, Inc. in exchange for 1,030,000 shares
of Common Stock plus up to an additional 150,000 shares if certain performance
goals are achieved (the "Cybergate Acquisition"). Cybergate, a Florida-based
ISP, delivers high-speed data communications services, including computer
network connections and related infrastructure services, that provide both
commercial and residential customers access to the Internet through their
personal computers and the use of a modem. The Cybergate Acquisition provides
ACSI with the ability to offer direct Internet access to end-user commercial
and consumer customers as well as to provide private label Internet services
for the Company's strategic distribution partners throughout all of the
Company's markets.
Initially, the Company expects to experience negative cash flow from operations
in each of its operating local networks. The Company estimates that because of
the reduced operating costs associated with its smaller local networks and its
single point of service sales force, it can achieve operating cash flow
breakeven (i.e., positive EBITDA before overhead allocations) on dedicated
access services provided on its local networks within ten to 15 months from the
start of those services. Thereafter, the Company anticipates that its profit
margins will increase as each local network is expanded to connect additional
customers directly to its network backbone and as off-net customers migrate to
on-net status (thus allowing the Company to retain the portion of customer
charges previously paid out to the ILEC for resale of ILEC facilities). The
Company will also experience initial negative cash flow from operations as its
data, local switched voice and Internet services are introduced and until
networks providing those services reach operating cash flow breakeven.
RESULTS OF OPERATIONS
Three and Six Month Periods Ended June 30, 1997 Compared to Three and Six Month
Periods Ended June 30, 1996
NETWORK STATISTICS
The following table presents key operating statistics for the Company for the
reporting periods.
<TABLE>
<CAPTION>
As of Emplo- Operational Route Fiber Bldgs Access 5ESS
Date yees Networks Miles Miles VGE Lines Switches
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1997 559 31 957 82,693 1,083 886,375 9,177 8
March 31, 1997 502 28 908 75,867 858 554,883 360 5
December 31, 1996 322 21 697 48,792 595 384,134 0 1
June 30, 1996 199 15 386 28,476 216 137,431 0 0
March 31, 1996 142 10 200 9,466 133 125,208 0 0
</TABLE>
Employees represent full-time employees of the Company. Operational networks
represent networks that are in service and have revenue generating customers.
VGE represents voice grade equivalent circuits, a measure of service equivalent
to one telephone line actually billed to a customer. Access lines represent
business lines providing switched voice services.
REVENUES
The Company recorded revenues of $11.6 million for the three month period ended
June 30, 1997 and revenues of $19.8 million for the six month period ended June
30, 1997. This compares to revenues of $1.6 million for the three month period
ended June 30, 1996 and revenues of $2.4 million for the six month period ended
June 30, 1996. Although substantially all of the revenues in the 1996 periods
were derived from the provision of dedicated services, revenues in the 1997
periods were derived primarily from significant growth in dedicated services,
plus the addition of data services, Internet services and local switched voice
services.
PAGE 13
<PAGE> 14
TOTAL OPERATING EXPENSES
Network development and operating expenses for the three month period ended
June 30, 1997 increased to $9.4 million from $0.4 million in the three month
period ended June 30, 1996, reflecting significant increases in personnel,
network development and non-payroll operating expenses. Related personnel costs
increased to $3.3 million in the quarter ended June 30, 1997, from
approximately $0.3 million in the quarter ended June 30, 1996. Other operating
expenses related to the development of prospective new markets, which include
expenses such as contract labor and legal expenses, travel expenses, rent,
utilities, charges and taxes increased to $6.0 million in the quarter ended
June 30, 1997 from approximately $0.1 million in the quarter ended June 30,
1996.
For the six month period ended June 30, 1997, total network development and
operating expenses increased to $18.0 million from $2.3 million in the six
month period ended June 30, 1996, reflecting significant increases in
personnel, network development and non-payroll operating expenses. Related
personnel costs increased to $6.5 million in the six month period ended June
30, 1997, from approximately $3.0 million in the same period in 1996. Other
operating expenses, which include expenses such as contract labor and legal
expenses, travel expenses, rent, utilities, charges and taxes increased to
$11.5 million in the six month period ended June 30, 1997 from approximately
($0.7) million in the six month period ended June 30, 1996.
In the three month period ended June 30, 1997, selling, general and
administrative expenses increased to $15.9 million from $7.7 million in the
three month period ended June 30, 1996. Related personnel costs increased to
$6.7 million in the quarter ended June 30, 1997 from $1.8 million in the
quarter ended June 30, 1996, and corresponding operating costs increased to
$9.2 million in the quarter ended June 30, 1997 from $5.9 million in the
quarter ended June 30, 1996. This increase reflected costs associated with the
Company's efforts to expand significantly its national and local city sales and
its marketing and administrative staffs, as well as increased legal and other
consulting expenses associated with its aggressive programs for obtaining
regulatory approvals and certifications and providing quality network services.
In the six month period ended June 30, 1997, selling, general and
administrative expenses increased to $29.8 million from $10.4 million in the
six month period ended June 30, 1996. Related personnel costs increased to $12.1
million in the six month period ended June 30, 1997 from $1.7 million in the
six month period ended June 30, 1996, and corresponding operating costs
increased to $17.7 million in the six month period ended June 30, 1997 from
$8.7 million in the six month period ended June 30, 1996.
Depreciation and amortization expenses increased to $5.3 million in the three
month period ended June 30, 1997 from $1.7 million in the three month period
ended June 30, 1996 and increased to $9.5 million in the six month period ended
June 30, 1997 from $2.3 million in the six month period ended June 30, 1996. As
of June 30, 1997 the Company increased its capital assets to $219.9 million,
from $144.4 million at December 31, 1996 and from $80.1 million as of June 30,
1996. Non-cash stock compensation expense increased to $0.6 million for the
quarter ended June 30, 1997 from ($0.5 million) for the quarter ended June 30,
1996. For the six month period ended June 30, 1997, non-cash compensation
expense decreased to $0.8 million from $1.5 for the same period in 1996. This
expense reflects the Company's accrual of non-cash costs for options and
warrants granted to key executives, employees and others arising from the
difference between the exercise price and the valuation prices used by the
Company to record such costs and from the vesting of those options and
warrants. Certain of these options had put rights and other factors that
required variable plan accounting in both 1996 and 1995 but, at the end of
fiscal 1995, the Company renegotiated contracts with certain of its officers,
establishing a limit of $2,500,000 on the Company's "put right" obligations
with respect to those contracts. During fiscal period ended December 31, 1996,
the limit was further reduced to $2,000,000.
PAGE 14
<PAGE> 15
INTEREST AND OTHER EXPENSES
Interest and other income decreased to $0.2 million and $1.1 million for the
three and six month periods ended June 30, 1997, respectively from $3.0 million
and $3.6 million in the three and six month periods ended June 30, 1996,
respectively. Interest and other expense increased to $6.3 million and $12.4
million in the quarter and six month period ended June 30, 1997, respectively
from $4.2 million and $7.6 million in the quarter and six month period ended
June 30, 1996, respectively. The decrease in interest and other income reflects
the decrease in available funds from the Company's sale of its 9% Series B
Preferred Stock, the 2005 Notes and the 2006 Notes. The increase in interest
and other expenses reflected the accrual of interest related to the 2005 Notes
and 2006 Notes and the Company's increased borrowings under AT&T Credit
Facility. Payments of principal and interest on the AT&T Credit Facility began
in the first quarter 1997. Payments of interest on the 2005 Notes will not
begin until May 2001 and payments of interest on the 2006 Notes will not begin
until October 2001.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has funded the construction of its local networks and its
operations with external financing. Prior to November 1995, the primary sources
of funds used to finance the building of existing networks and the completion
of new targeted networks were two preferred stock private offerings completed
in October 1994 and June 1995, through which the Company raised an aggregate of
approximately $39.6 million before related expenses, and the AT&T Credit
Facility, through which the Company has financing commitments for $31.2
million. On November 14, 1995, the Company completed a private offering of the
2005 Notes and the 2005 Warrants from which the Company received approximately
$96.1 million in net proceeds. The 2005 Notes will accrue to an aggregate
principal amount of $190.0 million by November 1, 2000, after which cash
interest will accrue and be payable on a semi-annual basis. The Company also
received net proceeds of approximately $4.7 million from the private sale of an
additional 50,000 shares of its preferred stock to a principal stockholder and
the exercise by that stockholder of warrants to purchase 214,286 shares of
Common Stock acquired in the Company's June 1995 preferred stock private
placement. On March 21, 1996, the Company completed a private offering of the
2006 Notes from which the Company received net proceeds of approximately $61.8
million. The 2006 Notes will accrue to an aggregate principal amount of $120.0
million by April 1, 2001, after which cash interest will accrue and be payable
on a semi-annual basis. On April 15, 1997, the Company completed the April
Offering of 8,000,000 shares of Common Stock. The Company completed the sale
of an additional 660,000 shares on May 14, 1997 upon exercise of the
Underwriters' over-allotment option. The Company received net proceeds of
approximately $40.0 million from the sale of these 8,660,000 shares. On July
10, 1997, the Company completed the Unit Offering of 75,000 units from which
the Company received net proceeds of approximately $67 million. On July 18,
1997, the Company completed a private offering of the 2007 Notes from which the
Company received net proceeds of approximately $209.0 million, $70 million of
which is being held in escrow solely to fund the first five interest payments
or otherwise for the benefit of the holders of the 2007 Notes.
AT&T Credit Facility.
In October 1994, the Company entered into the AT&T Credit Facility pursuant to
which AT&T Credit Corporation has agreed to provide up to $31.2 million in
financing for the development and construction of fiber optic local networks by
five of the Company's subsidiaries. In connection with each loan made under
the AT&T Credit Facility, AT&T Credit Corporation purchased 7.25% of the
capital stock of the funded subsidiary, and ACSI pledged the other shares and
the assets of the subsidiary to AT&T Credit Corporation as security for the
loan. As of June 30, 1997, an aggregate of $31.2 million had been borrowed
under these agreements. Principal amounts payable on the AT&T Credit Facility
during 1997 are approximately $872,000.
The Company has entered into negotiations with AT&T Capital Corporation to
roll-up the five existing loan agreements comprising the AT&T Credit Facility
into the New AT&T Facility. The Company expects the New AT&T Facility to
otherwise be on terms substantially similar to those of the existing AT&T
Credit Facility. The maximum aggregate amount of credit available under the
proposed New AT&T Facility will not exceed $35.0 million as defined by the
Company's existing indentures. On June 26, 1997, each of the Company's
Subsidiaries that are parties to the AT&T Credit Facility entered into an
agreement with AT&T Credit Corporation to waive, for a period of 90 business
days commencing on the date thereof, compliance by such subsidiaries with
certain covenants contained therein. Such covenants are not expected to be
included in the new AT&T Facility.
The Redeemable Preferred Stock
On July 10, 1997, the Company consummated the private placement of 75,000
units, (the "Unit Offering"), consisting of its 14 3/4% Redeemable Preferred
Stock due 2008 (the "Redeemable Preferred Stock") and warrants to purchase
shares of common stock. The Company received net proceeds of approximately $67
million from the sale of these units. Each unit includes a warrant to purchase
80.318 shares of ACSI common stock subject to an increase of 22.645 additional
shares of common stock in the event that the Company fails to raise net
proceeds of at least $50 million through the issuance and sale of its qualified
capital stock on or before December 31, 1998. Dividends on the Redeemable
Preferred Stock will accrue from the date of issuance, are cumulative and will
be payable in arrears on March 31, June 30, September 30 and December 31,
commencing September 30, 1997. Dividends may be paid, at the Company's option,
on any dividend payment date either in cash or by the issuance of additional
shares of preferred stock, provided however, that after June 30, 2002, to the
extent and for so long as the Company is not precluded from paying cash
dividends on the Redeemable Preferred Stock by the terms of any then
outstanding indebtedness or any other agreement or instrument to which the
Company is subject, the Company shall pay the dividends in cash. The company is
required to redeem all the Redeemable Preferred Stock outstanding on June 30,
2008 at a redemption price equal to 100.00% of the liquidation preference
thereof, plus, without duplication, accrued and unpaid dividends to the date of
redemption.
2005 and 2006 Senior Discount Notes and 2007 Senior Notes
On November 14, 1995, the Company completed an offering of 190,000 Units
consisting of $190,000,000 principal amount of its 2005 Notes and the 2005
Warrants to purchase 2,432,000 shares of the Company's common stock at a price
of $7.15 per share. The 2005 Notes will accrete at a rate of 13% compounded
semi-annually to an aggregate principal amount of $190,000,000 by November 1,
2000. Thereafter, interest on the 2005 Notes will accrue at the annual rate of
13% and will be payable in cash semi-annually. The Company received net
proceeds of approximately $96,105,000 from the sale of the 1995 Units. The
value ascribed to the 2005 Warrants was $8,684,000.
On March 21, 1996, the Company completed an offering of $120,000,000 of 12 3/4%
Senior Discount Notes due 2006 (the "2006 Notes") resulting in net proceeds of
approximately $61,800,000. The 2006 Notes will accrete at a rate of 12 3/4%
compounded semi-annually, to an aggregate principal amount of $120,000,000 by
April 1, 2001. Thereafter, interest on the 2006 Notes will accrue at the
annual rate of 12 3/4% and will be payable in cash semi-annually on April 1
and October 1, commencing on October 1, 2001. The 2006 Notes mature on April
1, 2006.
On July 18, 1997, the Company completed the private placement of $220,000,000
of 13-3/4% Senior Notes due 2007 (the "2007 Notes"). The Company received net
proceeds of approximately $209,000,000 from the sale of the 2007 Notes, with
approximately $70,000,000 place in escrow for the first five interest payments.
The 2007 Notes will bear interest at a rate of 13-3/4% compounded semi-annually
in arrears on January 15 and July 15 commencing on January 15, 1998. The notes
will mature on July 15, 2007.
On June 11, 1997, the Company notified the trustee under each of the indentures
governing the 2005 Notes and the indenture governing the 2006 Notes (the
"Existing Indentures") that, as of June 10, 1997, it had approximately $13.0
million in the aggregate of ordinary course trade accounts payable that were
more than 60 days overdue. As of June 30, 1997, the Company had approximately
$17.4 million in the aggregate of ordinary course trade accounts payable that
were more than 60 days overdue. These overdue amounts constituted Indebtedness
of the Company, as that term is defined in each of the Existing Indentures.
The incurrence by the Company of such Indebtedness is not permitted under each
of the Indentures and, therefore, constituted an Event of Default (as defined
in the Existing Indentures) under each Existing Indenture. The Company used a
portion of the proceeds of the Unit Offering to pay in full all ordinary course
trade accounts payable that were more than 60 days overdue to cure such Event
of Default.
Management anticipates that the cash resources available from these offerings
will be sufficient to fund the Company's negative cash flow and capital
expenditures required through the fourth quarter 1998. The Company's
expectations of required future cash flow and capital expenditures are based on
the Company's current estimates and the current state and Federal regulatory
environment. There can be no assurance that actual cash flows and capital
expenditures will not be significantly higher or lower than the Company's
estimates. In the future, additional funding will be required through the sale
of additional equity securities, increases in existing or new credit
facilities, or through the sale of additional debt securities, certain of which
would require the consent of the Company's debtholders. In addition there can
be no assurances that the Company will be able to meet its strategic objectives
or that such funds, if available at all, will be available on a timely basis or
on terms that are acceptable to the Company.
In addition, the Company in the past has considered and expects to continue to
consider potential acquisitions or other strategic arrangements that may fit
the Company's strategic plan. Although the Company has had discussions
concerning such potential acquisitions or arrangements, to date, no agreements
have been reached with regard to any particular transaction. Any such
acquisitions or strategic arrangements that the Company might consider are
likely to require additional equity or debt financing, which the Company will
seek to obtain as required.
PAGE 15
<PAGE> 16
EFFECTS OF NEW ACCOUNTING STANDARDS
During early 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128, Accounting for EPS, which will become effective December 15, 1997, and
will thereafter require the Company to disclose basic earnings (loss) per share
in addition to the common stock equivalent disclosure information already
required. Early adoption of SFAS No. 128 is not permitted.
While the Company does not know precisely the impact of adopting SFAS No. 128,
the Company does not expect that the adoption of SFAS No. 128 will have a
material effect on the Company's consolidated financial statements.
INFORMATION REGARDING FORWARD - LOOKING STATEMENTS
Information contained herein contains "forward-looking statements" (as such
term is defined in the Private Securities Litigation Reform Act of 1995) which
can be identified by the use of forward looking terminology such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative thereof or
other variations thereon or comparable terminology , or by discussions of
strategy. Certain statements contained in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and other sections herein,
including statements concerning the continued development of the Company's
businesses, the markets for the Company's services and products, the Company's
anticipated capital expenditures and regulatory reform, and other statements
contained herein regarding matters that are not historical facts, are
forward-looking statements. No assurance can be given that the future results
covered by the forward-looking statements will be achieved. The matters set
forth in Exhibit 99.1 to the Company's Annual Report on Form 10-KSB for the
fiscal period ended December 31, 1996 constitute cautionary statements
identifying important factors with respect to such forward-looking statements,
including risks and uncertainties, that could cause actual results to vary
materially from the future results indicated, expressed or implied, in such
forward-looking statements. Other factors could also cause actual results to
vary materially from the future results indicated in such forward-looking
statements.
PAGE 16
<PAGE> 17
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ACSI's former Chief Financial Officer, Harry J. D'Andrea, has initiated
litigation against the Company in the Circuit Court of Maryland for Anne
Arundel County. The lawsuit alleges four different counts: breach of contract;
breach of the covenant of good faith and fair dealing; negligent
misrepresentation; and specific performance. Mr. D'Andrea seeks damages in
excess of $5,000,000, and the right to exercise options to purchase 100,000
shares of ACSI common stock at $4.25 per share. The Company received a copy of
the Complaint on April 8, 1997. The Company believes it has meritorious
defenses to this complaint and intends to defend this lawsuit vigorously.
Additionally, the Company and its subsidiaries are currently parties to routine
litigation incidental to their business, none of which, individually or in the
aggregate, are expected to have a material adverse effect on the Company. The
Company and its subsidiaries are parties to various court appeals and
regulatory arbitration proceedings relating to certain of the Company's
interconnection agreements and continue to participate in regulatory
proceedings before the FCC and state regulatory agencies concerning the
authorization of services and the adoption of new regulations.
ITEM 2. CHANGES IN SECURITIES
On April 15, 1997, the Company completed a public offering of its Common Stock.
Upon completion of such offering, 461,254 shares of Preferred Stock then
outstanding were converted into 17,260,864 shares of Common Stock and once
again became authorized but unissued shares of Preferred Stock. The Company's
Certificate of Incorporation was restated to reflect the conversion of such
Preferred Stock and the elimination of voting, dividend, liquidation and other
rights of such Preferred Stock. Currently, the only class of voting stock
outstanding is the Common Stock.
Approximately $7.5 million of accrued dividends on 434,481 of the 461,254
shares of Preferred Stock converted in connection with the public offering were
paid April 15, 1997, through the issuance by the Company of 1,601,474 shares of
Common Stock to the holders of such Preferred Stock pursuant to the exemption
from the registration requirements of Section 5 of the Securities Act of 1933
set forth in Section 4(2) of such Act.
Effective March 6, 1997, the Company and MCImetro entered into an
agreement in which MCI named ACSI as its preferred local provider for dedicated
and transport services in 21 ACSI markets for at least a five year period.
Pursuant to this preferred provider agreement, MCI will migrate current
dedicated transport circuits in these markets to ACSI and ACSI will be listed
as the first choice provider in MCI's provisioning system for all new dedicated
access circuits in the designated markets and on June 19, 1997, executed an
agreement giving MCI the option to purchase loop transport services from ACSI
where ACSI has collocations with the ILEC and MCI has deployed its own local
switch. The parties also have agreed to use their best efforts to execute an
agreement pursuant to which MCI will resell local switched services in at least
10 of the 21 identified markets on a wholesale basis. In connection with these
agreements (collectively, the "MCI Transaction"), ACSI issued MCI warrants to
purchase up to 620,000 shares of ACSI's Common Stock at $9.86 per share,
subject to number and price adjustment in certain circumstances. ACSI has also
agreed to issue warrants to purchase up to an aggregate of approximately 1.7
million additional shares of ACSI's Common Stock at fair market value on the
date of grant in tranches every six months after execution of the preferred
provider agreement, subject to, and based upon, certain increases in revenues
to ACSI generated under that agreement. Of the 620,000 warrants issued to MCI
on March 6, 1997, 360,000 warrants have vested and the remaining 260,000
warrants will vest only upon execution of the switched services resale
agreement. MCI has certain registration rights with respect to any shares of
Common Stock issued to MCI in connection with the MCI Transaction.
PAGE 17
<PAGE> 18
On July 10, 1997, the Company consummated the private offering pursuant
to Rule 144A under the Securities Act of 1933, as amended, (the "Securities
Act") of 75,000 units, (the "Unit Offering"), consisting of its 14 3/4%
Redeemable Preferred Stock due 2008 and warrants to purchase shares of common
stock. The Units were resold by the initial purchasers to certain "qualified
institutional buyers" (as such term is defined under Rule 144A) and to a
limited number of institutional "accredited investors" (as defined in Rule
501(a)(1),(2),(3) or (7) of Regulation D under the Securities Act). The Company
received net proceeds of approximately $67 million from the sale of these
units. Each unit includes a warrant to purchase 80.318 shares of ACSI common
stock subject to an increase of 22.645 additional shares of common stock in the
event that the Company fails to raise net proceeds of at least $50 million
through the issuance and sale of its qualified capital stock on or before
December 31, 1998. Dividends on the Redeemable Preferred Stock will accrue from
the date of issuance, are cumulative and will be payable in arrears on March
31, June 30, September 30 and December 31, commencing September 30, 1997.
Dividends may be paid, at the Company's option, on any dividend payment date
either in cash or by the issuance of additional shares of preferred stock,
provided however, that after June 30, 2002, to the extent and for so long as
the Company is not precluded from paying cash dividends on the Redeemable
Preferred Stock by the terms of any then outstanding indebtedness or any other
agreement or instrument to which the Company is subject, the Company shall pay
the dividends in cash. The company is required to redeem all the Redeemable
Preferred Stock outstanding on June 30, 2008 at a redemption price equal to
100.00% of the liquidation preference thereof, plus, without duplication,
accrued and unpaid dividends to the date of redemption.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 25, 1997, the Company held its annual meeting to consider four
proposals.
The first proposal was to elect the seven nominees set forth in the Proxy
Statement. Pursuant to the Second Restated Certificate of Incorporation, the
Board is currently comprised of seven members, all of whom shall be elected by
the holders of the Company's Common Stock.
The nominees for directorship by holders of the Common Stock were: Anthony J.
Pompliano, Edwin M. Banks, Peter C. Bentz, Benjamin P. Giess, George M.
Middlemas, Christopher L. Rafferty and Olivier L. Trouveroy. There were
30,840,593 votes cast For, 15,162 Abstentions for Anthony J. Pompliano; there
were 30,841,793 votes cast For, 13,962 Abstentions for Edwin M. Banks;
30,841,993 votes cast For, 13,762 Abstentions for Peter C. Bentz; 30,841,993
votes cast For, 13,762 Abstentions for Benjamin P. Giess; 30,841,993 votes cast
For and 13,762 Abstentions for George M. Middlemas; 30,841,993 votes cast For,
13,762 Abstentions for Christopher L. Rafferty and 30,841,993 votes cast For,
and 13,762 Abstentions for Olivier L. Trouveroy.
The second proposal was to approve an amendment to the Company's 1994 Stock
Option Plan, as amended, to increase the number of shares of common stock
reserved for issuance upon exercise of option grants from 3,000,000 to
5,000,000. There were 21,951,403 votes cast For, 4,942,409 votes cast Against
and 12,556 Abstentions for Proposal No. 2.
The third proposal was an amendment to the Stock Option Plan to permit the
transfer by Outside Directors of options granted to them under the Stock Option
Plan. There were 27,736,863 votes cast For, 1,550,648 votes cast Against and
17,550 Abstentions for Proposal No. 3.
The fourth proposal was to ratify the selection of KPMG Peat Marwick LLP to
audit the consolidated financial statements of the Company for the fiscal year
ending December 31, 1997. There were 30,838,119 votes cast For, 14,836 votes
cast Against and 2,800 Abstentions for Proposal No. 4.
PAGE 18
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-B)
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1 Second Restated Certificate of Incorporation
of the Company
3.2 Certificate of Designations of the Company's
14.75% Redeemable Preferred Stock due 2008
3.3 Certificate of Amendment of the Certificate
of Designations of the Company's 14.75%
Redeemable Preferred Stock due 2008
3.4 Amended and Restated By-Laws of the Company
4.1 Supplemental Indenture dated as of July 7, 1997,
between the Company and The Chase Manhattan
Bank, as trustee, to the Indenture dated
November 14, 1995, as amended, relating to the
Company's 13% Senior Discount Notes due 2005
4.2 Supplemental Indenture dated as of July 7, 1997,
between the Company and The Chase Manhattan
Bank, as trustee, to the Indenture dated
March 26, 1995, as amended, relating to the
Company's 12.75% Senior Discount Notes due 2006
4.3 Specimen Certificate of the Company's 14.75%
Redeemable Preferred Stock due 2008
4.4 Warrant Agreement dated as of July 10, 1997,
between the Company and The Chase Manhattan
Bank, as warrant agent
4.5 Form of Warrant
4.6 Indenture dated as of July 23, 1997, between the
Company and The Chase Manhattan Bank, as trustee,
relating to the Company's 13.75% Senior Discount
Notes due 2007
</TABLE>
PAGE 19
<PAGE> 20
<TABLE>
<S> <C> <C>
4.7 Escrow and Disbursement Agreement dated as of
July 23, 1997, the Company, The Bank of New York, as
escrow agent, and The Chase Manhattan Bank, as
trustee, relating to the Company's 13.75% Senior
Discount Notes due 2007
10.1 Registration Rights Agreement dated as of July 10, 1997,
among the Company, BT Securities Corporation, Alex.
Brown & Sons Incorporated, The Huff Alternative Income
Fund, L.P., General Motors Domestic Group Pension Trust,
Societe Generale Securities Corporation, ING Baring (U.S.)
Securities, Inc. and McDermott Inc. Master Trust
10.2 Registration Rights Agreement dated as of July 23, 1997,
among the Company and BT Securities Corporation as
representatives of the Initial Purchasers names therein
11.1 Computation of Primary Net Income
Per Share
11.2 Computation of Fully Diluted Net Income
Per Share
27.0 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
(b) On July 29, 1997, the Company filed with the SEC a Current Report on Form
8-K dated July 29, 1997, to report the commencement and completion of its
private offering of units and certain other matters and the commencement and
completion of its private offering of 13 3/4% Senior Notes due 2007.
PAGE 20
<PAGE> 21
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
American Communications Services, Inc.
--------------------------------------
(Registrant)
August 14, 1997 /s/ ANTHONY J. POMPLIANO
- --------------------------- -------------------------------------------
(Anthony J. Pompliano, Executive Chairman)
August 14, 1997 /s/ DAVID L. PIAZZA
- --------------------------- -------------------------------------------
(David L. Piazza, Chief Financial Officer)
PAGE 21
<PAGE> 1
EXHIBIT 3.1
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
AMERICAN COMMUNICATIONS SERVICES, INC.
(Pursuant to Section 245 of the
General Corporation Law of the State of Delaware)
AMERICAN COMMUNICATIONS SERVICES, INC. (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "DGCL"), DOES HEREBY CERTIFY:
FIRST: That the name of the Corporation is American Communications
Services, Inc., and that this Corporation was originally incorporated on August
5, 1994 under the name of "ACSI Acquisition Corp.".
SECOND: That pursuant to the foregoing, this Second Restated
Certificate of Incorporation restates and integrates the Certificate of
Incorporation of the Corporation, pursuant to Section 245(c), by incorporating
said Amendments and does not further amend the provisions of the Corporation's
Certificate of Incorporation as theretofore amended or supplemented, and that
there is no discrepancy between those provisions and the provisions of this
Second Restated Certificate of Incorporation.
THIRD: The text of the Certificate of Incorporation as amended or
supplemented heretofore is integrated and restated hereby to read as herein set
forth in full:
<PAGE> 2
Article I - Name
1. The name of the Corporation is American Communications
Services, Inc.
Article II - Registered Agent
2. The address of its registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
Article III - Purpose
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the DGCL.
Article IV - Capitalization
4. The total number of shares of capital stock which the Corporation
shall have authority to issue is 76,500,000.
4.1. Of the authorized shares, 75,000,000 shares shall be common stock
(the "Common Stock") with a par value of $.01 per share.
4.2. Of the authorized shares, 1,500,000 shall be shares of preferred
stock (the "Preferred Stock" or "Preferred Shares") with a par value of $1.00
per share. The designations of the Preferred Stock and the powers,
preferences, qualifications, limitations or restrictions, and relative rights
thereof shall be as follows:
a. The Board is expressly authorized at any time
and from time to time to provide for the issuance of the Preferred Stock in one
or more series, with such voting powers and with such designations, preferences
and relative, participating, option or other special rights and qualifications,
limitations or restrictions thereof as shall be expressed in the resolution or
resolutions providing for the issue thereof adopted by the Board and as are not
expressed in this Certificate of Incorporation or any amendment hereto,
including (but without limiting the generality of the foregoing) the following:
(1) the designation of such series;
(2) the dividend rate of such series,
the conditions and dates upon which such dividends shall be payable, the
preference or relation which such dividends shall bear to the dividends payable
on any other class or classes or on any other
- 2 -
<PAGE> 3
series of any class or classes of capital stock of the Corporation, and whether
such dividends shall be cumulative or noncumulative;
(3) whether the shares of such series
may be redeemed by the Corporation, and, if so, the times, prices and other
terms and conditions of such redemption;
(4) the terms and amount of any sinking
fund provided for the purchase or redemption of the shares of such series;
(5) whether the shares of such series
shall be convertible into or exchangeable for shares of any other class or
classes or of any other series of any class or classes of capital stock of the
Corporation, and, if the provision be made for conversion or exchange, the
times, prices, rates, adjustments and other terms and condition of such
conversion or exchange.
(6) the restrictions and conditions, if
any, upon the issue or reissue of any additional Preferred Shares ranking on a
parity with or prior to such shares as to dividends or upon dissolution; and
(7) the rights of holders of the shares
of such series upon the liquidation or the distribution of assets of the
Corporation, which rights may be different in the case of a voluntary
liquidation than in the case of an involuntary liquidation.
b. Except as otherwise required by law and
except for such voting powers with respect to the election of directors or
other matters as may be stated in the resolutions of the Board creating any
series of Preferred Shares, the holders of any such series shall have no voting
power whatsoever.
4.3. Each share of common stock shall be entitled to one
vote, either in person or by proxy, at all stockholder meetings.
4.4. Cumulative voting with respect to the shares of
Common Stock of the Corporation shall not be allowed in the election of
directors.
4.5. All outstanding shares of common stock shall share
equally in dividends and upon liquidation subject to the rights of any
Preferred Shares. Dividends are payable at the discretion of the Board at such
times and in such amounts as it deems advisable, subject to the rights of any
Preferred Shares and the provisions of the DGCL.
- 3 -
<PAGE> 4
Article V - Duration
5. The Corporation is to have perpetual existence.
Article VI - Limitation of Liability
6. Limits on Director Liability. Directors of the Corporation shall
have no personal liability to the Corporation or its stockholders for monetary
damages for breach of a fiduciary duty as a director; provided that nothing
contained in this Article VI shall eliminate or limit the liability of a
director (i) for any breach of a director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve misconduct or knowing violations of the law, (iii) under Section 174 of
the DGCL, or (iv) for any transaction from which a director derived an improper
personal benefit. If the DGCL is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then by virtue of
this Article VI the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended.
6.1 Indemnification. The Corporation shall indemnify, in accordance
with the By-laws, to the fullest extent permitted from time to time by the DGCL
or any other applicable laws as presently or hereafter in effect, any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including, without limitation, an action by or
in the right of the Corporation, by reason of his acting as a director or
officer of the Corporation (and the Corporation, in the discretion of the
Board, may so indemnify a person by reason of the fact that he is or was an
employee or agent of the Corporation or is or was serving at the request of the
Corporation in any other capacity for or on behalf of the Corporation) against
any liability or expense actually and reasonably incurred by such person in
respect thereof; provided, however, that the Corporation shall be required to
indemnify an officer or director in connection with an action, suit or
proceeding (or part thereof) initiated by such person only if (i) such action,
suit or proceeding (or part thereof) was authorized by the Board or (ii) the
indemnification does not relate to any liability arising under Section 16(b) of
the Securities Exchange Act of 1934, as amended, or any of the rules or
regulations promulgated thereunder. Such indemnification is not exclusive of
any other right to indemnification provided by law or otherwise. The right to
indemnification conferred by this Section 6.1 shall be deemed to be a contract
between the Corporation and each person referred to herein.
If a claim under Section 6.1 of this Article VI is not
- 4 -
<PAGE> 5
paid in full by the Corporation within 30 days of the Corporation's receipt of
a written request from a director or officer, such director or officer may
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where any undertaking required by the By-laws has been tendered to
the Corporation) that the claimant has not met the standards of conduct which
make it permissible under the DGCL and Section 6.1 of this Article VI for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board, legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in the DGCL, nor an
actual determination by the Corporation (including its Board, legal counsel, or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Indemnification shall include payment to directors and
officers by the Corporation of expenses in defending an action or proceeding in
advance of the final disposition of such action or proceeding upon receipt of
an undertaking by the person indemnified to repay such payment if it is
ultimately determined that such person is not entitled to indemnification under
this Article VI, which undertaking may be accepted without reference to the
financial ability of such person to make such repayment.
The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Article VI shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of this
Certificate of Incorporation, by-law, agreement, contract, vote of stockholders
or disinterested directors, or otherwise.
6.2 Additional Indemnification. The Corporation may, by action of its
Board, provide additional indemnification to such of the directors, officers,
employees and agents of the Corporation to such extent and to such effect as
the Board shall determine to be appropriate and authorized by Delaware Law.
6.3 Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or
- 5 -
<PAGE> 6
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VI,
the DGCL, or otherwise.
6.4 Effect of Amendments. Neither the amendment, change, alteration
nor repeal of this Article VI, nor the adoption of any provision of this
Certificate of Incorporation or the By-Laws, nor, to the fullest extent
permitted by Delaware Law, any modification of law, shall eliminate or reduce
the effect of this Article VI or the rights or any protections afforded under
this Article VI in respect of any acts or omissions occurring prior to such
amendment, repeal, adoption or modification."
6.5 Certain Definitions. For purposes of this Article VI, references
to "the Corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors or
officers, so that any person who is or was a director or officer of such
constituent corporation, or is or was a director or officer of such constituent
corporation serving at the request of such constituent corporation as a
director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, shall stand in the same position
under the provisions of this Article VI with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued. For purposes
of this Article VI, references to "serving at the request of the Corporation"
shall include any service as a director or officer of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participant or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation.
Article VII - Amendment
7. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power. Except
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<PAGE> 7
as otherwise provided in the Certificate of Incorporation, the By-laws may be
amended, repealed or adopted by the Board of Directors or by vote of the
stockholders at the time entitled to vote in the election of any directors."
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, American Communications Services, Inc. has
caused this Second Amended and Restated Certificate of Incorporation to be duly
executed by Anthony J. Pompliano, its Executive Chairman, this 2nd day of
July, 1997.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: /s/ ANTHONY J. POMPLIANO
----------------------------------
Anthony J. Pompliano, Executive Chair
- 8 -
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 14.75%
REDEEMABLE PREFERRED STOCK DUE 2008 AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
American Communications Services, Inc. (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, does hereby certify that, pursuant to authority conferred
upon the board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, by unanimous written consent dated July 2, 1997, duly approved and
adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board
of Directors by its Certificate of Incorporation, the Board of
Directors does hereby create, authorize and provide for the issuance of
14.75% Redeemable Preferred Stock due 2008, par value $1.00 per share,
with a stated value of $1,000.00 per share, consisting initially of
400,000 shares, having the designations, preferences, relative,
participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth
in the Certificate of Incorporation and in this Resolution as follows:
(a) Designation. There is hereby created out of the authorized
and unissued shares of Preferred Stock of the Corporation a class of Preferred
Stock designated as the "14.75% Redeemable Preferred Stock due 2008." The number
of shares constituting such class shall be 400,000, and are referred to as the
"Redeemable Preferred Stock." The liquidation preference of the Redeemable
Preferred Stock shall be $1,000.00 per share (the "Liquidation Preference").
(b) Rank. The Redeemable Preferred Stock shall, with respect
to dividend rights and rights on liquidation, winding-up and dissolution of the
Corporation (as provided in paragraphs (c)(v), (c)(vi) and (d) below), rank (i)
senior to all classes of common stock of the Corporation and to each other class
of capital stock or series of Preferred Stock of the Corporation established
hereafter by the Board of Directors the
<PAGE> 2
-2-
terms of which expressly provide that it ranks junior to the Redeemable
Preferred Stock as to dividend rights and rights on liquidation, winding-up and
dissolution of the Corporation (collectively referred to, together with all
classes of common stock of the Corporation, as "Junior Stock"); (ii) subject to
certain conditions, and except as otherwise provided herein, on a parity with
each other class of Preferred Stock of the Corporation established hereafter by
the Board of Directors the terms of which expressly provide that such class or
series will rank on a parity with the Redeemable Preferred Stock as to dividend
rights and rights on liquidation, winding-up and dissolution (collectively
referred to as "Parity Stock"); and (iii) subject to certain conditions, junior
to each class of Preferred Stock of the Corporation established after the date
hereof by the Board of Directors the terms of which expressly provide that such
class will rank senior to the Redeemable Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution of the Corporation
(collectively referred to as "Senior Stock").
(c) Dividends.
(i) Beginning on the Issue Date, the Holders of the
outstanding shares of Redeemable Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, distributions in the form of full
cumulative dividends on each share of Redeemable Preferred Stock, at a
rate per annum equal to 14.75% (subject to adjustment as provided in
paragraph (c)(ii)) of the Liquidation Preference of the Redeemable
Preferred Stock, payable quarterly (each such quarterly period being
herein called a "Dividend Period"). In the event that, after June 30,
2002, dividends on the Redeemable Preferred Stock are in arrears and
unpaid for four or more Dividend Periods following such date (whether
or not consecutive), Holders of Redeemable Preferred Stock shall be
entitled to certain voting rights as provided in paragraph (f)(iv)
below. All dividends shall be cumulative, whether or not earned or
declared, on a daily basis from the Issue Date and shall be payable
quarterly in arrears on each Dividend Payment Date, commencing on
September 30, 1997, to Holders of record on the March 15, June 15,
September 15 and December 15 immediately preceding the relevant
Dividend Payment Date. Notwithstanding anything herein to the contrary,
any dividends that are in arrears on the Redeemable Preferred Stock
shall accrue and cumulate dividends thereon from the Dividend Payment
Date on which such dividend was payable.
<PAGE> 3
-3-
Dividends may be paid, at the Corporation's option, on any
Dividend Payment Date either in cash or by the issuance of additional
shares of Redeemable Preferred Stock (and, at the Corporation's option,
payment of cash in lieu of fractional shares) having an aggregate
Liquidation Preference (including any fractional shares) equal to the
amount of such dividends; provided, however, that after June 30, 2002,
to the extent and for so long as the Corporation is not precluded from
paying cash dividends on the Redeemable Preferred Stock by the terms of
any then outstanding indebtedness or any other agreement or instrument
to which the Corporation is subject, the Corporation shall pay
dividends in cash.
(ii) Within 30 days of the occurrence of a Change of Control,
Holders of two-thirds of the Redeemable Preferred Stock will designate
an Independent Financial Advisor to determine, within 20 days of such
designation, in the opinion of such firm, the appropriate dividend rate
that the Redeemable Preferred Stock should bear so that, after such
reset, the Redeemable Preferred Stock would have a market value of 101%
of the Liquidation Preference. If, for any reason and within 5 days of
the designation of an Independent Financial Advisor by the Holders,
such Independent Financial Advisor is unacceptable to the Corporation,
the Corporation shall designate a second Independent Financial Advisor
to determine, within 15 days of such designation, in its opinion, such
an appropriate reset dividend rate for the Redeemable Preferred Stock.
In the event that the two Independent Financial Advisors cannot agree,
within 25 days of the designation of an Independent Financial Advisor
by the Holders of two-thirds of the Redeemable Preferred Stock, on the
appropriate reset dividend rate, the two Independent Financial Advisors
shall, within 10 days of such 25th day, designate a third Independent
Financial Advisor, which, within 15 days of designation, will
determine, in its opinion, such an appropriate reset rate which is
between the two rates selected by the first two Independent Financial
Advisors; provided, however, that the reset rate shall in no event be
less than 14.75% per annum or greater than 17.25% per annum. The
reasonable fees and expenses, including reasonable fees and expenses of
legal counsel, if any, and customary indemnification, of each of the
three above-referenced Independent Financial Advisors shall be borne by
the Corporation. Upon the determination of the reset rate, the
Redeemable Preferred Stock shall accrue and cumulate dividends at the
reset rate as of the date of occurrence of the Change of Control.
<PAGE> 4
-4-
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors
to declare, or the Corporation to pay or set apart for payment, any
dividends on shares of the Redeemable Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption
pursuant to paragraph (e)(i) may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to Holders of
record on such date, not more than forty-five (45) days prior to the
payment thereof, as may be fixed by the Board of Directors.
(v) No full dividends may be declared by the Board of
Directors or paid or funds set apart for the payment of dividends by
the Corporation on any Parity Stock (except dividends on Parity Stock
payable solely in additional shares of Parity Stock) for any period
unless full cumulative dividends shall have been or contemporaneously
are declared and paid (or are deemed declared and paid) in full or
declared and, if payable in cash, a sum in cash sufficient for such
payment is set apart for such payment on the Redeemable Preferred Stock
for all Dividend Periods terminating on or prior to the date of payment
of such full dividends on such Parity Stock. If full dividends are not
so paid, all dividends declared upon shares of the Redeemable Preferred
Stock and any other Parity Stock (except dividends on Parity Stock
payable solely in additional shares of Parity Stock) shall be declared
pro rata so that the amount of dividends declared per share on the
Redeemable Preferred Stock and such Parity Stock shall in all cases
bear to each other the same ratio that accumulated and unpaid dividends
per share on the Redeemable Preferred Stock and such Parity Stock bear
to each other.
(vi) (A) Holders of shares of the Redeemable Preferred Stock
shall be entitled to receive the dividends provided for in paragraph
(c)(i) hereof in preference to and in priority over any dividends upon
any of the Junior Stock (except dividends on Junior Stock payable
solely in additional shares of Junior Stock).
(B) So long as any share of the Redeemable Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend on any of the Junior Stock (except dividends on
Junior Stock payable in Junior Stock) or make any payment on account
of, or set apart for payment money for a sinking or other similar fund
for, the purchase, redemption or other retirement of, any of the
<PAGE> 5
-5-
Junior Stock or any warrants, rights, calls or options exercisable for
or convertible into any of the Junior Stock, whether in cash,
obligations or shares of the Corporation or other property, and shall
not permit any corporation or other entity directly or indirectly
controlled by the Corporation to purchase or redeem any of the Junior
Stock or any such warrants, rights, calls or options unless full
cumulative dividends determined in accordance herewith on the
Redeemable Preferred Stock have been paid (or are deemed paid) in full,
other than certain repurchase obligations with respect to such
warrants, rights, calls or options in existence on the Issue Date.
(C) So long as any share of the Redeemable Preferred Stock is
outstanding, the Corporation shall not make any payment on account of,
or set apart for payment money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any of the Parity
Stock or any warrants, rights, calls or options exercisable for or
convertible into any of the Parity Stock and shall not permit any
corporation or other entity directly or indirectly controlled by the
Corporation to purchase or redeem any of the Parity Stock or any such
warrants, rights, calls or options unless full cumulative dividends
determined in accordance herewith on the Redeemable Preferred Stock
have been paid (or are deemed paid) in full.
(vii) Dividends payable on the Redeemable Preferred Stock for
any period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months. The amount of Additional Dividends (as
defined below) will be determined consistent with the preceding
sentence and by multiplying the applicable Additional Dividends by a
fraction, the numerator of which is the number of days such rate was
applicable during any Dividend Period and the denominator of which is
360.
(viii) (A) If (1) the Corporation fails to file a Shelf
Registration Statement (in the circumstances described below) on or
prior to 150 days after the Issue Date, (2) the Shelf Registration
Statement is not declared effective within 225 days after the Issue
Date or (3) the Shelf Registration Statement is filed and declared
effective within 225 days after the Issue Date but shall thereafter
cease to be effective (at any time that the Corporation is obligated to
maintain the effectiveness thereof) without being succeeded within 90
days by an additional Shelf Registration Statement, filed and declared
effective, then, in recognition that the limited liquidity of the
Redeemable Preferred Stock has deleteriously affected its value,
<PAGE> 6
-6-
additional dividends (the "Additional Dividends") shall accrue and
cumulate on the Redeemable Preferred Stock as set forth in paragraphs
(B), (C) and (D) below, respectively.
(B) If the Shelf Registration Statement is not filed within
150 days following the Issue Date, Additional Dividends shall accrue
and cumulate on the Redeemable Preferred Stock over and above the
stated dividend rate at a rate of 0.50% per annum.
(C) If the Shelf Registration Statement is not declared
effective within 225 days following the Issue Date, Additional
Dividends shall accrue and cumulate on the Redeemable Preferred Stock
over and above the stated dividend rate at a rate of 0.50% per annum.
(D) If the Shelf Registration Statement has been declared
effective and ceases to be effective at any time prior to the third
anniversary of the Issue Date, unless all of the Redeemable Preferred
Stock registered thereunder has been sold thereunder or an additional
Shelf Registration Statement has been filed and declared effective
within 90 days of the date on which the Shelf Registration Statement
ceases to be effective, then Additional Dividends shall accrue and
cumulate on the Redeemable Preferred Stock over and above the stated
dividend rate at a rate of 0.50% per annum commencing on the 90th day
following the day such Shelf Registration Statement ceases to be
effective.
(E) Notwithstanding paragraphs (A)-(D) of this paragraph (c),
the Additional Dividends payable hereunder shall not exceed in the
aggregate 0.50% per annum. In addition (1) upon the filing of the Shelf
Registration Statement (in the case of paragraph (B) above), (2) upon
the effectiveness of the Shelf Registration Statement (in the case of
paragraph (C) above) or (3) upon the effectiveness of the Shelf
Registration Statement that had ceased to remain effective (in the case
of paragraph (D) above), the dividend rate on the Redeemable Preferred
Stock shall revert to the dividend rate set forth in paragraph (c)(i)
or (c)(ii) hereof, as applicable, and Additional Dividends on the
Redeemable Preferred Stock shall cease to accrue and cumulate or be
payable.
(d) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, the Holders of shares of Redeemable
Preferred Stock then outstanding will be entitled to be paid, out of
the assets of the Corporation
<PAGE> 7
-7-
available for distribution to its stockholders, an amount in cash equal
to the Liquidation Preference for each share of Redeemable Preferred
Stock outstanding, plus, without duplication, an amount in cash equal
to all accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a
prorated dividend for the period from the last Dividend Payment Date to
the date fixed for liquidation, dissolution or winding-up and including
an amount equal to the redemption premium that would have been payable
had the Redeemable Preferred Stock been the subject of an optional
redemption on such date, but exclusive of any amount declared as a
dividend pursuant to paragraph (d)(ii) hereof), before any payment
shall be made or any assets distributed to the holders of any of the
Junior Stock, including, without limitation, common stock of the
Corporation. If, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the assets of the
Corporation are not sufficient to pay in full the liquidation
preference payments payable to the holders of outstanding shares of the
Redeemable Preferred Stock and all other Parity Stock, then the holders
of all such shares shall share equally and ratably in any such
distribution of assets in proportion to the full liquidation preference
to which each is entitled until such liquidation preferences are paid
in full, and then in proportion to their respective amounts of
accumulated but unpaid dividends. The holders of outstanding shares of
Redeemable Preferred Stock and all other Parity Stock shall not be
entitled to any further participation in any distribution of assets of
the Corporation after payment of the full amount of the liquidation
preference, including accumulated and unpaid dividends and redemption
premium to which such holders are entitled.
(ii) Immediately prior to making any distribution with respect
to the Redeemable Preferred Stock in connection with any liquidation,
dissolution or winding-up of the Corporation, the Corporation, by
resolution by its Board of Directors, shall, to the extent of any funds
legally available therefor, declare a dividend on the Redeemable
Preferred Stock payable prior to the date of any such distribution in
an amount equal to any accrued and unpaid dividends on the Redeemable
Preferred Stock as of such date.
(iii) For the purposes of this paragraph (d), neither the
sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
property or assets of the Corporation nor the consolidation or merger
of the
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Corporation with or into one or more entities shall be deemed to be a
liquidation, dissolution or winding-up of the Corporation.
(e) Redemption.
(i) Optional Redemption. (A) The Corporation may, at the
option of the Board of Directors, redeem at any time on or after
January 1, 2003, subject to the legal availability of funds therefor,
in whole or in part, in the manner provided for in paragraph (e)(iii)
hereof, any or all of the shares of the Redeemable Preferred Stock, at
the redemption prices (expressed in percentages of an amount equal to
the sum of (i) the Liquidation Preference and (ii) without duplication,
the liquidation preference of any accrued and unpaid dividends payable
in Redeemable Preferred Stock to the Dividend Payment Date immediately
prior to the Redemption Date) set forth below, plus, without
duplication, an amount in cash equal to all accrued and unpaid cash
dividends to the Dividend Payment Date immediately prior to the
Redemption Date (including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately
prior to the Redemption Date to the Redemption Date, but exclusive of
any amount declared as a dividend pursuant to paragraph e(iv) hereof
(the "Optional Redemption Price")), if redeemed during the 12-month
period beginning January 1 of each of the years set forth below:
2003.....................................107.375%
2004.....................................104.917%
2005.....................................102.458%
2006 and thereafter......................100.000%
(B Notwithstanding the foregoing paragraph (e)(i)(A), the
Corporation will have the option, on or prior to June 30, 2000, to
redeem up to 30% of the outstanding Redeemable Preferred Stock at a
price (the "Equity Redemption Price") of 114.750% (expressed as a
percentage of an amount equal to the sum of (i) of the Liquidation
Preference and (ii) without duplication, the liquidation preference of
any accrued and unpaid dividends payable in Redeemable Preferred Stock
to the Dividend Payment Date immediately prior to the Redemption Date),
plus, without duplication, accrued and unpaid cash dividends to the
Dividend Payment Date immediately prior to the Redemption Date
(including an amount in cash equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date, but exclusive of any amount
declared as a dividend pursuant to paragraph e(iv) hereof) with the
proceeds of
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(i) one or more Public Equity Offerings generating cash proceeds to the
Corporation of at least $25 million or (ii) the sale of Qualified
Capital Stock generating cash proceeds to the Corporation of at least
$25 million to a corporation which has, or whose Parent has, a
Total Equity Market Capitalization at the time of such sale of at least
$1 billion on a consolidated basis; provided that Redeemable Preferred
Stock equal to at least 70% of the Redeemable Preferred Stock initially
issued remains outstanding after any such redemption.
(ii Mandatory Redemption. On June 30, 2008, the Corporation
shall redeem (subject to the legal availability of funds therefor) in
the manner provided for in paragraph (e)(iii) hereof, all of the shares
of the Redeemable Preferred Stock then outstanding at a redemption
price equal to 100% of the Liquidation Preference per share, plus,
without duplication, an amount in cash equal to all accumulated and
unpaid dividends per share to the Redemption Date (including the
dividend payable on the Redemption Date, but exclusive of any amount
declared as a dividend pursuant to paragraph e(iv) hereof) (the
"Mandatory Redemption Price").
(iii) Procedures for Redemption. (A) At least 30 days and not
more than 60 days prior to any Redemption Date, the Corporation shall
send written notice (the "Redemption Notice") by first class mail,
postage prepaid, to each Holder of record on the record date fixed for
such redemption of the Redeemable Preferred Stock at such Holder's
address as it appears on the stock books of the Corporation, provided
that no failure to give such notice nor any deficiency therein shall
affect the validity of the procedure for the redemption of any shares
of Redeemable Preferred Stock to be redeemed except as to the Holder or
Holders to whom the Corporation has failed to give said notice or
except as to the Holder or Holders whose notice was finally judicially
determined by a court of competent jurisdiction to be defective. The
Redemption Notice shall state:
(1) whether the redemption is pursuant to
paragraph (e)(i)(A), (e)(i)(B), or (e)(ii);
(2) the Optional Redemption Price, the Equity
Redemption Price or the Mandatory Redemption Price;
(3) whether all or (solely with respect to paragraph
(e)(1)(A) or (e)(1)(B)) less than all the outstanding shares
of the Redeemable Preferred Stock
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are to be redeemed and the total number of shares of
the Redeemable Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the Holder is to surrender to the
Corporation, at the offices of the Transfer Agent and in the
manner and at the price designated, his certificate or
certificates representing the shares of Redeemable Preferred
Stock to be redeemed; and
(6) that dividends on the shares of the Redeemable
Preferred Stock to be redeemed shall cease to accumulate on
such Redemption Date unless the Corporation defaults in the
payment of the Optional Redemption Price, the Equity
Redemption Price or the Mandatory Redemption Price, as the
case may be.
(A) Each Holder of Redeemable Preferred Stock called for
redemption shall surrender the certificate or certificates representing
such shares of Redeemable Preferred Stock to the Corporation, duly
endorsed (or otherwise in proper form for transfer, as determined by
the Corporation), at the office of the Transfer Agent and in the manner
designated in the Redemption Notice, and on the Redemption Date the
full Optional Redemption Price, Mandatory Redemption Price or Equity
Redemption Price, as the case may be, for such shares shall be payable
in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate
shall be canceled and retired. In the event that less than all of the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(B) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on the Redeemable Preferred Stock called for redemption shall
cease to accumulate, and all rights of the Holders of such shares shall
terminate with respect thereto on the date fixed for redemption, other
than the right to receive the Optional Redemption Price, the Equity
Redemption Price or the Mandatory Redemption Price, as the case may be,
without interest; provided, however, that if a Redemption Notice shall
have been given as provided in paragraph (iii)(A) above and the funds
necessary for redemption (including an amount in respect of all
dividends that will accumulate to the Redemption Date) shall have been
delivered to the Transfer Agent, in trust for the equal and ratable
benefit
<PAGE> 11
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of the Holders of the shares to be redeemed, then dividends shall cease
to accrue and cumulate on the Redemption Date of such shares of
Redeemable Preferred Stock to be redeemed and, at the close of business
on the day on which such funds are delivered to the Transfer Agent, the
Holders of the shares to be redeemed shall cease to be stockholders of
the Corporation and shall be entitled only to receive the Optional
Redemption Price, the Equity Redemption Price or the Mandatory
Redemption Price, as the case may be, for such shares without interest.
(C) In the event of a redemption pursuant to paragraph
(e)(i)(A) or (e)(i)(B) hereof of only a portion of the then outstanding
shares of the Redeemable Preferred Stock, the Corporation shall effect
such redemption on a pro rata basis according to the number of shares
held by each Holder of the Redeemable Preferred Stock, except that the
Corporation may redeem such shares held by Holders of fewer than 10
shares (or shares held by Holders who would hold less than 10 shares as
a result of such redemption), as may be determined by the Corporation.
(iv) Immediately prior to making any such redemption with
respect to the Redeemable Preferred Stock, the Corporation, by
resolution by its Board of Directors, shall, to the extent of any funds
legally available therefor, declare a dividend on the Redeemable
Preferred Stock payable on the Redemption Date in an amount equal to
any accrued and unpaid dividends on the Redeemable Preferred Stock as
of such date. If the Corporation does not have sufficient funds legally
available therefor to declare and pay all dividends accrued at the time
of such redemption, then an amount equal to any remaining accrued and
unpaid dividends shall, without duplication, be added to the Redemption
Price of each share of Redeemable Preferred Stock being redeemed.
(f) Voting Rights.
(i) The Holders of Redeemable Preferred Stock, except as
otherwise required under Delaware law or as set forth in paragraphs
(ii), (iii) and (iv) below, shall not be entitled or permitted to vote
on any matter required or permitted to be voted upon by the
stockholders of the Corporation.
(ii) (A) So long as any shares of the Redeemable Preferred
Stock are outstanding, the Corporation shall not authorize any class of
Senior Stock without the affirmative vote or consent of Holders of at
least two-thirds of the outstanding shares of Redeemable Preferred
Stock, voting or consenting, as the case may be, as one class, given in
<PAGE> 12
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person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(B) So long as any shares of the Redeemable Preferred Stock
are outstanding, the Corporation shall not authorize any class of
Parity Stock (other than (i) any additional shares of Redeemable
Preferred Stock issued and sold by the Company within 365 days of the
Issue Date, (ii) any shares of Redeemable Preferred Stock issued as
dividends (including as Additional Dividends), (iii) any preferred
stock issued in exchange for the Redeemable Preferred Stock or (iv) any
Post-Closing Parity Stock) without the affirmative vote or consent of
Holders of at least two-thirds of the then outstanding shares of
Redeemable Preferred Stock, voting or consenting, as the case may be,
as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(C) So long as any shares of the Redeemable Preferred Stock
are outstanding, the Corporation shall not amend this Certificate of
Designation so as to affect the specified rights, preferences,
privileges or voting rights of the Redeemable Preferred Stock without
the affirmative vote or consent of Holders of at least two-thirds of
the issued and outstanding shares of Redeemable Preferred Stock, voting
or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting.
(D) The Redeemable Preferred Stock and the Post-Closing Parity
Stock shall vote on all matters as a single class.
(E) Except as set forth in paragraphs (f)(ii)(A), (f)(ii)(B)
and (f)(ii)(C) above, (x) the creation, authorization or issuance of
any shares of any Junior Stock or (y) the increase or decrease in the
amount of authorized Capital Stock of the Corporation of any class,
including any Preferred Stock of the Corporation, shall not require the
consent of the Holders of the Redeemable Preferred Stock and shall not
be deemed to affect adversely the rights, preferences, privileges or
voting rights of shares of Redeemable Preferred Stock.
(iii) (A) If (1) after June 30, 2002, dividends on the
Redeemable Preferred Stock are in arrears and unpaid for four or more
Dividend Periods following such date (whether or not consecutive) (a
"Dividend Default"); (2) the Corporation fails to redeem all of the
then outstanding shares of Redeemable Preferred Stock on June 30, 2008;
or
<PAGE> 13
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(3) the Corporation fails to pay at the final stated maturity (giving
effect to any extensions thereof) the principal amount of any
Indebtedness of the Corporation or any Subsidiary of the Corporation,
or the final stated maturity of any such Indebtedness is accelerated,
if the aggregate principal amount of such Indebtedness, together with
the aggregate principal amount of any other such Indebtedness in
default for failure to pay principal at the final stated maturity
(giving effect to any extensions thereof) or that has been accelerated,
aggregates $10 million or more at the time of such default, in each
case, after a 30-day period during which such default shall not have
been cured or such acceleration rescinded, then in the case of any of
clauses (1)-(3) the number of directors constituting the Board of
Directors shall be adjusted by the number, if any, necessary to permit
the Holders of two-thirds of the then outstanding shares of Redeemable
Preferred Stock, voting as a single class, to elect the lesser of two
directors and 25% of the number of members constituting the Board of
Directors. Each such event described in clauses (1), (2) and (3) is a
"Voting Rights Triggering Event." Holders of two-thirds of the issued
and outstanding shares of Redeemable Preferred Stock, voting as a
single class, shall have the exclusive right to elect, by two-thirds
vote, the lesser of two directors and 25% of the number of members
constituting the Board of Directors at a meeting therefor called upon
occurrence of such Voting Rights Triggering Event, and at every
subsequent meeting at which the terms of office of the directors so
elected by the Holders of the Redeemable Preferred Stock expire (other
than as described in (f)(iii)(B) below).
(B) The right of the Holders of Redeemable Preferred Stock
voting as a single class to elect members of the Board of Directors as
set forth in subparagraph (f)(iii)(A) above shall continue until such
time as (x) in the event such right arises due to a Dividend Default,
all accumulated dividends that are in arrears on the Redeemable
Preferred Stock are paid in full; and (y) in all other cases, the
failure, breach or default giving rise to such Voting Rights Triggering
Event is remedied or waived by the Holders of at least two-thirds of
the shares of Redeemable Preferred Stock then outstanding and entitled
to vote thereon, at which time (1) the special right of the Holders of
Redeemable Preferred Stock so to vote as a class for the election of
directors and (2) the term of office of the directors elected by the
Holders of the Redeemable Preferred Stock shall each terminate. At any
time after voting power to elect directors shall have become vested and
be continuing in the Holders of Redeemable Preferred Stock pursuant to
<PAGE> 14
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paragraph (f)(iii) hereof, or if vacancies shall exist in the offices
of directors elected by the Holders of Redeemable Preferred Stock, a
proper officer of the Corporation may, and upon the written request of
the Holders of record of at least 25% of the shares of Redeemable
Preferred Stock then outstanding addressed to the secretary of the
Corporation at its principal executive offices shall, call a special
meeting of the Holders of Redeemable Preferred Stock, for the purpose
of electing the directors which such Holders are entitled to elect. If
such meeting shall not be called by a proper officer of the Corporation
within 20 days after personal service of said written request upon the
secretary of the Corporation at its principal executive offices, or
within 20 days after mailing the same within the United States by
certified mail, return receipt requested, addressed to the secretary of
the Corporation at its principal executive offices, then the Holders of
record of at least 25% of the outstanding shares of Redeemable
Preferred Stock may designate in writing one of their number to call
such meeting at the expense of the Corporation, and such meeting may be
called by the Person so designated upon the notice required for the
annual meetings of stockholders of the Corporation and shall be held at
the place designated in such notice. Any Holder of Redeemable Preferred
Stock so designated shall have, and the Corporation shall provide,
access to the lists of stockholders to be called pursuant to the
provisions hereof.
(C) At any meeting held for the purpose of electing directors
at which the Holders of Redeemable Preferred Stock shall have the
right, voting together as a separate class, to elect directors as
aforesaid, the presence in person or by proxy of the Holders of at
least two-thirds of the outstanding shares of Redeemable Preferred
Stock shall be required to constitute a quorum of such Redeemable
Preferred Stock.
(D) Any vacancy occurring in the office of a director elected
by the Holders of Redeemable Preferred Stock may be filled by the
remaining director elected by the Holders of Redeemable Preferred Stock
unless and until such vacancy shall be filled by the Holders of
Redeemable Preferred Stock. Holders of two-thirds of the Redeemable
Preferred Stock, voting separately as a class, may remove, with or
without cause, any director elected by the Holders of Redeemable
Preferred Stock or appointed to fill a vacancy pursuant to the next
preceding sentence. Any director to be elected by the Holders of
Redeemable Preferred Stock shall agree, prior to his election to
office, to resign upon any termination of the right of the Holders of
Redeemable
<PAGE> 15
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Preferred Stock to vote as a class for a director as herein provided,
and upon any such termination any director then in office elected by
the Holders of Redeemable Preferred Stock shall forthwith resign.
(iv) In any case in which the Holders of Redeemable Preferred
Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Redeemable Preferred Stock
entitled to vote with respect to each such matter shall be entitled to
one vote for each share of Redeemable Preferred Stock held.
(g) Conversion or Exchange. The Holders of shares of
Redeemable Preferred Stock shall not have any rights hereunder to
convert such shares into or exchange such shares for shares of any
other class or classes or of any other series of any class or classes
of Capital Stock of the Corporation.
(h) Reissuance of Redeemable Preferred Stock. Shares of
Redeemable Preferred Stock that have been issued and reacquired in any
manner, including shares purchased or redeemed or exchanged, shall
(upon compliance with any applicable provisions of the laws of
Delaware) have the status of authorized but unissued shares of
Preferred Stock of the Corporation undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock of
the Corporation, provided that any issuance or reissuance of such
shares as Redeemable Preferred Stock must be in compliance with the
terms hereof.
(i) Business Day. If any payment, redemption or exchange shall
be required by the terms hereof to be made on a day that is not a
Business Day, such payment, redemption or exchange shall be made on the
immediately succeeding Business Day.
(j) Reports. So long as any shares of Redeemable Preferred
Stock are outstanding, the Corporation will provide to the holders of
Redeemable Preferred Stock and file with the Commission copies of the
annual reports and of the information, documents and other reports that
the Corporation would have been required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act regardless of
whether the Corporation is then obligated to file such reports. For so
long as any of the shares of the Redeemable Preferred Stock are
outstanding, the Company will, during any period in which it is not
subject to and in compliance with Section 13 or 15(d) of the Exchange
Act, provide to each Holder and to each prospective purchaser (as
<PAGE> 16
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designated by such Holder) of Redeemable Preferred Stock, any
information required to be provided by Rule 144A(d)(4) under the Act.
(k) Definitions. As used in this Certificate of Designation,
the following terms shall have the following meanings (with terms
defined in the singular having comparable meanings when used in the
plural and vice versa), unless the context otherwise requires:
"Additional Dividends" shall have the meaning
ascribed to it in paragraph (c) hereof.
"Board of Directors" shall have the meaning ascribed
to it in the first paragraph of this Resolution.
"Business Day" means any day except a Saturday, a
Sunday, or any day on which banking institutions in New York,
New York are required or authorized by law or other
governmental action to be closed.
"Capital Stock" in any Person means any and all
shares, interests, participations or other equivalents in the
equity interest (however designated) in such Person and any
rights (other than Indebtedness convertible into an equity
interest), warrants or options to acquire an equity interest
in such Person.
"Change of Control" shall be deemed to occur if (i)
the sale, conveyance, transfer or lease of all or
substantially all the assets of the Corporation to any
"person" or "group" (within the meaning of Sections 13(d)(3)
and 14(d)(2) of the Exchange Act or any successor provisions
to either of the foregoing, including any group acting for the
purpose of acquiring, holding or disposing of securities
within the meaning of Rule 13d-5(b)(i) under the Exchange Act)
(other than any Permitted Holder (as defined below) or any
subsidiary of the Corporation) shall have occurred; (ii) any
"person" or "group" as aforesaid other than any Permitted
Holder, becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 35% of the total
voting power of all classes of the voting stock of the
Corporation and/or warrants or options to acquire such voting
stock, calculated on a fully diluted basis, and such voting
power percentage is greater than or equal to the total voting
power percentage then beneficially owned by the Permitted
Holders in the aggregate; or (iii) during any period of
<PAGE> 17
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two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors (together with
any new directors whose election or appointment by such board
or whose nomination for election by the shareholders of the
Corporation was approved by a vote of a majority of the
directors then still in office who were either directors at
the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors then in
office; provided, however, that no Change of Control shall
occur if the "person" or "group" in the case of clause (i)
above is a Strategic Investor or the "beneficial owner" of
voting power in excess of 50% of the voting power of the
Corporation in the case of clause (ii) above is a Strategic
Investor and such Strategic Investor beneficially owns in
excess of 50% of the voting power of the Corporation.
"Commission" means the Securities and Exchange
Commission.
"Disqualified Capital Stock" means any Capital Stock
that, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable or
exercisable), or upon the happening of any event, matures
(excluding any maturity as the result of an optional
redemption by the issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder
thereof, in whole or in part, on or prior to the mandatory
redemption date of the Redeemable Preferred Stock.
"Dividend Payment Date" means March 31, June 30,
September 30 and December 31 of each year.
"Dividend Period" means the Initial Dividend
Period and, thereafter, each Quarterly Dividend Period.
"Dividend Record Date" means March 15, June 15,
September 15 and December 15 of each year.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
<PAGE> 18
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"Holder" means a holder of shares of Redeemable
Preferred Stock as reflected in the stock books of the
Corporation.
"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
or property or services (but excluding trade accounts payable
or accrued liabilities 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 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, (viii) any indebtedness attributable 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 for, directly or indirectly, as obligor, guarantor or
otherwise. For purposes of the preceding sentence, the maximum
fixed repurchase price of any Disqualified Stock that does not
have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Stock as if
such Disqualified Stock were repurchased on any date on which
Indebtedness shall be required to be determined hereunder;
provided that if such Disqualified Stock is not then permitted
to be repurchased, the repurchase price shall be the book
value of such Disqualified Stock.
<PAGE> 19
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"Independent Financial Advisor" means a United States
investment banking firm of national standing in the United
States which does not, and whose directors, officers and
employees or affiliates do not, have a direct or indirect
financial interest in the Corporation.
"Initial Dividend Period" means the dividend period
commencing on the Issue Date and ending on September 30, 1997.
"Issue Date" means the date of original issuance
of the Redeemable Preferred Stock.
"Junior Stock" shall have the meaning ascribed to
it in paragraph (b) hereof.
"Mandatory Redemption Price" shall have the
meaning ascribed to it in paragraph (e) hereof.
"Optional Redemption Price" shall have the meaning
ascribed to it in paragraph (e)(i) hereof.
"Parent" means, with respect to any entity, an entity
which, directly or indirectly, owns, at the time, a majority
of the voting interest of such first-referenced entity.
"Parity Stock" shall have the meaning ascribed to
it in paragraph (b) hereof.
"Permitted Holders" means The Huff Alternative Income
Fund, L.P., ING Equity Partners, L.P.I., Apex Investment Fund
I, L.P., Apex Investment Fund II, L.P., The Productivity Fund
II, L.P. and Anthony J. Pompliano and their respective
affiliates (other than the Corporation and its subsidiaries)
of each of the foregoing.
"Person" means any individual, corporation,
partnership, joint venture, trust, unincorporated organization
or government or any agency or subdivision thereof.
"Post-Closing Parity Stock" means a class or classes
of Parity Stock issued and sold by the Corporation within 60
days of the Issue Date and containing terms as to liquidation
preference, redemption and voting not materially different
from those of the Redeemable Preferred Stock.
<PAGE> 20
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"Public Equity Offering" means an underwritten public
offering of Capital Stock (other than Disqualified Capital
Stock) of the Corporation.
"Qualified Capital Stock" means any Capital Stock
that is not Disqualified Capital Stock.
"Quarterly Dividend Period" shall mean the quarterly
period commencing on each January 1, April 1, July 1 and
October 1 and ending on the next succeeding Dividend Payment
Date, respectively.
"Redeemable Preferred Stock" shall have the
meaning ascribed to it in paragraph (a) hereof.
"Redemption Date", with respect to any shares of
Redeemable Preferred Stock, means the date on which such
shares of Redeemable Preferred Stock are redeemed by the
Corporation.
"Redemption Notice" shall have the meaning
ascribed to it in paragraph (e) hereof.
"Registration Rights Agreement" means the
Registration Rights Agreement dated as of the Issue Date among
the Corporation, BT Securities Corporation, Alex. Brown & Sons
Incorporated and the other parties thereto.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Senior Stock" shall have the meaning ascribed to
it in paragraph (b) hereof.
"Shelf Registration Statement" means a registration
statement filed by the Corporation with the Commission for an
offering to be made on a continuous basis pursuant to Rule 415
promulgated under the Securities Act covering all of the
Redeemable Preferred Stock.
"Strategic Investor" means a publicly traded company
(i) whose principal business is operating a public utility
company and/or a cable and/or telephone and/or
telecommunications system in the United States or which, after
the consummation of the relevant transaction, is or will be
delivering its own services over the networks or systems of
the Corporation and any
<PAGE> 21
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business reasonably related to the foregoing or creating,
developing or marketing communications related network
equipment, software or other devices for use in transmitting
voice, video or data, (ii) which has a Total Equity Market
Capitalization in excess of $1 billion and (iii) whose senior
unsecured debt securities are rated (or carry an implied
rating) by Moody's Investors Service, Inc. (or any successor
to the rating agency business thereof) or Standard & Poor's
Corporation (or any successor to the rating agency business
thereof) as Baa- or BBB-, respectively, or better, on a pro
forma basis assuming the consummation of any transaction with
the Corporation, provided if such securities are rated by both
such rating agencies, the lowest rating of the two shall
govern for purposes of this definition.
"Total Equity Market Capitalization" of any Person
means, as of any day of determination, the sum of (1) the
product of (A) the aggregate number of outstanding primary
shares of common stock of such Person on such day (which shall
not include any options or warrants on, or securities
convertible or exchangeable into or exercisable for, shares of
common stock of such Person) multiplied by (B) the average
closing price of such common stock over the 20 consecutive
trading days immediately preceding such day, plus (2) the
liquidation value of any outstanding shares of preferred stock
of such Person on such day.
"Transfer Agent" shall mean The Bank of New York.
"Voting Rights Triggering Event" shall have the
meaning ascribed to it in paragraph (f)(iv) hereof.
<PAGE> 22
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IN WITNESS WHEREOF, said American Communications Services,
Inc. has caused this Certificate to be signed by Riley M. Murphy, its Executive
Vice President-Legal and Regulatory Affairs, General Counsel and Secretary, this
8th day of July, 1997.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: /s/ Riley M. Murphy
------------------------------------
Name: Riley M. Murphy
Title: Executive Vice President Legal
and Regulatory Affairs, General
Counsel and Secretary
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 14.75%
REDEEMABLE PREFERRED STOCK DUE 2008 AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
OF
AMERICAN COMMUNICATIONS SERVICES, INC.
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
American Communications Services, Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
1. That the Restated Certificate of Incorporation of the
Corporation was filed in the office of the Secretary of State of the State of
Delaware on July 3, 1997 and a Certificate of the Designations, Preferences and
Rights of the Corporation's 14.75% Redeemable Preferred Stock due 2008 was filed
in said office of the Secretary of State on July 8, 1997.
2. That no shares of the class of preferred stock designated
in the above-referenced Certificate of Designation have been issued by the
Corporation.
3. That pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation, by unanimous written consent dated July 9, 1997, duly approved and
adopted the following resolution (the "Resolution"):
RESOLVED, that the Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and other Special
Rights of the Redeemable Preferred Stock Due 2008 of the Corporation
and Qualifications, Limitations and Restrictions thereof (the
"Certificate"), and the resolution of the Board of Directors of the
Corporation contained therein as filed
<PAGE> 2
2
with the Secretary of State of the State of Delaware on July 8, 1997,
shall be amended as follows:
(a) paragraph (c)(viii)(D) shall be amended by
deleting the word "second" in the third line
thereof and replacing it with the word "third";
(b) the definition of "Post-Closing Parity Stock" in paragraph
(k) shall be amended by deleting the number "365" in the third
line thereof and replacing it with the number "120"; and
(c) the definition of "Permitted Holders" in paragraph (k)
shall be amended by deleting the word "their" in the fourth
line thereof and replacing it with the word "the",
and that the proper officers of the Corporation be, and each of them
hereby is, authorized and empowered, to execute and file said amendment
to the Certificate with the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, said American Communications Services,
Inc. has caused this Certificate of Amendment to be executed by Riley M. Murphy,
its Executive Vice President-Legal and Regulatory Affairs and Secretary, this
9th day of July, 1997.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: /s/ Riley M. Murphy
------------------------------------
Name: Riley M. Murphy
Title: Executive Vice President -- Legal
and Regulatory Affairs, and Secretary
<PAGE> 1
EXHIBIT 3.4
AMERICAN COMMUNICATIONS SERVICES, INC.
AMENDED AND RESTATED BY-LAWS(1)
ARTICLE I.
OFFICES
SECTION 1. Registered Office. The registered office of American
Communications Services, Inc. (the "Corporation") in the State of Delaware
shall be at 1209 Orange Street, City of Wilmington, County of New Castle, and
the registered agent in charge thereof shall be The Corporation Trust Company.
SECTION 2. Other Offices. The Corporation may also have an office or
offices at other place or places within or without the State of Delaware.
ARTICLE II.
MEETINGS OF STOCKHOLDERS; STOCKHOLDERS'
CONSENT IN LIEU OF MEETING
SECTION 1. Annual Meeting. The annual meeting of the stockholders
(unless the context clearly requires otherwise, the term "Stockholders" as used
herein shall refer to all holders of the Corporation's securities which then
have voting rights) for the election of directors, and for the transaction of
such other business as may properly come before the meeting, shall be held at
such place, date and hour as shall be fixed by the Board of Directors (the
"Board") and designated in the notice or waiver of notice thereof; except that
no annual meeting need be held if all actions, including the election of
directors, required by the General Corporation Law of the State of Delaware to
be taken at a stockholders' annual meeting are taken by written consent in lieu
of meeting pursuant to Section 10 or this Article II.
SECTION 2. Special Meetings. A special meeting of the stockholders
for any purpose or purposes may be called by the Board, the Chairman, the
President or the holders of at least 12.5% of the Corporation's voting stock,
to be held at such place, date and hour as shall be designated in the notice
thereof. Special meetings of the stockholders may also be called and convened
as provided in the Certificate of Incorporation.
- --------------------
(1) As amended by unanimous consent of the Board of Directors on July 2, 1997.
<PAGE> 2
SECTION 3. Notice of Meetings. Except as otherwise required by
statute or by the Certificate of Incorporation or these By-laws, notice of each
annual or special meeting of the stockholders shall be given to each
stockholder of record entitled to vote at such meeting not less than 10 or more
than 60 days before the day on which the meeting is to be held, by delivering a
typewritten or printed notice thereof to him personally, or by mailing a copy
of such notice, postage prepaid, directly to each such stockholder at his
address as it appears in the records of the Corporation, or by transmitting
notice thereof to him at such address by telegraph, cable or radio. Every such
notice shall state the place and the date and hour of the meeting, and, in case
of a special meeting, the purpose or purposes for which the meeting is called.
Notice of any meeting of stockholders shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy, or who shall,
in person or by attorney thereunto authorized, waive such notice in writing,
either before or after such meeting. Except as otherwise provided in these
By-laws, neither the business to be transacted at, nor the purpose of, any
meeting of the stockholders need be specified in any such waiver of notice.
Notice of any adjourned meeting of stockholders shall not be required to be
given, except when expressly required by law.
SECTION 4. Quorum. At each meeting of the stockholders, except where
otherwise provided by the Certificate of Incorporation or these By-Laws, the
holders of a majority of the issued and outstanding shares of stock of the
Corporation entitled to vote at such meeting, present in person or represented
by Proxy shall constitute a quorum for the transaction of business. In the
absence of a quorum, a majority in interest of the stockholders present in
person or represented by proxy and entitled to vote, or, in the absence of all
the stockholders entitled to vote, any officer entitled to preside at, or act
as secretary of such meeting, shall have the power to adjourn the meeting from
time to time, until stockholders holding the requisite amount of stock shall be
present or represented. At any such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally called.
SECTION 5. Organization. At each meeting of the stockholders, one of
the following shall act as chairman of the meeting and preside thereat, in the
following order of precedence:
(a) the Chairman of the Board, if any;
(b) the President;
(c) any other officer of the Corporation designated by
the Board of Directors to act as chairman of such meeting and to
preside thereat if the Chairman of the Board, if any, or the President
shall be absent from such meeting.
The Secretary, or if he shall be presiding over the meeting in accordance with
the provisions of this Section, or if he shall be absent from such meeting, the
person whom the chairman of such meeting shall appoint, shall act as secretary
of such meeting and keep the minutes thereof.
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<PAGE> 3
SECTION 6. Order or Business. The order of business at each meeting
of the stockholders shall be determined by the chairman of such meeting, but
such order of business may be changed by a majority in voting interest of those
present in person or by proxy at such meeting and entitled to vote thereat.
SECTION 7. Voting. Except as otherwise provided by law or by the
Certificate of Incorporation or these By-laws, at each meeting of the
stockholders, every stockholder of the Corporation shall be entitled to one
vote in person or by proxy for each share of common stock of the corporation
held by him and registered in his name on the books of the Corporation:
(a) on the date fixed pursuant to Section 7 of Article V
as the record date for the determination of stockholders entitled to
vote at such meeting; or
(b) if no such record date shall have been fixed, at the
close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting. Only the record holders of the Corporation's stock or their proxies
will be entitled to vote such shares. If shares or other securities having
voting power stand in the record of two or more persons, whether fiduciaries,
members of a partnership, joint tenants, tenants in common, tenants by the
entirety or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the Secretary shall be given
the written notice to the contrary and shall be furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the following effect:
(a) if only one votes, his act binds all;
(b) if more than one votes, the act of the majority so
voting binds all; and
(c) if more than one votes, but the vote is evenly split
on any particular matter, such shares shall be voted in the manner
provided by law.
If the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even-split for the purposes of this Section shall be
the majority or even-split in interest. The Corporation shall not vote directly
or indirectly any share of its own capital stock. Any vote of stock may be
given by the stockholder entitled thereto in person or by his proxy appointed
by an instrument in writing, subscribed by such stockholder or by his attorney
thereunto authorized, delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted after three years from its date, unless
said proxy provides for a longer period. At all meetings of the stockholders,
all matters (except where other provision is made by law, by the
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<PAGE> 4
Certificate of Incorporation or these By-laws) shall be decided by the vote of
a majority in interest of the stockholders present in person or by proxy at
such meeting and entitled to vote thereon, a quorum being present. Unless
demanded by a stockholder present in person or by proxy at any meeting and
entitled to vote thereon, the vote on any question need not be by ballot. Upon
a demand by any such stockholder for a vote by ballot upon any question, such
vote by ballot shall be taken. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
SECTION 8. Inspection. The chairman of the meeting may at any time
appoint two or more inspectors to serve at any meeting of the stockholders.
Any inspector may be removed, and a new inspector or inspectors may be
appointed by the Board at any time. Such inspectors shall decide upon the
qualifications of voters, accept and count the votes for and against the matter
to be voted upon, respectively, declare the results of such vote, and subscribe
and deliver to the secretary of the meeting a certificate stating the number of
shares of stock issued and outstanding and entitled to vote thereon and the
number of shares voted for and against the matter to be voted upon,
respectively. The inspectors need not be stockholders of the Corporation, and
any director or officer of the Corporation may be an inspector on any question
other than a vote for or against his election to any position with the
Corporation or on any other question in which he may be directly interested.
Before acting as herein provided, each inspector shall subscribe an oath
faithfully to execute the duties of an inspector with strict impartiality and
according to the best of his ability.
SECTION 9. List of Stockholders. It shall be the duty of the
Secretary or other officer of the Corporation who shall have charge of its
stock ledger to prepare and make, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
any such meeting, during ordinary business hours, for a period of at least 10
days prior to such meeting, either at a place within the city where such
meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
Such list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 10. Stockholders' Consent In Lieu of Meeting. Subject to the
requirements of the Certificate of Incorporation, any action required by law to
be taken at any annual or special meeting of the stockholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action
so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of
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<PAGE> 5
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made
to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. Every written consent shall bear
the date of signature of each stockholder who signs the consent and the number
of shares which the stockholder is entitled to vote. No written consent shall
be effective to take the corporate action referred to therein unless, within 60
days of the earliest dated consent delivered in the manner required by law to
the Corporation, written consents signed by a sufficient number of holders to
take action are delivered to the Corporation by delivery to its registered
office in Delaware, its principal place of business, or an officer or an agent
of the corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. General Powers. The business, property and affairs of the
Corporation shall be managed by the Board, which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by law or
by the Certificate of Incorporation directed or required to be exercised or
done by the stockholders.
SECTION 2. Number and Term of Office. The number of directors shall
be seven or as otherwise provided in the Certificate of Incorporation. Except
as otherwise provided in the Certificate of Incorporation, each Director shall
hold office for a term expiring at the next annual meeting of shareholders or
until his earlier death, removal or resignation.
Section 3. Election of Directors. Except as otherwise provided by
the Certificate of Incorporation, at each meeting of the stockholders for the
election of directors at which a quorum is present, the persons receiving the
greatest number of votes, up to the number of directors to be elected, of the
stockholders present in person or by proxy and entitled to vote thereon shall
be the directors. Unless an election by ballot shall be demanded as provided
in Section 7 of Article II, election of directors be conducted in any manner
approved at such a meeting.
Section 4. Resignation, Removal and Vacancies. Any director may
resign at any time by giving written notice to the Board, the Chairman, if any,
the President or the Secretary. Such resignation shall take effect at the time
specified thereon or, if the time be not specified, upon receipt thereof; and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Any or all directors may be removed, with or without cause, at any
time by vote of the
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<PAGE> 6
holders of a majority of the shares then entitled to vote for such directors at
an election of directors, or by written consent of the stockholders entitled to
vote for such directors pursuant to Section 10 of Article II.
Any vacancy caused by the death or resignation of a director may be
filled by the stockholders in the manner provided in the Certificate of
Incorporation of the Corporation and these By-laws, or may be filled by a vote
of the directors elected by the stockholders.
SECTION 5. Meetings.
(A) Annual Meeting. As soon as practicable after each annual
election of directors, the Board shall meet for the purpose of organization and
the transaction of other business, unless it shall have transacted all such
business by written consent pursuant to Section 6 of this Article III.
(B) Other Meetings. Other meetings of the Board shall be held at
such times and places as the Board, the Chairman, if any, or the President
shall from time to time determine.
(C) Notice of Meetings. The Secretary shall give notice to each
director of each meeting, including the time, place and purpose of such
meeting. Notice of each such meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least two days
before the day on which such meeting is to be held, or shall be sent to him at
such place by facsimile, telegraph, cable, wireless or other form of recorded
communication, or be delivered personally or by telephone not later than the
day before the day on which such meeting is to be held, but notice need not be
given to any director who attends such meetings. A written waiver of notice,
signed by the person entitled thereto, whether before or after the time of the
meeting stated therein, shall be deemed equivalent to notice.
(D) Place of Meetings. The Board may hold its meetings at such
place or places within or without the State of Delaware as the Board may from
time to time determine, or as shall be designated in the respective notices or
waivers of notice thereof.
(E) Quorum and Manner of Acting. Except as otherwise required by
the Certificate of Incorporation, a majority of the total number of directors
then in office (but not less than two if the number of Directors is greater
than one) shall be present in person at any meeting of the Board in order to
constitute a quorum for the transaction of business at such meeting, and except
as otherwise required by the Certificate of Incorporation or by law, the vote
of a majority of those directors present at any such meeting at which a quorum
is present shall be necessary for the passage of any resolution or act of the
Board.
(F) Organization. At each meeting of the Board, one of the
following shall act as chairman of the meeting and preside, in the following
order of precedence
(a) the Chairman of the Board, in any;
(b) the President (if a director);
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<PAGE> 7
(c) any director chosen by a majority of the directors
present.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary is present) whom the Chairman
shall appoint shall act as secretary of such meeting and keep the minutes
thereof.
SECTION 6. Directors' Consent in Lieu of Meeting. Any action
required or permitted to be taken at any meeting of the Board may be taken
without a meeting, without prior notice, without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by all the
directors and such consent is filed with the minutes of the proceedings of the
Board.
SECTION 7. Action by Means of Conference Telephone or Similar
Communications Equipment. Any one or more members of the Board may participate
in a meeting of the Board by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
SECTION 8. Committees of the Board. The Board may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member
of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board, shall have and may exercise all
the powers and authority of the Board in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
the Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending
the By-laws of the Corporation; and, unless the resolution designating it
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
Without limiting the generality of the foregoing, the board of
directors shall establish and maintain a compensation committee comprised of
three directors, none of whom may be an employee of the Company or any of its
subsidiaries. The compensation committee shall be responsible for recommending
to the full board of directors all stock option grants, bonuses and other
compensation arrangements for executives and key employees and loans and other
non-salary payments and other benefits and arrangements with employees and
affiliates and associates of the Company. The compensation committee shall
have such additional powers and duties as the board of directors from time to
time determines.
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<PAGE> 8
The board of directors shall establish and maintain an audit committee
comprised of three directors, one of whom shall be a senior executive officer
of the Company (but not the chief financial or chief accounting officer) and
two of whom may not be employees of the Company or any of its subsidiaries.
The audit committee shall be responsible for selecting the Company's
independent auditors and reviewing their audit, as well as reviewing and
approving the Company's internal controls and accounting systems. The audit
committee shall have such additional powers and duties as the board of
directors from time to time determines.
In the event that the group of directors of the Company that are
specified to select a committee member as provided herein is deadlocked over
its selection of such committee member for more than 30 days, the full board of
directors shall select such committee member from among such group of
directors.
ARTICLE IV.
OFFICERS
SECTION 1. Executive Officers. The executive officers of the
Corporation shall be a Chief Executive Officer, a President, a Chief Financial
Officer, a Secretary and a Treasurer and may include a Chairman of the Board, a
Chief Operating Officer and such other officers as the Board may appoint
pursuant to Section 3 of this Article IV. Any two or more offices may be held
by the same person, provided that the offices of President and Secretary shall
be held by different persons.
SECTION 2. Authority and Duties. All officers as between themselves
and the Corporation, shall have such authority and perform such duties in the
management of the Corporation as may be provided in these By-laws or, to the
extent so provided, by the Board.
SECTION 3. Other Officers. The Corporation may have such other
officers, agents and employees as the Board may deem necessary, including one
or more Vice-Presidents, one or more Assistant Secretaries and one or more
Assistant Treasurers, each of whom shall hold office for such period, have such
authority, and perform such duties as the Board, the Chief Executive Officer,
the President, or the Chief Operating Officer may from time to time determine.
The Board may delegate to any executive officer the power to appoint or remove
any such officer, agents or employees.
SECTION 4. Term of Office, Resignation and Removal. All officers
shall be elected or appointed by the Board and shall hold office for such term
as may be prescribed by the Board. Each officer shall hold office until his
successor has been elected or appointed and qualified or his earlier death or
resignation or removal in the manner hereinafter provided. The Board may
require any officer to give security for the faithful performance of his
duties.
Any officer may resign at any time by giving written notice to the
Board or to the Chief
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<PAGE> 9
Executive officer, or to the President or to the Chief Operating Officer, or to
the Secretary, and such resignation shall take effect at the time specified
therein or, if the time when it shall become effective is not specified
therein, at the time it is accepted by action of the Board. Except as
aforesaid, the acceptance of such resignation shall not be necessary to make it
effective.
All officers and agents elected or appointed by the Board shall be
subject to removal at any time by the Board with or without cause.
SECTION 5. Vacancies. If the office of the Chief Executive Officer,
the President, Chief Financial Officer, the Secretary or the Treasurer or any
other office becomes vacant for any reason, the Board shall fill such vacancy
or may elect not to fill such vacancy. An officer so appointed or elected by
the Board shall serve only until such time as the unexpired term of his
predecessor shall have expired unless reelected or reappointed by the Board.
SECTION 6. Chairman of the Board. If there shall be a Chairman of
the Board, he shall, unless provided otherwise by the Board by resolution,
preside at meetings of the Board and of the stockholders at which he is
present, and shall give counsel and advice to the Board and the officers of the
Corporation on all subjects concerning the welfare of the Corporation and the
conduct of its business. He shall perform such other duties as the Board may
from time to time determine.
SECTION 7. The Chief Executive Officer. The Chief Executive Officer
shall be the most senior officer of the Corporation and unless the Chairman of
the Board be appointed and present or the Board has provided otherwise by
resolution, he shall preside at all meetings of the Board and the stockholders
at which is he present. He shall have responsibility for the short and long
term strategy of the Corporation, corporate development and investor relations
and shall cause decisions concerning the attainment of strategic, corporate
development and investor relations' objectives to be implemented.
SECTION 8. The President. The President, unless the Chairman of the
Board be appointed and present, or the Chief Executive Officer be appointed and
present or the Board has provided otherwise by resolution shall preside at all
meetings of the Board and the stockholders at which he is present. He shall,
along with the Chief Operating Officer (if one is appointed by the board), have
the day-to-day, general and active management and control of the business and
affairs of the Corporation subject to the control of the Chief Executive
Officer and subject to the control of the Board, and shall see that all orders
of the Chief Executive Officer and orders and resolutions of the Board are
carried into effect.
SECTION 9. The Chief Operating Officer. He shall, along with the
President, have the day-to-day, general and active management and control of
the business and affairs of the Corporation subject to the control of the Chief
Executive Officer and subject to the control of the Board, and shall see that
all orders of the Chief Executive Officer and orders and resolutions of the
Board are carried into effect.
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<PAGE> 10
SECTION 10. Chief Financial Officer. He shall have responsibility
for the financial matters of the Corporation, including the books and records,
and such other responsibilities as determined by the Board.
SECTION 11. Vice-President. A Vice-President, which officer may have
such additional designations such as "Executive" or "Senior" as the Board may
provide, shall perform such duties as may be prescribed by the Board, the Chief
Executive Officer, the President, or Chief Operating Officer under whose
supervision he shall act.
SECTION 12. The Secretary. The Secretary shall, to the extent
practicable, attend all meetings of the Board and all meetings of the
stockholders and shall record all votes and the minutes of all proceedings in a
book to be kept for that purpose. He shall give, or cause to be given, notice
of all meetings of the stockholders and of the Board, and shall perform such
other duties as may be prescribed by the Board, the Chief Executive Officer, or
the President or Chief Operating Officer, under whose supervision he shall act.
He shall keep in safe custody the seal of the Corporation and affix the same to
any duly authorized instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of the Treasurer or, in
appointed, an Assistant Secretary or an Assistant Treasurer. He shall keep, or
cause the Corporation's transfer agent and registrar to keep, in safe custody
the certificate books and stockholder records and such other books and records
as the Board may direct and shall perform all other duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him by the Chief Executive Officer, President, Chief Operating Officer of
the Board.
SECTION 13. The Treasurer. The Treasurer shall have the care and
custody of the corporate funds and other valuable effects, including
securities, and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board. The
Treasurer shall disburse the funds of the corporation as may be ordered by the
Chief Executive Officer, President, Chief Financial Officer, or the Board,
taking proper vouchers for such disbursements, and shall render to the Chief
Executive Officer, President and Chief Financial Officer, Chief Operating
Officer and the Board, at the regular meetings of the Board, or whenever they
may require it, an account of all his transactions as Treasurer and of the
financial condition of the Corporation; and, in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Chief Executive Officer, President, Chief
Financial Officer, Chief Operating Officer, or the Board.
ARTICLE V.
SHARES AND THEIR TRANSFER; FIXING RECORD DATE
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SECTION 1. Certificates for Shares. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number and
class of shares owned by him in the Corporation, which shall otherwise be in
such form as shall be prescribed by the Board. Certificates shall be issued in
consecutive order and shall be numbered in the order of their issue, and shall
be signed by, or in the name of, the Corporation by the Chairman, if any, the
President or any Vice President and by the Treasurer (or an Assistant
Treasurer, if appointed) or the Secretary (or an Assistant Secretary, if
appointed). In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate had not ceased to be such officer or officers of the Corporation.
SECTION 2. Record. A record (herein called the stock record) in one
or more counterparts shall be kept of the name of the person, firm or
corporation owning the shares represented by each certificate for stock of the
Corporation issued, the number of shares represented by each such certificate,
the date thereof and, in the case of cancellation, the date of cancellation.
Except as otherwise expressly required by law, the person in whose name shares
of stock stand on the stock record of the Corporation shall be deemed the owner
thereof for all purposes as regards the Corporation.
SECTION 3. Transfer and Registration of Stock.
(a) The transfer of stock and certificates of stock which represent
the stock of the Corporation shall be governed by Article 8 of Subtitle 1 of
Title 6 of the Delaware Code (the Uniform Commercial Code), as amended from
time to time.
(b) Registration of transfers of shares of the Corporation shall be
made only on the books of the Corporation upon request of the registered holder
thereof, or of his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and upon the
surrender of the certificate or certificates for such shares properly endorsed
or accompanied by a stock power duly executed.
SECTION 4. Addresses of Stockholders - Each stockholder shall
designate to the Secretary an address at which notices of meetings and all
other corporate notices may be served or mailed to him, and, if any stockholder
shall fail to designate such address, corporate notices may be served upon him
by mail directed to him at his post office address, if any, as the same appears
on the share record books of the Corporation or at his last known post office
address.
SECTION 5. Lost, Destroyed and Mutilated Certificates. The holder of
any shares of the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board may,
in its discretion, cause to be issued to him a new
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<PAGE> 12
certificate or certificates for shares, upon the surrender of the mutilated
certificates or, in the case of loss or destruction of the certificate, upon
satisfactory proof of such loss or destruction, and the Board may, in its
discretion, require the owner of the lost or destroyed certificate or his legal
representative to give the Corporation a bond in such sum and with such surety
or sureties as it may direct to indemnify the Corporation against any claim
that may be made against it on account of the alleged loss or destruction of
any such certificate.
SECTION 6. Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-laws,
concerning the issue, transfer and registration of certificates for stock of
the Corporation.
SECTION 7. Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board
may fix, in advance, a record date, which shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than 60 days prior to
any other action. A determination of stockholders entitled to notice of or to
vote at a meeting of the stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
ARTICLE VI.
SEAL
The Board may provide a Corporate seal, which shall be in the form of
a circle and shall bear the full name of the Corporation and the words
"Corporate Seal Delaware."
ARTICLE VII.
FISCAL YEAR
The fiscal year of the Corporation shall end on the 31st of December
in each year unless changed by resolution of the Board.
ARTICLE VIII.
INDEMNIFICATION AND INSURANCE
Section 1. Power to Indemnify in Actions, Suits or Proceedings
other Than Those by or in the Right of the Corporation. Subject to Section 3
of this Article VIII, the
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Corporation shall indemnify, to the fullest extent permitted by applicable law,
now or hereafter in effect, any person who was or is a party or is threatened
to be a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason of the fact
that he is or was a director or executive officer (or in the Board's
discretion, an employee or agent) of the Corporation, or is or was a director,
executive officer, (or in the Board's discretion, an employee or agent) of the
Corporation serving at request of the Corporation in any other capacity for or
on behalf of the Corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful;
provided, however, the Corporation shall be required to indemnify an officer or
director in connection with any actions, suit or proceeding initiated by such
person only if (i) such action, suit or proceeding was authorized by the Board
or (ii) the indemnification does not relate to any liability arising under
Section 16(b) of the Securities Exchange Act of 1934, as amended, or any of the
rules or regulations promulgated thereunder. The termination of any action,
suit or proceeding by judgment, order, settlement, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, executive officer, employee
or agent of the Corporation, or is or was a director, executive officer, (or in
the Board's discretion, an employee or agent) of the Corporation serving at the
request of the Corporation as a director or executive officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against expenses (including attorneys' fees) actually reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in
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the specific case upon a determination that indemnification of the director or
executive officer is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 or Section 2 of this
Article VIII, as the case may be. Such determination shall be made (i) by the
Board of Directors by a majority vote of directors who were not parties to such
action, suit or proceeding (even if such majority vote constitutes less than a
quorum), or (ii) if the majority vote of disinterested directors so directs
(even if such majority vote constitutes less than a quorum), by independent
legal counsel in a written opinion, or (iii) by the stockholders. To the
extent, however, that a director or executive officer of the Corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or the defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith, without the
necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any
determination under Section 3 of this Article VIII, a person shall be deemed to
have acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe his
conduct was unlawful, if his action is based on the records or books of account
of the Corporation or another enterprise, or on information supplied to him by
the officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in
this Section 4 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director or executive
officer. The provisions of this Section 4 shall not be deemed to be exclusive
or to limit in any way the circumstances in which a person may be deemed to
have met the applicable standard of conduct set forth in Sections l or 2 of
this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or executive officer may apply to any court of competent jurisdiction
in the State of Delaware for indemnification to the extent otherwise
permissible under Sections 1 and 2 of this Article VIII. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director or executive officer is proper in the
circumstances because he has met the applicable standards of conduct set forth
in Section 1 or 2 of this Article VIII, as the case may be. Neither a contrary
determination in the specific case under Section 3 of this Article VIII nor the
absence of any determination hereunder shall be a defense to such application
or create a presumption that the director or executive officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to
the Corporation promptly upon the filing of such application. If
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successful, in whole or in part, the director or executive officer seeking
indemnification shall also be entitled to be paid the expense of prosecuting
such application.
Section 6. Expenses Payable in Advance. Expenses (including
attorneys' fees) incurred by a director or executive officer in defending any
civil, criminal proceeding, administrative or investigative action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or executive officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article VIII, which undertaking may be
accepted without reference to the financial ability of such person to make such
payment. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
Section 7. Non-exclusivity of Indemnification and Advancement
of Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any By-law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or
executive officer of the Corporation, or is or was a director or executive
officer of the Corporation serving at the request of the Corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII,
the DGCL or otherwise.
Section 9. Certain Definitions. For purposes of this Article
VIII, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or executive officers, so that any person who is or was a director or
executive officer of such constituent corporation, or is or was a director or
executive officer of such constituent corporation serving at the request of
such constituent corporation as a director or executive officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, shall stand in the same position under the provisions of this
Article VIII with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued. For purposes of this
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Article VIII, references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director or
executive officer of the Corporation which imposes duties on, or involves
services by, such director or executive officer with respect to an employee
benefit plan, its participant or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Article VIII.
Section 10. Procedure for Indemnification of Directors and
Officers. Any indemnification of a director or officer of the Corporation
under Sections 1 and 2 or advance of costs, charges and expenses to a director
or officer under Section 6 of this Article VIII, shall be made promptly, and in
any event within 30 days, upon the written request of the director or officer.
If a determination by the Corporation that the director or officer is entitled
to indemnification pursuant to this Article VIII, and the Corporation fails to
respond within 60 days to a written request for indemnity, the Corporation
shall be deemed to have approved such request. If the Corporation denies a
written request for indemnity or advancement of expenses, in whole or in part,
or if payment in full pursuant to such request is not made within 30 days, the
right to indemnification or advances as granted by this Article VIII shall be
enforceable by the director or officer in any court of competent jurisdiction.
Section 11. Survival; Preservation of Other Rights. The
foregoing indemnification provisions shall be deemed to be a contract between
the Corporation and each director, officer, employee and agent who serves in
any such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are not in effect and any
repeal or modification thereof shall not affect any right or obligation then
existing with respect to any state of facts then or previously existing or any
action, suit, or proceeding previously or thereafter brought or threatened
based, in whole or in part upon any such state of facts. Such a "contract
right" may not be modified retroactively without the consent of such director,
officer, employee or agent. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VIII shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director or executive officer and shall inure to the benefit of the heirs,
executors and administrators of such a person.
The indemnification provided by this Article VIII shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any other By-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in any other capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person. The Corporation may enter into a separate written agreement with any
director, officer, employee or agent of the Corporation that expressly provides
for indemnification and reimbursement of such person to the full extent
permitted by this Article VIII, on the same terms and conditions
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provided herein.
Section 12. Limitation on Indemnification. Notwithstanding
anything contained in this Article VIII to the contrary, except for proceedings
to enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
executive officer in connection with a proceeding (or part thereof) initiated
by such person unless such proceeding (or part thereof) was authorized or
consented to by the Board of Directors of the Corporation.
Section 13. Severability. If this Article VIII or any
portion hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each director
or officer and may indemnify each employee or agent of the Corporation as to
costs, charges and expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including an action
by or in the right of the Corporation, to the fullest extent permitted by any
applicable portion of this Article VIII that shall not have been invalidated
and to the fullest extent permitted by applicable law.
ARTICLE IX
AMENDMENTS
Subject to the provisions of the Certificate of Incorporation of the
Corporation, any provision contained in these By-laws may be amended, repealed
or adopted by the Board of Directors or by vote of the stockholders at the time
entitled to vote in the election of any directors.
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EXHIBIT 4.1
AMERICAN COMMUNICATIONS SERVICES, INC.
$190,000,000
13% SENIOR DISCOUNT NOTES DUE 2005
SUPPLEMENTAL INDENTURE
Dated as of July 7, 1997
to
INDENTURE
Dated as of November 14, 1995, as amended
THE CHASE MANHATTAN BANK,
Trustee
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2
THIS SUPPLEMENTAL INDENTURE (the
"Supplemental Indenture"), dated as of July 7, 1997,
by and between AMERICAN COMMUNICATIONS SERVICES,
INC., a Delaware corporation (the "Company"), having
its principal office at 131 National Business
Parkway, Suite 100, Annapolis Junction, Maryland
20701, and THE CHASE MANHATTAN BANK (formerly know as
Chemical Bank), a New York banking corporation, as
trustee (the "Trustee") under the Indenture (as
defined below), having its Corporate Trust Office at
450 West 33rd Street, New York, New York 10001-2697.
Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the
Indenture.
WHEREAS, the Company and the Trustee previously duly executed,
and the Company duly delivered to the Trustee, an Indenture dated as of November
14, 1995, as amended by the Supplemental Indenture dated as of March 11, 1996
and the Supplemental Indenture dated as of January 13, 1997 (as supplemented,
the "Indenture"), relating to $190,000,000 aggregate principal amount at
maturity of the Company's 13% Senior Discount Notes due 2005 (the "Notes");
WHEREAS, pursuant to Section 9.02 of the Indenture, the
Company and the Trustee have obtained the consent of the Holders of not less
than a majority in principal amount of the outstanding Notes to the amendments
made hereby;
WHEREAS, the Board of Directors of the Company has
authorized the execution of this Supplemental Indenture and
its delivery to the Trustee;
WHEREAS, the Company has delivered an Officers' Certificate
and Opinion of Counsel to the Trustee pursuant to Section 9.07 of the Indenture;
and
WHEREAS, all other actions necessary to make this Supplemental
Indenture a legal, valid and binding obligation of the parties hereto in
accordance with its terms and the terms of the Indenture have been performed;
NOW, THEREFORE, in consideration of the promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Trustee hereby
<PAGE> 3
3
mutually covenant and agree for the equal and proportionate benefit of all
Holders of the Notes as follows:
ARTICLE I
Amendments
Upon execution of this Supplemental Indenture, the terms of
the Notes and the Indenture shall be amended as follows:
SECTION 1.1. Section 1.01 of the Indenture shall be amended by
adding the following definition in appropriate alphabetical order:
"EBIT" means the amount calculated in the same manner as
EBITDA, but not including clauses (iii) and (iv) of the definition thereof
contained herein."
"Fiber Network" means a digital fiber optic telecommunications
network wholly owned by the Company that serves a Metropolitan Area."
"Metropolitan Area" means the 31 metropolitan areas in which
the Company, as of June 30, 1997, has a Fiber Network and other metropolitan
areas deemed in the reasonable business judgment of the management of the
Company to provide an opportunity for the building and operation of such a Fiber
Network with the reasonable potential to produce financial results for the
Company at least substantially comparable to the metropolitan areas in which the
Company has such operational Fiber Networks."
"2006 Notes means the Company's 12-3/4% Senior Discount Notes
Due 2006."
SECTION 1.2. The definition of "Additional Notes" in Section
1.01 of the Indenture shall be amended by (A) striking the word "discount" in
the first line of such definition, (B) inserting the words "or more" after the
word "ten" in the fourth line thereof, (C) striking clause (iii) of such
definition in its entirety and (D) renumbering the final clause (iv) of such
definition as clause (iii) and inserting, after the words "other than" in the
parenthetical therein, the following: "interest payment terms, escrow account
provisions,".
SECTION 1.3. The definition of "Indebtedness" in
Section 1.01 of the Indenture shall be amended by replacing
<PAGE> 4
4
the words "Additional Notes" each time they appear therein with the words "2006
Notes."
SECTION 1.4. The definition of "Permitted Liens" in Section
1.01 of the Indenture shall be amended by striking the word "and" at the end of
clause (xv) of such definition, by renumbering the final clause (xvi) of such
definition as clause (xvii) and by inserting a new clause (xvi) on the
immediately preceding line as follows:
"(xvi) any Lien with respect to cash proceeds from the sale of
the Additional Notes (or certificated or uncertificated
securities or other investments) placed or held in escrow for
the benefit of the holders of the Additional Notes; and".
SECTION 1.5. Section 4.09(b) of the Indenture shall be amended
by striking such Section in its entirety and inserting a new Section 4.09(b) as
follows:
"(b) The provisions of Section 4.09(a) hereof shall not apply to:
(i) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness under the Secured Credit Facility; provided that the aggregate
principal amount of Indebtedness incurred under the Secured Credit Facility by
the Company and its Restricted Subsidiaries does not exceed $35,000,000 at any
one time outstanding;
(ii) the incurrence of the Existing Indebtedness;
(iii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Restricted Subsidiaries;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Interest Hedging Obligations with respect to any floating rate
Indebtedness that is permitted to be outstanding under this Section 4.09;
(v) the incurrence by the Company of any Exchange Rate Obligations;
provided that such Exchange Rate Obligations were entered into in connection
with transactions in the ordinary course of business or the incurrence of
Indebtedness that is permitted under this Section 4.09;
(vi) the incurrence by the Company of Indebtedness represented by the
Notes, the 2006 Notes or the Additional Notes;
<PAGE> 5
5
(vii) the incurrence by the Company of Indebtedness in connection with
one or more standby letters of credit issued in the ordinary course of business;
(viii) the incurrence by the Company of Indebtedness in respect of
performance, surety or appeal bonds provided by the Company in the ordinary
course of business;
(ix) the incurrence by the Company of Indebtedness not to exceed, at
any one time outstanding, an amount that is one and a half times the amount of
the Net Cash Proceeds in excess of $40,000,000 received by the Company from the
issuance and sale of its Qualified Stock (other than Preferred Stock) subsequent
to the Issue Date; provided that such Indebtedness shall have a Stated Maturity
no earlier than the Stated Maturity of the Notes and is subordinated to the
Notes as provided in Exhibit F hereto;
(x) the incurrence by the Company or any of its Restricted Subsidiaries
of Refinancing Indebtedness issued in exchange for, or the proceeds of which are
used to refinance, repurchase, replace, refund or defease ("Refinance")
Indebtedness permitted pursuant to clauses (ii), (vi) or (xii) of this Section
4.09(b); provided that (1) the amount of such Refinancing Indebtedness shall not
exceed the principal amount of, premium, if any, and accrued interest on the
Indebtedness so Refinanced (or if such Indebtedness was issued with original
issue discount, the original issue price plus amortization of the original issue
discount at the time of the repayment of such Indebtedness) plus the fees,
expenses and costs of such Refinancing and reasonable prepayment premiums, if
any, in connection therewith; (2) such Refinancing Indebtedness shall have a
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced; (3) such Refinancing Indebtedness shall have an Average Life equal
to or greater than the Average Life of the Indebtedness being Refinanced; (4) if
the Indebtedness being Refinanced is subordinated in right of payment to the
Notes, such Refinancing Indebtedness shall be subordinate in right of payment to
the Notes on terms at least as favorable to the holders of Notes as those
contained in the documentation governing the Indebtedness being so Refinanced;
and (5) no Restricted Subsidiary shall incur Refinancing Indebtedness to
Refinance Indebtedness of the Company or another Subsidiary;
(xi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness of any Person which incurrence resulted directly
from an Investment described in clause (ix) of the definition of "Permitted
Investments" in Section 1.01 hereof; provided that, (x) immediately after giving
effect to such Investment on a pro forma basis (and
<PAGE> 6
6
treating any Indebtedness which becomes, or is anticipated to become, an
obligation of the Company or any Restricted Subsidiary as a result of such
Investment as having been incurred by the Company or such Restricted Subsidiary
at the time of such Investment), the Company would (A) be permitted to incur
$1.00 of additional Indebtedness under Section 4.09(a) hereof or (B) have a Debt
to EBITDA Ratio which is equal to or not worse than the Debt to EBITDA Ratio of
the Company immediately prior to such Investment or (y) such incurrence is
otherwise permitted; provided further that Indebtedness incurred by the Company
and its Restricted Subsidiaries under this clause (xi) as a result of any such
Investment does not exceed 50 percent of the Fair Market Value of the Qualified
Stock used as consideration in such Investment; provided further that the
aggregate principal amount of Indebtedness incurred under this clause (xi) does
not exceed $50,000,000;
(xii) the incurrence by the Company of Indebtedness consisting of
Additional Notes yielding up to $150,000,000 gross proceeds to the Company
(exclusive of any cash proceeds from the sale of the Additional Notes placed in
escrow by the Company for the benefit of the holders of the Additional Notes)
upon issuance thereof;
(xiii) the incurrence by the Company of Permitted Subordinated
Financing; and
(xiv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness not otherwise permitted to be incurred pursuant to
this Section 4.09 in an aggregate amount not to exceed $428,634."
SECTION 1.6. Section 4.13(a)(iii) of the Indenture shall be amended by
deleting the words "and Section 4.13(b)(viii)" in the last line thereof.
SECTION 1.7. Section 4.18 will be amended by adding after the final
sentence the following:
"In addition to the foregoing, commencing with the unaudited information for the
fiscal quarter ended September 30, 1997, the Company will file with the
Commission and will thereafter transit by mail to the Holders and file with the
Trustee within the same time periods as set forth in the second next preceding
sentence, unaudited information, on an aggregate Fiber Network basis (before
headquarter allocations) segmented by the calendar year in which each such Fiber
Network became operational, setting forth the investment in plant, property and
equipment to date, revenue, EBITDA, EBIT, access lines, fiber miles, route
miles, buildings connected and voice grade equivalents;
<PAGE> 7
7
provided, however, that, the Company will provide such unaudited information
with respect to (i) all Fiber Networks that were initially operational at any
time prior to December 31, 1995 (all such Fiber Networks shall be deemed to have
become operational in calendar year 1995) and (ii) all Fiber Networks that were
initially operational in each succeeding calendar year (including all or any
portion of the then current year); and provided, further, that the Company need
no longer comply with the information requirements of this sentence after four
consecutive fiscal quarters for which the ratio of EBITDA of the Company to
Consolidated Interest Expense (other than dividends or distributions with
respect to preferred stock or Disqualified Stock of the Company) of the Company
is greater than 1.0 or after the occurrence of a Change of Control."
SECTION 1.8. A new Section 4.20 of the Indenture will be added, as
follows:
"SECTION 4.20. Limitation on Construction of Fiber Networks. The
Company may construct Fiber Networks in no more than 45 Metropolitan Areas until
the earlier of (i) the ratio of EBITDA of the Company to Consolidated Interest
Expense (other than dividends or distributions with respect to preferred stock
or Disqualified Stock of the Company) of the Company is greater than 1.0 for
four consecutive fiscal quarters and (ii) the occurrence of a Change of
Control."
SECTION 1.9. The paragraph on the reverse side of each Note entitled
"Optional Redemption." will be deleted in its entirety and replaced with the
following:
"Optional Redemption.
The Notes may not be redeemed prior to May 1, 2001. Theeafter, the
Notes will be subject to redemption at the option of the Company, in whole or in
part, upon not less than 30 calendar days' not more than 60 calendar days'
notice, at the prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest thereon (if any) to the applicable
Redemption Date, if redeemed during the twelve-month period beginning May 1 of
the years indicated below:
Year Percentage
---- ----------
2001 110.000%
2002 106.667%
2003 103.333%
2004 and thereafter 100.000%"
<PAGE> 8
8
ARTICLE II
Miscellaneous
SECTION 2.1. For all purposes of this Supplemental Indenture,
except as otherwise herein expressly provided or unless the context otherwise
requires: (A) the terms and expressions used herein shall have the same meanings
as corresponding terms and expressions used in the Indenture and (B) the words
"herein", "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
any particular Article, Section or other subdivision.
SECTION 2.2. Upon execution of this Supplemental Indenture,
the Indenture shall be modified in accordance therewith, but except as expressly
amended hereby, the Indenture is in all respects ratified and confirmed and all
the terms, conditions and provisions thereof shall remain in full force and
effect.
SECTION 2.3. Upon execution, this Supplemental Indenture shall
form a part of the Indenture and the Supplemental Indenture shall be read, taken
and construed as one and the same instrument for all purposes, and every holder
of Notes heretofore or hereafter authenticated and delivered under the Indenture
shall be bound hereby.
SECTION 2.4. This Supplemental Indenture shall become
effective as of the date first above written; provided, however, that the
amendment to Section 4.09 (b)(ix) of the Indenture made by Section 1.5 hereto
and the amendments made by Sections 1.7, 1.8 and 1.9 hereto shall become
effective immediately prior to the consummation of the issuance and sale by the
Company of the Additional Notes.
SECTION 2.5. The Trustee accepts the amendments to the
Indenture effected by this Supplemental Indenture and agrees to execute the
trust created by the Indenture, as hereby amended, but only upon the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, which terms and provisions shall in like manner define and limit the
Trustee's liabilities in the performance of the trust created by the Indenture,
as hereby amended. Without limiting the generality of the foregoing, the Trustee
has no responsibility for the correctness of the recitals of fact herein
contained which shall be taken as the statements of the Company and makes no
representations as to the validity or sufficiency of this Supplemental
Indenture, except as to the due and valid execution hereof
<PAGE> 9
9
by the Trustee, and shall incur no liability or responsibility in respect of the
validity thereof. The Trustee's execution of this Supplemental Indenture should
not be construed to be an approval or disapproval of the advisability of the
amendments to the Indenture provided herein.
SECTION 2.6. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
SECTION 2.7. This Supplemental Indenture may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original, and all of such counterparts shall together constitute one and the
same instrument.
<PAGE> 10
10
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture
to be duly executed, and their respective corporate seals to be hereunto affixed
and duly attested, all as of the day and year first above written.
AMERICAN COMMUNICATIONS
SERVICES, INC.
by /s/ Riley M. Murphy
--------------------------
Name: Riley M. Murphy
Title: Executive Vice
President/Secretary
[Corporate Seal]
Attest:
THE CHASE MANHATTAN BANK,
as Trustee
by /s/ Andrew M, Deck
--------------------------
Name: Andrew M. Deck
Title: Vice President
[Corporate Seal]
Attest:
<PAGE> 11
11
STATE OF COLORADO)
) SS.:
COUNTY OF CHAFFEE)
On the 7th day of July, 1997, before me personally came Riley M.
Murphy, to me known, who, being by me duly sworn, did depose and say that she is
Executive Vice President/Secretary of American Communications Services, Inc.,
one of the corporations described in and which executed the foregoing
instrument; that she knows the seal of said corporation; that the seal affixes
to said instrument is such corporate seal; that it was so affixed by authority
of the Board of Directors of said corporation; and that she signed her name
thereto by like authority.
/s/ William Josephy Murphy
---------------------------------
Notary Public
State of Colorado
My commission expires 9/20/99
[Seal]
<PAGE> 12
12
STATE OF )
) SS.:
COUNTY OF )
On the 8th day of July, 1997, before me personally came Andrew
M. Deck, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of The Chase Manhattan Bank, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixes to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
/s/ Emily Fayan
----------------------------------
Notary Public
State of New York
My commission expires 12/31/97
[Seal]
<PAGE> 1
EXHIBIT 4.2
AMERICAN COMMUNICATIONS SERVICES, INC.
$120,000,000
12-3/4% SENIOR DISCOUNT NOTES DUE 2006
SUPPLEMENTAL INDENTURE
Dated as of July 7, 1997
to
INDENTURE
Dated as of March 26, 1996, as amended
THE CHASE MANHATTAN BANK,
Trustee
<PAGE> 2
1
THIS SUPPLEMENTAL INDENTURE (the
"Supplemental Indenture"), dated as of July 7, 1997,
by and between AMERICAN COMMUNICATIONS SERVICES,
INC., a Delaware corporation (the "Company"), having
its principal office at 131 National Business
Parkway, Suite 100, Annapolis Junction, Maryland
20701, and THE CHASE MANHATTAN BANK (formerly known
as Chemical Bank), a New York banking corporation, as
trustee (the "Trustee") under the Indenture (as
defined below), having its Corporate Trust Office at
450 West 33rd Street, New York, New York 10001-2697.
Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the
Indenture.
WHEREAS, the Company and the Trustee previously duly executed,
and the Company duly delivered to the Trustee, an Indenture dated as of March
26, 1996, as amended by the Supplemental Indenture dated January 13, 1997 (as
supplemented, the "Indenture"), relating to $120,000,000 aggregate principal
amount at maturity of the Company's 12-3/4% Senior Discount Notes due 2006 (the
"Notes");
WHEREAS, pursuant to Section 9.02 of the Indenture, the
Company and the Trustee have obtained the consent of the Holders of not less
than a majority in principal amount of the outstanding Notes to the amendments
made hereby;
WHEREAS, the Board of Directors of the Company has
authorized the execution of this Supplemental Indenture and its delivery to
the Trustee;
WHEREAS, the Company has delivered an Officers' Certificate
and Opinion of Counsel to the Trustee pursuant to Section 9.07 of the Indenture;
and
WHEREAS, all other actions necessary to make this Supplemental
Indenture a legal, valid and binding obligation of the parties hereto in
accordance with its terms and the terms of the Indenture have been performed;
NOW, THEREFORE, in consideration of the promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Trustee hereby
<PAGE> 3
2
mutually covenant and agree for the equal and proportionate benefit of all
Holders of the Notes as follows:
ARTICLE I
Amendments
Upon execution of this Supplemental Indenture, the terms of
the Notes and the Indenture shall be amended as follows:
SECTION 1.1. Section 1.01 of the Indenture shall be amended by
adding the following definition in appropriate alphabetical order:
"Additional Notes" means unsecured notes of the Company (i)
ranking in right of payment pari passu with, or junior to, the Notes and the
2005 Notes, (ii) having a Stated Maturity of approximately ten or more years
from the date of issuance of such notes and (iii) having covenants and terms
(other than interest payment terms, escrow account provisions, interest rate,
interest payment dates, maturity dates, optional redemption dates and redemption
prices) substantially similar to those of the Notes and the 2005 Notes."
"EBIT" means the amount calculated in the same manner as
EBITDA, but not including clauses (iii) and (iv) of the definition thereof
contained herein."
"Fiber Network" means a digital fiber optic telecommunications
network wholly owned by the Company that serves a Metropolitan Area."
"Metropolitan Area" means the 31 metropolitan areas in which
the Company, as of June 30, 1997, has a Fiber Network and other metropolitan
areas deemed in the reasonable business judgment of the management of the
Company to provide an opportunity for the building and operation of such a Fiber
Network with the reasonable potential to produce financial results for the
Company at least substantially comparable to the metropolitan areas in which the
Company has such operational Fiber Networks."
SECTION 1.2. The definition of "Indebtedness" in Section 1.01
of the Indenture shall be amended by (A) adding the words ", Additional Notes"
after each occurrence of the word "Notes" in the thirty-first line thereof, (B)
deleting the words "(as defined herein with respect to the Notes and as defined
in the 2005 Indenture with respect to the 2005 Notes) and (C) adding the words
"(as defined in the relevant indenture)" after the word "thereof" in the
thirty-third
<PAGE> 4
3
line thereof and after the word "Value" in the thirty-seventh line thereof.
SECTION 1.3. The definition of "Permitted Liens" in Section
1.01 of the Indenture shall be amended by striking the word "and" at the end of
clause (xv) of such definition, by renumbering the final clause (xvi) of such
definition as clause (xvii) and by inserting a new clause (xvi) on the
immediately preceding line as follows:
"(xvi) any Lien with respect to cash proceeds from the sale of the
Additional Notes (or certificated or uncertificated securities or other
investments) placed or held in escrow for the benefit of the holders of
the Additional Notes; and".
SECTION 1.4. Section 4.09(b) of the Indenture shall be amended
by:
(A) inserting the words ", the 2005 Notes or the Additional
Notes" after the word "Notes" in the second line in subsection (vi) thereof;
(B) inserting the words "an amount that is one and a half
times" after the word "outstanding," in the second line in subsection (ix)
thereof;
(C) replacing the references to subsections "(ii) or (vi)" in
the fourth line of subsection (x) thereof with references to subsections "(ii),
(vi) or (xiii)";
(D) deleting the word "and" at the end of subsection (xii)
thereof;
(E) renumbering subsection (xiii) thereof as subsection (xiv);
and
(F) adding a new subsection (xiii) as follows:
"(xiii) the incurrence by the Company of Indebtedness
consisting of Additional Notes yielding up to $150,000,000 gross
proceeds to the Company (exclusive of any cash proceeds from the sale
of the Additional Notes placed in escrow by the Company for the benefit
of the holders of the Additional Notes) upon issuance thereof; and".
SECTION 1.5. Section 4.13(a)(iii) of the Indenture shall be
amended by deleting the words "and Section 4.13(b)(viii)" in the last line
thereof.
<PAGE> 5
4
SECTION 1.6. Section 4.18 of the Indenture shall be amended by
adding after the final sentence, the following:
"In addition to the foregoing, commencing with the unaudited information for the
fiscal quarter ended September 30, 1997, the Company will file with the
Commission and will thereafter transmit by mail to the Holders and file with the
Trustee within the same time periods as set forth in the second next preceding
sentence, unaudited information, on an aggregate Fiber Network basis (before
headquarter allocations) segmented by the calendar year in which each such Fiber
Network became operational, setting forth the investment in plant, property and
equipment to date, revenue, EBITDA, EBIT, access lines, fiber miles, route
miles, buildings connected and voice grade equivalents; provided, however, that
the Company will provide such unaudited information with respect to (i) all
Fiber Networks that were initially operational at any time prior to December 31,
1995 (all such Fiber Networks shall be deemed to have become operational in
calendar year 1995) and (ii) all Fiber Networks that were initially operational
in each succeeding calendar year (including all or any portion of the then
current year); and provided, further, that the Company need no longer comply
with the information requirements of this sentence after four consecutive fiscal
quarters for which the ratio of EBITDA of the Company to Consolidated Interest
Expense (other than dividends or distributions with respect to preferred stock
or Disqualified Stock of the Company) of the Company is greater than 1.0 or
after the occurrence of a Change of Control."
SECTION 1.7. A new Section 4.20 of the Indenture will be
added, as follows:
"Section 4.20. Limitation on Construction of Fiber Networks.
The Company may construct Fiber Networks in no more than 45 Metropolitan Areas
until the earlier of such time as (i) the ratio of EBITDA of the Company to
Consolidated Interest Expense (other than dividends or distributions with
respect to preferred stock or Disqualified Stock of the Company) of the Company
is greater than 1.0 for four consecutive fiscal quarters and (ii) the occurrence
of a Change of Control."
SECTION 1.8. The paragraph on the reverse side of each Note
entitled "Optional Redemption." will be deleted in its entirety and replaced
with the following:
"Optional Redemption.
<PAGE> 6
5
The Notes may not be redeemed prior to October 1, 2001.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 calendar days; nor more than
60 calendar days' notice, at the prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon (if any) at
the applicable Redemption Date, if redeemed during the twelve-month period
beginning October 1 of the years indicated below:
Year Percentage
2001 106.375%
2002 104.250%
2003 102.125%
2004 and thereafter 100.000%"
<PAGE> 7
6
ARTICLE II
Miscellaneous
SECTION 2.1. For all purposes of this Supplemental Indenture,
except as otherwise herein expressly provided or unless the context otherwise
requires: (A) the terms and expressions used herein shall have the same meanings
as corresponding terms and expressions used in the Indenture and (B) the words
"herein", "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
any particular Article, Section or other subdivision.
SECTION 2.2. Upon execution of this Supplemental Indenture,
the Indenture shall be modified in accordance therewith, but except as expressly
amended hereby, the Indenture is in all respects ratified and confirmed and all
the terms, conditions and provisions thereof shall remain in full force and
effect.
SECTION 2.3. Upon execution, this Supplemental Indenture shall
form a part of the Indenture and the Supplemental Indenture shall be read, taken
and construed as one and the same instrument for all purposes, and every holder
of Notes heretofore or hereafter authenticated and delivered under the Indenture
shall be bound hereby.
SECTION 2.4. This Supplemental Indenture shall become
effective as of the date first above written; provided, however, that the
amendment to Section 4.09(b)(ix) of the Indenture made by Section 1.4 hereto and
the amendments made by Sections 1.6, 1.7 and 1.8 hereto shall become effective
immediately prior to the consummation of the issuance and sale by the Company of
the Additional Notes.
SECTION 2.5. The Trustee accepts the amendments to the
Indenture effected by this Supplemental Indenture and agrees to execute the
trust created by the Indenture, as hereby amended, but only upon the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, which terms and provisions shall in like manner define and limit the
Trustee's liabilities in the performance of the trust created by the Indenture,
as hereby amended. Without limiting the generality of the foregoing, the Trustee
has no responsibility for the correctness of the recitals of fact herein
contained which shall be taken as the statements of the Company and makes no
representations as to the validity or sufficiency of this Supplemental
Indenture, except as to the due and valid execution hereof
<PAGE> 8
7
by the Trustee, and shall incur no liability or responsibility in respect of the
validity thereof. The Trustee's execution of this Supplemental Indenture should
not be construed to be an approval or disapproval of the advisability of the
amendments to the Indenture provided herein.
SECTION 2.6. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
SECTION 2.7. This Supplemental Indenture may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original, and all of such counterparts shall together constitute one and the
same instrument.
<PAGE> 9
8
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture
to be duly executed, and their respective corporate seals to be hereunto affixed
and duly attested, all as of the day and year first above written.
AMERICAN COMMUNICATIONS
SERVICES, INC.
by /s/ Riley M. Murphy
-----------------------------
Name: Riley M. Murphy
Title: Executive Vice
President/
Secretary
[Corporate Seal]
Attest:
THE CHASE MANHATTAN BANK,
as Trustee
by /s/ Andrew M. Deck
----------------------------
Name: Andrew M. Deck
Title: Vice President
[Corporate Seal]
Attest:
<PAGE> 10
9
STATE OF COLORADO)
) SS.:
COUNTY OF CHAFFEE)
On the 7th day of July, 1997, before me personally came Riley
M. Murphy, to me known, who, being by me duly sworn, did depose and say that she
is Executive Vice President/Secretary of American Communications Services, Inc.,
one of the corporations described in and which executed the foregoing
instrument; that she knows the seal of said corporation; that the seal affixes
to said instrument is such corporate seal; that it was so affixed by authority
of the Board of Directors of said corporation; and that she signed her name
thereto by like authority.
/s/ William Josephy Murphy
-------------------------------
Notary Public
State of Colorado
My commission expires 9/20/99
[Seal]
<PAGE> 11
10
STATE OF )
) SS.:
COUNTY OF )
On the 8th day of July, 1997, before me personally came Andrew
M. Deck, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of The Chase Manhattan Bank, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixes to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
/s/ Emily Fayan
----------------------------------
Notary Public
State of New York
My commission expires 12/31/97
[Seal]
<PAGE> 1
EXHIBIT 4.3
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO AMERICAN COMMUNICATIONS SERVICES, INC. (THE
"ISSUER"), OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRANSFER AGENT'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF THE FOREGOING CAUSE
(E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE ISSUER AND THE
TRANSFER AGENT, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE THE
BENEFITS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF JULY 10, 1997 AMONG THE
COMPANY, BT SECURITIES CORPORATION, ALEX. BROWN & SONS INCORPORATED AND THE
OTHER PARTIES SIGNATORY
<PAGE> 2
THERETO, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. NO
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.
THE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE IS PART OF
AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE SHARE OF PREFERRED STOCK AND
ONE WARRANT ENTITLING THE HOLDER THEREOF TO PURCHASE INITIALLY 80.318 SHARES OF
COMMON STOCK, PAR VALUE $.01 PER SHARE, OF AMERICAN COMMUNICATIONS SERVICES
INC., SUBJECT TO AN INCREASE OF 22.645 ADDITIONAL SHARES OF COMMON STOCK. PRIOR
TO THE EARLIEST TO OCCUR OF (A) 90 DAYS AFTER THE ORIGINAL ISSUANCE OF THE UNITS
AND (B) SUCH EARLIER DATE AS MAY BE DETERMINED BY BT SECURITIES CORPORATION, THE
PREFERRED STOCK EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR
EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER
WITH, THE WARRANTS.
<PAGE> 3
CERTIFICATE NUMBER ((CertNo)) 14-3/4% REDEEMABLE PREFERRED STOCK
AMERICAN COMMUNICATIONS SERVICES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CUSIP ((CUSIPNo))
THIS CERTIFIES THAT ((Name))
IS THE OWNER OF ((ShareNo))
FULLY PAID AND NON-ASSESSABLE SHARES OF THE 14-3/4% REDEEMABLE
PREFERRED STOCK DUE 2008, PAR VALUE OF $1.00 PER SHARE, OF AMERICAN
COMMUNICATIONS SERVICES, INC. (the "Company") transferable on the books of the
Company by the holder hereof in person or by duly authorized attorney upon
surrender of this share certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be subject to all of the
provisions of the Certificate of Incorporation and Certificate of Designation of
the Company, as filed in the State of Delaware and to all provisions whereof the
holder hereof hereby asserts and is bound. The Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile signatures of the duly authorized officers of the
Company
Dated Countersigned and Registered
THE BANK OF NEW YORK
Transfer Agent
- --------------------------- ----------------------------------
Authorized Signature
<PAGE> 4
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF REGISTRABLE PREFERRED STOCK
Re: Shares of 14-3/4% Redeemable Preferred Stock due 2008 (the "Shares") of
American Communications Services, Inc.
This Certificate relates to ____ Shares held in certificated
form by ______ (the "Transferor").
|_| The Transferor has requested the Transfer Agent by written order to
exchange or register the transfer of one or more certificates representing
Shares.
In connection with such request and in respect of each such
Share, the Transferor does hereby certify that Transferor is familiar with the
Registration Rights Agreement relating to the above captioned Shares and the
restrictions on transfers thereof as provided in Section 10 of such Registration
Rights Agreement, and that the transfer of these Shares does not require
registration under the Securities Act of 1933, as amended (the "Securities Act")
because*:
|_| Such Shares are being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 10 (a)(y)(A) or Section 10(d)(i)(A)
of the Registration Rights Agreement).
|_| Such Shares are being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Securities Act), in reliance on Rule
144A or in accordance with Regulation S under the Securities Act.
|_| Such Shares are being transferred in accordance with Rule 144 under
the Securities Act.
|_| Such Shares are being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act,
other than Rule 144A or Rule 144 or Regulation S under the Securities Act. An
opinion of counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate.
----------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------
Date:
----------------------
*Check applicable box.
-2-
<PAGE> 5
Certificate of Transfer
American Communications Services, Inc.
131 National Business Parkway
Suite 100
Annapolis Junction, MD 20701
Ladies and Gentlemen:
In connection with our proposed purchase of shares of 14-3/4%
Redeemable Preferred Stock due 2008, par value $1.00 per share (the
"Securities"), of American Communications Services, Inc. (the "Company"), we
confirm that:
1. We understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "Securities Act")
and, unless so registered, may not be sold except as permitted in the
following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Securities to offer, sell
or otherwise transfer such Securities while they are Registrable
Preferred Stock within the meaning of the Registration Rights Agreement
to which this certificate is an exhibit only (a) to the Company or any
of its subsidiaries, (b) pursuant to a registration statement which has
been declared effective under the Securities Act, (c) so long as the
Securities are eligible for resale pursuant to Rule 144A, under the
Securities Act, to a person we reasonably believe is a "qualified
institutional buyer" under Rule 144A (a "QIB") that purchases for its
own account or for the account of a QIB and to whom notice is given
that the transfer is being made in reliance on Rule 144A, (d) pursuant
to offers and sales that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an "accredited
investor" within the meaning of subparagraphs (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act that is purchasing for his own
account or for the account of such an "accredited investor," or (f)
pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing
cases to any requirement of law that the disposition of our property or
the property of such investor account or accounts be at all times
within our or their control and to compliance with any applicable state
securities laws. The foregoing restrictions on resale will not apply
after the Securities are no longer Registrable Preferred Stock. We
understand that the Securities purchased by us will bear a legend to
the foregoing effect.
<PAGE> 6
2. We are an "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and we are acquiring the Securities for investment purposes and not
with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act and we have such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each
able to bear the economic risk of our or its investment for an
indefinite period.
3. We are acquiring the Securities purchased by us for our own
account or for one or more accounts (each of which is an "accredited
investor") as to each of which we exercise sole investment discretion.
4. You and your counsel are entitled to rely upon this letter
and you are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered
hereby.
Very truly yours,
----------------------------
(Name of Purchaser)
By:
-------------------------
Date:
-----------------------
Upon transfer the Securities would be registered in the name
of the new beneficial owner as follows:
Name:
----------------------------------
Address:
-------------------------------
Taxpayer ID Number:
--------------------
-2-
<PAGE> 1
EXHIBIT 4.4
WARRANT AGREEMENT
between
AMERICAN COMMUNICATIONS SERVICES, INC.
and
THE CHASE MANHATTAN BANK,
Warrant Agent
Dated as of July 10, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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ARTICLE I
CERTAIN DEFINITIONS
<S> <C>
Section 1.1. Certain Definitions......................................................... 1
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates and Dating...................................... 6
Section 2.2. Legends...................................................................... 7
Section 2.3. Execution and Delivery of Warrant Certificates............................... 9
Section 2.4. Temporary Warrant Certificates.............................................. 10
ARTICLE III
EXERCISE OF WARRANTS
Section 3.1. Exercise Price.............................................................. 10
Section 3.2. Exercise; Restrictions on Exercise; Expiration.............................. 10
Section 3.3. Method of Exercise; Payment of Exercise Price............................... 11
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments................................................................. 13
Section 4.2. Notice of Adjustment........................................................ 19
Section 4.3. Statement on Warrants....................................................... 20
Section 4.4. Notice of Consolidation, Merger or Sale of Assets........................... 20
Section 4.5. Fractional Interests........................................................ 20
Section 4.6. No Dilution or Impairment................................................... 21
Section 4.7. Responsibility of Warrant Agent............................................. 21
Section 4.8. No Adjustments for Certain Issuances........................................ 21
ARTICLE V
DECREASE IN EXERCISE PRICE
Section 5.1. Exercise Price.............................................................. 21
ARTICLE VI
RESERVATION AND AUTHORIZATION OF COMMON SHARES
Section 6.1. Reservation and Authorization............................................... 22
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 6.2. Covenant Regarding Securities............................................... 22
Section 6.3. Registration................................................................ 22
ARTICLE VII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 7.1. Transfer and Exchange....................................................... 23
Section 7.2. The Global Warrant.......................................................... 24
Section 7.3. Special Transfer Provisions................................................. 26
Section 7.4. Surrender of Warrant Certificates........................................... 27
Section 7.5. Rule 144A Information....................................................... 27
ARTICLE VIII
HOLDERS
Section 8.1. Holder Not Deemed a Stockholder............................................. 27
Section 8.2. Right of Action............................................................. 28
ARTICLE IX
THE WARRANT AGENT
Section 9.1. Duties and Liabilities...................................................... 28
Section 9.2. Right to Consult Counsel.................................................... 29
Section 9.3. Compensation; Indemnification............................................... 29
Section 9.4. No Restrictions on Action................................................... 30
Section 9.5. Discharge or Removal; Replacement Warrant Agent............................. 30
Section 9.6. Successor Warrant Agent..................................................... 31
ARTICLE X
REGISTRATION RIGHTS
Section 10.1. Registration of the Warrants............................................... 31
Section 10.2. Registration of the Warrant Shares......................................... 32
Section 10.3. Registration Procedures.................................................... 32
Section 10.4. Registration Expenses...................................................... 36
Section 10.5. Indemnification and Contribution........................................... 36
Section 10.6. Additional Rights of Initial Purchasers.................................... 39
Section 10.7. Notice to Warrant Agent.................................................... 40
ARTICLE XI
MISCELLANEOUS
Section 11.1. Money Deposited with the Warrant Agent..................................... 40
Section 11.2. Loss or Mutilation......................................................... 40
Section 11.3. Payment of Taxes........................................................... 41
Section 11.4. No Merger, Consolidation or Sale of Assets or the Company.................. 41
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 11.5. Reports to Holders......................................................... 41
Section 11.6. Notices.................................................................... 41
Section 11.7. Governing Law.............................................................. 42
Section 11.8. Successors................................................................. 42
Section 11.9. Counterparts............................................................... 42
Section 11.10. Amendments................................................................ 42
Section 11.11. Headings.................................................................. 43
Section 11.12. Third Party Beneficiaries................................................. 43
Section 11.13. Severability.............................................................. 43
Section 11.14. No Inconsistent Agreements................................................ 43
Section 11.15. Warrants Held by the Company.............................................. 43
Section 11.16. Statements Required in Certificate........................................ 43
EXHIBIT A FORM OF CERTIFICATED WARRANT.............................................. A-1
</TABLE>
iii
<PAGE> 5
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of July 10, 1997 (this "Agreement"),
between AMERICAN COMMUNICATIONS SERVICES, INC., a Delaware corporation (the
"Company"), and THE CHASE MANHATTAN BANK, a New York banking corporation, as
warrant agent (the "Warrant Agent").
Pursuant to the terms of each of the respective purchase agreements
(collectively, the "Purchase Agreements"), dated as of July 3, 1997, between and
among the Company and BT Securities Corporation and Alex. Brown & Sons
Incorporated (the "Initial Purchasers") and between and among the Company and
other parties dated as of July 3, 1997 (the "Other Purchasers" and with the
Initial Purchasers the "Purchasers"), the Company has agreed to issue and sell
to the Purchasers 75,000 warrants (the "Warrants") each initially entitling the
holder thereof to purchase 80.318 shares (the "Initial Warrant Shares") of
Common Stock, subject to an increase of 22.645 additional shares of Common Stock
(the "Additional Warrant Shares" and, together with the Initial Warrant Shares,
the "Warrant Shares") in the event the Company fails to raise net proceeds of at
least $50 million through the issue and sale of its Qualified Stock (other than
preferred stock) on or before December 31, 1998 (the "Warrant Adjustment Date")
at the Exercise Price per Warrant Share, subject to adjustment as described
herein, as part of 75,000 Units (the "Units").
Each Unit also will include one share of the Company's 14-3/4%
Redeemable Preferred Stock due 2008 (the "Preferred Stock"). The Preferred Stock
and the Warrants will not trade separately until the Separation Date (as defined
herein).
In consideration of the foregoing and of the agreements contained in
the Purchase Agreements, and for the purpose of defining the terms and
provisions of the Warrants and the respective rights and obligations thereunder
of the Company and the holders thereof (the "Holders"), the Company and the
Warrant Agent hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. For all purposes of this Warrant
Agreement, except as otherwise expressly provided:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Warrant Agreement as a whole and not to any
particular Article, Section or other subdivision;
(3) "or" is not exclusive; and
1
<PAGE> 6
(4) "including" means including without limitation.
"Additional Warrant Shares" has the meaning given such term in the
preamble hereto.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "under common control with" and "controlled
by"), and as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
stock, by agreement or otherwise; provided, that beneficial ownership of 10% or
more of the voting stock of a person shall be deemed to be control.
"Agent Members" has the meaning set forth in Section 7.2(a) hereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a duly adopted resolution of the Board of
Directors in full force and effect at the time of determination and certified as
such by the Secretary or any Assistant Secretary of the Company.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day on which banking institutions in The City of New York
are authorized or obligated by law, executive order or regulation to close.
"Cashless Exercise" has the meaning given such term in Section 3.3(a).
"Certificated Warrants" means Warrants represented by Warrant
Certificates issued in definitive, fully registered form.
"clearing agency" has the meaning set forth in Section 3(a)(23) of the
Exchange Act.
"Commission" means the Securities and Exchange Commission.
"Common Shelf Registration Period" has the meaning set forth in Section
10.2(b) hereof.
"Common Shelf Registration Statement" means a shelf registration
statement (or any successor registration statement thereto) relating to the
offer and sale of the Warrant Shares by the Holders, from time to time in
accordance with the methods of distribution elected by such Holders and set
forth in such registration statement and Rule 415 under the Securities Act.
2
<PAGE> 7
"Common Stock" means the common stock, par value $.01 per share, of the
Company and any other capital stock into which shares of such common stock may
be converted or reclassified or that may be issued in respect of, in exchange
for, or in substitution of, such common stock by reason of any stock splits,
stock dividends, distributions, mergers, consolidations or other like events.
"Company" means the party named as such in the preamble hereto until a
successor replaces it pursuant to the applicable provisions hereof and,
thereafter, means such successor.
"Company Order" means a written order signed in the name of the Company
by (i) its Chairman of the Board, President, a Vice Chairman or a Vice
President, and (ii) its principal financial or accounting officer, its Secretary
or an Assistant Secretary.
"Corporate Trust Office" means the principal office of the Warrant
Agent at which at any particular time its corporate trust business shall be
principally administered, which office is, at the date of execution of this
Agreement, located at 450 West 33rd Street, New York, New York 10001-2697.
"Current Market Value" has the meaning set forth in Section 4.1(f)
hereof.
"Depositary" means The Depository Trust Company, its nominees, and
their respective successors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Exercise Price" has the meaning set forth in Section 3.1 hereof.
"Expiration Date" means 5:00 p.m., New York time, on January 1, 2004.
"Fair Value" has the meaning set forth in Section 4.1(d) hereof.
"Final Memorandum" means the final Offering Memorandum, dated July 3,
1997, as amended or supplemented, used in connection with the Initial Placement.
"Financial Expert" means a nationally recognized investment banking
firm, ranking in the top ten (as determined by the Securities Industry
Association, Inc., or a similar securities industry data source company) as lead
manager for primary common stock offerings in the year prior to the year in
which it is called upon to give financial advice as described herein.
"Global Warrant" has the meaning set forth in Section 2.1 hereof.
"Global Warrant Legend" means the legend in the form set forth in
Section 2.2(b) hereof.
3
<PAGE> 8
"Holder" means (i) in the case of any Certificated Warrant, the Person
in whose name such Certificated Warrant is registered in the Warrant Register
and (ii) in the case of any Global Warrant, the Depositary.
"Independent Financial Expert" means a Financial Expert that (i) does
not, and whose directors, executive officers and holders of 5% or more of its
equity securities do not, have a direct or indirect financial interest in the
Company or any of its subsidiaries, and which has not been for at least five
years, (ii) at the time it is called upon to give independent financial advice
to the Company is not, and none of its directors, executive officers or holders
of 5% or more of its equity securities is, a promoter, director, or officer of
the Company or any of its subsidiaries and (iii) has not been retained by the
Company, other than to perform an equity valuation, within the preceding twelve
months. The Independent Financial Expert may be compensated and indemnified by
the Company as customary for opinions or services it provides as an Independent
Financial Expert.
"Initial Placement" has the meaning set forth in Section 10.5(d)
hereof.
"Initial Purchasers" has the meaning set forth in the preamble hereto.
"Issue Date" means the date of the original issuance of the Warrants.
"Majority Holders" means the Holders of a majority of the Warrants
registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering
under a Registration Statement.
"National Securities Exchange" shall mean any national securities
exchange and shall include The Nasdaq Stock Market or any successor market
thereto.
"Officers' Certificate" means a certificate signed by (i) the Chairman
of the Board of Directors, a Vice Chairman of the Board of the Directors, the
President or a Vice President, and (ii) the Chief Financial Officer, the Chief
Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company and delivered to the Warrant Agent, which
certificate shall comply with the provisions of Section 11.16 thereof.
"Other Purchasers" has the meaning set forth in the preamble hereto.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company, unincorporated organization or government or
any agency or political subdivision thereof.
"Preferred Stock" has the meaning set forth in the preamble hereto.
4
<PAGE> 9
"Private Placement Legend" means the legend in the form set forth in
Section 2.2(a) hereof.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Warrants or the Warrant Shares covered by
such Registration Statement, and all amendments and supplements to the
Prospectus, including post-effective amendments.
"Purchase Agreements" has the meaning set forth in the preamble hereto.
"Purchasers" has the meaning set forth in the preamble hereto.
"Qualified Stock" of any Person means any class of capital stock other
than capital stock which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon the happening
of any event, or otherwise, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, or is exchangeable for Indebtedness at a time, in whole or in
part, on or prior to the Expiration Date.
"Registration Statement" means either of the Warrant Shelf Registration
Statement or the Common Shelf Registration Statement (or a successor
registration statement thereto), amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto, and all material
incorporated by reference therein.
"Rights" means rights, options or warrants for the purchase of, or
securities convertible into or exchangeable for, Common Stock.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Separation Date" means the earliest to occur of (i) 90 days from the
Issue Date and (ii) such earlier date as may be determined by BT Securities
Corporation.
"Temporary Warrant Certificates" has the meaning set forth in Section
2.4 hereof.
"Unit Legend" means the legend in the form set forth in Section 2.2(c)
hereof.
"Units" has the meaning set forth in the preamble hereto.
5
<PAGE> 10
"Valuation Date" means a date specified herein as of which the Current
Market Value of a security or property must be determined by an Independent
Financial Expert.
"Value Report" means a report prepared by an Independent Financial
Expert and delivered to the Board of Directors in accordance with Section 4.1(k)
hereof.
"Warrant Adjustment Date" has the meaning set forth in the preamble
hereto.
"Warrant Agent" means the party named as such in this Agreement until a
successor replaces it in accordance with the provisions of this Agreement and,
thereafter, means such successor.
"Warrant Certificate" has the meaning set forth in Section 2.1 hereof.
"Warrant Register" has the meaning set forth in Section 7.1(a) hereof.
"Warrant Shares" has the meaning set forth in the preamble hereto.
"Warrant Shelf Registration Period" has the meaning set forth in
Section 10.1(b) hereof.
"Warrant Shelf Registration Statement" means a shelf registration
statement (or any successor registration statement thereto) relating to the
offer and sale of the Warrants by the Holders from time to time in accordance
with the methods of distribution elected by such Holders and set forth in such
registration statement and Rule 415 under the Securities Act.
"Warrants" has the meaning set forth in the preamble hereto and more
particularly means any Warrants represented by a Warrant Certificate
countersigned by the Warrant Agent and delivered under this Agreement.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates and Dating. Any certificate
representing Warrants (each a "Warrant Certificate") shall be dated the date on
which countersigned by the Warrant Agent and shall have such insertions as are
appropriate or required or permitted by this Agreement and may have such
letters, numbers or other marks of identification and such legends and
endorsements stamped, printed, lithographed or engraved thereon, (i) as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, (ii) such as may be required to comply with this Agreement, any
law or with any rule of any securities exchange on which the Warrants may be
listed, (iii) and such as may be necessary to conform to customary usage.
The Warrants shall be issued initially in the form of Warrant
Certificates in definitive, fully registered form, substantially in the form set
forth in Exhibit A hereto, which exhibit is hereby incorporated in and expressly
made a part of this Agreement. Upon
6
<PAGE> 11
issuance, all such Warrant Certificates shall be duly executed by the Company
and countersigned by the Warrant Agent and delivered, all as hereinafter
provided. Any Warrants that may be issued pursuant to Section 7.1(h) hereof
shall be issued in the form of a permanent global Warrant Certificate (the
"Global Warrant") in definitive, fully registered form, substantially in the
form set forth in Exhibit A hereto but with the Global Warrant Legend (as
defined) on the face thereof in the form given in Section 2.2(b) hereof. Any
such Global Warrant shall be duly executed by the Company and countersigned by
the Warrant Agent and deposited with the Warrant Agent as custodian for the
Depositary.
Definitive Warrant Certificates shall be typed, printed, lithographed
or engraved or produced by any combination of such methods or produced in any
other manner permitted by the rules of any securities exchange on which the
Warrants may be listed, all as determined by the officers of the Company
executing such Warrant Certificates, as evidenced by their execution thereof.
Section 2.2. Legends. (a) Except as provided in Section 7.3(c) hereof,
each Warrant Certificate shall bear the following legend (the "Private Placement
Legend") on the face thereof:
THE SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION,
(2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULES 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, COMPLIES WITH THE
TERMS OF THE WARRANT AGREEMENT, (D) OUTSIDE THE UNITED STATES TO
PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING THE
REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
7
<PAGE> 12
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
(b) The Global Warrant shall bear the following legend (the "Global
Warrant Legend") on the face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO AMERICAN
COMMUNICATIONS SERVICES, INC. OR THE WARRANT AGENT FOR REGISTRATION OF
TRANSFER OR EXCHANGE AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS HAS
BEEN REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFER OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE VII OF THE
WARRANT AGREEMENT, DATED AS OF JULY 10, 1997, BETWEEN AMERICAN
COMMUNICATIONS SERVICES, INC. AND THE WARRANT AGENT NAMED THEREIN,
PURSUANT TO WHICH THIS WARRANT WAS ISSUED.
(c) Except as provided in Section 7.3(d) hereof, each Warrant
Certificate shall bear the following legend (the "Unit Legend") on the face
thereof:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE PART OF AN ISSUANCE OF
UNITS, EACH OF WHICH CONSISTS OF ONE SHARE OF PREFERRED STOCK AND ONE
WARRANT ENTITLING THE HOLDER THEREOF TO PURCHASE INITIALLY 80.318
SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OF AMERICAN
COMMUNICATIONS SERVICES INC., SUBJECT TO AN INCREASE OF 22.645
ADDITIONAL SHARES OF COMMON STOCK. PRIOR TO THE
8
<PAGE> 13
EARLIEST TO OCCUR OF (A) 90 DAYS AFTER THE ORIGINAL ISSUANCE OF THE
UNITS AND (B) SUCH EARLIER DATE AS MAY BE DETERMINED BY BT SECURITIES
CORPORATION, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE PREFERRED STOCK.
Section 2.3. Execution and Delivery of Warrant Certificates. On or
after the date of this Agreement, Warrant Certificates may be executed by the
Company and delivered to the Warrant Agent for countersignature, and the Warrant
Agent shall thereupon countersign and deliver such Warrant Certificates upon
receipt of a Company Order directing such action. The Warrant Agent is hereby
authorized to countersign and deliver Warrant Certificates as required by this
Section 2.3, Section 2.4, Section 3.3, Section 11.2 and Article VII hereof.
Notwithstanding any other provision hereof, the Warrant Agent shall
countersign and deliver Warrant Certificates only upon receipt by the Warrant
Agent of an Officers' Certificate complying with Section 11.16 hereof with
respect to satisfaction of all conditions precedent contained in this Agreement
to such countersignature and delivery.
The Warrant Certificates and any Temporary Warrant Certificates shall
be executed on behalf of the Company by its Chief Executive Officer, its
President or any Executive Vice President, either manually or by facsimile
signature printed thereon, under its corporate seal. The Warrant Certificates
and any Temporary Warrant Certificates shall be countersigned by manual
signature of the Warrant Agent and shall be delivered by the Warrant Agent as
directed pursuant to a Company Order.
Upon the occurrence of any event specified in Section 7.2(d) hereof and
compliance by the Company with the provisions of this Section 2.3, the Company
shall execute and the Warrant Agent shall countersign and deliver to each
beneficial owner identified by the Depositary, in exchange for such beneficial
owner's interest in the Global Warrant, Certificated Warrants, representing, in
the aggregate, the Warrants theretofore represented by the Global Warrant.
A Warrant Certificate shall not be valid or entitled to any benefit
under this Agreement or obligatory for any purpose unless executed by the
Company and countersigned by the manual signature of the Warrant Agent as
provided herein. The signature of an authorized officer of the Warrant Agent
shall be conclusive evidence, and the only evidence, that such Warrant
Certificate has been countersigned and delivered under this Agreement.
In case any officer of the Company whose signature shall have been
placed upon any of the Warrant Certificates or Temporary Warrant Certificates
shall cease to be such officer of the Company before countersignature by the
Warrant Agent and the delivery thereof, such Warrant Certificates or Temporary
Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such Person
had not ceased to be such officer of the Company.
9
<PAGE> 14
Section 2.4. Temporary Warrant Certificates. Pending the preparation of
definitive Warrant Certificates, the Company may execute, and the deliver to the
Warrant Agent for countersignature, temporary warrant certificates ("Temporary
Warrant Certificates") which are printed, lithographed, or otherwise produced,
substantially of the tenor of the definitive Warrant Certificates in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations, all as determined by the officers of the
Company executing such Temporary Warrant Certificates, as evidenced by their
execution thereof.
If Temporary Warrant Certificates are issued, the Company shall cause
definitive Warrant Certificates to be prepared without unreasonable delay. After
the preparation of definitive Warrant Certificates, the Temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the Temporary Warrant Certificates to the Warrant Agent, without
charge to the Holder. Until so exchanged, Temporary Warrant Certificates shall
in all respects be entitled to the same benefits under this Warrant Agreement as
definitive Warrant Certificates.
ARTICLE III
EXERCISE OF WARRANTS
Section 3.1. Exercise Price. Each Warrant shall, when the Warrant
Certificate representing such Warrant is countersigned by the Warrant Agent,
entitle the Holder thereof, subject to the provisions of this Agreement, to
purchase 80.318 Initial Warrant Shares and, if applicable, 22.645 Additional
Warrant Shares at a purchase price (the "Exercise Price") of $7.15 per Warrant
Share, subject to adjustment as provided in Article IV and Article V hereof.
Section 3.2. Exercise; Restrictions on Exercise; Expiration. At any
time after the Issue Date and on or before the Expiration Date, Warrants may be
exercised on any Business Day; provided that Warrants may not be exercised if
the Common Shelf Registration Statement is not effective under the Securities
Act unless such exercise is a Cashless Exercise or the Company receives evidence
reasonably satisfactory to it that such exercise is exempt from the registration
and prospectus delivery requirements of the Securities Act. Any Warrants not
exercised by the Expiration Date shall expire and all rights of the Holders of
such Warrants hereunder and thereunder shall terminate unless otherwise provided
herein or therein.
Section 3.3. Method of Exercise; Payment of Exercise Price. (a) In
order to exercise all or any of the Warrants represented by a Warrant
Certificate, the Holder thereof is required to surrender to the Warrant Agent at
the office or agency of the Company maintained for such purpose, which shall
initially be the Corporate Trust Office of the Warrant Agent in New York, New
York, the related Warrant Certificate with the Subscription Form thereon duly
filled in and signed, and payment in full of the Exercise Price for each Warrant
Share or other securities or property issuable upon exercise of the Warrants as
to which a Warrant is
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exercised. The Exercise Price may be paid by certified or official bank check or
by wire transfer to an account designated by the Company for such purpose, (ii)
by the surrender of shares of Preferred Stock (which surrender shall be
evidenced by cancellation of such shares) having a Current Market Value (as
defined herein) per share of Preferred Stock on the date of exercise equal to
the Exercise Price per share as of the date of exercise, without the payment of
the Exercise Price in cash, together with a specification as to the number of
Warrants to be exercised, (iii) by surrender of publicly traded debt securities
of the Company (which surrender shall be evidenced by cancellation of such
publicly traded debt securities) having a Current Market Value (as defined
herein) per security on the date of exercise equal to the Exercise Price per
share as of the date of exercise, without the payment of the Exercise Price in
cash, together with a specification as to the number of Warrants to be exercised
or (iv) by the surrender (which surrender shall be evidenced by cancellation of
the number of Warrants represented by any Warrant Certificate presented in
connection with a Cashless Exercise) of a Warrant or Warrants (represented by
one or more relevant Warrant Certificates), and without the payment of the
Exercise Price in cash, for such number of Warrant Shares equal to the product
of (1) the number of Warrant Shares for which such Warrant is exercisable as of
the date of exercise (if the Exercise Price were being paid in cash) and (2) the
Cashless Exercise Ratio. An exercise referred to in clauses (ii), (iii) or (iv)
of the preceding sentence shall be referred to as a "Cashless Exercise." For
purposes of this Agreement, the "Cashless Exercise Ratio" shall equal a
fraction, the numerator of which is the excess of the Current Market Value (as
defined herein) per share of Common Stock on the date of exercise over the
Exercise Price per share as of the date of exercise and the denominator of which
is the Current Market Value per share of Common Stock on the date of exercise
(calculated as set forth herein).
In connection with any Cashless Exercise, the Warrant Agent shall
forward to the Company any shares of Preferred Stock, debt securities or
Warrants received by it and request that the Warrant Shares to which the
applicable Holder is entitled in connection with such exercise be issued to such
Holder. The Warrant Agent shall be entitled conclusively to rely upon the
determination of the Company as to the number of Warrant Shares issuable in
connection with any Cashless Exercise, and shall not be required to determine
(but may rely on a determination made by the Company with respect to) the
Current Market Value or, if applicable, the Cashless Exercise Ratio determined
in connection with any such exercise.
Upon surrender of a Warrant Certificate representing more than one
Warrant in connection with the holder's option to elect a Cashless Exercise, the
number of Warrant Shares deliverable upon a Cashless Exercise shall be equal to
the number of Warrant Shares issuable upon the exercise of Warrants that the
holder specifies are to be exercised pursuant to a Cashless Exercise multiplied
by the Cashless Exercise Ratio. All provisions of this Agreement shall be
applicable with respect to an exercise of a Warrant Certificate pursuant to a
Cashless Exercise for less than the full number of Warrants represented thereby.
If, pursuant to the Securities Act, the Company is not able to effect the
registration under the Securities Act of the resale of the Warrant Shares by the
Holders of the Warrants following the exercise thereof as required by this
Agreement, the holders of the Warrants will be required to effect a Cashless
Exercise. Upon the exercise of any Warrants in accordance with this Agreement,
the Warrant Agent will request the Company to transfer promptly to or upon the
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written order of the holder of such Warrant Certificate appropriate evidence of
ownership of any Warrant Shares or other securities or property to which it is
entitled, registered or otherwise, to the person or persons entitled to receive
the same. All Warrant Shares or other securities issuable by the Company upon
the exercise of the Warrants must be validly issued, fully paid and
nonassessable.
(b) Upon exercise of any Warrant in conformity with the foregoing
provisions, the Warrant Agent shall instruct the Company to, and the Company
shall, (i) transfer promptly to, or upon the written order of the Holder of such
Warrant, appropriate evidence of ownership of any Warrant Shares or other
securities or property (including money) to which it is entitled, registered or
otherwise placed in such name or names as may be directed in writing by the
Holder, and (ii) deliver such evidence of ownership and any other securities or
property (including money) to the Person or Persons entitled to receive the
same, together with an amount in cash in lieu of any fraction of a share as
provided in Section 4.5 hereof; provided, however, that the Holder of such
Warrant shall be responsible for the payment of any transfer taxes required as
the result of any transfer of such Warrant, or the issuance of such Warrant
Shares or other securities or property, to a Person other than the registered
owner of such Warrant. Upon exercise of a Warrant and, in the case of a Cashless
Exercise, written direction of the Company as to the number of Warrant Shares as
to which the Holder is entitled, the Warrant Agent is hereby authorized and
directed by the Company to requisition from any transfer agent of the Warrant
Shares or any other securities issuable upon exercise of a Warrant (and all such
transfer agents are hereby irrevocably authorized to comply with all such
requests) certificates for the necessary number of Warrant Shares or other
securities to which the Holder of such Warrant may be entitled. A Warrant shall
be deemed to have been exercised immediately prior to the close of business on
the date of the surrender for exercise of the Warrant Certificate representing
such Warrant and, for all purposes of this Agreement, the Person entitled to
receive any Warrant Shares or other securities or property deliverable upon such
exercise shall, as between such Person and the Company, be deemed to be the
Holder of such Warrant Shares or other securities or property of record as of
the close of business on such date and shall be entitled to receive, and the
Warrant Agent shall deliver to such Person, any Warrant Shares or other
securities or property (including money) to which such Person would have been
entitled had such Person been the record holder of such Warrant Shares or other
securities or property on such date.
(c) If less than all the Warrants represented by a Warrant Certificate
are exercised, such Warrant Certificate shall be surrendered and a new Warrant
Certificate of the same tenor and for the number of Warrants which were not
exercised, registered in such name or names as may be directed in writing by the
Holder, shall be executed by the Company and delivered to the Warrant Agent and
the Warrant Agent shall countersign such new Warrant Certificate and shall
deliver such new Warrant Certificate to the Person or Persons entitled to
receive the same.
If less than all the Warrants represented by the Global Warrant are
exercised in accordance with this Agreement, the Global Warrant shall be
surrendered by the Holder thereof to the Warrant Agent who shall cause an
adjustment to be made to Schedule A thereto
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<PAGE> 17
so that the number of Warrants represented thereby will be equal to the number
of Warrants theretofore represented by the Global Warrant less the number of
Warrants then exercised. The Warrant Agent shall thereafter return the Global
Warrant to such Holder.
(d) Without limiting the foregoing, if, at the date referred to above,
the transfer books for the Warrant Shares or other securities purchasable upon
the exercise of the Warrants shall be closed, the certificates for the Warrant
Shares or securities in respect of which such Warrants are then exercised shall
be issuable as of the date on which such books shall next be opened, and until
such date the Company shall be under no duty to deliver any certificate for such
Warrant Shares or other securities; provided, however, that such transfer books,
unless required by law, shall not be closed at any one time for a period longer
than 5 days.
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments. The Exercise Price and the number of Warrant
Shares purchasable upon exercise of each Warrant shall be subject to adjustment
from time to time as follows:
(a) Adjustments for Change in Common Stock. If the Company at any time
after the date of this Agreement:
(i) pays a dividend or makes any other distribution with respect to
shares of its Common Stock in shares of any class or series of its capital
stock, or other securities;
(ii) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(iii) combines its outstanding shares of Common Stock into a smaller
number of shares; or
(iv) issues any shares of its capital stock in a reclassification of
the shares of its Common Stock (other than a reclassification in connection with
a merger, consolidation or other business combination governed by Section 4.1(i)
hereof);
the number and kind of Warrant Shares issuable upon exercise of each Warrant, at
the time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, shall be proportionately adjusted
so that the Holder of any Warrant exercised after such time shall be entitled to
receive the aggregate number and kind of shares of Common Stock and/or shares of
other capital stock or other securities of the Company which, if such Warrant
had been exercised immediately prior to such date, such Holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. An adjustment made pursuant to
this Section 4.1(a) shall become effective immediately after the record date in
the case of a dividend or distribution and
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immediately after the effective date in the case of a subdivision, combination
or reclassification. Such adjustment shall be made successively whenever any
event listed above shall occur.
If at any time, as a result of an adjustment made pursuant to this
Section 4.1(a), the Holder of any Warrant thereafter exercised becomes entitled
to receive any securities other than shares of Common Stock, the number of such
other securities so receivable upon exercise of such Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
this Section 4.1, and the provisions of this Agreement with respect to the
Warrant Shares shall apply on like terms to any such other securities.
(b) Rights; Options; Warrants. If at any time after the date of this
Agreement, the Company shall issue or sell Rights (other than in an issuance
subject to Section 4.1(a) hereof) to all holders of shares of Common Stock,
which Rights entitle the holders thereof to acquire shares of Common Stock at a
price per share of Common Stock (determined by dividing (x) the sum of (A) the
total amount receivable or received by the Company in consideration of the sale
and issuance of such Rights, plus (B) the total consideration payable to the
Company upon exercise, conversion or exchange thereof, by (y) the total number
of shares of Common Stock covered by such Rights) that is lower than the Current
Market Value per share of Common Stock as of the record date for such issuance,
the number of Warrant Shares thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of Warrant Shares
theretofore purchasable upon the exercise of each Warrant by a fraction, the
numerator of which shall be the sum of (A) the number of shares of Common Stock
outstanding immediately prior to the issuance of such Rights, plus (B) the
number of shares of Common Stock offered for subscription or purchase pursuant
to such Rights, and the denominator of which shall be the sum of (A) the number
of shares of Common Stock outstanding immediately prior to the issuance of such
Rights, plus (B) the number of shares which the aggregate offering price of the
total number of shares of Common Stock offered pursuant to such Rights would
purchase at the then Current Market Value per share of Common Stock, as of the
record date for such issuance. Such adjustment shall be made successively
whenever such Rights are issued or sold and shall become effective on the date
of issuance or sale retroactive to the record date for the determination of
shareholders entitled to receive such Rights.
(c) Issuance of Shares of Common Stock at Lower Values. If at any time
after the date of this Agreement, the Company shall issue or sell any share of
Common Stock or Right (excluding (i) any Right issued or sold in any transaction
covered by Section 4.1(a) or Section 4.1(b) hereof, (ii) any share of Common
Stock issued or sold pursuant to a Right outstanding on the date of this
Agreement, (iii) any share of Common Stock issued or sold pursuant to a Right,
if on the date such Right was issued, the exercise, conversion or exchange price
per share of Common Stock with respect thereto was at least equal to the then
Current Market Value per share of Common Stock, (iv) any Right issued or sold as
consideration when any corporation or business is acquired, merged into or
becomes part of the Company or a subsidiary of the Company in an arm's-length
transaction between the Company and a Person
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other than an Affiliate of the Company, and (v) any Rights which may be issued
under a "shareholders' rights" plan and which trade with the Common Stock), at a
price per share of Common Stock (determined in the case of Rights, by dividing
(x) the sum of (A) the total amount receivable or received by the Company in
consideration of the sale and issuance of such Rights, plus (B) the total
consideration payable to the Company upon exercise, conversion or exchange
thereof, by (y) the total number of shares of Common Stock covered by such
Rights) that is lower than the Current Market Value per share of Common Stock in
effect immediately prior to such sale or issuance, the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such sale or
issuance (determined as provided below), and the denominator of which shall be
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to such sale or issuance, plus (B) the number of shares of Common Stock
which the aggregate consideration received by the Company (determined as
provided below) for such sale or issuance would purchase at such Current Market
Value per share of Common Stock. Such adjustment shall be made successively
whenever such Rights are issued or sold and shall be effective immediately after
such issuance or sale.
For purposes of any adjustment made pursuant to this Section 4.1(c),
the shares of Common Stock which the holder of any such Right shall be entitled
to subscribe for or purchase pursuant to such Right shall be deemed to be issued
and outstanding as of the date of the sale or issuance of such Right, and the
consideration received by the Company therefor shall be deemed to be the
consideration receivable or received by the Company for such Right, plus the
consideration or premiums stated in such Right to be paid for the shares of
Common Stock covered thereby. In case the Company shall sell and issue any share
of Common Stock or any Right, for consideration consisting, in whole or in part,
of property other than cash or cash equivalents, then in determining the "price
per share of Common Stock" and the "consideration received by the Company" for
purposes of the first sentence of this Section 4.1(c), the Board of Directors
shall determine, in good faith, the fair value of said property, which
determination shall be evidenced by a Board Resolution delivered to the Warrant
Agent. In case the Company shall sell or issue any Right together with one or
more other securities as part of a unit at a price per unit, then in determining
the "price per share of Common Stock" and the "consideration received by the
Company" for purposes of the first sentence of this Section 4.1(c), the Board of
Directors shall determine, in good faith, the fair value of such Right then
being sold as part of such unit, which determination shall be evidenced by a
Board Resolution delivered to the Warrant Agent.
(d) Adjustment for Extraordinary Dividends or Distributions. If at any
time after the date of this Agreement, the Company declares, orders, pays or
makes a dividend or other distribution (excluding dividends or distributions
covered by Section 4.1(a) hereof, cash dividends or distributions from current
or retained earnings, and distributions pursuant to Section 4.1(i)(B) hereof) of
property, assets, debt securities or Rights (excluding any Right issued in a
transaction covered by Section 4.1(a), Section 4.1(b) or Section 4.1(c) hereof)
to all holders of shares of Common Stock, the number of Warrant Shares
purchasable upon the
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<PAGE> 20
exercise of each Warrant after the record date of such dividend or distribution
shall be determined by multiplying the number of Warrant Shares purchasable upon
the exercise of such Warrant immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Value per share of
Common Stock immediately prior to the record date for such distribution, and the
denominator of which shall be the difference between (A) the Current Market
Value per share of Common Stock immediately prior to the record date for such
distribution, minus (B) the then fair value (the "Fair Value") of the portion of
the property, assets, evidence of indebtedness, cash dividends, distributions or
securities so distributed applicable to one share of Common Stock. Such
adjustment shall be made successively whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to the record
date for the determination of shareholders entitled to receive such
distribution. Fair Value shall be determined by the Board of Directors, in good
faith, and evidenced by a Board Resolution delivered to the Warrant Agent.
(e) Expiration of Rights, Options and Conversion Privileges. Upon the
expiration of any unexercised Rights the issuance of which previously resulted
in an adjustment hereunder, the Exercise Price and the number of Warrant Shares
purchasable upon the exercise of each Warrant shall, upon such expiration, be
readjusted so that thereafter the Exercise Price and the number of Warrant
Shares purchasable upon exercise of each Warrant shall be such as they would
have been had they originally been adjusted as if (i) the only shares of Common
Stock considered in the adjustment made with respect to such Rights were the
shares of Common Stock, if any, actually issued or sold upon the exercise of
such Rights and (ii) such shares of Common Stock, if any, were issued or sold
for the consideration actually received by the Company upon such exercise plus
the consideration, if any, actually received by the Company for issuance, sale
or grant of all such Rights, whether or not exercised; provided that no such
readjustment shall have the effect of increasing the Exercise Price by an
amount, or decreasing the number of Warrant Shares purchasable upon exercise of
each Warrant by a number, in excess of the amount or number, as the case may be,
of the adjustment initially made with respect to the issuance or sale of such
Rights.
(f) Current Market Value. For the purposes of any computation under
this Article IV, the Current Market Value per share of Common Stock or of any
other security (such share of Common Stock or other security herein referred to
as a "security") at any date herein specified shall equal:
(i) if the security is not registered under the Exchange Act, the value
of the security (A) most recently determined as of a date within the six
months preceding such date by an Independent Financial Expert selected by
the Company in accordance with the criteria for such valuation set out in
Section 4.1(k), or (B) if no such determination shall have been made within
such six month period, determined as of such date by an Independent
Financial Expert selected by the Company in accordance with the criteria
for such valuation set out in Section 4.1(k); provided, however, that with
respect to any such determination made in respect of the Preferred Stock or
the Company's publicly traded debt securities, the Company shall bear no
more than $25,000 in the aggregate of the reasonable fees and expenses of
such Independent Financial Expert and the
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exercising Holder shall bear all amounts of such fees and expenses in
excess of such $25,000, or
(ii) if the security is registered under the Exchange Act, the average
of the daily market prices of the security for the 20 consecutive trading
days immediately preceding such date or, if the security has been
registered under the Exchange Act for less than 20 consecutive trading days
before such date, the average of the daily market prices for all trading
days preceding such date for which daily market prices are available. The
daily market price for each such trading day shall be: (A) in the case of a
security listed or admitted to trading on any National Securities Exchange,
the closing sales price, regular way, on such day, or if no sale takes
place on such day, the average of the closing bid and asked prices on such
day, on the principal National Securities Exchange on which such security
is listed or admitted, (B) in the case of a security not then listed or
admitted to trading on any National Securities Exchange, the last reported
sale price on such day, or if no sale takes place on such day, the average
of the closing bid and asked prices on such day, as reported by a reputable
quotation source designated by the Company, (C) in the case of a security
not then listed or admitted to trading on any National Securities Exchange
and as to which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices on
such day, as reported by a reputable quotation source or a newspaper of
general circulation in The City of New York customarily published on each
Business Day, designated by the Company, or, if there shall be no bid and
asked prices on such day, the average of the high bid and low asked prices,
as so reported on the most recent day (not more than 10 days prior to the
date in question) for which prices have been so reported or (D) if the
prices specified in clause (A), (B) or (C) are not available, the Current
Market Value of a security shall be determined as if such security were not
registered under the Exchange Act.
(g) De Minimis Adjustments. No adjustment in the Exercise Price or
number of Warrant Shares purchasable upon exercise of any Warrant shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the Exercise Price or number of Warrant Shares
purchasable upon the exercise of each Warrant, as the case may be; provided,
however, that any adjustments which by reason of this Section 4.1(g) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share or nearest $.0001, as the case may be.
(h) Adjustment of Exercise Price. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted, as herein provided,
the Exercise Price per Warrant Share payable upon exercise of each Warrant shall
be adjusted (calculated to the nearest $.0001) so that it shall equal the price
determined by multiplying such Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of Warrant
Shares purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and the denominator of which shall be the number of Warrant Shares
so purchasable immediately thereafter.
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(i) Consolidation, Merger or Sale of Assets; Liquidation. (A) Subject
to the provisions of subsection (B) of this Section 4.1(i), in the event that,
at any time after the date of this Agreement, the Company consolidates with,
merges with or into, or sells, transfers or otherwise disposes of all or
substantially all of its property and assets to, any Person, and in connection
therewith consideration is payable to holders of shares of Common Stock (or
other securities or property purchasable upon exercise of Warrants), the
Warrants shall remain subject to the terms and conditions set forth in this
Agreement and each Warrant shall, after such consolidation, merger or sale,
entitle the Holder thereof to receive, upon exercise, the number of shares of
capital stock or other securities or property (including cash) of the Company,
or of such Person resulting from such consolidation or surviving such merger or
to which such sale shall be made, or of the parent of such Person, as the case
may be, that would have been distributable or payable on account of the shares
of Common Stock (or other securities or property purchasable upon exercise of
Warrants) if such Holder's Warrants had been exercised immediately prior to such
merger, consolidation or sale (or, if applicable, any record date therefor);
and, in any such case, the provisions of this Agreement with respect to the
rights and interests thereafter of the Holders of Warrants shall be
appropriately adjusted by the Board of Directors, in good faith, as evidenced by
a Board Resolution delivered to the Warrant Agent, so as to be applicable, as
nearly as reasonably possible, to any shares of stock or other securities or any
property thereafter deliverable on the exercise of the Warrants.
(B) Notwithstanding the foregoing clause (A), (x) if the Company
consolidates with, merges with or into, or sells, transfers or otherwise
disposes of all or substantially all of its property and assets to, any Person,
and consideration is payable to holders of shares of Common Stock in exchange
for their shares of Common Stock in connection with such merger, consolidation
or sale which consists solely of cash, or (y) in the event of the dissolution,
liquidation or winding-up of the Company, then the Holders of Warrants shall
receive distributions at the same time as and on an equal basis with holders of
shares of Common Stock (or other securities purchasable upon exercise of the
Warrants) as if the Warrants had been exercised immediately prior to such event
(or, if applicable, any record date therefor), less the Exercise Price. Upon
receipt of such payment, with respect to the Warrants in respect of which such
payment was received, the rights of a Holder hereunder shall terminate except as
expressly provided herein or in the Warrant Certificate and such Warrants shall
expire. In the case of any such merger, consolidation or sale of assets, the
surviving or acquiring Person or, in the event of any dissolution, liquidation
or winding up of the Company, the Company, shall deposit promptly with the
Warrant Agent the funds or other consideration, if any, necessary to pay Holders
pursuant to this subsection. After receipt of such deposit from such Person or
the Company and after receipt of surrendered Warrant Certificates, the Warrant
Agent shall make payment by delivering a check in such amount as is appropriate
(or, in the case of consideration other than cash, such other consideration as
is appropriate) to such Person or Persons as it may be directed in writing by
the Holder surrendering such Warrants.
(j) Adjustments by Board. In addition to the foregoing adjustments, and
subject to Article V hereof, the Board of Directors may make any other
adjustment, as evidenced by a Board Resolution delivered to the Warrant Agent,
to increase the number of
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Warrant Shares purchasable upon exercise of Warrants or to decrease the Exercise
Price as it may, in good faith, deem desirable to protect the rights and
benefits of Holders hereunder. Any adjustments made by the Board of Directors
pursuant to this Article IV shall be conclusive absent manifest error.
(k) Value Determination. If required pursuant to Section 4.1(f), the
Current Market Value shall be deemed to be equal to the value determined by an
Independent Financial Expert and set forth in a Value Report by such Independent
Financial Expert. Such Independent Financial Expert shall be selected by the
Board of Directors and retained on customary terms and conditions. In making any
determination of Current Market Value, such Independent Financial Expert shall
(A) use one or more valuation methods that, in its best professional judgment,
it determines to be most appropriate and (B) take into account any lack of
liquidity of the relevant security. The Company shall cause such Independent
Financial Expert to deliver to the Company, with a copy to the Warrant Agent,
within 25 days of the appointment of such Independent Financial Expert, the
Value Report which shall state the Current Market Value of the Common Stock
and/or any other securities being valued, as of the Valuation Date, and shall
contain a brief statement as to the nature and scope of the examination or
investigation upon which the determination of value was made. The Warrant Agent
shall have no duty with respect to the Value Report of any Independent Financial
Expert, except to keep it on file and available for inspection by Holders. Any
determination of Current Market Value in accordance with the provisions of this
Section 4.1(k) shall be conclusive as to all Persons.
(l) Warrant Adjustment Date. If the Company fails to raise net proceeds
of at least $50 million through the issuance and sale of its Qualified Stock
(other than preferred stock) on or before the Warrant Adjustment Date, each
Warrant then outstanding shall thereafter be exercisable for the Initial Warrant
Shares plus the Additional Warrant Shares, with no adjustment being made to the
Exercise Price.
Section 4.2. Notice of Adjustment. Whenever the number of Warrant
Shares or other securities or property purchasable upon the exercise of each
Warrant or the Exercise Price is adjusted or determined, as herein provided, the
Company shall cause the Warrant Agent promptly to mail, at the expense of the
Company, to each Holder, a notice of such adjustment or adjustments, and shall
deliver to the Warrant Agent a certificate of a firm of independent public
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) setting forth (i) the number of Warrant
Shares or other securities or property purchasable upon the exercise of each
Warrant and the Exercise Price after such adjustment, (ii) a brief statement of
the facts requiring such adjustment and (iii) the computation by which such
adjustment was made. The Warrant Agent shall be entitled to rely on such
certificate and shall be under no duty or responsibility with respect to any
such certificate, except to keep it on file and available for inspection by
Holders during reasonable business hours.
Section 4.3. Statement on Warrants. Irrespective of any adjustment in
the Exercise Price or the number or kind of Warrant Shares purchasable upon the
exercise of the
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Warrants, Warrant Certificates theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in the
Warrant Certificate initially issued pursuant to this Agreement.
Section 4.4. Notice of Consolidation, Merger or Sale of Assets. In the
event that, at any time after the date of this Agreement, and prior to the
Expiration Date, there shall be any (i) consolidation or merger involving the
Company, or sale, transfer or other disposition of all or substantially all of
the Company's property and assets (except a merger or other reorganization in
which the Company shall be the surviving corporation and holders of shares of
Common Stock (or other securities or property purchasable upon exercise of the
Warrants) receive no consideration in respect of their shares or property) or
(ii) any other transaction contemplated by Section 4.1(i)(B) above, then in any
such case, the Company shall cause to be mailed to the Warrant Agent and each
Holder, at the earliest practicable time (and, in any event, not less than 25
days before any date set for definitive action), notice of the date on which
such reorganization, sale, consolidation, merger, dissolution, liquidation or
winding up or other such transaction shall take place, as the case may be. Such
notice shall also set forth such facts as shall indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Exercise Price and the kind and amount of securities and property
purchasable upon exercise of the Warrants. Such notice shall also specify the
date as of which the holders of record of the shares of Common Stock or other
securities or property purchasable upon exercise of the Warrants shall be
entitled to exchange their shares or other securities or property for
securities, money or other property deliverable upon such reorganization, sale,
consolidation, merger, dissolution, liquidation or winding up or other such
transaction, as the case may be. The delivery of any notice pursuant to this
Section 4.4 shall not in itself relieve the Company from any obligation under
Section 4.2 hereof.
Section 4.5. Fractional Interests. If more than one Warrant is
presented for exercise at the same time by the same Holder, the number of
Warrant Shares which shall be purchasable upon such exercise shall be computed
on the basis of the aggregate number of Warrant Shares purchasable on exercise
of all Warrants so presented. If any fraction of a Warrant Share would, except
for the provisions of this Section 4.5, be issued on the exercise of any Warrant
(or specified portion thereof), the Company, in lieu of issuing any such
fractional share, shall pay an amount in cash calculated by it to be equal to
the Current Market Value per Warrant Share on the date of exercise multiplied by
such fraction, computed to the nearest whole cent.
Section 4.6. No Dilution or Impairment. The Company shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times, in good faith, assist in
carrying out all such actions as may be reasonably necessary or appropriate in
order to protect the rights of the Holders of the Warrants against dilution or
other impairment.
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Section 4.7. Responsibility of Warrant Agent. The Warrant Agent shall
not at any time be under any duty or responsibility to any Holder to determine
whether any facts exist which may require any adjustment of the Exercise Price
or the number of Warrant Shares or other securities or property purchasable on
exercise of the Warrants, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed in making such
adjustment, or the validity or value (or the kind or amount) of any Warrant
Shares or other securities or property which may be purchasable on exercise, or
delivered upon exchange, of the Warrants. The Warrant Agent shall not be
responsible for any failure of the Company to make any cash payment or to issue,
transfer or deliver any Warrant Shares or stock certificates or other securities
or property upon the exercise of any Warrant. Section
4.8. No Adjustments for Certain Issuances. The provisions of Section
4.1(b) and Section 4.1(c) hereof shall not apply to any securities issued
pursuant to this Agreement.
ARTICLE V
DECREASE IN EXERCISE PRICE
Section 5.1. Exercise Price. Notwithstanding the provisions of Section
4.1(j) hereof, the Board of Directors, in its sole discretion, shall have the
right at any time the Warrants are exercisable under Section 3.2 hereof, and
from time to time during such period, to decrease the Exercise Price of the
Warrants, provided, such reduction of the Exercise Price is effective for a
period of not less than 30 days. Any exercise by the Board of Directors of any
rights granted in this Section 5.1 must be preceded by a written notice from the
Company to the Warrant Agent and each Holder of Warrants setting forth the
reduction in the Exercise Price, which notice shall be mailed at least 30 days
prior to the effective date of such decrease in the Exercise Price. Any
reduction of the Exercise Price pursuant to provisions of this Article V shall
not in itself result in an adjustment of the number of Warrant Shares or other
securities or property purchasable upon the exercise of the Warrants.
ARTICLE VI
RESERVATION AND AUTHORIZATION OF COMMON SHARES
Section 6.1. Reservation and Authorization. The Company shall at all
times reserve and keep available for issuance upon exercise of the Warrants such
number of its duly authorized but unissued shares of Common Stock or other
securities of the Company purchasable upon exercise of the Warrants as will be
sufficient to permit the exercise in full of all outstanding Warrants and will
cause appropriate evidence of ownership of such shares of Common Stock or other
securities to be delivered to the Warrant Agent upon its request for delivery of
such, and all such shares of Common Stock or other securities shall, at all
times, be duly approved for listing, subject to official notice of issuance, on
each securities exchange, if any, on which such shares of Common Stock or other
securities are then listed.
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Section 6.2. Covenant Regarding Securities. The Company covenants that
all shares of Common Stock or other securities of the Company that may be issued
upon the exercise of the Warrants will, upon issuance, be (i) duly authorized,
validly issued, fully paid and nonassessable, (ii) free from preemptive and any
other similar rights, (iii) free from any taxes, liens, charges or security
interests with respect thereto and (iv) included for trading on each securities
exchange, if any, on which such shares of Common Stock or other securities are
then listed.
Section 6.3. Registration. If the Warrant Shares or other securities of
the Company purchasable upon the exercise of the Warrants require registration
with, or approval of, any governmental authority (in addition to such as the
Company is required to obtain pursuant to Article X hereof), or the taking of
any other action (in addition to such as the Company is required to take
pursuant to Article X hereof), under the laws of the United States of America or
any state or political subdivision thereof, before such securities may be
validly offered or sold in compliance with such laws, then the Company covenants
that it will, in good faith and as expeditiously as practicable, at its expense,
endeavor to secure and maintain such registration or approval or to take such
other action, as the case may be; provided that the Company will not be required
to qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action that would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so subject.
ARTICLE VII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 7.1. Transfer and Exchange. (a) The Warrant Certificates shall
be issued in registered form only. The Company shall cause to be kept at the
office of the Warrant Agent, and the Warrant Agent shall maintain, a register
(the "Warrant Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Warrants and
transfers or exchanges of Warrants as herein provided. All Warrants issued upon
any registration of transfer or exchange of Warrants shall be the valid
obligations of the Company, evidencing the same obligations, and entitled to the
same benefits under this Agreement, as the Warrants surrendered for such
registration of transfer or exchange.
(b) The Warrants shall initially be issued as part of the issuance of
the Units. Prior to the Separation Date, Warrants shall not be transferable
except as part of a transfer of Units and the Warrant Agent shall not register
any transfer of any Warrant Certificate unless the Warrant Agent receives
evidence satisfactory to it that such transfer is part of a transfer of a Unit,
provided that the Warrant Agent may conclusively rely on the determination made
by the Company with respect to the sufficiency of any such evidence. Notice from
the transfer agent for the Preferred Stock of a proposed transfer of Preferred
Stock (in a number of shares that together with the Warrants proposed to be
transferred will constitute a Unit or Units) by the same Holder requesting
transfer of such Warrants to the same proposed transferee to which
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such Warrants are to be transferred, shall constitute satisfactory evidence for
the purposes of the first sentence of this subsection (b).
(c) Prior to the registration of any transfer of a Warrant Certificate
by a Holder as provided herein, the Company, the Warrant Agent, and any agent of
the Company may treat the Person in whose name the Warrants represented thereby
are registered as the owner thereof for all purposes and as the Person entitled
to exercise the rights represented thereby, any notice to the contrary
notwithstanding.
(d) Every Warrant presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Warrant Agent) be
duly endorsed, or be accompanied by a duly executed instrument of transfer in
form satisfactory to the Company and the Warrant Agent, by the Holder thereof or
such Holder's attorney duly authorized in writing.
(e) When Warrant Certificates are presented to the Warrant Agent with a
request to register the transfer or to exchange such Warrant Certificates for
other Warrant Certificates representing an equal number of Warrants, the Warrant
Agent shall register the transfer or make the exchange as requested if its
requirements for such transactions and any applicable requirements hereunder are
satisfied. To permit registrations of transfers and exchanges, the Company shall
execute Warrant Certificates at the Warrant Agent's request and the Warrant
Agent shall countersign and deliver such Warrant Certificates in accordance with
the provisions hereof. No service charge shall be made for any registration of
transfer or exchange of Warrants, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer of Warrants.
(f) Any Warrant Certificate when duly endorsed in blank shall be deemed
negotiable. The Holder of any Warrant Certificate duly endorsed in blank may be
treated by the Company, the Warrant Agent and all other Persons dealing
therewith as the absolute owner thereof for any purpose and as the Person
entitled to exercise the rights represented thereby, or to the transfer thereof
on the Warrant Register maintained by the Warrant Agent, any notice to the
contrary notwithstanding; but until such transfer on such Warrant Register, the
Company and the Warrant Agent may treat the registered Holder thereof as the
owner for all purposes.
(g) If less than all the Warrants represented by a Certificated Warrant
are transferred or exchanged in accordance with this Agreement, the Warrant
Certificate shall be surrendered to the Warrant Agent and a new Warrant
Certificate of the same tenor and for the number of Warrants which were not
transferred or exchanged, registered in such name or names as may be directed in
writing by the surrendering Holder, shall be executed by the Company and
delivered to the Warrant Agent and the Warrant Agent shall countersign such new
Warrant Certificate and shall deliver such new Warrant Certificate to the Person
or Persons entitled to receive the same.
(h) Upon receipt by the Warrant Agent of a Certificated Warrant, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the
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Warrant Agent, together with (A) a certification that such Certificated Warrant
is being transferred to a "qualified institutional buyer" (within the meaning of
Rule 144A) and (B) written instructions directing the Warrant Agent to make, or
to direct the Depositary to make, an endorsement on the Global Warrant to
reflect an increase in the aggregate amount of the Warrants represented by the
Global Warrant, then the Warrant Agent shall cancel such Certificated Warrant
and cause, or direct the Depositary to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Warrant
Agent, the number of Warrants represented by the Global Warrant to be increased
accordingly. If no Global Warrant is then outstanding, the Company shall issue
and the Warrant Agent shall upon written instructions from the Company
authenticate the Global Warrant in the appropriate amount.
(i) The transfer and exchange of beneficial interests in the Global
Warrant shall be effected through the Depositary, in accordance with this
Agreement (including the restrictions on transfer set forth herein) and the
procedures of the Depositary therefor.
Section 7.2. The Global Warrant. (a) So long as the Global Warrant is
registered in the name of the Depositary or its nominee, members of, or
participants in, the Depositary ("Agent Members") shall have no rights under
this Agreement with respect to the Global Warrant held on their behalf by the
Depositary or the Warrant Agent as its custodian, and the Depositary may be
treated by the Company, the Warrant Agent and any agent of the Company or the
Warrant Agent as the absolute owner of such Global Warrant for all purposes.
Notwithstanding the foregoing, nothing herein shall (i) prevent the Company, the
Warrant Agent or any agent of the Company or the Warrant Agent, from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or (ii) impair, as between the Depositary and its Agent Members,
the operation of customary practices governing the exercise of the rights of a
Holder.
(b) Any Holder of the Global Warrant shall, by acceptance of such
Global Warrant, agree that transfers of beneficial interests in such Global
Warrant may be effected only through a book entry system maintained by the
Holder of such Global Warrant (or its agent), and that ownership of a beneficial
interest in the Warrants represented thereby shall be required to be reflected
in book entry form.
(c) Transfers of the Global Warrant shall be limited to transfers in
whole, and not in part, to the Depositary, its successors, and their respective
nominees. Interests of beneficial owners in the Global Warrant may be
transferred in accordance with the rules and procedures of the Depositary.
(d) The Global Warrant shall be exchanged for Certificated Warrants in
the event that (a) the Depositary (i) has notified the Company that it is
unwilling or unable to continue as, or ceases to be, a clearing agency
registered under Section 17A of the Exchange Act and (ii) a successor to the
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Depositary registered as a clearing agency under Section 17A of the Exchange Act
is not able to be appointed by the Company within 90 days or (b) the Depositary
is at any time unwilling or unable to continue as Depositary and a successor to
the Depositary is not able to be appointed by the Company within 90 days. In any
such event, the Global Warrant shall be surrendered to the Warrant Agent for
cancellation, and the Company shall execute, and the Warrant Agent shall
countersign and deliver, to each beneficial owner identified by the Depositary,
in exchange for its beneficial interest in the Global Warrant, Certificated
Warrants representing, in the aggregate, the number of Warrants theretofore
represented by the Global Warrant. Any Certificated Warrant delivered in
exchange for an interest in the Global Warrant pursuant to this Section 7.2(d)
shall, except as otherwise provided in Section 7.3(c) and Section 7.3(d) hereof,
bear the Private Placement Legend and the Unit Legend, but shall not bear the
Global Warrant Legend. Interests in the Global Warrant may not be exchanged for
Certificated Warrants other than as provided in this Section 7.2(d).
(e) The holder of the Global Warrant may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Agreement or the Warrant.
Section 7.3. Special Transfer Provisions.
(a) Limitations on Transfer. By its acceptance of any Warrant
represented by a Warrant Certificate bearing the Private Placement Legend, each
Holder of, and beneficial owner of an interest in, such Warrant acknowledges the
restrictions on transfer of such Warrant set forth in the Private Placement
Legend and under the heading "Transfer Restrictions" in the Final Memorandum and
agrees that it will transfer such Warrant only in accordance with the Private
Placement Legend and the restrictions set forth under the heading "Transfer
Restrictions" in the Final Memorandum.
(b) Transfer of Restricted Warrants. In connection with any transfer of
a Warrant Certificate bearing the Private Placement Legend, each Holder agrees
to deliver to the Company, upon its request, such satisfactory evidence, which
may include an opinion of independent counsel licensed to practice law in the
State of New York, as reasonably may be requested by the Company to confirm that
such transfer is being made in accordance with the limitations set forth in the
Private Placement Legend; provided that the Warrant Agent shall not be required
to determine (but may rely on a determination made by the Company with respect
to) the sufficiency of any such evidence. The Warrant Agent shall not be
required to register the transfer of any Warrant Certificate bearing the Private
Placement Legend until directed in writing by the Company to do so.
(c) Private Placement Legend. Upon the registration of transfer,
exchange or replacement of a Warrant Certificate not bearing the Private
Placement Legend, the Warrant Agent shall deliver a Warrant Certificate that
does not bear the Private Placement Legend. Upon the registration of transfer,
exchange or replacement of a Warrant Certificate bearing the Private Placement
Legend, the Warrant Agent shall deliver a Warrant Certificate bearing the
Private Placement Legend, unless such legend may be removed
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from such Warrant Certificate as provided in the next sentence. The Private
Placement Legend may be removed from a Warrant Certificate if there is delivered
to the Company such satisfactory evidence, which may include an opinion of
independent counsel licensed to practice law in the State of New York, as
reasonably may be requested by the Company to confirm that neither such legend
nor the restrictions on transfer set forth therein are required to ensure that
transfers of such Security will not violate the registration and prospectus
delivery requirements of the Securities Act; provided that the Warrant Agent
shall not be required to determine (but may rely on a determination made by the
Company with respect to) the sufficiency of any such evidence. Upon provision of
such evidence, the Warrant Agent, at the direction of the Company, shall
countersign and deliver in exchange for such Warrant Certificate, a Warrant
Certificate or Warrant Certificates (representing, in the aggregate, the same
number of Warrants) that do not bear such legend. If the Private Placement
Legend has been removed from a Warrant Certificate, as provided above, no other
Warrant Certificate issued in exchange for all or any part of such Warrant
Certificate shall bear such legend, unless the Company has reasonable cause to
believe that such other Warrant Certificate is a "restricted security" within
the meaning of Rule 144 and instructs the Warrant Agent to cause a legend to
appear thereon.
(d) Unit Legend. The Company shall notify the Warrant Agent in writing
of (i) any expected Separation Date, 15 calendar days prior to such expected
Separation Date, and (ii) the occurrence of the Separation Date on the
Separation Date. Warrant Certificates issued after the Separation Date shall not
include the Unit Legend.
(e) Documents. The Warrant Agent shall retain copies of all documents
received pursuant to this Section 7.3. The Company shall have the right to
inspect and make copies of all such documents at any reasonable time upon the
giving of reasonable written notice to the Warrant Agent.
Section 7.4. Surrender of Warrant Certificates. Any Warrant Certificate
surrendered for registration of transfer, exchange or exercise of the Warrants
represented thereby shall, if surrendered to the Company, be delivered to the
Warrant Agent, and all Warrant Certificates surrendered or so delivered to the
Warrant Agent shall be promptly canceled by the Warrant Agent and shall not be
reissued by the Company and, except as provided in this Article VII in case of
an exchange or transfer, Article III hereof in case of the exercise of less than
all the Warrants represented thereby or Section 11.2 in case of mutilation, no
Warrant Certificate shall be issued hereunder in lieu thereof. The Warrant Agent
shall dispose of such canceled Warrant Certificates in accordance with its
customary procedures unless the Company otherwise directs.
Section 7.5. Rule 144A Information. Prior to the effectiveness under
the Securities Act of the Warrant Shelf Registration Statement, or at any time
during the suspension or following the termination thereof, Holders of Warrants
(or holders of interests therein) and prospective purchasers designated by such
Holders of Warrants (or such holders of interests therein) shall have the right
to obtain from the Company upon request by such Holders (or such holders of
interests) or prospective purchasers, during any period in which the Company is
not subject to Section 13 or 15(d) of the Exchange Act, or exempt from
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reporting pursuant to 12g3-2(b) under the Exchange Act, the information required
by paragraph (d)(4)(i) of Rule 144A in connection with any transfer or proposed
transfer of such Warrants or interests.
ARTICLE VIII
HOLDERS
Section 8.1. Holder Not Deemed a Stockholder. Prior to the exercise of
a Warrant, the Holder thereof shall not be entitled, as such, to any rights of a
stockholder of the Company, including, without limitation, the right to vote or
to consent to any action of the stockholders of the Company, to receive
dividends or other distributions, to exercise any preemptive right or to receive
any notice of meetings of stockholders of the Company and, except as otherwise
provided in this Agreement, shall not be entitled to receive any notice of any
proceedings of the Company.
Section 8.2. Right of Action. All rights of action with respect to this
Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without the consent of the Warrant Agent or the Holders of any other
Warrant, may, in such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's right
to exercise such Holder's Warrants in the manner provided in the Warrant
Certificate representing his Warrants and in this Agreement.
ARTICLE IX
THE WARRANT AGENT
Section 9.1. Duties and Liabilities. The Warrant Agent hereby accepts
the agency established by this Agreement and agrees to perform the same upon the
terms and conditions herein set forth. The Warrant Agent shall not, by
countersigning any Warrant Certificate or by any other act hereunder, be deemed
to make any representation or warranty as to the validity or authorization of
any Warrant or Warrant Certificate (except as to its countersignature thereon)
or of any securities or other property delivered upon exercise or tender of any
Warrant, or as to the accuracy of the computation of the Exercise Price or the
number or kind or amount securities or other property deliverable upon exercise
or tender of any Warrant, or as to the independence of any Independent Financial
Expert or the accuracy of the representations made in any certificate or report
that the Warrant Agent receives; provided that the Warrant Agent shall examine
any such certificate or report required to be furnished to the Warrant Agent
pursuant to the terms hereof and determine whether or not they conform to the
requirements of this Agreement. The Warrant Agent shall not be accountable for
the use or application by the Company of the proceeds of the exercise of any
Warrant. The Warrant Agent shall not have any duty to calculate or determine any
adjustments with respect to either the Exercise Price or the kind and amount of
securities or any property receivable by Holders upon the exercise or tender of
any Warrant and the Warrant Agent shall have no duty or
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responsibility to determine the accuracy or correctness of any such calculation
or determination. The Warrant Agent shall not be (a) liable for any recital or
statement of fact contained herein or in any Warrant Certificate or for any
action taken, suffered or omitted by it in good faith in the belief that any
Warrant Certificate or any other documents or any signatures are genuine or
properly authorized, (b) responsible for any failure on the part of the Company
to comply with any of its covenants and obligations contained in this Agreement
or in any Warrant Certificate or (c) liable for any act or omission in
connection with this Agreement except for its own willful misconduct, negligence
or bad faith. The Warrant Agent is hereby authorized to accept instructions with
respect to the performance of its duties hereunder from the President, any Vice
President or the Secretary or Treasurer of the Company and to apply to any such
officer for instructions (which instructions will be promptly given in writing
when requested) and the Warrant Agent shall not be liable for any action taken
or suffered to be taken by it in good faith in accordance with the instructions
of any such officer; however, in its discretion, the Warrant Agent may in lieu
thereof accept other evidence of such or may require such further or additional
evidence as it may deem reasonable. The Warrant Agent shall not be liable for
any action taken, suffered or omitted with respect to any matter in the event it
requests instructions from the Company as to that matter and does not receive
such instructions within a reasonable period of time after the request therefor.
The Warrant Agent may execute and exercise any of the rights and powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees, provided that reasonable care has been
exercised in the selection and in the continued employment of any such attorney,
agent or employee. The Warrant Agent shall not be under any obligation or duty
to institute, appear in or defend any action, suit or legal proceeding in
respect hereof, unless first indemnified to its satisfaction, but this provision
shall not affect the power of the Warrant Agent to take any such action as the
Warrant Agent may consider proper, whether with or without such indemnity. The
Warrant Agent shall promptly notify the Company in writing of any claim made or
action, suit or proceeding instituted against it arising out of or in connection
with this Agreement.
The Company will perform, execute, acknowledge and deliver or cause to
be delivered all such further acts, instruments and assurances as are consistent
with this Agreement and as may reasonably be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
The Warrant Agent shall act solely as an agent hereunder and shall not
be required to perform any duties except such as are specifically set forth
herein, and no implied covenants or obligations shall be read into this
Agreement against the Warrant Agent, whose duties and obligations shall be
determined solely by the express provisions hereof.
Section 9.2. Right to Consult Counsel. The Warrant Agent may at any
time consult with legal counsel and the opinion or advice of such counsel shall
be full and complete
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authorization and protection to the Warrant Agent and the Warrant Agent shall
incur no liability or responsibility to the Company or to any Holder for any
action taken, suffered or omitted by it in good faith in accordance with the
opinion or advice of such counsel.
Section 9.3. Compensation; Indemnification. The Company shall pay to
the Warrant Agent from time to time reasonable compensation for its services.
The Company shall reimburse the Warrant Agent upon request for all reasonable
out-of-pocket expenses incurred or made by it, in addition to the compensation
for its services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Warrant Agent's agents and counsel.
The Company shall indemnify the Warrant Agent for, and hold it harmless
against, any and all loss, liability or reasonable expense (including reasonable
attorney's fees) incurred by it in connection with the administration of this
Agreement and the performance of its duties hereunder, except as set forth in
the next paragraph. The Warrant Agent shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Warrant Agent to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Warrant Agent shall cooperate in the
defense. The Warrant Agent may have separate counsel and the Company shall pay
the reasonable fees and expenses of such counsel. The Company need not pay for
any settlement made without its consent, which consent shall not be unreasonably
withheld.
The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Warrant Agent through the Warrant
Agent's own willful misconduct, negligence or bad faith.
The Company's payment obligations pursuant to this Section 9.3 shall
survive the resignation or removal of the Warrant Agent, the exercise of all
Warrants and the discharge of this Agreement.
In no event shall the Warrant Agent, its officers, employees or agents
be held liable under this Agreement to any third party for special, punitive or
consequential loss or damage of any kind whatsoever, including lost profits,
whether or not the likelihood of such loss or damage was known to the Warrant
Agent, or any such officer, employee or agent, or any such third party.
Section 9.4. No Restrictions on Action. The Warrant Agent in its
individual or any other capacity may become the owner or pledgee of Warrants or
any other securities of the Company and may otherwise deal with the Company or
its Affiliates with the same rights it would have if it were not Warrant Agent.
Section 9.5. Discharge or Removal; Replacement Warrant Agent. The
Warrant Agent may resign by so notifying the Company in writing. The Company may
remove the Warrant Agent by so notifying the Warrant Agent in writing. Any such
resignation or removal of the Warrant Agent shall become effective only upon the
acceptance
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of the appointment as Warrant Agent of a successor Warrant Agent pursuant to
this Section 9.5.
If the Warrant Agent resigns or is removed by the Company or if a
vacancy exists in the office of Warrant Agent for any reason (the Warrant Agent
in such event being referred to herein as the retiring Warrant Agent), the
Company shall promptly appoint a successor Warrant Agent.
Any successor Warrant Agent shall be a bank or trust company doing
business under the laws of the United States or any state thereof, in good
standing and having a combined capital and surplus of not less than $50,000,000.
The combined capital and surplus of any such successor Warrant Agent shall be
deemed to be the combined capital and surplus as set forth in the most recent
annual report of its condition published by such successor Warrant Agent prior
to its appointment, provided that such reports are published at least annually
pursuant to law or to the requirements of a federal or state supervising or
examining authority.
A successor Warrant Agent shall deliver a written acceptance of its
appointment to the retiring Warrant Agent and to the Company. Thereupon the
resignation or removal of the retiring Warrant Agent shall become effective, and
the successor Warrant Agent shall have all the rights, powers and duties of the
Warrant Agent under this Warrant Agreement. The successor Warrant Agent shall
mail a notice of its succession to each Holder.
If a successor Warrant Agent does not take office within 60 days after
the retiring Warrant Agent resigns or is removed, the retiring Warrant Agent or
the Company may petition any court of competent jurisdiction for the appointment
of a successor Warrant Agent.
Notwithstanding the replacement of the Warrant Agent pursuant to this
Section 9.5, the Company's obligations under Section 9.3 hereof shall continue
for the benefit of the retiring Warrant Agent.
Section 9.6. Successor Warrant Agent. Any corporation into which the
Warrant Agent may be merged, or any corporation resulting from any consolidation
to which the Warrant Agent shall be a party, shall be a successor Warrant Agent
under this Agreement without any further act, provided that such corporation
would be eligible for appointment as successor to the Warrant Agent under the
provisions of Section 9.5 hereof. In the event such corporation is not so
eligible for appointment as successor to the Warrant Agent, the Warrant Agent
shall resign and a successor Warrant Agent shall be appointed pursuant to
Section 9.5 hereof. Any such successor Warrant Agent shall mail notice of its
succession to each Holder.
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ARTICLE X
REGISTRATION RIGHTS
Section 10.1. Registration of the Warrants. (a) The Company shall
prepare and, not later than 150 days following the Issue Date, shall file with
the Commission, a Warrant Shelf Registration Statement.
(b) The Company shall use commercially reasonable efforts to cause the
Warrant Shelf Registration Statement to be declared effective under the
Securities Act within 225 days of the Issue Date and keep the Warrant Shelf
Registration Statement continuously effective in order to permit the Prospectus
contained therein to be usable by Holders for a period of three years from the
Issue Date or such shorter period that will terminate when all the Warrants
covered by the Warrant Shelf Registration Statement have been sold pursuant to
the Warrant Shelf Registration Statement (in any such case, such period being
called the "Warrant Shelf Registration Period").
Section 10.2. Registration of the Warrant Shares. (a) The Company shall
prepare and, not later than 150 days following the Issue Date, shall file with
the Commission, a Common Shelf Registration Statement.
(b) The Company shall use commercially reasonable efforts to cause the
Common Shelf Registration Statement to be declared effective under the
Securities Act within 225 days of the Issue Date and keep the Common Shelf
Registration Statement (or a successor Registration Statement thereto)
continuously effective for a period of three years from the Issue Date or such
shorter period that will terminate when all the Warrant Shares covered by the
Common Shelf Registration Statement have been sold pursuant to such Statement
(in any such case, such period being called the "Common Shelf Registration
Period").
Section 10.3. Registration Procedures. In connection with any Warrant
Shelf Registration Statement, and, to the extent applicable, any Common Shelf
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to the Holders, prior to the filing
thereof with the Commission, a copy of any Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the Prospectus
included therein and shall use commercially reasonable efforts to reflect in
each such document, when so filed with the Commission, such comments as the
Holders reasonably may propose.
(b) The Company shall ensure that:
(i) any Registration Statement and any amendment thereto and any
Prospectus contained therein and any amendment or supplement thereto
complies in all material respects with the Securities Act.
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(ii) any Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and
(iii) any Prospectus forming part of any Registration Statement and any
amendment or supplement to such Prospectus does not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(c) The Company shall advise the Holders, and, if requested by any such
Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the warrants or shares included
therein for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the happening of any event that requires the making of any
changes in the Registration Statement or the Prospectus so that, as of such
date, the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading (which advice
shall be accompanied by an instruction to suspend the use of the Prospectus
until the requisite changes have been made).
(d) The Company shall use commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(e) The Company shall furnish to each Holder, without charge, at least
one copy of the Warrant Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits thereto (including those
incorporated by reference).
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(f) The Company shall, during the Warrant Shelf Registration Period,
deliver to each Holder, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in the Warrant Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Holders in connection
with the offering and sale of the Warrants covered by the Prospectus or any
amendment or supplement thereto. The Company shall, during the Common Shelf
Registration Period, deliver to each holder of Warrant Shares, without charge,
as many copies of the Prospectus (including each preliminary Prospectus)
included in the Common Shelf Registration Statement and any amendment or
supplement thereto as such holder may reasonably request; and the Company
consents to the use of the Prospectus or any amendment or supplement thereto by
each of the selling holders in connection with the offering and sale of the
Warrant Shares covered by the Prospectus or any amendment or supplement thereto.
(g) Prior to any offering of Warrants pursuant to the Warrant Shelf
Registration Statement or the offering of Warrant Shares pursuant to the Common
Shelf Registration Statement by the respective holders thereof, the Company
shall register or qualify or cooperate with the Holders and their respective
counsel in connection with the registration or qualification of such Warrants or
Warrant Shares for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holders reasonably request in writing and do any and
all other acts or things necessary or advisable to enable the offer and sale in
such jurisdictions of the Warrants or Warrant Shares; provided, however, that
the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(h) The Company shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Warrants to be sold
or Warrant Shares to be sold pursuant to any Registration Statement free of any
restrictive legends and registered in such names as Holders may request prior to
sales of Warrants or sales of Warrant Shares pursuant to such Registration
Statement.
(i) Upon the occurrence of any event contemplated by paragraph (c)(v)
of this Section 10.3, the Company shall promptly prepare a post-effective
amendment to any Registration Statement or an amendment or supplement to the
related Prospectus or file any other required document so that, as thereafter
delivered to purchasers of the Warrants or Warrant Shares included therein, the
Prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(j) The Company shall use commercially reasonable efforts to comply
with all applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable after the
effective date of the applicable Registration Statement an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act.
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(k) The Company may require each Holder of Warrants to be sold pursuant
to the Warrant Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of such Warrants as the
Company may from time to time reasonably require for inclusion in such
Registration Statement.
(l) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Registration Statement
such information as the Managing Underwriters (if any) and the Majority Holders
of Warrants being sold in connection with any underwritten offering, if any,
reasonably agree should be included therein and shall make all required filings
of such Prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment.
(m) In the case of the Warrant Shelf Registration Statement, the
Company shall enter into such agreements (including underwriting agreements) and
take all other appropriate actions in order to expedite or facilitate the
registration or the disposition of any Warrants included therein, and in
connection therewith, if an underwriting agreement is entered into, cause the
same to contain indemnification provisions and procedures no less favorable than
those set forth in Section 10.5 (or such other provisions and procedures
acceptable to the Majority Holders and the Managing Underwriters, if any) with
respect to all parties to be indemnified pursuant to Section 10.5.
(n) In the case of any underwritten offering, the Company shall:
(i) make reasonably available for inspection by the Holders of Warrants
to be registered thereunder, any underwriter participating in any
disposition pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by the Holders or any such underwriter
all relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries;
(ii) cause the Company's officers, directors and employees to supply
all relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is designated in
writing by the Company, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by the Holders or
any such underwriter, attorney, accountant or agent, unless such disclosure
is made in connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a third
party without an accompanying obligation of confidentiality. Each Holder of
such Warrants will be required to agree that information obtained by it as
a result of such inspections shall be deemed confidential and shall not be
used by it as the basis for any market transactions in the securities of
the Company unless and until such information is generally available to the
public (other than as a result of an impermissible disclosure or failure to
safeguard by such person). Each Holder of such Warrants will be required to
further agree that it
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will, upon learning that disclosure of such Confidential Information is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company to undertake appropriate action to prevent disclosure of
such Confidential Information deemed confidential at the Company's sole
expense; and make such representatives of the Company as shall be
reasonably requested by the Holders available for discussion of any such
Registration Statement;
(iii) make such representations and warranties to the Holders of
Warrants registered thereunder and the underwriters, if any, in form,
substance and scope as are customarily and appropriately made by issuers to
underwriters in primary underwritten offerings and covering matters set
forth in the Purchase Agreements;
(iv) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the underwriters, if any, covering such matters as
are customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such Holders and
underwriters;
(v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each selling Holder of Warrants
registered thereunder and the underwriters, if any, in customary form and
covering matters of the type customarily covered in "cold comfort" letters
in connection with primary underwritten offerings; and
(vi) deliver such documents and certificates as reasonably may be
requested by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 10.3(i) and with any
conditions contained in the underwriting agreement or other agreement
entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of
this Section 10.3(n) shall be performed at (A) the effectiveness of such
Registration Statement and each post-effective amendment thereto and (B) each
closing under any underwriting or similar agreement as and to the extent
required thereunder.
Section 10.4. Registration Expenses. (a) The Company shall bear all
expenses incurred in connection with the performance of its obligations under
Sections 10.1, 10.2, 10.3, and 10.6 whether or not any Registration Statement is
filed or becomes effective. Notwithstanding the foregoing, the holders of any
Warrants or Warrant Shares being registered shall pay all underwriting
discounts, commissions and placement agent fees attributable to the sale of such
securities.
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(b) The Company shall reimburse holders of Warrants or Warrant Shares
being registered in any Registration Statement for the reasonable fees and
disbursements of not more than three counsel (in addition to appropriate local
counsel) chosen by the holders of a majority of the Warrants or Warrant Shares,
as applicable, to be included in such Registration Statement, all such
reasonable fees and expenses not to exceed $30,000 in the aggregate. Section
10.5. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Company agrees to indemnify and hold the Holders and
the directors, officers, employees and agents and each Person who controls such
Person within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act (each a "Participant"), harmless against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Securities Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement as
originally filed or in any amendment thereof, or in any preliminary Prospectus
or Prospectus, or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, further, that the Company will not
be liable in any case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such Initial Purchaser or Holder specifically for inclusion
therein; provided, however, that the Company will not be required to indemnify a
Participant if such untrue statement or omission or alleged untrue statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus or any amendment or supplement thereto and it is established in
the related proceeding that such Participant failed to deliver or provide a copy
of the Prospectus (as amended or supplemented) to such Person with or prior to
the confirmation of the sale of such Securities sold to such Person if required
by applicable law, unless such failure to deliver or provide a copy of the
Prospectus (as amended or supplemented) shall have been determined by a court of
competent jurisdiction by final and non-appealable judgment (or stipulated in a
settlement agreement reached by all parties involved in any action or proceeding
related to such claim) to have been the result of noncompliance by the Company
with Section 10.3 of this Agreement. This indemnity agreement will be in
addition to any liability that the Company may otherwise have.
The Company also agrees to indemnify any underwriters of Warrants
registered under the Warrant Shelf Registration Statement, their directors,
officers, employees and agents and each person who controls such underwriters on
the same basis as that of the indemnification of the Initial Purchasers and
Holders provided in this Section 10.5(a).
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(b) Each Holder of Warrants and each holder of Warrant Shares covered
by a Registration Statement (including each Initial Purchaser) severally agrees
to indemnify and hold harmless (i) the Company, (ii) each of its directors,
(iii) each of its officers who signs such Registration Statement and (iv) each
person who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to each such holder, but only (A) with
respect to written information relating to such Holder furnished to the Company
by or on behalf of such Holder specifically for inclusion in the documents
referred to in the foregoing indemnity or (B) with respect to any untrue
statement or representation made by such holder in writing to the Company. This
indemnity agreement will be in addition to any liability that any such Holder
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
10.5 or notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
this Section 10.5, notify the indemnifying party in writing of the commencement
thereof; but the failure so to notify the indemnifying party (i) will not
relieve the indemnifying party from liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses, and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel (including local
counsel) of the indemnifying party's choice at the indemnifying party's expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel (and local
counsel) if (i) the use of counsel chosen by the indemnifying party to represent
the indemnified party would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such
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settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 10.5 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the initial placement of the
Units (the "Initial Placement") and the Registration Statement that resulted in
such Losses; provided, however, that in no case shall any Initial Purchaser be
responsible, in the aggregate, for any amount in excess of the purchase discount
or commission applicable to such Warrant or, in case of a Warrant Share, the
Warrant pursuant to the exercise of which such Warrant Share was issued, nor
shall any underwriter be responsible for any amount in excess of the
underwriting discount or commission applicable to the Warrants purchased by such
underwriter under the Registration Statement that resulted in such Losses. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the sum of (x) the total net proceeds from the Initial Placement (before
deducting expenses) as set forth on the cover page of the Final Memorandum.
Benefits received by the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions as set forth on the cover page of the
Final Memorandum, and benefits received by any other Holders shall be deemed to
be equal to the value of receiving Warrants or Warrant Shares, as applicable,
registered under the Securities Act. Benefits received by any underwriter shall
be deemed to be equal to the total underwriting discounts and commissions, as
set forth on the cover page of the Prospectus forming a part of the Registration
Statement that resulted in such Losses. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand. The parties agree that it would not be
just and equitable if contribution were determined by pro rata allocation or any
other method of allocation that did not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
subsection (d), no Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 10.5, each Person who controls a
Holder or an Initial Purchaser within the meaning of either the Securities Act
or the Exchange Act and each director, officer, employee and agent of such
Holder or Initial Purchaser shall have the same rights to contribution as such
Holder or Initial Purchaser, and each Person who controls the Company within the
meaning of either the Securities Act or the Exchange Act, each officer of the
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Company who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company, subject
in each case to the applicable terms and conditions of this subsection (d).
(e) The provisions of this Section 10.5 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder, any
Initial Purchaser or the Company or any of the officers, directors or
controlling Persons referred to in Section 10.5 hereof, and will survive the
sale by a Holder or an Initial Purchaser of Warrants or Warrant Shares covered
by a Registration Statement.
Section 10.6. Additional Rights of Initial Purchasers. In the event any
Initial Purchaser concludes, in its sole discretion, that it must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with the offer and sale by it of any securities delivered to it upon
the exercise of Warrants during the Common Shelf Registration Period, such
Initial Purchaser shall be entitled to the same rights with respect to the
Common Shelf Registration Statement and any offer and sale of securities
thereunder as Holders are entitled during the Warrant Shelf Registration Period
with respect to the Warrant Shelf Registration Statement and any offer and sale
of securities thereunder, and the Company shall take all steps necessary to
permit such Initial Purchaser to offer and sell such securities under the Common
Shelf Registration Statement.
Section 10.7. Notice to Warrant Agent. The Company shall give the
Warrant Agent prompt written notice of the effectiveness under the Securities
Act of the Common Shelf Registration Statement and the Warrant Shelf
Registration Statement, and any suspension or termination thereof. After receipt
of any such notice, the Warrant Agent may assume that such notice remains true
until it receives written notice to the contrary.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Money Deposited with the Warrant Agent. The Warrant Agent
shall not be required to pay interest on any moneys deposited pursuant to the
provisions of this Agreement except such as it shall agree in writing with the
Company to pay thereon. Any moneys, securities or other property which at any
time shall be deposited by the Company or on its behalf with the Warrant Agent
pursuant to this Agreement shall be and are hereby assigned, transferred and set
over to the Warrant Agent in trust for the purpose for which such moneys,
securities or other property shall have been deposited; but such moneys,
securities or other property need not be segregated from other funds, securities
or other property except to the extent required by law. Any money, securities or
other property deposited with the Warrant Agent for payment or distribution to
the Holders that remains unclaimed for two years after the date the money,
securities or other property was deposited with the Warrant Agent shall be
delivered to the Company upon its request therefor.
Section 11.2. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of (i) evidence satisfactory to them of the ownership, and the
loss, theft,
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destruction or mutilation, of any Warrant Certificate and (ii) of indemnity
satisfactory to them or, in the case of mutilation, upon surrender and
cancellation of the mutilated Warrant Certificate, then, in the absence of
notice to the Company or the Warrant Agent that the Warrant or Warrants
represented thereby have been acquired by a bona fide purchaser, the Company
shall execute and the Warrant Agent shall countersign and deliver to the
registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of
the same tenor and for a like aggregate number of Warrants. Upon the issuance of
any new Warrant Certificate under this Section 11.2, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and other expenses (including the fees and
expenses of the Warrant Agent) in connection therewith. Every new Warrant
Certificate executed and delivered pursuant to this Section 11.2 in lieu of any
lost, stolen or destroyed Warrant Certificate shall constitute a contractual
obligation of the Company, whether or not the allegedly lost, stolen or
destroyed Warrant Certificates shall be at any time enforceable by anyone, and
shall be entitled to the benefits of this Agreement equally and proportionately
with any and all other Warrant Certificates duly executed and delivered
hereunder. The provisions of this Section 11.2 are exclusive and shall preclude
(to the extent lawful) all other rights or remedies with respect to the
replacement of mutilated, lost, stolen, or destroyed Warrant Certificates.
Section 11.3. Payment of Taxes. The Company shall pay any taxes and
other governmental charges that may be imposed under the laws of the United
States of America or any political subdivision or taxing authority thereof or
therein in respect of the issue or delivery of Warrant Shares or of other
securities or property deliverable upon exercise of Warrants (other than income
taxes imposed on the Holders). The Company shall not be required, however, to
pay any tax or other charge imposed in connection with any transfer involved in
the issue of any certificate for Warrant Shares or other securities or property
issuable upon the exercise of the Warrants or payment of cash to any person
other than the Holder of a Warrant Certificate surrendered upon exercise of a
Warrant and in case of such transfer or payment, the Warrant Agent and the
Company shall not be required to issue any stock certificate or pay any cash
until such tax or charge has been paid or it has been established to the Warrant
Agent's and the Company's satisfaction that no such tax or charge is due.
Section 11.4. No Merger, Consolidation or Sale of Assets or the
Company. Except as otherwise provided herein, the Company will not merge into or
consolidate with any other Person, or sell or otherwise transfer its property,
assets and business substantially as an entirety to a successor of the Company,
unless the Person resulting from such merger or consolidation, or such successor
of the Company, shall expressly assume, by supplemental agreement satisfactory
in form to the Warrant Agent and executed and delivered to the Warrant Agent,
the due and punctual performance and observance of each and every covenant and
condition of this Agreement to be performed and observed by the Company.
Section 11.5. Reports to Holders. The Company shall file with the
Commission the annual, quarterly and other reports required by Section 13(a),
13(c) or 15(d)
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of the Exchange Act, regardless of whether such sections of the Exchange Act are
applicable to the Company, and shall provide copies of such reports to each
Holder, without cost to such Holder, and the Warrant Agent within 30 days after
the date it would have been required to file such reports or other information
with the Commission had it been subject to such sections.
Section 11.6. Notices. Any notice, demand or delivery authorized by
this Agreement shall be sufficiently given or made when mailed, if sent by first
class mail, postage prepaid, addressed to any Holder at such Holder's last known
address appearing on the Warrant Register and to the Company or the Warrant
Agent as follows:
To the Company:
American Communications Services, Inc.
131 National Business Parkway
Suite 100
Annapolis Junction, MD 20701
Attention: Secretary
To the Warrant Agent:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001-2697
Attention: Corporate Trust Administration Department
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery. Any notice that is mailed in the manner herein
shall have been duly given when sent.
Section 11.7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE WITHOUT GIVING EFFECT TO ANY
CONFLICTS OF LAW PROVISIONS.
Section 11.8. Successors. This Agreement shall be binding upon and
inure to the benefit of the Company and the Warrant Agent and their respective
successors and assigns, and the Holders from time to time of the Warrants.
Nothing in this Agreement is intended or shall be construed to confer upon any
Person, other than the Company, the Warrant Agent and the Holders, any right,
remedy or claim under or by reason of this Agreement or any part hereof.
Section 11.9. Counterparts. This Agreement may be executed manually or
by facsimile in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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Section 11.10. Amendments. The Warrant Agent may, without the consent
or concurrence of the Holders of the Warrants, by supplemental agreement or
otherwise, join with the Company in making any changes or corrections in this
Agreement that (a) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error herein contained or (b) add to the covenants and agreements of the Company
in this Agreement further covenants and agreements of the Company thereafter to
be observed, or surrender any rights or power reserved to or conferred upon the
Company in this Agreement; provided that in either case such changes or
corrections do not and will not adversely affect, alter or change the rights,
privileges or immunities of the Holders of Warrants.
Section 11.11. Headings. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 11.12. Third Party Beneficiaries. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Warrant Agent, on the other hand, and each Holder shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of the
Holders hereunder.
Section 11.13. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
Section 11.14. No Inconsistent Agreements. The Company has not, as of
the date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement that is inconsistent with the rights granted to the Holders
herein or that otherwise conflicts with the provisions hereof.
Section 11.15. Warrants Held by the Company. In determining whether the
Holders of the required number of Warrants have granted any consent or approval
under this Agreement, Warrants held or beneficially owned by the Company or a
subsidiary of the Company shall be disregarded, except that for the purposes of
determining whether the Warrant Agent shall be protected in relying on any such
consent or approval, only Warrants which the Warrant Agent knows are so owned
shall be so disregarded. Warrants so owned which have been pledged in good faith
shall not be disregarded if the pledgee establishes to the satisfaction of the
Warrant Agent such pledgee's right so to act with respect to the Warrants and
that the pledgee is not the Company or a subsidiary of the Company.
Section 11.16. Statements Required in Certificate. Each certificate
with respect to compliance with a covenant or condition provided for in this
Agreement shall include:
42
<PAGE> 47
(a) a statement that the individual making such certificate 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 contained in such certificate are based;
(c) a statement that, in the opinion of such individual, such person
has made such examination or investigation as is necessary to enable such person
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, their respective corporate seals to be hereunto affixed, all as of the
date first above written.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: __________________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Warrant Agent
By: __________________________________________
Name:
Title:
43
<PAGE> 48
EXHIBIT A
FORM OF CERTIFICATED WARRANT
AMERICAN COMMUNICATIONS SERVICES, INC.
[CUSIP] [CINS] No._______
No.________
WARRANTS TO PURCHASE SHARES OF COMMON STOCK
This certifies that , or its registered assigns, is the
owner of the number of Warrants set forth above, each of which represents the
right to purchase, the Issue Date from AMERICAN COMMUNICATIONS SERVICES, INC., a
Delaware corporation ("the Company"), shares of Common Stock (each a "Warrant
Share"), par value $.01 per share, of the Company (the "Common Stock") at the
purchase price (the "Exercise Price") of $7.15 per share of Common Stock
(subject to adjustment as provided in the Warrant Agreement hereinafter referred
to), upon surrender hereof at the office of The Chase Manhattan Bank or to its
successor as the warrant agent under the Warrant Agreement hereinafter referred
to (any such warrant agent being herein called the "Warrant Agent"), with the
Subscription Form on the reverse hereof duly executed, with signature guaranteed
as therein specified and simultaneous payment in full (by Fedwire or by
certified or official bank or bank cashier's check payable to the order of the
Company, or by a Cashless Exercise (as defined in the Warrant Agreement) equal
to the Exercise Price of the Warrants being exercised) of the purchase price for
the share(s) as to which the Warrant(s) represented by this Warrant Certificate
are exercised, all subject to the terms and conditions hereof and of the Warrant
Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of July 10, 1997 (the "Warrant Agreement"), between
the Company and The Chase Manhattan Bank, as Warrant Agent, and is subject to
the terms and provisions contained therein, to all of which terms and provisions
the Holder of this Warrant Certificate consents by acceptance hereof. The
Warrant Agreement is hereby incorporated herein by reference and made a part
thereof. Reference is hereby made to the Warrant Agreement for a full
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Company and the Holders of the Warrants. The
summary of the terms of the Warrant Agreement contained in this Warrant
Certificate is qualified in its entirety by express reference to the Warrant
Agreement. All terms used in this Warrant Certificate that are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
<PAGE> 49
A-2
Copies of the Warrant Agreement are on file at the office of the
Warrant Agent and may be obtained by writing to the Warrant Agent at the
following address:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001-2697
Attention: Corporate Trust Administration Department
The number of Common Shares purchasable upon the exercise of each
Warrant and the price per share are subject to adjustment as provided in the
Warrant Agreement. In the event the Company merges or consolidates with, or
sells all or substantially all of its assets to, another person, each Warrant
will, upon exercise, entitle the Holder thereof to receive the number of shares
of capital stock or other securities or the amount of money and other property
which the holder of a Warrant Share (or other securities or property issuable
upon exercise of a Warrant) is entitled to receive upon completion of such
merger, consolidate or sale.
As to any final fraction of a share which the same Holder of one or
more Warrant Certificates would otherwise be entitled to purchase upon exercise
thereof in the same transaction, the Company shall pay the cash value thereof
determined as provided in the Warrant Agreement.
All shares of Common Stock or other securities issuable by the Company
upon the exercise of Warrants shall be validly issued, fully paid and
nonassessable, and the Company shall pay all taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
the issue or delivery of such shares or of other securities deliverable upon
exercise of Warrants. The Company shall not be required, however, to pay any tax
or other charge imposed in connection with any transfer involved in the issue of
any certificate for Common Stock, and in such case the Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no tax or other charge is due.
Subject to the restrictions on transfer set forth in Article VIII of
the Warrant Agreement, this Warrant Certificate and all rights hereunder are
transferable by the registered Holder hereof, in whole or in part, on the
register of the Company maintained by the Warrant Agent for such purpose at its
office in New York, New York, upon surrender of this Warrant Certificate duly
endorsed, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Warrant Agent duly executed, with signatures
guaranteed as specified in the attached Form of Assignment, by the registered
Holder hereof or his attorney duly authorized in writing and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer.
Upon any partial transfer, the Company will issue and the Warrant Agent will
deliver to such Holder a new Warrant Certificate or Certificates with respect to
any portion not so transferred. Each taker and Holder of this Warrant
Certificate, by taking and holding the same, consents and agrees that prior to
the
<PAGE> 50
A-3
registration of transfer as provided in the Warrant Agreement, the Company and
the Warrant Agent may treat the person in whose name the Warrants are registered
as the absolute owner hereof for any purpose and as the person entitled to
exercise the rights represented hereby, any notice to the contrary
notwithstanding.
This Warrant Certificate may be exchanged at the office of the Warrant
Agent maintained for such purpose in New York, New York for Warrant Certificates
representing the same aggregate number of Warrants, each new Warrant Certificate
to represent such number of Warrants as the Holder hereof shall designate at the
time of such exchange.
Prior to the exercise of the Warrants represents hereby, the Holder of
this Warrant Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company, including, without limitation, the right to vote or
to consent to any action of the stockholders, to receive dividends or other
distributions, to exercise any preemptive right or to receive any notice of
meetings of stockholders, and shall not be entitled to receive any notice of any
proceedings of the Company except as provided in the Warrant Agreement.
This Warrant shall be void and all rights evidenced hereby shall cease
at 5:00 p.m., New York time, on January 1, 2004, unless sooner terminated by the
liquidation, dissolution or winding-up of the Company.
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
Dated:
AMERICAN COMMUNICATIONS SERVICES, INC.
By: __________________________________
Name:
Title:
Countersigned:
The Chase Manhattan Bank,
as Warrant Agent
By:__________________________
Authorized Officer
<PAGE> 51
A-4
FORM OF REVERSE OF CERTIFICATED WARRANT
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To:
The undersigned irrevocably exercise [ ] of the Warrants
represented by the Warrant Certificate for the purchase of ___ (subject to
adjustment) shares of Common Stock, par value $.01 per share, of AMERICAN
COMMUNICATIONS SERVICES, INC. and herewith makes payment of $[ ] (such
payment being by Fedwire or by certified or official bank or bank cashier's
check payable to the order or at the direction of American Communications
Services, Inc., or by a Cashless Exercise (as defined in the Warrant Agreement)
equal to the Exercise Price of the Warrants being exercised), all at the
exercise price and on the terms and conditions specified in the within Warrant
Certificate and the Warrant Agreement therein referred to, surrenders this
Warrant Certificate and all right, title and interest therein to and directs
that the shares of Common Stock deliverable upon the exercise of such Warrants
be registered or placed in the name and at the address specified below and
delivered thereto.
Dated: _________________________________________
(Signature of Owner)
_________________________________________
(Street Address)
_________________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_________________________________________
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE> 52
A-5
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of the within
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by the within Warrant Certificate not being
assigned hereby) all of the right of the undersigned under the within Warrant
Certificate, with respect to the number of Warrants set forth below:
Name(s) of Assignee(s):________________________________
Address:_______________________________________________
No. of Warrants:_______________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint __________ the undersigned's
attorney to make such transfer on the books of _____________ maintained for the
purpose, with full power of substitution in the premises.
In connection with any transfer of Warrants, the undersigned confirms
that without utilizing any general solicitation or general advertising that:
[Check One]
[ ] (a) these Warrants are being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,provided by Rule
144A thereunder.
or
[ ] (b) these Warrants are being transferred other than in accordance with (a)
above and documents are being furnished which comply with the conditions of
transfer set forth in this Warrant Certificate and the Warrant Agreement.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to registered the Warrants in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Article VIII of the Warrant Agreement shall
have been satisfied.
<PAGE> 53
A-6
Dated:
________________________________________
(Signature of Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
________________________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the
Warrant(s) for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date:________________
____________________________________________
NOTE: To be executed by an executive officer
<PAGE> 1
EXHIBIT 4.5
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO
AMERICAN COMMUNICATIONS SERVICES, INC. (THE "ISSUER"), OR ANY SUBSIDIARY
THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
ISSUER'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN THE CASE OF THE FOREGOING CAUSE (E), A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE ISSUER AND THE TRANSFER AGENT, THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE THE BENEFITS OF A WARRANT
AGREEMENT DATED AS OF JULY 10, 1997 AMONG THE COMPANY, BT SECURITIES
CORPORATION, ALEX. BROWN & SONS INCORPORATED AND THE OTHER PARTIES SIGNATORY
THERETO, A COPY OF
<PAGE> 2
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE PART OF AN ISSUANCE OF UNITS,
EACH OF WHICH CONSISTS OF ONE SHARE OF PREFERRED STOCK AND ONE WARRANT ENTITLING
THE HOLDER THEREOF TO PURCHASE INITIALLY 80.318 SHARES OF COMMON STOCK, PAR
VALUE $.01 PER SHARE, OF AMERICAN COMMUNICATIONS SERVICES INC., SUBJECT TO AN
INCREASE OF 22.645 ADDITIONAL SHARES OF COMMON STOCK. PRIOR TO THE EARLIEST TO
OCCUR OF (A) 90 DAYS AFTER THE ORIGINAL ISSUANCE OF THE UNITS, (B) SUCH EARLIER
DATE AS MAY BE DETERMINED BY BT SECURITIES CORPORATION, THE WARRANTS EVIDENCED
BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY
BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE PREFERRED STOCK.
<PAGE> 3
AMERICAN COMMUNICATIONS SERVICES, INC.
No. (WarrantNo) CUSIP No. (CUSIPNo)
(NoWarrants)Warrants
WARRANTS TO PURCHASE COMMON STOCK
This certifies that (Name), or its registered assigns, is the owner
of the number of Warrants set forth above, each of which initially represents
the right to purchase, after July 10, 1997, from AMERICAN COMMUNICATIONS
SERVICES, INC., a Delaware corporation ("the Company"), 80.318 shares of Common
Stock (each an "Initial Warrant Share"), par value $.01 per share, of the
Company (the "Common Stock"), subject to an increase of 22.645 additional shares
of Common Stock (the "Additional Warrant Shares" and, together with the Initial
Warrant Shares, the "Warrant Shares") in the event the Company fails to raise
net proceeds of at least $50 million through the issue and sale of its Qualified
Stock (as defined in the Warrant Agreement) (other than preferred stock) on or
before December 31, 1998 (the "Warrant Adjustment Date") at the purchase price
(the "Exercise Price") of $7.15 per share of Common Stock (subject to adjustment
as provided in the Warrant Agreement hereinafter referred to), upon surrender
hereof at the office of The Chase Manhattan Bank or to its successor as the
warrant agent under the Warrant Agreement hereinafter referred to (any such
warrant agent being herein called the "Warrant Agent"), with the Subscription
Form on the reverse hereof duly executed, with signature guaranteed as therein
specified and simultaneous payment in full (by Fedwire or by certified or
official bank or bank cashier's check payable to the order of the Company, or by
a Cashless Exercise (as defined in the Warrant Agreement) equal to the Exercise
Price of the Warrants being exercised) of the purchase price for the share(s) as
to which the Warrant(s) represented by this Warrant Certificate are exercised,
all subject to the terms and conditions hereof and of the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of July 10, 1997 (the "Warrant Agreement"), between
the Company and The Chase Manhattan Bank, as Warrant Agent, and is subject to
the terms and provisions contained therein, to all of which terms and provisions
the Holder of this Warrant Certificate consents by acceptance hereof. The
Warrant Agreement is hereby incorporated herein by reference and made a part
thereof. Reference is hereby made to the Warrant Agreement for a full
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Company and the Holders of the Warrants. The
summary of the terms of the Warrant Agreement contained in this Warrant
Certificate is qualified in its entirety by express reference to the Warrant
Agreement. All terms used in this Warrant Certificate that are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
<PAGE> 4
Copies of the Warrant Agreement are on file at the office of the
Warrant Agent and may be obtained by writing to the Warrant Agent at the
following address:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001-2697
Attention: Corporate Trust Administration Department
The number of Common Shares purchasable upon the exercise of each
Warrant and the price per share are subject to adjustment as provided in the
Warrant Agreement. In the event the Company merges or consolidates with, or
sells all or substantially all of its assets to, another person, each Warrant
will, upon exercise, entitle the Holder thereof to receive the number of shares
of capital stock or other securities or the amount of money and other property
which the holder of a Warrant Share (or other securities or property issuable
upon exercise of a Warrant) is entitled to receive upon completion of such
merger, consolidation or sale.
As to any final fraction of a share which the same Holder of one or
more Warrant Certificates would otherwise be entitled to purchase upon exercise
thereof in the same transaction, the Company shall pay the cash value thereof
determined as provided in the Warrant Agreement.
All shares of Common Stock or other securities issuable by the
Company upon the exercise of Warrants shall be validly issued, fully paid and
nonassessable, and the Company shall pay all taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
the issue or delivery of such shares or of other securities deliverable upon
exercise of Warrants. The Company shall not be required, however, to pay any tax
or other charge imposed in connection with any transfer involved in the issue of
any certificate for Common Stock, and in such case the Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no tax or other charge is due.
Subject to the restrictions on transfer set forth in Article VII of
the Warrant Agreement, this Warrant Certificate and all rights hereunder are
transferable by the registered Holder hereof, in whole or in part, on the
register of the Company maintained by the Warrant Agent for such purpose at its
office in New York, New York, upon surrender of this Warrant Certificate duly
endorsed, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the
-2-
<PAGE> 5
Warrant Agent duly executed, with signatures guaranteed as specified in the
attached Form of Assignment, by the registered Holder hereof or his attorney
duly authorized in writing and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer. Upon any partial transfer,
the Company will issue and the Warrant Agent will deliver to such Holder a new
Warrant Certificate or Certificates with respect to any portion not so
transferred. Each taker and Holder of this Warrant Certificate, by taking and
holding the same, consents and agrees that prior to the registration of transfer
as provided in the Warrant Agreement, the Company and the Warrant Agent may
treat the person in whose name the Warrants are registered as the absolute owner
hereof for any purpose and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding.
This Warrant Certificate may be exchanged at the office of the
Warrant Agent maintained for such purpose in New York, New York for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the Holder
of this Warrant Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company, including, without limitation, the right to vote or
to consent to any action of the stockholders, to receive dividends or other
distributions, to exercise any preemptive right or to receive any notice of
meetings of stockholders, and shall not be entitled to receive any notice of any
proceedings of the Company except as provided in the Warrant Agreement.
This Warrant shall be void and all rights evidenced hereby shall
cease at 5:00 p.m., New York time, on January 1, 2004, unless sooner terminated
by the liquidation, dissolution or winding-up of the Company.
-3-
<PAGE> 6
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
Dated:
AMERICAN COMMUNICATIONS SERVICES, INC.
By:----------------------------------------
Name:
Title:
Countersigned:
The Chase Manhattan Bank,
as Warrant Agent
By:-----------------------------
Authorized Officer
-4-
<PAGE> 7
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To:
The undersigned irrevocably exercise [_______] of the Warrants
represented by the Warrant Certificate for the purchase of ___ (subject to
adjustment) shares of Common Stock, par value $.01 per share, of AMERICAN
COMMUNICATIONS SERVICES, INC. and herewith makes payment of $[ ] (such
payment being by Fedwire or by certified or official bank or bank cashier's
check payable to the order or at the direction of American Communications
Services, Inc., or by a Cashless Exercise (as defined in the Warrant Agreement)
equal to the Exercise Price per share at the date of exercise of the Warrants
being exercised), all at the exercise price and on the terms and conditions
specified in the within Warrant Certificate and the Warrant Agreement therein
referred to, surrenders this Warrant Certificate and all right, title and
interest therein to and directs that the shares of Common Stock deliverable upon
the exercise of such Warrants be registered or placed in the name and at the
address specified below and delivered thereto.
Dated: ----------------------------------------
(Signature of Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
----------------------------------------
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE> 8
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of the within
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by the within Warrant Certificate not being
assigned hereby) all of the right of the undersigned under the within Warrant
Certificate, with respect to the number of Warrants set forth below:
Name(s) of Assignee(s):_____________________________________________
Address:____________________________________________________________
No. of Warrants:____________________________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ______________ the
undersigned's attorney to make such transfer on the books of
_______________________ maintained for the purpose, with full power of
substitution in the premises.
In connection with any transfer of Warrants, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
[Check One]
[ ] (a) these Warrants are being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided by Rule
144A thereunder.
or
[ ](b) these Warrants are being transferred other than in accordance with (a)
above and documents are being furnished which comply with the conditions of
transfer set forth in this Warrant Certificate and the Warrant Agreement.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Article VIII of the Warrant Agreement shall
have been satisfied.
<PAGE> 9
Dated: ________________________________________
(Signature of Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
________________________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the
Warrant(s) for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date:________________
NOTE: To be executed by an executive officer
-2-
<PAGE> 1
EXHIBIT 4.6
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AMERICAN COMMUNICATIONS SERVICES, INC.
$220,000,000
13-3/4% SENIOR NOTES DUE 2007
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INDENTURE
Dated as of July 23, 1997
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THE CHASE MANHATTAN BANK,
Trustee
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CROSS-REFERENCE TABLE
Reconciliation and tie between the Trust Indenture Act of 1939, as amended, and
the Indenture, dated as of July 23, 1997.
<TABLE>
<CAPTION>
TRUST
INDENTURE
ACT INDENTURE
SECTION SECTION
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<S> <C>
Section 310(a)(1) ............................................. 7.10
(a)(2) ............................................ 7.10
(a)(3) ............................................ N.A.
(a)(4) ............................................ N.A.
(a)(5) ............................................ 7.10
(b) ............................................ 7.08; 7.10
(c) ............................................ N.A.
Section 311(a) ............................................. 7.11
(b) ............................................ 7.11
(c) ............................................ N.A.
Section 312(a) ............................................ 7.06(a); 7.06(b)
(b) ............................................ 7.06(c)
(c) ............................................ 7.06(d)
Section 313(a) ............................................ 7.06(e)
(b) ............................................ N.A.
(c) ............................................ 7.06(e); 7.06(f)
(d) ............................................ 7.06
Section 314(a) ............................................ 4.18; 4.19
(b) ............................................ N.A.
(c)(1) ............................................ 10.03
(c)(2) ............................................ 10.03
(c)(3) ............................................ N.A.
(d) ............................................ N.A.
(e) ............................................ 10.04
(f) ............................................ 4.19
Section 315(a) ............................................ 7.01(b)
(b) ............................................ 7.05(a)
(c) ............................................ 7.01(a)
(d) ............................................ 7.01(c)
(e) ............................................ 6.10
Section 316(a) ............................................ 2.08
(a)(1)(A) ............................................ 6.05
(a)(1)(B) ............................................ 6.04
(a)(2) ............................................ N.A.
(b) ............................................ 6.07
(c) ............................................ 9.05
Section 317(a)(1) ............................................ N.A.
(a)(2) ............................................ 6.08
(b) ............................................ 2.04
Section 318(a) ............................................ 10.01
</TABLE>
NOTE: THIS RECONCILIATION AND TIE SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE
PART OF THE INDENTURE.
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions ........................................... 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act ..... 25
SECTION 1.03. Rules of Construction ................................. 26
SECTION 1.04. Form of Documents Delivered to Trustee ................ 27
SECTION 1.05. Acts of Holders ....................................... 27
SECTION 1.06. Satisfaction and Discharge ............................ 28
ARTICLE II THE NOTES
SECTION 2.01. Form and Dating ....................................... 29
SECTION 2.02. Execution and Authentication .......................... 32
SECTION 2.03. Registrar and Paying Agent ............................ 33
SECTION 2.04. Paying Agent to Hold Money in Trust ................... 34
SECTION 2.05. Global Notes .......................................... 35
SECTION 2.06. Transfer and Exchange ................................. 35
SECTION 2.07. Replacement Notes ..................................... 39
SECTION 2.08. Outstanding Notes ..................................... 39
SECTION 2.09. Temporary Notes ....................................... 40
SECTION 2.10. Cancellation .......................................... 41
SECTION 2.11. Payment of Interest; Interest Rights Preserved ........ 41
SECTION 2.12. Authorized Denominations .............................. 42
SECTION 2.13. Computation of Interest ............................... 42
SECTION 2.14. Persons Deemed Owners ................................. 42
SECTION 2.15. CUSIP Numbers ......................................... 42
SECTION 2.16. Escrow Agreement. ..................................... 43
ARTICLE III REDEMPTION
SECTION 3.01. Notice to Trustee ..................................... 43
SECTION 3.02. Selection of Notes to be Redeemed ..................... 43
SECTION 3.03. Notice of Redemption .................................. 44
SECTION 3.04. Effect of Notice of Redemption ........................ 45
SECTION 3.05. Deposit of Redemption Price ........................... 45
SECTION 3.06. Notes Redeemed in Part ................................ 45
ARTICLE IV COVENANTS
SECTION 4.01. Payment of Notes ...................................... 46
SECTION 4.02. Maintenance of Office or Agency ....................... 46
SECTION 4.03. Money for the Note Payments to be Held in Trust ....... 46
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SECTION 4.04. Corporate Existence ....................................47
SECTION 4.05. Maintenance of Property ................................47
SECTION 4.06. Payment of Taxes and Other Claims ......................47
SECTION 4.07. Repurchase at the Option of Holders upon a Change
of Control .........................................48
SECTION 4.08. Limitation on Asset Sales ..............................50
SECTION 4.09. Limitation on Indebtedness .............................54
SECTION 4.10. Limitation on Issuance of Guarantees by Restricted
Subsidiaries .......................................56
SECTION 4.11. Limitation on Liens ....................................57
SECTION 4.12. Limitation on Sale and Leaseback Transactions ..........57
SECTION 4.13. Restricted Payments ....................................57
SECTION 4.14. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries ................61
SECTION 4.15. Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries ............................62
SECTION 4.16. Transactions with Affiliates ...........................63
SECTION 4.17. Restricted and Unrestricted Subsidiaries ...............64
SECTION 4.18. Reports ................................................65
SECTION 4.19. Compliance Certificate; Notice of Default or Event
of Default .........................................66
SECTION 4.20. Limitation on Construction of Fiber Networks ...........66
ARTICLE V CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER
SECTION 5.01. Merger, Consolidation or Sale of Assets ................67
SECTION 5.02. Successor Corporation Substituted ......................68
ARTICLE VI DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default ......................................68
SECTION 6.02. Acceleration ...........................................71
SECTION 6.03. Other Remedies .........................................72
SECTION 6.04. Waiver of Past Defaults ................................73
SECTION 6.05. Control by Majority ....................................73
SECTION 6.06. Limitation on Suits ....................................73
SECTION 6.07. Rights of Holders to Receive Payment ...................74
SECTION 6.08. Trustee May File Proofs of Claim .......................74
SECTION 6.09. Priorities .............................................75
SECTION 6.10. Undertaking for Costs ..................................75
SECTION 6.11. Waiver of Stay or Extension Laws .......................76
SECTION 6.12. Trustee May Enforce Claims Without Possession of
the Notes ..........................................76
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SECTION 6.13. Restoration of Rights and Remedies .....................76
SECTION 6.14. Rights and Remedies Cumulative .........................76
SECTION 6.15. Delay or Omission Not Waiver ...........................77
ARTICLE VII TRUSTEE
SECTION 7.01. Duties of Trustee ......................................77
SECTION 7.02. Rights of Trustee ......................................78
SECTION 7.03. Individual Rights of Trustee ...........................79
SECTION 7.04. Trustee's Disclaimer ...................................79
SECTION 7.05. Notice of Defaults .....................................79
SECTION 7.06. Preservation of Information; Reports by Trustee to
Holders ...........................................80
SECTION 7.07. Compensation and Indemnity .............................81
SECTION 7.08. Replacement of Trustee .................................82
SECTION 7.09. Successor Trustee by Merger ............................84
SECTION 7.10. Eligibility; Disqualification ..........................84
SECTION 7.11. Preferential Collection of Claims Against Company ......85
ARTICLE VIII DEFEASANCE
SECTION 8.01. Company's Option to Effect Legal Defeasance or
Covenant Defeasance ...............................86
SECTION 8.02. Legal Defeasance and Discharge .........................86
SECTION 8.03. Covenant Defeasance ....................................87
SECTION 8.04. Conditions to Defeasance or Covenant Defeasance ........87
SECTION 8.05. Deposited Money and U.S. Government Obligations
to be Held in Trust; Miscellaneous Provisions .....89
SECTION 8.06. Reinstatement ..........................................89
ARTICLE IX AMENDMENTS
SECTION 9.01. Without Consent of Holders .............................90
SECTION 9.02. With Consent of Holders ................................90
SECTION 9.03. Effect of Supplemental Indentures ......................91
SECTION 9.04. Compliance with Trust Indenture Act ....................92
SECTION 9.05. Revocation and Effect of Consents and Waivers ..........92
SECTION 9.06. Notation on or Exchange of Notes .......................92
SECTION 9.07. Trustee to Execute Supplemental Indentures .............92
ARTICLE X MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls ..........................94
SECTION 10.02. Notices ...............................................94
SECTION 10.03. Certificate and Opinion as to Conditions Precedent ....94
SECTION 10.04. Statements Required in Certificate or Opinion .........94
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SECTION 10.05. Rules by Trustee, Paying Agent and Registrar ..........95
SECTION 10.06. Payments on Business Days .............................95
SECTION 10.07. Governing Law .........................................95
SECTION 10.08. No Recourse Against Others ............................95
SECTION 10.09. Successors ............................................95
SECTION 10.10. Counterparts ..........................................96
SECTION 10.11. Table of Contents; Headings ...........................96
SECTION 10.12. Severability ..........................................96
SECTION 10.13. Further Instruments and Acts ..........................96
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EXHIBIT A FORM OF INITIAL GLOBAL NOTE
EXHIBIT B FORM OF INITIAL CERTIFICATED NOTE
EXHIBIT C FORM OF EXCHANGE GLOBAL NOTE
EXHIBIT D FORM OF EXCHANGE CERTIFICATED NOTE
EXHIBIT E REGISTRATION RIGHTS AGREEMENT
EXHIBIT F TERMS OF SUBORDINATED INDEBTEDNESS
EXHIBIT G ESCROW AND DISBURSEMENT AGREEMENT
SCHEDULE A EXISTING INDEBTEDNESS
SCHEDULE B REQUIRED INVESTMENTS
SCHEDULE C SECURED CREDIT FACILITY AGREEMENTS
SCHEDULE D CONTRACTS WITH AFFILIATES
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INDENTURE, dated as of July 23, 1997, between AMERICAN
COMMUNICATIONS SERVICES, INC., a Delaware corporation (the "Company"), having
its principal office at 131 National Business Parkway, Suite 100, Annapolis
Junction, Maryland 20701, and THE CHASE MANHATTAN BANK, a New York banking
corporation, as trustee hereunder (the "Trustee"), having its Corporate Trust
Administration Office at 450 West 33rd Street, 15th Floor, New York, New York
10001-2697.
RECITALS OF THE COMPANY
The Company has duly authorized the creation and issue of its
13-3/4% Senior Notes due 2007 (the "Initial Notes") of substantially the tenor
and amount hereinafter set forth, and to provide therefor and for, if and when
issued in exchange for the Initial Notes pursuant to the Indenture and the
Registration Rights Agreement, the Company's 13-3/4% Senior Notes due 2007 (the
"Exchange Notes," and together with the Initial Notes, the "Notes"), the Company
has duly authorized the execution and delivery of this Indenture.
All things necessary to make the Notes, when executed by the Company
and authenticated and delivered by the Trustee hereunder and duly issued by the
Company, the valid obligations of the Company and to make this Indenture a valid
instrument of the Company, in accordance with their respective terms, have been
done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for and in
consideration of the premises and the purchase of the Initial Notes by the
Holders (as defined herein) thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Notes, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP (as defined herein).
"Acquired Indebtedness" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidi-
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ary of such specified Person, but excluding Indebtedness which is extinguished,
retired or repaid in connection with such Person merging with or into or
becoming a Subsidiary of such specified Person.
"Act" when used with respect to any Holder, has the meaning set
forth in Section 1.05 hereof.
"Affiliate" means, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled by,
such Person; provided that each Unrestricted Subsidiary shall be deemed to be an
Affiliate of the Company and of each other Subsidiary of the Company; provided,
further, that except for purposes of Section 2.08 hereof, neither the Company
nor any of its Restricted Subsidiaries shall be deemed to be Affiliates of each
other; and provided, further, that any Lender under the Secured Credit Facility
and its Affiliates shall not be deemed to be Affiliates of the Company or any of
its Restricted Subsidiaries solely as a result of the existence of the Secured
Credit Facility or their holdings of Capital Stock of the Company or any of its
Restricted Subsidiaries acquired in connection with the Secured Credit Facility.
For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "under common control with" and "controlled
by"), and as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise; provided that beneficial ownership of 10
percent or more of the Voting Stock of a Person shall be deemed to constitute
control.
"Affiliate Transaction" has the meaning set forth in Section 4.16
hereof.
"Agent Member" has the meaning set forth in Section 2.05(a) hereof.
"Asset Sale" means, with respect to any Person, any transfer,
conveyance, sale, lease or other disposition (including, without limitation, by
way of consolidation or merger, but excluding by means of any Sale and Leaseback
Transaction or by the granting of a Lien permitted by Section 4.11) by such
Person or any of its Restricted Subsidiaries to any Person other than the
Company or a Restricted Subsidiary of the Company, in one transaction, or a
series of related transactions (each hereinafter referred to as a
"Disposition"), of Property or assets of such Person or any of its Restricted
Subsidiaries, the Fair Market Value of which exceeds $2,000,000, other than (i)
a Disposition of Property in the ordinary course of business consistent with
industry practice, (ii) a Disposition that constitutes a Restricted Payment
permitted to be made under Section 4.13 hereof and (iii) a Disposition by the
Company in connection with a transaction permitted pursuant to Article V hereof.
For purposes of this definition, any series of related transactions that, if
effected as a single transaction
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would constitute an Asset Sale, shall be deemed to be a single Asset Sale
effected when the last transaction which is a part thereof is effected.
"Asset Sale Offer" has the meaning set forth in Section 4.08(c)
hereof.
"Asset Sale Payment Date" has the meaning set forth in Section
4.08(d)(ii) hereof.
"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, or the Board of Directors if such
Person is the Company or a Restricted Subsidiary) 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" means, as of any date, with respect to any debt
security or Disqualified Stock, the quotient obtained by dividing (i) the sum of
the products of (x) the number of years from such date to the dates of each
scheduled principal payment or redemption payment (including any sinking fund or
mandatory redemption payment requirements) of such debt security or Disqualified
Stock multiplied in each case by (y) the amount of such principal or redemption
payment, by (ii) the sum of all such principal or redemption payments.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board of
Directors.
"Board Resolution" means a duly adopted resolution of the Board of
Directors in full force and effect at the time of determination and certified as
such by the Secretary or an Assistant Secretary of the Company.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in The City of New York
are authorized or obligated by law, executive order or regulation to close.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Indebtedness
arrangement conveying the right to use) real or personal property of such Person
which is required to be classified and accounted for as a capital lease or a
liability on the face of a balance sheet of such Person
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prepared in accordance with GAAP and the stated maturity thereof shall be the
date of the last payment of rent or any amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without payment
of a penalty.
"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person (including, without limitation, common stock, preferred stock and
partnership interests) and any rights (other than Indebtedness convertible into
an equity interest), warrants or options to subscribe for or acquire an equity
interest in such Person.
"Cash Proceeds" means, with respect to any Asset Sale or issuance or
sale of Capital Stock by any Person, the aggregate consideration received in
respect of such sale or issuance by such Person in the form of cash and Eligible
Cash Equivalents.
"Certificated Notes" means Initial Certificated Notes and Exchange
Certificated Notes.
"Change of Control" shall be deemed to occur if (i) the sale,
conveyance, transfer or lease of all or substantially all of the assets of the
Company to any "Person" or "group" (within the meaning of Sections 13(d)(3) and
14(d)(2) of the Exchange Act or any successor provision to either of the
foregoing, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(i) under the
Exchange Act), other than to any Permitted Holder or any Restricted Subsidiary
of the Company, shall have occurred; or (ii) any "Person" or "group" (within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor
provision to either of the foregoing, including any group acting for the purpose
of acquiring, holding or disposing of securities within the meaning of Rule
13d-5(b)(i) under the Exchange Act), other than any Permitted Holder, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 35 percent of the total voting power of all classes of the Voting Stock of
the Company (including any warrants, options or rights to acquire such Voting
Stock), calculated on a fully diluted basis, and such voting power percentage is
greater than or equal to the total voting power percentage then beneficially
owned by the Permitted Holders in the aggregate; or (iii) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors whose
election or appointment by such board or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office.
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"Change of Control Offer" has the meaning set forth in Section
4.07(a) hereof.
"Change of Control Payment Date" has the meaning set forth in
Section 4.07(b)(ii) hereof.
"Change of Control Purchase Price" has the meaning set forth in
Section 4.07(a) hereof.
"clearing agency" has the meaning set forth in Section 3(a)(23) of
the Exchange Act.
"Closing Price" means, on any Trading Day with respect to the per
share price of any share of Common Stock, the last reported sale price regular
way or, in case no such reported sale takes place on such day, the average of
the reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if another national securities exchange on which such
shares are listed or admitted to trading is the principal trading market for
such Common Stock, then such national securities exchange or, if such Common
Stock is not listed or admitted to trading on any national securities exchange,
on The Nasdaq Stock Market (or any market for trading of securities administered
by the NASD), or, if such Common Stock is not listed or admitted to trading on
any such national securities exchange or market, the average of the closing bid
and asked prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm that is selected from time to time by the Company for
that purpose.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act,
or, if at any time after the execution of this Indenture such commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, the body performing such duties at such time.
"Common Stock" means, with respect to any Person, Capital Stock of
such Person that does not rank prior, as to the payment of dividends or as to
the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Company" means the party named as such in the preamble to this
Indenture until a successor replaces it pursuant to the applicable provisions
hereof and, thereafter, means such successor.
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"Company Order" means a written order signed in the name of the
Company by (i) its Chairman of the Board, President, a Vice Chairman or a Vice
President, and (ii) its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary.
"Consolidated Interest Expense" means, with respect to any Person
for any period, without duplication (A) the sum of (i) the aggregate amount of
cash and non-cash interest expense (including capitalized interest) of such
Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP in respect of Indebtedness
(including, without limitation, (v) any amortization of debt discount, (w) net
costs associated with Interest Hedging Obligations (including any amortization
of discounts), (x) the interest portion of any deferred payment obligation, (y)
all accrued interest and (z) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptances or similar
facilities) paid or accrued, or scheduled to be paid or accrued, during such
period; (ii) dividends or distributions with respect to Preferred Stock or
Disqualified Stock of such Person (and of its Restricted Subsidiaries if to be
paid to a Person other than such Person or its Restricted Subsidiaries) declared
and payable in cash; (iii) the portion of any rental obligation of such Person
or its Restricted Subsidiaries in respect of any Capital Lease Obligation
allocable to interest expense in accordance with GAAP; (iv) the portion of any
rental obligation of such Person or its Restricted Subsidiaries in respect of
any Sale and Leaseback Transaction allocable to interest expense (determined as
if such Sale and Leaseback Transaction were treated as a Capital Lease
Obligation); and (v) to the extent any Indebtedness of any other Person is
Guaranteed by such Person or any of its Restricted Subsidiaries, the aggregate
amount of interest paid, accrued or scheduled to be paid or accrued, by such
other Person during such period attributable to any such Indebtedness, less (B)
to the extent included in (A) above, amortization or write-off of deferred
financing costs of such Person and its Restricted Subsidiaries during such
period and any charge related to any premium or penalty paid in connection with
redeeming or retiring any Indebtedness of such Person and its Restricted
Subsidiaries prior to its Stated Maturity; in the case of both (A) and (B)
above, after elimination of intercompany accounts among such Person and its
Restricted Subsidiaries and as determined in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or net loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis determined in accordance
with GAAP; provided that there shall be excluded therefrom, without duplication,
(i) all items classified as extraordinary; (ii) any net income of any Person
other than such Person and its Restricted Subsidiaries, except to the extent of
the amount of dividends or other distributions actually paid to such Person or
its Restricted Subsidiaries by such other Person during such period in respect
of such income; (iii) the net income of any Person acquired by such Person or
any of its Restricted Subsidiaries in a pooling-of-interests transaction for any
period prior to the date of the related acquisition; (iv) any gain or loss, net
of taxes, realized on the termination of any employee pension
<PAGE> 14
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benefit plan; (v) net gains (but not net losses) in respect of Asset Sales by
such Person or its Restricted Subsidiaries; (vi) the net income (but not net
loss) of any Restricted Subsidiary of such Person to the extent that the payment
of dividends or other distributions to such Person is restricted by the terms of
its charter or any agreement, instrument, contract, judgment, order, decree,
statute, rule, governmental regulation or otherwise, except for any dividends or
distributions actually paid by such Restricted Subsidiary to such Person; (vii)
with regard to a non-wholly owned Restricted Subsidiary, any aggregate net
income (or loss) in excess of such Person's or such Restricted Subsidiary's pro
rata share of such non-wholly owned Restricted Subsidiary's net income (or
loss); and (viii) the cumulative effect of changes in accounting principles.
"Consolidated Tangible Assets" of any Person means, as of any date,
the sum for such Person and its Restricted Subsidiaries (after eliminating
intercompany items) of the net book value of all Property and assets of such
Person and its Restricted Subsidiaries reflected on a balance sheet of such
Person or such Restricted Subsidiary, as the case may be, prepared in accordance
with GAAP, less the net book value of all items that would be classified as
intangibles under GAAP, including, without limitation, (i) licenses, patents,
patent applications, copyrights, trademarks, trade names, goodwill, noncompete
agreements and organizational expenses, and (ii) unamortized deferred financing
costs, debt discount and expenses, including any appropriate deductions for any
minority interest in such assets of such Restricted Subsidiaries.
"Corporate Trust Administration Office" means the principal office
of the Trustee at which at any particular time its corporate trust business
shall be principally administered, which office is, at the date of execution of
this Indenture, located at 450 West 33rd Street, 15th Floor, New York, New York
10001-2697.
"Covenant Defeasance" has the meaning set forth in Section 8.03
hereof.
"Debt to EBITDA Ratio" means, as at any date of determination, the
ratio of (i) the aggregate amount of Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis as at the date of determination
to (ii) the aggregate amount of EBITDA of the Company and its Restricted
Subsidiaries for the four preceding fiscal quarters for which financial
information is available immediately prior to the date of determination;
provided that any Indebtedness incurred or retired by the Company or any of its
Restricted Subsidiaries during the fiscal quarter in which the date of
determination occurs shall be calculated as if such Indebtedness was so incurred
or retired on the first day of the fiscal quarter in which the date of
determination occurs; and provided, further, that (x) if the transaction giving
rise to the need to calculate the Debt to EBITDA Ratio would have the effect of
increasing or decreasing Indebtedness or EBITDA in the future, Indebtedness or
EBITDA shall be calculated on a pro forma basis as if such transaction had
occurred on the first day of such four fiscal
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quarter period preceding the date of determination, and (y) if during such four
fiscal quarter period, the Company or any of its Restricted Subsidiaries shall
have engaged in any Asset Sale, EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive), or increased by an amount equal to the
EBITDA (if negative), directly attributable to the assets which are the subject
of such Asset Sale and any related retirement of Indebtedness as if such Asset
Sale and related retirement of Indebtedness had occurred on the first day of
such period and (z) if during such four fiscal quarter period the Company or any
of its Restricted Subsidiaries shall have acquired any material assets outside
the ordinary course of business, EBITDA shall be calculated on a pro forma basis
as if such asset acquisition and related financing had occurred on the first day
of such period.
"Default" means any event, act or condition, the occurrence of which
is, or after notice or the passage of time or both would be, an Event of
Default.
"Defaulted Interest" has the meaning set forth in Section 2.11
hereof.
"Defeasance" has the meaning set forth in Section 8.02 hereof.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Disposition" has the meaning set forth in the definition of "Asset
Sale" in this Section 1.01.
"Disqualified Stock" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, or otherwise, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, or is exchangeable for
Indebtedness at any time, in whole or in part, on or prior to the Stated
Maturity of the Notes.
"EBIT" means the amount calculated in the same manner as EBITDA, but
not including clauses (iii) and (iv) of the definition thereof.
"EBITDA" means, with respect to any Person for any period, the sum
for such Person for such period of Consolidated Net Income plus, to the extent
reflected in the income statement of such Person for such period from which
Consolidated Net Income is determined, without duplication, (i) Consolidated
Interest Expense; (ii) income tax expense; (iii) depreciation expense; (iv)
amortization expense; (v) any non-cash charge related to the issuance to
employees of such Person of options to purchase Capital Stock of such Person;
and (vi) any charge related to any premium or penalty paid in connection with
redeeming or retiring any Indebtedness prior to its Stated Maturity and minus,
to the extent reflected in
<PAGE> 16
-9-
such income statement, any non-cash credits that had the effect of increasing
Consolidated Net Income of such Person for such period, each item to be
determined in accordance with GAAP.
"Eligible Cash Equivalents" means (i) securities issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof, provided that the full faith and credit of the United
States of America is pledged in support thereof; (ii) time deposits and
certificates of deposit of any commercial bank organized in the United States
having capital and surplus in excess of $500,000,000, with a maturity date not
more than one year from the date of acquisition; (iii) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above; (iv) direct 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, or subject to tender
at the option of the holder thereof within 90 calendar days after the date of
acquisition thereof and, at the time of acquisition, having a rating of A or
better from Standard & Poor's or A-2 or better from Moody's; (v) commercial
paper issued by the parent corporation of any commercial bank organized in the
United States having capital and surplus in excess of $500,000,000 and
commercial paper issued by others having one of the two highest ratings
obtainable from either Standard & Poor's or Moody's and in each case maturing
within ninety days after the date of acquisition; (vi) overnight bank deposits
and bankers' acceptances at any commercial bank organized in the United States
having capital and surplus in excess of $500,000,000; (vii) deposits available
for withdrawal on demand with a commercial bank organized in the United States
having capital and surplus in excess of $500,000,000; and (viii) investments in
money market funds substantially all of whose assets comprise securities of the
types described in clauses (i) through (vi).
"Eligible Institution" means a commercial banking institution that
has combined capital and surplus of not less than $500 million or its equivalent
in foreign currency, whose debt is rate "A" (or higher) according to Standard &
Poor's or Moody's at the time as of which any investment or rollover therein is
made.
"Equity Offering" means an offering of Common Stock of the Company
resulting in net proceeds to the Company in excess of $20 million.
"Escrow Account" means an escrow account for the deposit of
approximately $70 million of the net proceeds from the sale of the Notes under
the Escrow and Disbursement Agreement.
<PAGE> 17
-10-
"Escrow Agent" means The Bank of New York, as Escrow Agent under the
Escrow and Disbursement Agreement, or any successor thereto appointed pursuant
to such agreement.
"Escrow and Disbursement Agreement" means the Escrow and
Disbursement Agreement, dated as of the date of the Indenture, by and among the
Escrow Agent, the Trustee and the Company, governing the disbursement of funds
from the Escrow Account and substantially in the form of Exhibit G to this
Indenture.
"Event of Default" has the meaning set forth in Section 6.01 hereof.
"Excess Proceeds" has the meaning set forth in Section 4.08(b)
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Certificated Notes" means Notes issued in definitive,
fully registered form to beneficial owners of interests in the Exchange Global
Note pursuant to Section 2.06(c) hereof.
"Exchange Global Note" has the meaning set forth in Section 2.01(d)
hereof.
"Exchange Notes" has the meaning set forth in the Recitals of the
Company and more particularly means any of the Notes authenticated and delivered
under this Indenture pursuant to the Registered Exchange Offer.
"Exchange Rate Obligation" means, with respect to any Person, any
currency swap agreements, forward exchange rate agreements, foreign currency
futures or options, exchange rate collar agreements, exchange rate insurance or
other agreements or arrangements, or combination thereof, designed to provide
protection against fluctuations in currency exchange rates.
"Existing Indebtedness" means the Indebtedness of the Company and
its Restricted Subsidiaries outstanding on the date of this Indenture, including
the 2005 Notes and the 2006 Notes, and specified in Schedule A hereto, and the
incurrence by the Company of Indebtedness represented by the 2005 Notes and the
2006 Notes.
"Existing Notes" means the 2005 Notes and the 2006 Notes.
"Fair Market Value" means, with respect to any Property or asset,
the sale value that would be obtained in an arm's-length transaction between an
informed and willing
<PAGE> 18
-11-
seller under no compulsion to sell and an informed and willing buyer under no
compulsion to buy, as determined in good faith by the Board of Directors.
"Fiber Network" means a digital fiber optic telecommunications
network wholly owned by the Company that serves a Metropolitan Area.
"Final Memorandum" means the final Offering Memorandum, dated July
18, 1997, used in connection with the Initial Placement.
"GAAP" means United States generally accepted accounting principles,
consistently applied, as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States, that are applicable to the circumstances as of the date of
determination; provided that, except as otherwise specifically provided herein,
all calculations made for purposes of determining compliance with Article IV or
Section 5.01 hereof shall utilize GAAP as in effect on the Issue Date.
"Global Notes" means the Initial Global Note and the Exchange Global
Note.
"Guarantee" means any direct or indirect obligation, contingent or
otherwise, of a Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person in any manner. The terms
"Guaranteed," "Guaranteeing" and "Guarantor" shall have correlative meanings.
"Guaranteed Indebtedness" has the meaning set forth in Section
4.10(a) hereof.
"Holder" means (i) in the case of any Certificated Note, the Person
in whose name such Certificated Note is registered in the Security Register and
(ii) in the case of any Global Note, the Depositary.
"incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or otherwise),
extend, assume, Guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or obligation on the balance sheet of
such Person (and "incurrence," "incurred," "incurrable" and "incurring" shall
have meanings correlative to the foregoing); provided that a change in GAAP that
results in an obligation of such Person that exists at such time becoming
Indebtedness shall not be deemed an incurrence of such Indebtedness.
Indebtedness otherwise incurred by a Person before it becomes a Subsidiary of
the Company (whether by merger, con-
<PAGE> 19
-12-
solidation, acquisition or otherwise) shall be deemed to have been incurred at
the time at which such Person becomes a Subsidiary of the Company.
"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, assets or services (but
excluding trade accounts payable or accrued liabilities 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 Stock of such Person and, to the extent held by Persons other than
such Person or its Restricted Subsidiaries, the maximum fixed redemption or
repurchase price of Disqualified 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 Stock that does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were repurchased on any date on which Indebtedness shall be
required to be determined pursuant to this Indenture; provided that if such
Disqualified Stock is not then permitted to be repurchased, the repurchase price
shall be the book value of such Disqualified 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 2005 Notes or 2006 Notes outstanding at any date, the amount of such 2005
Notes or 2006 Notes shall be the Accreted Value (as defined in the relevant
indenture) thereof as of such date unless cash interest has commenced to accrue
pursuant to the terms of the relevant indenture, in which case the amount of the
2005 Notes or 2006 Notes outstanding will be determined pursuant to the terms of
such notes and will not include any accrued and unpaid cash interest which would
otherwise be included in Accreted Value (as defined in the relevant Indenture)
because of clause (iii) of the definition thereof.
<PAGE> 20
-13-
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument, and any such supplemental indenture,
respectively.
"Independent Director" means a director of the Company other than a
director who is (i) a party, or who is an officer, employee, promoter, partner
or Person performing similar functions for a party (including the Company) to
the transaction in question; (ii) a director of a party (other than the Company)
to the transaction; or (iii) related by blood or marriage to any Person
specified in clause (i) or (ii) of this definition.
"Initial Certificated Notes" means Notes issued in definitive, fully
registered form to beneficial owners of interests in the Initial Global Note
pursuant to Section 2.06(c) hereof.
"Initial Global Note" has the meaning set forth in Section 2.01(c)
hereof.
"Initial Notes" has the meaning set forth in the Recitals of the
Company and, more particularly, means any of the Notes authenticated and
delivered under this Indenture other than pursuant to the Registered Exchange
Offer.
"Initial Placement" means the initial sales of the Notes by the
Initial Purchasers.
"Initial Purchasers" means the Initial Purchasers, as such term is
defined in the Purchase Agreement.
"Interest Hedging Obligation" means, with respect to any Person, an
obligation of such Person pursuant to any interest rate swap agreement, interest
rate cap, collar or floor agreement or other similar agreement or arrangement
designed to protect against or manage such Person's or any of its Restricted
Subsidiaries' exposure to fluctuations in interest rates.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Notes.
"Investment" in any Person means any direct, indirect or contingent
(i) advance or loan to, Guarantee of any Indebtedness of, extension of credit or
capital contribution to such Person; (ii) the acquisition of any shares of
Capital Stock, bonds, notes, debentures or other securities of such Person; or
(iii) the acquisition, by purchase or otherwise,
<PAGE> 21
-14-
of all or substantially all of the business, assets or stock or other evidence
of beneficial ownership of such Person; provided that Investments shall exclude
commercially reasonable extensions of trade credit. The amount of any Investment
shall be the original cost of such Investment, plus the cost of all additions
thereto and minus the amount of any portion of such Investment repaid to such
Person in cash as a repayment of principal or a return of capital, as the case
may be, but without any other adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment. In
determining the amount of any Investment involving a transfer of any Property or
asset other than cash, such Property or asset shall be valued at its Fair Market
Value at the time of such transfer. For purposes of the definition of
"Restricted Payment" and Section 4.13 only, "Investment" shall include the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the Fair Market Value of the net assets of any Subsidiary at the time that such
Subsidiary is designated an Unrestricted Subsidiary and shall exclude the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the Fair Market Value of the net assets of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary.
"Issue Date" means the date on which the Notes were first
authenticated and delivered under this Indenture.
"Joint Venture Entity" has the meaning set forth in Section
4.13(b)(vii) hereof.
"Lender" means a lender under the Secured Credit Facility that is a
party to and is bound by an agreement with respect to the Secured Credit
Facility and has extended or is committed to extend financing to the Company or
any of its Subsidiaries under the Secured Credit Facility.
"Lien" means, with respect to any Property or other asset, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien (statutory or other), charge, easement,
encumbrance, preference, priority or other security or similar agreement or
preferential arrangement of any kind or nature whatsoever on or with respect to
such Property or other asset (including, without limitation, any conditional
sale or title retention agreement having substantially the same economic effect
as any of the foregoing).
"Maturity" means, when used with respect to a Note, the date on
which the principal of such Note becomes due and payable as provided therein or
in this Indenture, whether on the date specified in such Note as the fixed date
on which the principal of such Note is due and payable, on the Change of Control
Payment Date or Asset Sale Payment Date, or by declaration of acceleration, call
for redemption or otherwise.
<PAGE> 22
-15-
"Metropolitan Area" means the 31 metropolitan areas in which the
Company, as of June 30, 1997, has a Fiber Network and other metropolitan areas
deemed in the reasonable business judgment of the management of the Company to
provide an opportunity for the building and operation of such a Fiber Network
with the reasonable potential to produce financial results for the Company at
least substantially comparable to the metropolitan areas in which the Company
has such operational Fiber Networks.
"Moody's" means Moody's Investors Service, Inc., or, if Moody's
Investors Service, Inc. shall cease rating the specified debt securities and
such ratings business with respect thereto shall have been transferred to a
successor Person, such successor Person; provided that if Moody's Investors
Service, Inc. ceases rating the specified debt securities and its ratings
business with respect thereto shall not have been transferred to any successor
Person or such successor Person is Standard & Poor's, then "Moody's" shall mean
any other nationally recognized rating agency (other than Standard & Poor's)
that rates the specified debt securities and that shall have been designated by
the Company in an Officers' Certificate.
"NASD" means the National Association of Securities Dealers, Inc.
"Net Cash Proceeds" means, with respect to the sale of any Property
or assets by any Person or any of its Restricted Subsidiaries, Cash Proceeds
received net of (i) all reasonable out-of-pocket expenses of such Person or such
Restricted Subsidiary incurred in connection with such a sale, including,
without limitation, all legal, title and recording tax expenses, commissions and
other fees and expenses incurred (but excluding any finder's fee or broker's fee
payable to any Affiliate of such Person or any of its Restricted Subsidiaries)
and all federal, state, foreign and local taxes arising in connection with such
sale that are paid or required to be accrued as a liability under GAAP by such
Person or its Restricted Subsidiaries; (ii) all payments made or required to be
made by such Person or its Restricted Subsidiaries on any Indebtedness which is
secured by such Properties or assets in accordance with the terms of any Lien
upon or with respect to such Properties or assets or which must, by the terms of
such Lien, or in order to obtain a necessary consent to such transaction or by
applicable law, be repaid in connection with such sale; and (iii) all
contractually required distributions and other payments made to minority
interest holders (but excluding distributions and payments to Affiliates of such
Person) in Restricted Subsidiaries of such Person as a result of such
transaction; provided that, in the event that any consideration for a
transaction (which would otherwise constitute Net Cash Proceeds) is required to
be held in escrow pending determination of whether a purchase price adjustment
will be made, such consideration (or any portion thereof) shall become Net Cash
Proceeds only at such time as it is released to such Person or its Restricted
Subsidiaries from escrow; provided, further, that any non-cash consideration
received in connection with any transaction, which is subsequently converted to
<PAGE> 23
-16-
cash, shall be deemed to be Net Cash Proceeds at such time, and shall thereafter
be applied in accordance with the applicable provisions of this Indenture.
"Notes" has the meaning set forth in the Recitals of the Company and
more particularly means any of the Notes authenticated and delivered under this
Indenture.
"Offer Purchase Price" has the meaning set forth in Section 4.08(c)
hereof.
"Officer" means the Chairman of the Board of Directors, a Vice
Chairman of the Board of Directors, the President, a Vice President, the Chief
Financial Officer, the Chief Accounting Officer, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary.
"Officers' Certificate" means a certificate signed by (i) the
Chairman of the Board of Directors, a Vice Chairman of the Board of Directors,
the President, the Chief Executive Officer or a Vice President, and (ii) the
Chief Financial Officer, the Chief Accounting Officer, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee, which certificate shall comply with the provisions of
Section 10.04 hereof; provided that any Officers' Certificate delivered pursuant
to the first paragraph of Section 4.19 hereof shall be signed by the Chief
Executive Officer, the Chief Financial Officer or the Chief Accounting Officer.
"Opinion of Counsel" means a written opinion from legal counsel (who
may be counsel to the Company or the Trustee) who is acceptable to the Trustee,
which opinion shall comply with the provisions of Section 10.04 hereof; provided
that any Opinion of Counsel delivered pursuant to Section 8.04 hereof shall not
be rendered by an employee of the Company or any of its Subsidiaries.
"Paying Agent" means any Person authorized by the Company to make
payments of principal, premium or interest with respect to the Notes on behalf
of the Company.
"Permitted Holders" means The Huff Alternative Income Fund, L.P.,
ING Equity Partners, L.P.I., Apex Investment Fund I, L.P., Apex Investment Fund
II, L.P., The Productivity Fund II, L.P. and Anthony J. Pompliano and the
respective Affiliates (other than the Company and the Restricted Subsidiaries)
of each of the foregoing.
"Permitted Investments" means
(i) Eligible Cash Equivalents;
(ii) Investments in Property used in the ordinary course of
business;
<PAGE> 24
-17-
(iii) Investments in any Person as a result of which such Person
becomes a Restricted Subsidiary of the Company in compliance with Section
4.17 hereof;
(iv) Investments pursuant to certain agreements or obligations of
the Company or a Restricted Subsidiary of the Company, in effect on the
Issue Date, to make such Investments, which agreements and obligations are
specified in Schedule B hereto;
(v) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility and workers' compensation, performance and
other similar deposits;
(vi) Interest Hedging Obligations with respect to any floating rate
Indebtedness that is permitted under Section 4.09 hereof to be
outstanding;
(vii) Exchange Rate Obligations, provided that such Exchange Rate
Obligations were entered into in connection with transactions in the
ordinary course of business or the incurrence of Indebtedness that is
permitted under Section 4.09 hereof to be outstanding;
(viii) bonds, notes, debentures or other debt securities received as
a result of Asset Sales permitted under Section 4.08 hereof;
(ix) Investments by the Company or a Restricted Subsidiary in or in
respect of a Person to the extent the consideration for such Investment
consists of shares of Qualified Stock of the Company; and
(x) Investments in existence at the Issue Date.
"Permitted Liens" means
(i) Liens on Property or assets of a Person existing at the time
such Person is merged with or into or consolidated with the Company or any
Subsidiary of the Company, provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
secure any Property or assets of the Company or any of its Subsidiaries
other than the Property or assets subject to the Liens prior to such
merger or consolidation;
(ii) Liens on Telecommunications Assets existing during the time of
the construction thereof;
<PAGE> 25
-18-
(iii) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business consistent with industry
practice;
(iv) Liens existing on the Issue Date;
(v) Liens to secure Indebtedness permitted to be incurred under
Section 4.09(b)(i) hereof;
(vi) any Lien on Property of the Company in favor of the United
States of America or any state thereof, or any instrumentality of either,
to secure certain required payments pursuant to any contract or statute;
(vii) any Lien for taxes or assessments or other governmental
charges or levies not then due and payable (or which, if due and payable,
are being contested in good faith and for which adequate reserves are
being maintained, to the extent required by GAAP);
(viii) easements, rights-of-way, licenses and other similar
restrictions on the use of Properties or minor imperfections of title
that, in the aggregate, are not material in amount and do not in any case
materially detract from the Properties subject thereto or interfere with
the ordinary conduct of the business of the Company or its Subsidiaries;
(ix) any Lien to secure obligations under workmen's compensation
laws or similar legislation, including any Lien with respect to judgments
which are not currently dischargable;
(x) any statutory warehousemen's, materialmen's or other similar
Liens for sums not then due and payable (or which, if due and payable, are
being contested in good faith and with respect to which adequate reserves
are being maintained, to the extent required by GAAP);
(xi) any interest or title of a lessor in Property subject to a
Capital Lease Obligation;
(xii) Liens to secure any Vendor Financing Indebtedness; provided
that such Liens do not extend to any Property or assets other than the
Property or assets the acquisition of which was financed by such Vendor
Financing Indebtedness;
<PAGE> 26
-19-
(xiii) Liens in favor of the Company or any Restricted Subsidiary of
the Company;
(xiv) Liens on Property or assets of a Person existing prior to the
time such Person is acquired by the Company as a result of (a) an
Investment described in clause (ix) of the definition of "Permitted
Investments" herein or (b) an Investment described in clause (vii) of
Section 4.13(b) hereof; provided that such Liens were in existence prior
to the contemplation of such Investment and do not secure any Property or
assets of the Company or any of its Subsidiaries other than the Property
or assets subject to the Liens prior to such Investment;
(xv) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other Property relating to
such letters of credit and the products and proceeds thereof;
(xvi) Liens on the Escrow Account and all funds and securities
therein securing only the Notes equally and ratably; and
(xvii) Liens to secure any permitted extension, renewal, refinancing
or refunding (or successive extensions, renewals, refinancings or
refundings), in whole or in part, of any Indebtedness secured by Liens
referred to in the foregoing clauses (i) through (v) and (xii), provided
that such Liens do not extend to any other Property or assets other than
the Property and assets that secured the original Lien and the principal
amount of the Indebtedness secured by such Liens is not increased.
"Permitted Subordinated Financing" means Indebtedness or Preferred
Stock of the Company issued to a Permitted Holder; provided that (i) in the case
of Permitted Subordinated Financing that constitutes Indebtedness, such
Indebtedness (A) is subordinated in right of payment to the Notes as provided in
Exhibit F hereto and (B) has a maturity of 180 days or less, and (ii) in the
case of Permitted Subordinated Financing that constitutes Preferred Stock, such
Preferred Stock is retired within 180 days of issuance.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock" means, as applied to the Capital Stock of any
Person, Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
<PAGE> 27
-20-
"Private Placement Legends" means the legends in the form set forth
in Section 2.01(e)(i) hereof.
"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms hereof, a calculation in accordance with
Article 11 of Regulation S-X promulgated under the Securities Act (to the extent
applicable), as interpreted in good faith by the Board of Directors, or
otherwise, a calculation made in good faith by the Board of Directors.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed,
tangible or intangible, excluding Capital Stock in any other Person.
"Purchase Agreement" means the Purchase Agreement relating to the
Notes, dated July 18, 1997, among the Company and the Initial Purchasers.
"Qualified Stock" of any Person means a class of Capital Stock other
than Disqualified Stock.
"Record Date" means, for the interest payable on any Interest
Payment Date, the date specified in Section 2.11 hereof.
"Redemption Date" means, when used with respect to any Note or part
thereof to be redeemed hereunder, the date fixed for redemption of such Notes
pursuant to the terms of the Notes and this Indenture.
"Redemption Price" means, when used with respect to any Note or part
thereof to be redeemed hereunder, the price fixed for redemption of such Note
pursuant to the terms of the Notes and this Indenture, plus accrued and unpaid
interest thereon, if any, to the Redemption Date.
"Refinance" has the meaning set forth in Section 4.09(b)(x) hereof
(and "Refinanced" and "Refinancing" shall have meanings correlative to the
foregoing).
"Refinancing Indebtedness" means any Indebtedness incurred in
connection with the Refinancing of other Indebtedness.
"Registered Exchange Offer" has the meaning set forth in the
Registration Rights Agreement.
"Registrar" has the meaning set forth in Section 2.03 hereof.
<PAGE> 28
-21-
"Registration Rights Agreement" means the Registration Rights
Agreement relating to the Notes, dated July 23, 1997 among the Company and the
Initial Purchasers, and attached hereto as Exhibit E.
"Required Filing Date" has the meaning set forth in Section 4.18
hereof.
"Restricted Payment" means (i) a dividend or other distribution
declared or paid on the Capital Stock of the Company or to the Company's
stockholders (in their capacity as such), or declared or paid to any Person
other than the Company or a Restricted Subsidiary of the Company on the Capital
Stock of any Restricted Subsidiary of the Company, in each case, other than
dividends, distributions or payments made solely in Qualified Stock of the
Company or such Restricted Subsidiary; (ii) a payment made by the Company or any
of its Restricted Subsidiaries (other than to the Company or any Restricted
Subsidiary of the Company) to purchase, redeem, acquire or retire any Capital
Stock of the Company or of a Restricted Subsidiary of the Company; (iii) a
payment made by the Company or any of its Restricted Subsidiaries (other than a
payment made solely in Qualified Stock of the Company) to redeem, repurchase,
defease (including an in-substance or legal defeasance) or otherwise acquire or
retire for value (including pursuant to mandatory repurchase covenants), prior
to any scheduled maturity, scheduled sinking fund or mandatory redemption
payment, Indebtedness of the Company or such Restricted Subsidiary which is
subordinate (whether pursuant to its terms or by operation of law) in right of
payment to the Notes and which was scheduled to mature on or after the maturity
of the Notes; or (iv) an Investment in any Person, including an Unrestricted
Subsidiary or the designation of a Subsidiary as an Unrestricted Subsidiary,
other than (a) a Permitted Investment, (b) an Investment by the Company in a
Restricted Subsidiary of the Company or (c) an Investment by a Restricted
Subsidiary of the Company in the Company or a Restricted Subsidiary of the
Company.
"Restricted Subsidiary" means (i) with respect to any Person other
than the Company and its Subsidiaries, a Subsidiary of such Person, and (ii)
with respect to the Company, any Subsidiary of the Company that has not been
classified as an Unrestricted Subsidiary pursuant to Section 4.17 hereof.
"Rule 144" means Rule 144 under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"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
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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.
"Secured Credit Facility" means the credit agreements among the
Company, certain of its Subsidiaries and AT&T Credit Corporation specified in
Schedule C hereto and additional secured credit agreements to which the Company
is or becomes a party, in an aggregate amount not to exceed $35,000,000, and all
related amendments, notes, collateral documents, guarantees, instruments and
other agreements executed in connection therewith, as the same may be amended,
modified, supplemented, restated, renewed, extended, refinanced, substituted or
replaced from time to time.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Security Register" has the meaning set forth in Section 2.03
hereof.
"Shelf Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Significant Restricted Subsidiary" means a Restricted Subsidiary
that is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X
under the Securities Act and the Exchange Act.
"Special Record Date" means a date fixed by the Trustee pursuant to
Section 2.11 for the payment of Defaulted Interest.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of McGraw Hill Corporation, or, if Standard & Poor's Ratings Group
shall cease rating the specified debt securities and such ratings business with
respect thereto shall have been transferred to a successor Person, such
successor Person; provided that if Standard & Poor's Ratings Services ceases
rating the specified debt securities and its ratings business with respect
thereto shall not have been transferred to any successor Person or such
successor Person is Moody's, then "Standard & Poor's" shall mean any other
nationally recognized rating agency (other than Moody's) that rates the
specified debt securities and that shall have been designated by the Company in
an Officers' Certificate.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred), and, when used with
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respect to any installment of interest on such security, the fixed date on which
such installment of interest is due and payable.
"Subsidiary" means, with respect to any Person, (i) any corporation
more than 50 percent of the outstanding shares of Voting Stock of which is
owned, directly or indirectly, by such Person, or by one of more other
Subsidiaries of such Person, or by such Person and one or more other
Subsidiaries of such Person; (ii) any general partnership, joint venture or
similar entity, more than 50 percent of the outstanding partnership or similar
interests of which are owned, directly or indirectly, by such Person, or by one
or more other Subsidiaries of such Person, or by such Person and one or more
other Subsidiaries of such Person; and (iii) any limited partnership of which
such Person or any Subsidiary of such Person is a general partner.
"Subsidiary Guarantee" has the meaning set forth in Section 4.10(a)
hereof.
"Surviving Entity" has the meaning set forth in Section 5.01(a)
hereof.
"Telecommunications Assets" means, with respect to any Person,
assets (including, without limitation, rights-of-way, trademarks and licenses to
use copyrighted material) that are utilized by such Person, directly or
indirectly, in a Telecommunications Business. Telecommunications Assets shall
include stock, joint venture or partnership interests in another Person,
provided that substantially all of the assets of such other Person consist of
Telecommunications Assets, and provided, further, that if such stock, joint
venture or partnership interests are held by the Company or a Restricted
Subsidiary, such other Person either is, or immediately following the relevant
transaction shall become, a Restricted Subsidiary of the Company pursuant to
Section 4.17 hereof. The determination of what constitutes Telecommunication
Assets shall be made by the Board of Directors and evidenced by a Board
Resolution delivered to the Trustee.
"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 use in (i) above; or (iii) evaluating, participating or
pursuing any other activity or opportunity that is related to those specified in
(i) or (ii) above.
"Telecommunications Company" means any Person substantially all of
the assets of which consist of Telecommunications Assets.
"Temporary Notes" has the meaning set forth in Section 2.09 hereof.
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"Total Market Capitalization" of any Person means, at the time of
determination, the product of (i) the aggregate amount of outstanding shares of
Common Stock of such Person (which shall not include any Common Stock issuable
upon the exercise of options or warrants on, or securities convertible or
exchangeable into, shares of Common Stock of such Person) and (ii) the average
Closing Price of such Common Stock over the preceding twenty consecutive Trading
Days. If no such Closing Price exists with respect to shares of any such class,
the value of such shares shall be determined by the Board of Directors in good
faith and evidenced by a Board Resolution delivered to the Trustee.
"Trading Day" means, with respect to a security traded on a
securities exchange, automated quotation system or market, a day on which such
exchange, system or market is open for a full day of trading.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15
U.S.C. Sections 77aaa-77bbbb) as in effect on the date of this Indenture except
as required by Section 9.04 hereof or if the Indenture is qualified under such
Act then as in effect on the date of such qualification, provided that in the
event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939, as so amended.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and,
thereafter, means such successor.
"2005 Indenture" means the indenture, dated as of November 14, 1995,
between the Company and The Chase Manhattan Bank (formerly known as Chemical
Bank), as trustee, as such indenture may from time to time be supplemented or
amended.
"2006 Indenture" means the indenture dated as of March 26, 1996,
between the Company and The Chase Manhattan Bank (formerly known as Chemical
Bank), as trustee, as such indenture may from time to time be supplemented or
amended.
"2005 Notes" means the Company's 13% Senior Discount Notes due 2005
issued under the 2005 Indenture.
"2006 Notes" means the Company's 12 3/4% Senior Discount Notes due
2006 issued under the 2006 Indenture.
<PAGE> 32
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"U.S. Government Obligations" means (i) securities that are (a)
direct obligations of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged or (b)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof; and (ii) depository receipts issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian with respect to
any U.S. Government Obligation which is specified in clause (i) above and held
by such bank for the account of the holder of such depository receipt, or with
respect to any specific payment of principal or interest on any U.S. Government
Obligation which is so specified and held, provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal or interest of the U.S. Government Obligation evidenced by such
depository receipt.
"Unrestricted Subsidiary" means any Subsidiary of the Company that
the Company has classified as an "Unrestricted Subsidiary" and that has not been
reclassified as a Restricted Subsidiary, pursuant to Section 4.17 hereof.
"Vendor Financing Indebtedness" of any Person means an obligation
owed by such Person to a vendor of any Telecommunications Assets solely in
respect of the purchase price of such assets, provided that the amount of such
Indebtedness does not exceed the Fair Market Value of such assets, and provided,
further, that such Indebtedness is incurred within 180 calendar days of the
acquisition of such assets.
"Voting Stock" means, with respect to any Person, 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.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust Indenture
Act, the provision is incorporated by reference in and made a part of this
Indenture. The following Trust Indenture Act terms incorporated by reference in
this Indenture have the following meanings:
"indenture securities" means the Notes.
<PAGE> 33
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"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or other
obligor on the Notes, if any.
All other Trust Indenture Act terms used or incorporated by
reference in this Indenture that are defined by the Trust Indenture Act, defined
by Trust Indenture Act reference to another statute or defined by Commission
rule have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(a) the words "herein," "hereof" and "hereunder," and other words of
similar import, refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(b) "or" is not exclusive;
(c) "including" means including without limitation;
(d) the principal amount of any noninterest bearing or other
discount security (other than the 2005 Notes or the 2006 Notes), at any
date shall be the principal amount thereof that would be shown on a
balance sheet of the issuer dated such date prepared in accordance with
GAAP;
(e) when used with respect to the 2005 Notes or the 2006 Notes, the
term "principal amount" shall mean the principal amount thereof at the
Stated Maturity of such principal amount; and
(f) unless otherwise expressly provided herein, the principal amount
of any Preferred Stock shall be the greater of (i) the maximum liquidation
value of such Preferred Stock or (ii) the maximum mandatory redemption or
mandatory repurchase price with respect to such Preferred Stock.
SECTION 1.04. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion
<PAGE> 34
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of, only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.05. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 7.01)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by an acknowledgment of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than such signer's
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of the signer's authority. The fact and date of the execution
of any such instrument or
<PAGE> 35
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writing, or the authority of the person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
SECTION 1.06. Satisfaction and Discharge. This Indenture shall cease
to be of further effect (except as to the rights of Holders under Sections 2.06,
2.07, 2.09, 4.02, 4.03 and 4.04 hereof) and the Trustee, on receipt of a Company
Order requesting such action, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when (a) either (i) all
outstanding Notes have been delivered to the Trustee for cancellation or (ii)
all such Notes not theretofore delivered to the Trustee for cancellation (A)
have become due and payable, (B) will become due and payable at their Stated
Maturity within one year or (C) are to be called for redemption within one year
under irrevocable arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the expense, of the
Company, and the Company, in the case of (A), (B) or (C) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust for
the purpose an amount sufficient to pay and discharge the entire indebtedness on
such Notes, for principal (and premium, if any) and interest to the date of such
deposit (in the case of Notes which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be, together with
irrevocable instructions from the Company in form and substance satisfactory to
the Trustee directing the Trustee to apply such funds to the payment thereof;
(b) the Company has paid or caused to be paid all other sums payable hereunder
by the Company; and (c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with. Notwithstanding the satisfaction and
discharge of this Indenture pursuant to this Section 1.06, the obligations of
the Company to the Trustee under Section 7.07 hereof, and, if money shall have
been deposited with the Trustee in trust for the Holders pursuant to this
Section 1.06, the obligations of the Trustee under this Section 1.06 and Section
4.03 hereof shall survive.
All money deposited with the Trustee pursuant to this Section 1.06
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, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for the payment of which such money has been deposited with
the Trustee. If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Section 1.06 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to this
Section 1.06 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
Section 1.06; provided, that if the Company has made any payment of inter-
<PAGE> 36
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est on or principal of any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the cash or U.S. Government Obligations
held by the Trustee or Paying Agent.
ARTICLE II
THE NOTES
SECTION 2.01. Form and Dating. (a) The Initial Notes and the
certificate of authentication of the Trustee thereon shall be substantially in
the form of Exhibit A or Exhibit B hereto, as applicable, which are hereby
incorporated in and expressly made a part of this Indenture. The Exchange Notes
and the certificate of authentication of the Trustee thereon shall be
substantially in the form of Exhibit C or Exhibit D hereto, as applicable, which
are hereby incorporated in and expressly made a part of this Indenture.
(b) The Notes may have such letters, numbers or other marks of
identification and such legends and endorsements, stamped, printed, lithographed
or engraved thereon, (i) as the Company may deem appropriate and as are not
inconsistent with the provisions of this Indenture, (ii) such as may be required
to comply with this Indenture, any law or any rule of any securities exchange on
which the Notes may be listed and (iii) such as may be necessary to conform to
customary usage. Each Note shall be dated the date of its authentication by the
Trustee.
(c) Initial Notes shall be issued initially in the form of a
permanent, global note in definitive, fully registered form, without coupons,
substantially in the form of Exhibit A hereto (the "Initial Global Note"). Upon
issuance, such Initial Global Note shall be duly executed by the Company and
authenticated by the Trustee as hereinafter provided and deposited with the
Trustee as custodian for the Depositary. Any Initial Certificated Note that may
be issued pursuant to Section 2.06(c) hereof, shall be issued in the form of a
note in definitive, fully registered form, without coupons, substantially in the
form set forth in Exhibit B hereto. Upon issuance, any such Initial Certificated
Note shall be duly executed by the Company and authenticated by the Trustee as
hereinafter provided.
(d) In the event Exchange Notes are issued pursuant to a Registered
Exchange Offer in exchange for Initial Notes held in the form of the Initial
Global Note, such Exchange Notes shall be issued initially in the form of a
permanent global note in definitive, fully registered form, without coupons,
substantially in the form set forth in Exhibit C hereto (the "Exchange Global
Note"). Upon issuance, such Exchange Global Note shall be duly executed by the
Company and authenticated by the Trustee as hereinafter provided and deposited
with the Trustee as custodian for the Depositary. Any Exchange Certificated Note
that may be issued pursuant to Section 2.06(c) hereof or in exchange for Initial
Certificated Notes pursuant to a Registered Exchange Offer, shall be issued in
the form of a note in definitive, fully
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registered form, without coupons, substantially in the form set forth in Exhibit
D hereto. Upon issuance, any such Exchange Certificated Notes shall be duly
executed by the Company and authenticated by the Trustee as hereinafter
provided.
(e) The following legends shall appear on each Global Note and each
Certificated Note as indicated below:
(i) Except as provided in Section 2.06(a)(iii) hereof, each Initial
Global Note and Initial Certificated Note shall bear the following legend
on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL
OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF
OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED
ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT
IT WILL GIVE TO EACH
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PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND
THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
(ii) Each Global Note shall bear the following legend on the face
thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO AMERICAN COMMUNICATIONS SERVICES, INC.
OR THE REGISTRAR FOR REGISTRATION OF TRANSFER OR EXCHANGE AND ANY
NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
INTERESTS IN THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE
INDENTURE, DATED AS OF JULY 23, 1997, BETWEEN AMERICAN
COMMUNICATIONS SERVICES, INC. AND THE TRUSTEE NAMED THEREIN,
PURSUANT TO WHICH THIS NOTE WAS ISSUED.
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(f) Definitive Notes shall be typed, printed, lithographed or
engraved or produced by any combination of such methods or produced in any other
manner permitted by the rules of any securities exchange on which such Notes may
be listed, all as determined by the officers of the Company executing such
Notes, as evidenced by their execution of such Notes.
SECTION 2.02. Execution and Authentication. The Notes may be issued
in two series, a series of Initial Notes and a series of Exchange Notes. The
aggregate principal amount of Notes outstanding at any time shall not exceed
$220,000,000 except as provided in Section 2.07 hereof. The Notes shall be
executed on behalf of the Company by its Chief Executive Officer, its President
or any Executive Vice President by manual or facsimile signature.
The Notes shall be authenticated by manual signature of an
authorized officer of the Trustee and shall not be valid for any purpose unless
so authenticated.
In case any officer of the Company whose signature shall have been
placed upon any of the Notes shall cease to be such officer of the Company
before authentication of such Notes by the Trustee and the issuance and delivery
thereof, such Notes may, nevertheless, be authenticated by the Trustee and
issued and delivered with the same force and effect as though such Person had
not ceased to be such officer of the Company.
Notwithstanding any other provision hereof, the Trustee shall
authenticate and deliver Notes only upon receipt by the Trustee of an Officers'
Certificate and Opinion of Counsel complying with Section 10.04 hereof with
respect to satisfaction of all conditions precedent contained in this Indenture
to authentication and delivery of such Notes.
Upon compliance by the Company with the provisions of the previous
paragraph, the Trustee shall, upon receipt of a Company Order requesting such
action, authenticate (a) Initial Notes for original issuance in an aggregate
principal amount not to exceed $220,000,000 in the form of the Initial Global
Note or (b) Exchange Notes for issuance pursuant to a Registered Exchange Offer
for Initial Notes in a principal amount equal to the principal amount of Initial
Notes exchanged in such Registered Exchange Offer. Such Company Order shall
specify the amount of Notes to be authenticated and the date on which, in the
case of clause (a) above, the Initial Notes or, in the case of clause (b) above,
the Exchange Notes, are to be authenticated and shall further provide
instructions concerning registration, amounts for each Holder and delivery.
Upon the occurrence of any event specified in Section 2.06(c) hereof
and compliance by the Company with the provisions of the paragraph preceding the
immediately preceding paragraph, the Company shall execute and the Trustee shall
authenticate and deliver to
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each beneficial owner identified by the Depositary, in exchange for such
beneficial owner's interest in the Initial Global Note or Exchange Global Note,
as the case may be, Initial Certificated Notes or Exchange Certificated Notes,
as the case may be, representing Notes theretofore represented by the Initial
Global Note or Exchange Global Note, as the case may be.
A Note shall not be valid or entitled to any benefit under this
Indenture or obligatory for any purpose unless executed by the Company and
authenticated by the manual signature of the Trustee as provided herein. The
signature of an authorized officer of the Trustee shall be conclusive evidence,
and the only evidence, that such Note has been authenticated and delivered under
this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Notes. Unless limited by the terms
of such appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Any authenticating agent of the
Trustee shall have the same rights hereunder as any Registrar or Paying Agent.
SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain, pursuant to Section 4.02 hereof, an office or agency where the Notes
may be presented for registration of transfer or for exchange. The Company shall
cause to be kept at such office a register (the register maintained in such
office being herein sometimes referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Notes and of transfers of Notes entitled to be
registered or transferred as provided herein. The Trustee, at its Corporate
Trust Administration Office, is initially appointed "Registrar" for the purpose
of registering Notes and transfers of Notes as herein provided. The Company may,
upon written notice to the Trustee, change the designation of the Trustee as
Registrar and appoint another Person to act as Registrar for purposes of this
Indenture. If any Person other than the Trustee acts as Registrar, the Trustee
shall have the right at any time, upon reasonable notice, to inspect or examine
the Security Register and to make such inquiries of the Registrar as the Trustee
shall in its discretion deem necessary or desirable in performing its duties
hereunder.
The Company shall enter into an appropriate agency agreement with
any Person designated by the Company as Registrar or Paying Agent that is not a
party to this Indenture, which agreement shall incorporate the provisions of the
Trust Indenture Act and shall implement the provisions of this Indenture that
relate to such Registrar or Paying Agent. Prior to the designation of any such
Person, the Company shall, by written notice (which notice shall include the
name and address of such Person), inform the Trustee of such designation. If the
Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as
such.
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Upon surrender for registration of transfer of any Note at an office
or agency of the Company designated for such purpose, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Initial Notes or Exchange Notes, as
the case may be, of any authorized denomination or denominations, of like tenor
and aggregate principal amount, all as requested by the transferor.
Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company, the Trustee or the Registrar)
be duly endorsed, or be accompanied by a duly executed instrument of transfer in
form satisfactory to the Company, the Trustee and the Registrar, by the Holder
thereof or such Holder's attorney duly authorized in writing.
SECTION 2.04. Paying Agent to Hold Money in Trust. On or prior to
each due date of the principal, premium, or any payment of interest with respect
to any Note, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal, premium or interest when so becoming due.
The Company shall require each Paying Agent (other than the Trustee)
to agree in writing that such Paying Agent, shall hold in trust for the benefit
of Holders or the Trustee all money held by such Paying Agent for the payment of
principal, premium, or interest with respect to the Notes, shall notify the
Trustee of any default by the Company in making any such payment and at any time
during the continuance of any such default, upon the written request of the
Trustee, shall forthwith pay to the Trustee all sums held in trust by such
Paying Agent.
The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed by such Paying
Agent. Upon complying with this Section 2.04, the Paying Agent shall have no
further liability for the money delivered to the Trustee.
SECTION 2.05. Global Notes. (a) So long as a Global Note is
registered in the name of the Depositary or its nominee, members of, or
participants in, the Depositary ("Agent Members") shall have no rights under
this Indenture with respect to the Global Note held on their behalf by the
Depositary or the Trustee as its custodian, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Note for all purposes. Notwithstanding the
foregoing, nothing herein shall (i) prevent the Company, the Trustee or any
agent of the Company or the Trustee, from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or (ii)
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of Notes.
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(b) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests in such Global Note through Agent Members, to take any action which a
Holder of Notes is entitled to take under this Indenture or the Notes.
(c) Whenever, as a result of an optional redemption of Notes by the
Company, a Change of Control Offer, an Asset Sale Offer, a Registered Exchange
Offer or an exchange pursuant to the second sentence of Section 2.06(c) hereof,
a Global Note is redeemed, repurchased or exchanged in part, such Global Note
shall be surrendered by the Holder thereof to the Trustee who shall cause an
adjustment to be made to Schedule A thereof so that the principal amount of such
Global Note will be equal to the portion of such Global Note not redeemed,
repurchased or exchanged and shall thereafter return such Global Note to such
Holder, provided that each such Global Note shall be in a principal amount of
$1,000 or an integral multiple thereof.
SECTION 2.06. Transfer and Exchange. (a) The following provisions of
this paragraph (a) are applicable only to Initial Notes:
(i) By its acceptance of any Initial Note represented by a
certificate bearing the Private Placement Legend, each Holder of, and
beneficial owner of an interest in, such Initial Note acknowledges the
restrictions on transfer of such Initial Note set forth in the Private
Placement Legend and under the heading "Transfer Restrictions" in the
Final Memorandum and agrees that it will transfer such Initial Note only
in accordance with the Private Placement Legend and the restrictions set
forth under the heading "Transfer Restrictions" in the Final Memorandum.
(ii) In connection with any transfer of an Initial Note bearing the
Private Placement Legend other than to a Person whom the Holder reasonably
believes to be a "qualified institutional buyer" under the Securities Act,
such Holder shall deliver to the Company such satisfactory evidence, which
may include an opinion of independent counsel licensed to practice law in
the State of New York, as reasonably may be requested by the Company to
confirm that such transfer is being made in accordance with the
limitations set forth in the Private Placement Legend. In the event the
Company reasonably determines that any such transfer is not in accordance
with the Private Placement Legend, the Company shall so inform the
Registrar who shall not register such transfer; provided that the
Registrar shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any
such evidence.
(iii) Upon the registration of transfer, exchange or replacement of
an Initial Note not bearing the Private Placement Legend, the Trustee
shall deliver an Initial
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Note or Initial Notes that do not bear the Private Placement Legend. Upon
the transfer, exchange or replacement of an Initial Note bearing the
Private Placement Legend, the Trustee shall deliver an Initial Note or
Initial Notes bearing the Private Placement Legend, unless such legend may
be removed from such Note as provided in the next sentence. The Private
Placement Legend may be removed from an Initial Note if there is delivered
to the Company such satisfactory evidence, which may include an opinion of
independent counsel licensed to practice law in the State of New York, as
reasonably may be requested by the Company to confirm that neither such
legend nor the restrictions on transfer set forth therein are required to
ensure that transfers of such Initial Note will not violate the
registration and prospectus delivery requirements of the Securities Act;
provided that the Trustee shall not be required to determine (but may rely
on a determination made by the Company with respect to) the sufficiency of
any such evidence. Upon provision of such evidence, the Trustee shall
authenticate and deliver in exchange for such Initial Note, an Initial
Note or Initial Notes (representing the same aggregate principal amount of
the Initial Note being exchanged) without such legend. If the Private
Placement Legend has been removed from an Initial Note, as provided above,
no other Initial Note issued in exchange for all or any part of such
Initial Note shall bear such legend, unless the Company has reasonable
cause to believe that such other Initial Note represents a "restricted
security" within the meaning of Rule 144 and instructs the Trustee in
writing to cause a legend to appear thereon.
(iv) The Company shall deliver to the Trustee, and the Trustee shall
retain for two years, copies of all documents received pursuant to this
Section 2.06(a). The Company shall have the right to inspect and make
copies of all such documents at any reasonable time upon the giving of
reasonable written notice to the Trustee.
(b) Any Initial Notes which are presented to the Registrar for
exchange pursuant to a Registered Exchange Offer shall be exchanged for Exchange
Notes of equal principal amount upon surrender to the Registrar of the Initial
Notes to be exchanged in accordance with the terms of the Registered Exchange
Offer; provided that the Initial Notes so surrendered for exchange are duly
endorsed and accompanied by a letter of transmittal or written instrument of
transfer in form satisfactory to the Company, the Trustee and the Registrar and
duly executed by the Holder thereof or such Holder's attorney who shall be duly
authorized in writing to execute such document on the behalf of such Holder.
Whenever any Initial Notes are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver to the surrendering
Holder thereof Exchange Notes in the same aggregate principal amount as the
Initial Notes so surrendered.
(c) The Initial Global Note or Exchange Global Note, as the case may
be, shall be exchanged by the Company for one or more Initial Certificated Notes
or Exchange
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Certificated Notes, as the case may be, if (a) the Depositary (i) has notified
the Company that it is unwilling or unable to continue as, or ceases to be, a
clearing agency registered under Section 17A of the Exchange Act and (ii) a
successor to the Depositary registered as a clearing agency under Section 17A of
the Exchange Act is not able to be appointed by the Company within 90 calendar
days or (b) the Depositary is at any time unwilling or unable to continue as
Depositary and a successor to the Depositary is not able to be appointed by the
Company within 90 calendar days. If an Event of Default occurs and is
continuing, the Company shall, at the request of the Holder thereof, exchange
all or part of the Initial Global Note or Exchange Global Note, as the case may
be, for one or more Initial Certificated Notes or Exchange Certificated Notes,
as the case may be; provided that the principal amount of each of such Initial
Certificated Notes or Exchange Certificated Notes, as the case may be, and such
Global Note, after such exchange, shall be $1,000 or an integral multiple
thereof. Whenever a Global Note is exchanged as a whole for one or more Initial
Certificated Notes or Exchange Certificated Notes, as the case may be, it shall
be surrendered by the Holder thereof to the Trustee for cancellation. Whenever a
Global Note is exchanged in part for one or more Initial Certificated Notes or
Exchange Certificated Notes, as the case may be, it shall be surrendered by the
Holder thereof to the Trustee and the Trustee shall make the appropriate
notations thereon pursuant to Section 2.05(c) hereof. All Initial Certificated
Notes or Exchange Certificated Notes, as the case may be, issued in exchange for
a Global Note or any portion thereof shall be registered in such names, and
delivered, as the Depositary shall instruct the Trustee. Any Initial
Certificated Notes issued pursuant to this Section 2.06(c) shall include the
Private Placement Legend, except as set forth in Section 2.06(a)(iii) hereof.
Interests in a Global Note may not be exchanged for Certificated Notes other
than as provided in this Section 2.06(c).
(d) A Holder may transfer a Note only upon the surrender of such
Note for registration of transfer. No such transfer shall be effected until, and
the transferee shall succeed to the rights of a Holder only upon, final
acceptance and registration of the transfer in the Security Register by the
Registrar. When Notes are presented to the Registrar with a request to register
the transfer of, or to exchange, such Notes, the Registrar shall register the
transfer or make such exchange as requested if its requirements for such
transactions and any applicable requirements hereunder are satisfied. To permit
registrations of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Certificated Notes at the Registrar's request.
(e) The Company shall not be required to make and the Registrar need
not register transfers or exchanges of Certificated Notes selected for
redemption (except, in the case of Certificated Notes to be redeemed in part,
the portion thereof not to be redeemed) for a period of 15 calendar days before
a selection of Certificated Notes to be redeemed.
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(f) No service charge shall be made for any registration of transfer
or exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer of Notes (other than in respect of a
Registered Exchange Offer, except as provided in the Registration Rights
Agreement).
(g) All Notes issued upon any registration of transfer or exchange
pursuant to the terms of this Indenture will evidence the same debt and will be
entitled to the same benefits under this Indenture as the Notes surrendered for
such registration of transfer or exchange.
(h) Prior to the effectiveness under the Securities Act of a Shelf
Registration Statement, or at any time during the suspension or following the
termination thereof, Holders of Initial Notes (or holders of interests therein)
and prospective purchasers designated by such Holders of Initial Notes (or such
holders of interests therein) shall have the right to obtain from the Company
upon request by such Holders (or such holders of interests) or prospective
purchasers, during any period in which the Company is not subject to Section 13
or Section 15(d) of the Exchange Act, or is exempt from reporting pursuant to
12g3-2(b) under the Exchange Act, the information required by paragraph
(d)(4)(i) of Rule 144A in connection with any transfer or proposed transfer of
such Notes or interests.
(i) Any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Notes represented thereby shall be required to be reflected in book entry form.
Transfers of a Global Note shall be limited to transfers in whole and not in
part, to the Depositary, its successors, and their respective nominees.
Interests of beneficial owners in a Global Note may be transferred in accordance
with the rules and procedures of the Depositary (or its successors).
SECTION 2.07. Replacement Notes. If any mutilated Note is
surrendered to the Trustee, the Company shall execute and upon its written
request the Trustee shall authenticate and deliver, in exchange for any such
mutilated Note, a new Note containing identical provisions and of like principal
amount, bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Note and
(ii) such security or indemnity as may be required by them to save either of
them and any agent of each of them harmless, then, in the absence of notice to
the Company or the Trustee that such Note has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee
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shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Note, a new Note containing identical provisions and of like principal amount,
bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section 2.07, the
Company may require the payment by the Holder of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Note issued pursuant to this Section 2.07 in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.08. Outstanding Notes. Notes outstanding at any time are
all Notes authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation and those described in this Section 2.08 as not
outstanding. A Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds such Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee and the Company receive proof satisfactory to
them that such replaced Note is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or Maturity date money sufficient to
pay all principal, premium, if any, and interest payable on that date with
respect to the Notes (or portions thereof) to be redeemed or maturing, as the
case may be, then on and after that date such Notes (or such portions thereof)
shall cease to be outstanding and interest on them shall cease to accrue or the
principal of such Notes shall cease to accrete, as the case may be.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent or any amendment,
modification or other
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change to this Indenture, Notes held or beneficially owned by the Company or a
Restricted Subsidiary of the Company or by an Affiliate of the Company or a
Restricted Subsidiary of the Company or by agents of any of the foregoing shall
be disregarded, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent or any
amendment, modification or other change to this Indenture, only Notes which a
Trust Officer knows are so owned shall be so disregarded. Notes so owned which
have been pledged in good faith shall not be disregarded if the pledgee
establishes to the satisfaction of the Trustee such pledgee's right so to act
with respect to the Notes and that the pledgee is not the Company or an
Affiliate of the Company or any of their agents.
SECTION 2.09. Temporary Notes. Pending the preparation of definitive
Notes, the Company may execute, and the Trustee shall authenticate, temporary
notes ("Temporary Notes") which are printed, lithographed, or otherwise
produced, substantially of the tenor of the definitive Notes in lieu of which
they are issued and with such appropriate insertions, omissions, substitutions
and other variations.
If Temporary Notes are issued, the Company shall cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the Temporary Notes shall be exchangeable for definitive Notes
upon surrender of the Temporary Notes to the Trustee, without charge to the
Holder. Until so exchanged, Temporary Notes will evidence the same debt and will
be entitled to the same benefits under this Indenture as the definitive Notes in
lieu of which they have been issued.
SECTION 2.10. Cancellation. The Company at any time may deliver
Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange, purchase or payment. The Trustee shall cancel all Notes
surrendered for registration of transfer, exchange, purchase, payment or
cancellation and shall destroy such canceled Notes unless the Company shall by
Company Order otherwise direct. The Company may not issue new Notes to replace
Notes it has redeemed or paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.11. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid or duly provided
for, on any Interest Payment Date shall be paid to the Person in whose name such
Note is registered at the close of business on the Record Date for such interest
payment, which shall be the January 1 or July 1 (whether or not a Business Day)
immediately preceding such Interest Payment Date.
Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forth-
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with cease to be payable to the registered Holder on the relevant Record Date,
and, except as hereinafter provided, such Defaulted Interest, and any interest
payable on such Defaulted Interest, may be paid by the Company, at its election,
as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest,
and any interest payable on such Defaulted Interest, to the Persons in
whose names the Notes are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on the
Notes and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as provided in this Clause. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 calendar days and not less than 10 calendar days prior
to the date of the proposed payment and not less than 10 calendar days
after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be sent, first class mail, postage prepaid, to each
Holder at such Holder's address as it appears in the Security Register,
not less than 10 calendar days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been mailed as aforesaid, such Defaulted Interest
shall be paid to the Persons in whose names the Notes are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest, and any
interest payable on such Defaulted Interest, on the Notes in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.11, each Note
delivered under this Indenture upon registration of transfer of, or in exchange
for, or in lieu of, any other Note, shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Note.
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SECTION 2.12. Authorized Denominations. The Notes shall be issuable
in denominations of $1,000 and any integral multiple thereof.
SECTION 2.13. Computation of Interest. Interest on the Notes shall
be computed on the basis of a 360-day year of twelve 30-day months.
SECTION 2.14. Persons Deemed Owners. Prior to the due presentation
for registration of transfer of any Note, the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar may deem and treat the person in whose
name 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 whatsoever, whether or not such Note is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar or any
co-Registrar shall be affected by notice to the contrary.
SECTION 2.15. CUSIP Numbers. The Company, in issuing the Notes, may
use a "CUSIP" number for each series of Notes and, if so, the Trustee shall use
the relevant CUSIP number in any notices to Holders as a convenience to such
Holders; provided that any such notice may state that no representation is made
as to the correctness or accuracy of the CUSIP number printed in the notice or
on the Notes and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company shall promptly notify the Trustee of
any change in any CUSIP number used.
SECTION 2.16. Escrow Agreement. On the Issue Date, the Company, the
Trustee and the Escrow Agent shall enter into the Escrow Agreement. The Trustee
is hereby authorized and directed to perform its obligations under the Escrow
Agreement in accordance with the terms thereof.
ARTICLE III
REDEMPTION
SECTION 3.01. Notice to Trustee. If the Company elects to redeem
Notes pursuant to paragraph six of the Initial Notes, and/or paragraph five of
the Exchange Notes, as the case may be, it shall notify the Trustee in writing
of the Redemption Date and the principal amount of Notes to be redeemed. The
Company shall give each such notice to the Trustee at least 60 calendar days
prior to the Redemption Date unless the Trustee consents to a shorter period.
Such notice shall be accompanied by an Officers' Certificate and an Opinion of
Counsel from the Company to the effect that such redemption will comply with any
conditions to such redemption set forth herein and in the Notes.
SECTION 3.02. Selection of Notes to be Redeemed. If less than all
the Notes are to be redeemed at any time, the Trustee shall select the Notes to
be redeemed on a
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pro rata basis, provided that the Trustee may select for redemption in part only
Notes in denominations larger than $1,000. In selecting Notes to be redeemed
pursuant to this Section 3.02, the Trustee shall make such adjustments,
reallocations and eliminations as it shall deem proper so that the principal
amount of each Note to be redeemed shall be $1,000 or an integral multiple
thereof, by increasing, decreasing or eliminating any amount less than $1,000
which would be allocable to any Holder. If the Notes to be redeemed are
Certificated Notes, the Certificated Notes to be redeemed shall be selected by
the Trustee by prorating, as nearly as may be, the principal amount of
Certificated Notes to be redeemed among the Holders of Certificated Notes
registered in their respective names. The Trustee in its discretion may
determine the particular Notes (if there are more than one) registered in the
name of any Holder which are to be redeemed, in whole or in part. Provisions of
this Indenture that apply to Notes called for redemption also apply to portions
of Notes called for redemption. The Trustee shall notify the Company promptly of
the Notes or portions of Notes to be redeemed. Each redemption of Notes shall be
pro rata as between Initial Notes and Exchange Notes.
SECTION 3.03. Notice of Redemption. At least 30 calendar days but
not more than 60 calendar days before a Redemption Date, the Company shall send
a notice of redemption, first class mail, postage prepaid, to Holders of Notes
to be redeemed at the addresses of such Holders as they appear in the Security
Register.
The notice shall identify the Notes to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price (and shall specify the portion of such
Redemption Price that constitutes the amount of accrued and unpaid
interest to be paid, if any);
(c) the name and address of the Paying Agent;
(d) that the Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(e) if any Global Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, the Global Note, with a notation on Schedule A thereof
adjusting the principal amount thereof to be equal to the unredeemed
portion, will be returned to the Holder thereof;
(f) if any Certificated Note is being redeemed in part, the portion
of the principal amount of such Note to be redeemed and that, after the
Redemption Date, a new Certificated Note or Certificated Notes in
principal amount equal to the unredeemed portion will be issued;
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(g) if fewer than all the outstanding Notes are to be redeemed, the
identification and principal amounts of the particular Notes to be
redeemed;
(h) that, unless the Company defaults in making the redemption
payment, interest on the Notes (or portions thereof) called for redemption
shall cease and such Notes (or portions thereof) shall cease to accrue
interest on and after the Redemption Date;
(i) the paragraph of the Notes pursuant to which the Notes are being
called for redemption; and
(j) any other information necessary to enable Holders to comply with
the notice of redemption.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section 3.03 in a timely manner.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption shall become due and payable
on the Redemption Date and at the Redemption Price stated in such notice. Upon
surrender to the Paying Agent, such Notes shall be paid at the Redemption Price
stated in such notice. Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. On or prior to 10:00
a.m., New York City time, on each Redemption Date, the Company shall deposit
with the Paying Agent (or, if the Company, one of its Subsidiaries or any of
their Affiliates is the Paying Agent, the Paying Agent shall segregate and hold
in trust for the benefit of the Holders) money, in federal or other immediately
available funds, sufficient to pay the Redemption Price on all Notes to be
redeemed on that date other than Notes or portions of Notes called for
redemption on such date which have been delivered by the Company to the Trustee
for cancellation.
So long as the Company complies with the preceding paragraph and the
other provisions of this Article III, interest on the Notes to be redeemed on
the applicable Redemption Date shall cease to accrue or such Notes shall cease
to accrete in value, as the case may be, from and after such date and such Notes
or portions thereof shall be deemed not to be entitled to any benefit under this
Indenture except to receive payment of the Redemption Price on the Redemption
Date. If any Note called for redemption shall not be so paid upon surrender for
redemption, then, from the Redemption Date until such principal is paid, inter-
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est shall be paid on the unpaid principal and, to the extent permitted by law,
on any accrued but unpaid interest thereon, in each case at the rate prescribed
therefor by such Notes.
SECTION 3.06. Notes Redeemed in Part. Upon surrender and
cancellation of a Certificated Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate and deliver to the surrendering Holder
(at the Company's expense) a new Certificated Note equal in principal amount to
the unredeemed portion of the Certificated Note surrendered and canceled,
provided that each such Certificated Note shall be in a principal amount of
$1,000 or an integral multiple thereof.
Upon surrender of a Global Note that is redeemed in part, the Paying
Agent shall forward such Global Note to the Trustee who shall make a notation on
Schedule A thereof to reduce the principal amount of such Global Note to an
amount equal to the unredeemed portion of such Global Note, as provided in
Section 2.05(c) hereof.
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Notes. The Company shall promptly pay the
principal of, premium, if any, and interest on, the Notes on the dates and in
the manner provided in the Notes and in this Indenture. Principal, premium and
interest shall be considered paid on the date due if, on such date, the Trustee
or the Paying Agent holds in accordance with this Indenture money sufficient to
pay all principal, premium and interest then due.
SECTION 4.02. Maintenance of Office or Agency. The Company shall
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be presented or surrendered for payment, where Notes may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The 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
Administration Office of the Trustee, and the Company hereby appoints the
Trustee its agent to receive all presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Notes may
be presented or surrendered for any or all of such purposes, and may from time
to time rescind such designations; provided that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in The City of New York, for such
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purposes. The Company shall give prompt written notice to the Trustee of any
such designation and any change in the location of any such other office or
agency.
SECTION 4.03. Money for the Note Payments to be Held in Trust. If
the Company, any Subsidiary of the Company or any of their respective Affiliates
shall at any time act as Paying Agent with respect to the Notes, such Paying
Agent shall, on or before each due date of the principal of (and premium, if
any) or interest on any of the Notes, segregate and hold in trust for the
benefit of the Persons entitled thereto money sufficient to pay the principal
(and premium, if any) or interest so becoming due until such money shall be paid
to such Persons or otherwise disposed of as herein provided, and shall promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents with
respect to the Notes, it shall, prior to or on each due date of the principal of
(and premium, if any) or interest on any of the Notes, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Paying Agent shall promptly notify the Trustee of the
Company's action or failure so to act.
SECTION 4.04. Corporate Existence. Subject to the provisions of
Article V hereof, the Company shall do or cause to be done all things necessary
to preserve and keep in full force and effect the corporate existence, rights
(charter and statutory) and franchises of the Company and each of its Restricted
Subsidiaries; provided that the Company and any such Restricted Subsidiary shall
not be required to preserve the corporate existence of any such Restricted
Subsidiary or any such right or franchise if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and that the loss thereof is not disadvantageous in
any material respect to the Holders of Notes.
SECTION 4.05. Maintenance of Property. The Company shall cause all
Property used or useful in the conduct of its business or the business of any of
its Restricted Subsidiaries to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as, in the judgment of the Company, may be necessary
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided that nothing in this Section
4.05 shall prevent the Company from discontinuing the operation or maintenance
of any of such Property if such discontinuance is, in the judgment of the
Company, desirable in the conduct of its business or the business of any of its
Restricted Subsidiaries and not disadvantageous in any material respect to the
Holders of Notes.
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SECTION 4.06. Payment of Taxes and Other Claims. The Company shall
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company or any of its Restricted Subsidiaries or upon the
income, profits or Property of the Company or any of its Restricted Subsidiaries
and (b) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a Lien upon the Property of the Company or any of its
Restricted Subsidiaries; provided that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings upon stay of execution or the enforcement
thereof and for which adequate reserves in accordance with GAAP or other
appropriate provision has been made.
SECTION 4.07. Repurchase at the Option of Holders upon a 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 purchase such Holder's Notes, in
whole, or in part in a principal amount that is an integral multiple of $1,000,
pursuant to the offer described in Section 4.07(b) hereof (the "Change of
Control Offer"), at a purchase price (the "Change of Control Purchase Price") in
cash equal to 101 percent of the aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to the Change of Control Payment Date.
(b) Within 30 calendar days of the date of any Change of Control,
the Company, or the Trustee at the request and expense of the Company, shall
send to each Holder by first class mail, postage prepaid, a notice prepared by
the Company stating:
(i) that a Change of Control has occurred and a Change of Control
Offer is being made pursuant to this Section 4.07, and that all Notes that
are timely tendered will be accepted for payment;
(ii) the Change of Control Purchase Price, and the date Notes are to
be purchased pursuant to the Change of Control Offer (the "Change of
Control Payment Date"), which date shall be a date occurring no earlier
than 30 calendar days nor later than 40 calendar days subsequent to the
date such notice is mailed;
(iii) that any Notes or portions thereof not tendered or accepted
for payment will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the Change
of Control Purchase Price with respect thereto, all Notes or portions
thereof accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest from and after the Change of Control Payment
Date;
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(v) that any Holder electing to have any Notes or portions thereof
purchased pursuant to a Change of Control Offer will be required to
surrender such Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of such Notes completed, to the Paying Agent at
the address specified in the notice, prior to the close of business on the
third Business Day preceding the Change of Control Payment Date;
(vi) that any Holder shall be entitled to withdraw such election if
the Paying Agent receives, not later than the close of business on the
second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter, setting forth the name
of the Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing such Holder's election to have
such Notes or portions thereof purchased pursuant to the Change of Control
Offer;
(vii) that any Holder electing to have Notes purchased pursuant to
the Change of Control Offer must specify the principal amount that is
being tendered for purchase, which principal amount must be $1,000 or an
integral multiple thereof;
(viii) if Certificated Notes have been issued pursuant to Section
2.06(c), that any Holder of Certificated Notes whose Certificated Notes
are being purchased only in part will be issued new Certificated Notes
equal in principal amount to the unpurchased portion of the Certificated
Note or Notes surrendered, which unpurchased portion will be equal in
principal amount to $1,000 or an integral multiple thereof;
(ix) that the Trustee will return to the Holder of a Global Note
that is being purchased in part, such Global Note with a notation on
Schedule A thereof adjusting the principal amount thereof to be equal to
the unpurchased portion of such Global Note; and
(x) any other information necessary to enable any Holder to tender
Notes and to have such Notes purchased pursuant to this Section 4.07.
(c) On the Change of Control Payment Date, the Company shall (i)
accept for payment any Notes or portions thereof properly tendered pursuant to
the Change of Control Offer; (ii) irrevocably deposit with the Paying Agent, by
10:00 a.m., New York City time, on such date, in immediately available funds, an
amount equal to the Change of Control Purchase Price in respect of all Notes or
portions thereof so accepted; and (iii) deliver, or cause to be delivered, to
the Trustee the Notes so accepted together with an Officers' Certificate listing
the Notes or portions thereof tendered to the Company and accepted for payment.
The Paying Agent shall promptly send by first class mail, postage prepaid, to
each Holder
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of Notes or portions thereof so accepted for payment, payment in an amount equal
to the Change of Control Purchase Price for such Notes or portions thereof. The
Company shall publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date. For purposes of
this Section 4.07, the Trustee shall act as the Paying Agent.
(d) Upon surrender and cancellation of a Certificated Note that is
purchased in part pursuant to the Change of Control Offer, the Company shall
promptly issue and the Trustee shall authenticate and deliver to the
surrendering Holder of such Certificated Note, a new Certificated Note equal in
principal amount to the unpurchased portion of such surrendered Certificated
Note; provided that each such new Certificated Note shall be in a principal
amount of $1,000 or an integral multiple thereof.
Upon surrender of a Global Note that is purchased in part pursuant
to a Change of Control Offer, the Paying Agent shall forward such Global Note to
the Trustee who shall make a notation on Schedule A thereof to reduce the
principal amount of such Global Note to an amount equal to the unpurchased
portion of such Global Note, as provided in Section 2.05(c) hereof.
(e) The Company shall comply with the requirements of Section 14(e)
under the Exchange Act and any other securities laws or regulations, to the
extent such laws and regulations are applicable, in connection with the purchase
of Notes pursuant to a Change of Control Offer.
SECTION 4.08. Limitation on Asset Sales. (a) The Company shall not,
and shall not permit any of its Restricted Subsidiaries, directly or indirectly,
to, consummate any Asset Sale, unless:
(i) no Event of Default shall have occurred and be continuing or
shall occur as a consequence thereof;
(ii) 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 (as evidenced by a Board Resolution delivered to the
Trustee) of the Property or assets sold or otherwise disposed of;
(iii) at least 75 percent of the consideration received in respect
of such Asset Sale by the Company or such Restricted Subsidiary, as the
case may be, for such Property or assets consists of Cash Proceeds and/or
Telecommunications Assets; and
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(iv) the Company or such Restricted Subsidiary, as the case may be,
uses the Net Cash Proceeds from such Asset Sale in the manner set forth in
Section 4.08(b) hereof.
(b) Within 270 calendar days after the closing of any Asset Sale,
the Company or such Restricted Subsidiary, as the case may be, may, at its
option:
(i) reinvest (or enter a binding agreement to reinvest, provided
that such reinvestment is completed within 180 calendar days of the date
of such agreement) an amount equal to the Net Cash Proceeds, or any
portion thereof, from such Asset Sale in Telecommunications Assets; and/or
(ii) apply an amount equal to such Net Cash Proceeds, or remaining
Net Cash Proceeds, to the permanent reduction of Indebtedness of the
Company (other than Indebtedness to a Restricted Subsidiary of the
Company) that is pari passu with the Notes or to the permanent reduction
of Indebtedness or Preferred Stock of any Restricted Subsidiary of the
Company (other than Indebtedness to, or Preferred Stock owned by, the
Company or another Restricted Subsidiary of the Company); provided,
however, that any Net Cash Proceeds applied to the permanent reduction of
Indebtedness represented by the 2005 Notes and the 2006 Notes shall be
applied in accordance with Section 4.08(c) hereof.
Net Cash Proceeds from any Asset Sale that are not applied pursuant to clause
(i) or (ii) above within 270 calendar days of the closing of such Asset Sale
shall constitute "Excess Proceeds."
(c) If at any time the aggregate amount of Excess Proceeds
(including any Net Cash Proceeds to be applied to the permanent reduction of
Indebtedness represented by the 2005 Notes and the 2006 Notes) calculated as of
such date exceeds $10 million, the Company shall, within 30 days of the date the
amount of Excess Proceeds exceeds $10 million, use such Excess Proceeds to make
an offer to purchase (an "Asset Sale Offer") on a pro rata basis, from all
holders, outstanding Notes, 2005 Notes and 2006 Notes in an aggregate principal
amount equal to the maximum principal amount that may be purchased out of Excess
Proceeds, at a purchase price (the "Offer Purchase Price") in cash equal to (a)
with respect to the Existing Notes, 100% of the Accreted Value thereof (as
defined in the relevant indenture) and (b) with respect to the Notes, 100% of
the principal amount thereof, plus, in each case, accrued and unpaid interest,
if any, to the purchase date, in accordance with the procedures set forth in the
relevant indenture. Upon completion of an Asset Sale Offer (including payment of
the Offer Purchase Price), any surplus Excess Proceeds that were the subject of
such offer shall cease to be Excess Proceeds, and the Company may then use such
amounts for general corporate purposes.
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(d) Within 30 calendar days of the date the amount of Excess
Proceeds exceeds $10,000,000, the Company, or the Trustee at the request and
expense of the Company, shall send to each Holder by first class mail, postage
prepaid, a notice prepared by the Company stating:
(i) that an Asset Sale Offer is being made pursuant to this Section
4.08, and that all Notes that are timely tendered will be accepted for
payment, subject to proration in the event the amount of Excess Proceeds
is less than the aggregate Offer Purchase Price of all Notes, 2005 Notes
and 2006 Notes timely tendered pursuant to the Asset Sale Offer;
(ii) the Offer Purchase Price, the amount of Excess Proceeds that
are available to be applied to purchase tendered Notes, 2005 Notes and
2006 Notes, and the date Notes, 2005 Notes and 2006 Notes are to be
purchased pursuant to the Asset Sale Offer (the "Asset Sale Payment
Date"), which date shall be a date no earlier than 30 calendar days nor
later than 40 calendar days subsequent to the date such notice is mailed;
(iii) that any Notes, 2005 Notes and 2006 Notes or portions thereof
not tendered or accepted for payment will continue to accrete in value or
accrue interest, as the case may be;
(iv) that, unless the Company defaults in the payment of the Offer
Purchase Price with respect thereto, all Notes, 2005 Notes and 2006 Notes
or portions thereof accepted for payment pursuant to the Asset Sale Offer
shall cease to accrete in value or accrue interest, as the case may be,
from and after the Asset Sale Payment Date;
(v) that any Holder electing to have any Notes or portions thereof
purchased pursuant to the Asset Sale Offer will be required to surrender
such Notes, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of such Notes completed, to the Paying Agent at the address
specified in the notice, prior to the close of business on the third
Business Day preceding the Asset Sale Payment Date;
(vi) that any Holder shall be entitled to withdraw such election if
the Paying Agent receives, not later than the close of business on the
second Business Day preceding the Asset Sale Payment Date, a telegram,
telex, facsimile transmission or letter, setting forth the name of the
Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing such Holder's election to have
such Notes or portions thereof purchased pursuant to the Asset Sale Offer;
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(vii) that any Holder electing to have Notes purchased pursuant to
the Asset Sale Offer must specify the principal amount that is being
tendered for purchase, which principal amount must be $1,000 or an
integral multiple thereof;
(viii) if Certificated Notes have been issued pursuant to Section
2.06(c), that any Holder of Certificated Notes whose Certificated Notes
are being purchased only in part will be issued new Certificated Notes
equal in principal amount to the unpurchased portion of the Certificated
Note or Notes surrendered, which unpurchased portion will be equal in
principal amount to $1,000 or an integral multiple thereof;
(ix) that the Trustee will return to the Holder of a Global Note
that is being purchased in part, such Global Note with a notation on
Schedule A thereof adjusting the principal amount thereof to be equal to
the unpurchased portion of such Global Note; and
(x) any other information necessary to enable any Holder to tender
Notes and to have such Notes purchased pursuant to this Section 4.08.
(e) If the aggregate Offer Purchase Price of the Notes, 2005 Notes
and 2006 Notes surrendered by Holders exceeds the amount of Excess Proceeds as
indicated in the notice required by Section 4.08(d) hereof, the Trustee shall
select the Notes, 2005 Notes and 2006 Notes to be purchased on a pro rata basis
based on the aggregate principal amount or the Accreted Value (as defined in the
relevant indenture), as the case may be, as of the Asset Sale Payment Date, with
such adjustments as may be deemed appropriate by the Trustee, so that only Notes
in denominations of $1,000 or integral multiples thereof shall be purchased.
(f) On the Asset Sale Payment Date, the Company shall (i) accept for
payment any Notes or portions thereof properly tendered and selected for
purchase pursuant to the Asset Sale Offer and Section 4.08(e) hereof; (ii)
irrevocably deposit with the Paying Agent, by 10:00 a.m., New York City time, on
such date, in immediately available funds, an amount equal to the Offer Purchase
Price in respect of all Notes or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee the Notes so accepted together
with an Officers' Certificate listing the Notes or portions thereof tendered to
the Company and accepted for payment. The Paying Agent shall promptly send by
first class mail, postage prepaid, to each Holder of Notes or portions thereof
so accepted for payment, payment in an amount equal to the Offer Purchase Price
for such Notes or portions thereof. The Company shall publicly announce the
results of the Asset Sale Offer on or as soon as practicable after the Asset
Sale Payment Date. For purposes of this Section 4.08, the Trustee shall act as
the Paying Agent.
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(g) Upon surrender and cancellation of a Certificated Note that is
purchased in part, the Company shall promptly issue and the Trustee shall
authenticate and deliver to the surrendering Holder of such Certificated Note a
new Certificated Note equal in principal amount to the unpurchased portion of
such surrendered Certificated Note; provided that each such new Certificated
Note shall be in a principal amount of $1,000 or an integral multiple thereof.
Upon surrender of a Global Note that is purchased in part pursuant
to an Asset Sale Offer, the Paying Agent shall forward such Global Note to the
Trustee who shall make a notation on Schedule A thereof to reduce the principal
amount of such Global Note to an amount equal to the unpurchased portion of such
Global Note, as provided in Section 2.05(c) hereof.
(h) Upon completion of an Asset Sale Offer (including payment of the
Offer Purchase Price for accepted Notes), any surplus Excess Proceeds that were
the subject of such offer shall cease to be Excess Proceeds, and the Company may
then use such amounts for general corporate purposes.
(i) The Company shall comply with the requirements of Section 14(e)
under the Exchange Act and any other securities laws or regulations, to the
extent such laws and regulations are applicable, in connection with the purchase
of Notes pursuant to an Asset Sale Offer.
SECTION 4.09. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit its Restricted Subsidiaries to, directly or indirectly,
incur any Indebtedness (including Acquired Indebtedness), and the Company shall
not issue any Disqualified Stock or permit any of its Restricted Subsidiaries to
issue any Disqualified Stock or Preferred Stock; provided that the Company may
incur Indebtedness or issue Disqualified Stock if, after giving effect to such
issuance or incurrence on a pro forma basis, the Debt to EBITDA Ratio of the
Company does not exceed 5.5x in the case of any issuance or incurrence on or
before November 1, 1998, or 5.0x in the case of any issuance or incurrence
thereafter.
(b) The provisions of Section 4.09(a) hereof shall not apply to:
(i) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness under the Secured Credit Facility; provided
that the aggregate principal amount of Indebtedness incurred under the
Secured Credit Facility by the Company and its Restricted Subsidiaries
does not exceed $35,000,000 at any one time outstanding;
(ii) the incurrence of the Existing Indebtedness;
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(iii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Interest Hedging Obligations with respect to any floating
rate Indebtedness that is permitted to be outstanding under this Section
4.09;
(v) the incurrence by the Company of any Exchange Rate Obligations,
provided that such Exchange Rate Obligations were entered into in
connection with transactions in the ordinary course of business or the
incurrence of Indebtedness that is permitted under this Section 4.09;
(vi) the incurrence by the Company of Indebtedness represented by
the Existing Notes;
(vii) the incurrence by the Company of Indebtedness in connection
with one or more standby letters of credit issued in the ordinary cause of
business;
(viii) the incurrence by the Company of Indebtedness in respect of
performance, surety or appeal bonds provided by the Company in the
ordinary course of business;
(ix) the incurrence by the Company of Indebtedness not to exceed, at
any one time outstanding, one and a half times the amount of the Net Cash
Proceeds received by the Company from the issuance and sale of its
Qualified Stock (other than Preferred Stock) subsequent to the Issue Date;
provided that such Indebtedness shall have a Stated Maturity no earlier
than the Stated Maturity of the Notes and is subordinated to the Notes as
provided in Exhibit F hereto;
(x) the incurrence by the Company or any of its Restricted
Subsidiaries of Refinancing Indebtedness issued in exchange for, or the
proceeds of which are used to refinance, repurchase, replace, refund or
defease ("Refinance") Indebtedness permitted pursuant to clauses (ii) or
(vi) of this Section 4.09(b); provided that (1) the amount of such
Refinancing Indebtedness shall not exceed the principal amount of,
premium, if any, and accrued interest on the Indebtedness so Refinanced
(or if such Indebtedness was issued with original issue discount, the
original issue price plus amortization of the original issue discount at
the time of the repayment of such Indebtedness) plus the fees, expenses
and costs of such Refinancing and reasonable prepayment premiums, if any,
in connection therewith; (2) such Refinancing Indebtedness shall have a
Stated Maturity no earlier than the Stated Maturity of the Indebtedness
being Refi-
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nanced; (3) such Refinancing Indebtedness shall have an Average Life equal
to or greater than the Average Life of the Indebtedness being Refinanced;
(4) if the Indebtedness being Refinanced is subordinated in right of
payment to the Notes, such Refinancing Indebtedness shall be subordinate
in right of payment to the Notes on terms at least as favorable to the
holders of Notes as those contained in the documentation governing the
Indebtedness being so Refinanced; and (5) no Restricted Subsidiary shall
incur Refinancing Indebtedness to Refinance Indebtedness of the Company or
another Subsidiary;
(xi) The incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness of any Person which incurrence resulted
directly from an Investment described in clause (ix) of the definition of
"Permitted Investments" in Section 1.01 hereof; provided that, (x)
immediately after giving effect to such Investment on a pro forma basis
(and treating any Indebtedness which becomes, or is anticipated to become,
an obligation of the Company or any Restricted Subsidiary as a result of
such Investment as having been incurred by the Company or such Restricted
Subsidiary at the time of such Investment), the Company would (A) be
permitted to incur $1.00 of additional Indebtedness under Section 4.09(a)
hereof or (B) have a Debt to EBITDA Ratio which is equal to or not worse
than the Debt to EBITDA Ratio of the Company immediately prior to such
Investment or (y) such incurrence is otherwise permitted; provided,
further that Indebtedness incurred by the Company and its Restricted
Subsidiaries under this clause (xi) as a result of any such Investment
does not exceed 50 percent of the Fair Market Value of the Qualified Stock
used as consideration in such Investment; provided, further that the
aggregate principal amount of Indebtedness incurred under this clause (xi)
does not exceed $50,000,000;
(xii) the incurrence by the Company of Permitted Subordinated
Financing; and;
(xiii) Indebtedness not otherwise permitted to be incurred pursuant
to this Section 4.09 in an aggregate amount not to exceed $428,634.
SECTION 4.10. Limitation on Issuance of Guarantees by Restricted
Subsidiaries. (a) The Company shall not permit any of its Restricted
Subsidiaries, directly or indirectly, to Guarantee any Indebtedness of the
Company ("Guaranteed Indebtedness") other than the Notes, unless (i) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for a Guarantee (a "Subsidiary Guarantee")
of payment of the Notes by such Restricted Subsidiary and (ii) such Restricted
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Restricted Subsidiary of
the Company as a result of any payment by such
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Restricted Subsidiary under its Subsidiary Guarantee. If the Guaranteed
Indebtedness is (i) pari passu with the Notes then the Guarantee of such
Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee or (ii) subordinated to the Notes, then the Guarantee of
such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee
at least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes.
(b) Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be automatically
and unconditionally released and discharged upon the release or discharge of the
Guarantee which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by, or as a result of, payment under such Guarantee.
SECTION 4.11. Limitation on Liens. The Company shall not, and shall
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into, create, incur, assume or suffer to exist any Liens of any kind, other than
Permitted Liens, on or with respect to any of its Property or assets now owned
or hereafter acquired, or any interest therein or any income or profits
therefrom, without effectively providing that the Notes shall be secured equally
and ratably with or prior to (and provided the Notes shall be secured prior to
any secured obligation that is subordinated in right of payment to the Notes)
the obligations so secured for so long as such obligations are so secured.
SECTION 4.12. 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, assume, Guarantee or otherwise become liable
with respect to, any Sale and Leaseback Transaction, unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Sale and Leaseback Transaction at least equal to the Fair Market
Value (as evidenced by a Board Resolution delivered to the Trustee) of the
Property or assets subject to such transaction; (ii) the Attributable
Indebtedness of the Company or such Restricted Subsidiary with respect thereto
is included as Indebtedness and would be permitted to be incurred under Section
4.09 hereof; (iii) the Company or such Restricted Subsidiary would be permitted
to create a Lien on such Property or assets without securing the Notes under
Section 4.11 hereof; and (iv) the Net Cash Proceeds from such transaction are
applied in accordance with Section 4.08 hereof as if such proceeds resulted from
an Asset Sale.
SECTION 4.13. Restricted Payments. (a) The Company shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or indirectly,
make any Restricted Payment unless, at the time thereof and after giving effect
thereto (the amount of any such payment to be made if other than in cash to be
determined by the Board of Directors and evidenced by a Board Resolution):
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(i) no Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof;
(ii) after giving effect, on a pro forma basis, to such Restricted
Payment and the incurrence of any Indebtedness the net proceeds of which
are used to finance such Restricted Payment, the Company could incur at
least $1.00 of additional Indebtedness pursuant to Section 4.09(a) hereof;
and
(iii) after giving effect to such Restricted Payment on a pro forma
basis, the aggregate amount expended or declared for all Restricted
Payments after the Issue Date does not exceed the sum of (without
duplication) (A) 50 percent of the Consolidated Net Income of the Company
(or, if Consolidated Net Income shall be a deficit, minus 100 percent of
such deficit) for the period (taken as one accounting period) beginning on
the last day of the fiscal quarter immediately preceding the Issue Date
and ending on the last day of the fiscal quarter immediately preceding the
date of such Restricted Payment, plus (B) 100 percent of the aggregate Net
Cash Proceeds received by the Company subsequent to the Issue Date from
the issuance or sale (other than to a Restricted Subsidiary) of shares of
its Qualified Stock, including Qualified Stock issued upon the exercise of
options, warrants or rights to purchase Qualified Stock, plus (C) 100
percent of the amount of any Indebtedness of the Company or any of its
Restricted Subsidiaries (as expressed on the face of a balance sheet in
accordance with GAAP), or the carrying value of any Disqualified Stock,
which has been converted into, exchanged for or satisfied by the issuance
of shares of Qualified Stock of the Company subsequent to the Issue Date,
less the amount of any cash, or the value of any other Property
distributed by the Company or its Restricted Subsidiaries upon such
conversion, exchange or satisfaction, plus (D) 100 percent of the net
reduction in Investments, subsequent to the Issue Date, in any Person,
resulting from payments of interest on Indebtedness, dividends, repayments
of loans or advances, or other transfers of Property or assets (but only
to the extent such interest, dividends, repayments or other transfers of
Property or assets are not included in the calculation of Consolidated Net
Income), in each case to the Company or any Restricted Subsidiary of the
Company from any Person (including without limitation, from Unrestricted
Subsidiaries) or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries of the Company (valued in each case as provided in
the definition of "Investments"), not to exceed in the case of any Person
the amount of Investments previously made by the Company or any Restricted
Subsidiary in such Person and which was treated as a Restricted Payment,
minus (E) 100% of the amount of Investments made pursuant to Section
4.13(b)(vii) hereof subsequent to the Issue Date.
(b) The provisions of Section 4.13(a) hereof shall not prevent the
Company from:
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(i) paying a dividend on its Capital Stock at any time within 60
calendar days after the declaration thereof if, on the date of declaration
thereof, the Company could have paid such dividend in compliance with this
Section 4.13 and the other provisions of this Indenture;
(ii) retiring, purchasing, redeeming or otherwise acquiring for
value, (A) any Capital Stock of the Company or any Restricted Subsidiary
of the Company, or (B) Indebtedness of the Company that is subordinated in
right of payment to the Notes or (C) Indebtedness of a Restricted
Subsidiary of the Company, solely in exchange for, or out of the proceeds
of the substantially concurrent sale of Qualified Stock of the Company;
(iii) retiring, purchasing, redeeming or otherwise acquiring for
value, any Indebtedness of the Company subordinated in right of payment to
the Notes in exchange for, or out of the proceeds of, the substantially
concurrent incurrence of Indebtedness of the Company (other than
Indebtedness to a Subsidiary of the Company), provided that such new
Indebtedness (A) is subordinated in right of payment to the Notes at least
to the same extent as, (B) has an Average Life at least as long as, and
(C) has no scheduled principal payments due in any amount earlier than,
any equivalent amount of principal under the Indebtedness so retired;
(iv) retiring, purchasing, redeeming or otherwise acquiring for
value, any Indebtedness of a Restricted Subsidiary of the Company in
exchange for, or out of the proceeds of, the substantially concurrent
incurrence of Indebtedness of the Company or any Restricted Subsidiary of
the Company that is permitted under Section 4.09 hereof and that (A) is
not secured by any assets of the Company or any Restricted Subsidiary of
the Company to a greater extent than the retired, purchased, redeemed or
acquired Indebtedness was so secured, (B) has an Average Life at least as
long as the retired, purchased, redeemed or acquired Indebtedness and (C)
is subordinated in right of payment to the Notes at least to the same
extent as the retired, purchased, redeemed or acquired Indebtedness;
(v) retiring, purchasing, redeeming or otherwise acquiring for
value, any Capital Stock of the Company or any Restricted Subsidiary of
the Company held by any member of the Company's (or any of its
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option plan in effect on the Issue Date or upon the
death or termination of such member, provided that the aggregate price
paid subsequent to the Issue Date for all such retired, purchased,
redeemed or acquired Capital Stock shall not exceed, in the aggregate, the
sum of $2,000,000 plus the aggregate Net Cash Proceeds received by the
Company subsequent to the Is-
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sue Date from any reissuance of such Capital Stock by the Company to members of
management of the Company or its Subsidiaries;
(vi) making loans to members of management of the Company as
required pursuant to employment agreements with such members, provided
that the aggregate amount of all such loans (whether such loans are
outstanding or have been repaid) shall not exceed $2,200,000;
(vii) making Investments in an aggregate amount not to exceed
$20,000,000 in joint ventures or other risk sharing arrangements (which
may include partnerships, limited liability companies, corporations or
other arrangements) (each a "Joint Venture Entity") the purpose of which
is to engage in the same or complementary lines of business as the Company
or a Restricted Subsidiary or in businesses consistent with the
fundamental nature of the operating business of the Company or a
Restricted Subsidiary; provided the management and operations of any such
Joint Venture Entity are controlled by the Company pursuant to (i) the
charter documents of such Joint Venture Entity, or (ii) an agreement
between or among the holders of the Voting Stock of such Joint Venture
Entity, or (iii) a management agreement of a minimum duration of three or
more years between the Company and such Joint Venture Entity;
(viii) permitting a Restricted Subsidiary which became a Restricted
Subsidiary as a result of an Investment by the Company or a Restricted
Subsidiary described in clause (vii) of this Section 4.13(b) to declare or
pay any dividend or distribution on any Capital Stock of such Subsidiary
to all holders of Capital Stock of such Subsidiary on a pro rata basis;
and
(ix) permitting a Restricted Subsidiary to pay a dividend with
respect to any shares of Capital Stock of such Subsidiary held by a
Lender, which shares of Capital Stock were acquired by such Lender in
connection with the Secured Credit Facility.
(c) Not later than the date of making any Restricted Payment
(including any Restricted Payment permitted to be made pursuant to Section
4.13(b) hereof), the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the required calculations were computed, which calculations
may be based upon the Company's latest available financial statements.
SECTION 4.14. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries. The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, cause or suffer to exist or
become effective, or enter into, any encumbrance or restriction (other than
pursuant to law or regulation) on the ability of any of its Restricted
Subsidiaries (i) to pay dividends or make any other distributions in
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respect of its Capital Stock or pay any Indebtedness or other obligation owed to
the Company or any Restricted Subsidiary of the Company; (ii) to make loans or
advances to the Company or any Restricted Subsidiary of the Company; or (iii) to
transfer any of its Property or assets to the Company or any Restricted
Subsidiary of the Company, except:
(a) any encumbrance or restriction pursuant to an agreement relating
to the Secured Credit Facility or the Existing Indebtedness as of the
Issue Date;
(b) any encumbrance or restriction pursuant to an agreement relating
to an acquisition of assets or Property, so long as the encumbrances or
restrictions in any such agreement relate solely to the assets or Property
so acquired;
(c) any encumbrance or restriction relating to any Indebtedness of
any Restricted Subsidiary of the Company existing on the date on which
such Restricted Subsidiary is acquired by the Company or any Restricted
Subsidiary of the Company (other than Indebtedness incurred by such
Restricted Subsidiary in connection with or in anticipation of its
acquisition), provided that the EBITDA of such Restricted Subsidiary is
not taken into account in determining whether such acquisition is
permitted hereunder;
(d) any encumbrance or restriction pursuant to an agreement
effecting a permitted Refinancing of Indebtedness issued pursuant to an
agreement referred to in the foregoing clauses (a) through (c) of this
Section 4.14; provided that the encumbrances and restrictions contained in
any such Refinancing agreement are not materially more restrictive than
the encumbrances and restrictions contained in such original agreement;
(e) customary provisions restricting subletting or assignment of any
lease governing a leasehold interest of the Company or any Restricted
Subsidiary of the Company or customary provisions in supply, license or
other agreements entered into in the ordinary course of business that
restrict the assignment of any such agreement or any rights thereunder;
(f) any temporary encumbrance or restriction with respect to a
Restricted Subsidiary of the Company pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all
of the Capital Stock of, or Property and assets of, such Restricted
Subsidiary; and
(g) any restriction on the sale or other disposition of Property or
assets securing Indebtedness as a result of a Permitted Lien on such
Property or assets permitted pursuant to Section 4.11 hereof.
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SECTION 4.15. Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries. The Company (i) shall not permit any of its Restricted
Subsidiaries to issue any Capital Stock other than to the Company or a
Restricted Subsidiary of the Company and (ii) shall not permit any Person other
than the Company or a Restricted Subsidiary of the Company to own any Capital
Stock of any of its Restricted Subsidiaries (other than directors' qualifying
shares), except for:
(a) a sale of 100 percent of the Capital Stock of a Restricted
Subsidiary sold in a transaction permitted under Section 4.08 hereof;
(b) Capital Stock of a Restricted Subsidiary issued and outstanding
on the Issue Date and held by Persons other than the Company or any
Restricted Subsidiary;
(c) Capital Stock of a Restricted Subsidiary issued and outstanding
prior to the time that such Person becomes a Restricted Subsidiary so long
as such Capital Stock was not issued in contemplation of such Person's
becoming a Restricted Subsidiary or otherwise being acquired by the
Company;
(d) any Disqualified Stock permitted to be issued under Section 4.09
hereof;
(e) Capital Stock of a Subsidiary issued to a Lender or Lenders
under the Secured Credit Facility in an aggregate amount not to exceed
7.25 percent of the outstanding Capital Stock of such Subsidiary; and
(f) Capital Stock of a Person which became or will become a
Restricted Subsidiary as a result of an Investment by the Company or a
Restricted Subsidiary described in clause (vii) of Section 4.13(b) hereof,
provided that (A) the Company or such Restricted Subsidiary, as the case
may be, receives net consideration at the time of such issuance at least
equal to the Fair Market Value (as evidenced by a Board Resolution
delivered to the Trustee) of the Capital Stock issued, (B) any
consideration received by the Company or such Restricted Subsidiary in
respect of such issuance consist of Cash Proceeds and/or
Telecommunications Assets, (C) the Company or such Restricted Subsidiary,
as the case may be, within 270 calendar days of such issuance, uses the
Net Cash Proceeds from such issuance to (1) reinvest (or enters a binding
agreement to reinvest, provided that such reinvestment is completed within
180 calendar days of the date of such agreement) an amount equal to the
Net Cash Proceeds (or any portion thereof) from such issuance in
Telecommunications Assets and/or (2) apply an amount equal to such Net
Cash Proceeds (or remaining Net Cash Proceeds) from such issuance to
repurchase or redeem Notes or to permanently reduce Indebtedness of the
Company (other than Indebtedness to a Restricted Subsidiary) that is pari
passu with the Notes or to permanently reduce Indebtedness or Pre-
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ferred Stock of any Restricted Subsidiary (other than Indebtedness to, or
Preferred Stock owned by, the Company or another Restricted Subsidiary)
and (D) after giving effect to such issuance, the total amount of
consideration that will have been received as a result of all issuances of
Capital Stock of Restricted Subsidiaries made pursuant to this clause (f)
is less than the greater of (x) $5,000,000 and (y) 5 percent of the
Consolidated Tangible Assets of the Company determined as of the date of
such issuance;
provided that any issuance or sale specified in clause (c), (d), (e) or (f) of
this Section 4.15 shall not cause such Restricted Subsidiary to fail to qualify
as a Restricted Subsidiary under the terms of this Indenture.
SECTION 4.16. Transactions with Affiliates. The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, sell, lease, transfer, or otherwise dispose of, any of its
Properties or assets to, or purchase any Property or assets from, or enter into
any contract, agreement, transaction, understanding, loan, advance or Guarantee
with, or for the benefit of, any Affiliate of the Company or any such Restricted
Subsidiary (each of the foregoing, an "Affiliate Transaction"), unless (a) such
Affiliate Transaction is on terms that are no less favorable to the Company or
such Restricted Subsidiary than those that would have been obtained in a
comparable arm's-length transaction by the Company or such Restricted Subsidiary
with a Person that is not an Affiliate and (b) the Company delivers to the
Trustee (i) with respect to any Affiliate Transaction involving aggregate
payments in excess of $1,000,000, a Board Resolution certifying that such
Affiliate Transaction complies with clause (a) above and that such Affiliate
Transaction has been approved by a majority of the Independent Directors on the
Board of Directors, who have determined that such Affiliate Transaction is in
the best interests of the Company or such Restricted Subsidiary and (ii) with
respect to any Affiliate Transaction (other than Permitted Subordinated
Financing) involving aggregate payments in excess of $5,000,000, an opinion as
to the fairness from a financial point of view to the Company or such Restricted
Subsidiary issued by an investment banking firm of national standing together
with an Officers' Certificate to the effect that such opinion complies with this
clause (ii); provided that the following shall not be deemed Affiliate
Transactions:
(i) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business and
consistent with industry practice for services rendered by a Person in
such Person's capacity as an officer or employee of the Company or such
Restricted Subsidiary;
(ii) any agreement or arrangement with respect to the compensation
of a director of the Company or any Restricted Subsidiary of the Company
for services ren-
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dered by a Person in such Person's capacity as a director approved by the
Board of Directors and consistent with industry practice;
(iii) transactions between or among the Company and its Restricted
Subsidiaries;
(iv) the making of any payment permitted to be made under Section
4.13 hereof;
(v) transactions pursuant to contracts existing on the Issue Date
and listed in Schedule D hereto; and
(vi) loans and advances to employees and officers of the Company or
a Restricted Subsidiary of the Company in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, provided that the aggregate principal amount of all such loans
and advances shall not exceed $3,000,000 at any one time outstanding, and
provided, further, that in the event the aggregate principal amount of all
such loans or advances exceeds $1,000,000 at any one time outstanding, the
Company shall, within 180 calendar days of the date such amount first
exceeds $1,000,000, reduce such amount to an amount less than $1,000,000.
SECTION 4.17. Restricted and Unrestricted Subsidiaries. (a) The
Company may designate a Subsidiary (including a newly formed or newly acquired
Subsidiary) of the Company or any of its Restricted Subsidiaries as an
Unrestricted Subsidiary if such Subsidiary does not have any obligations which,
if in Default, would result in a cross default on Indebtedness of the Company or
a Restricted Subsidiary (other than Indebtedness to the Company or a Restricted
Subsidiary), and (i) such Subsidiary has total assets of $1,000 or less or (ii)
such designation is effective immediately upon such Person becoming a
Subsidiary. Unless so designated as an Unrestricted Subsidiary, any Person that
becomes a Subsidiary of the Company or any of its Restricted Subsidiaries shall
be classified as a Restricted Subsidiary of the Company. Except as provided in
clause (a)(i) hereof, no Restricted Subsidiary may be redesignated as an
Unrestricted Subsidiary.
(b) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, take any action or enter into any transaction or
series of transactions that would result in a Person (other than a newly formed
Subsidiary having no outstanding Indebtedness (other than Indebtedness to the
Company or a Restricted Subsidiary) at the date of determination) becoming a
Restricted Subsidiary of the Company (whether through an acquisition, the
redesignation of an Unrestricted Subsidiary or otherwise) unless, after giving
effect to such action, transaction or series of transactions, on a pro forma
basis, (i) the Company could in-
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cur at least $1.00 of additional Indebtedness pursuant to Section 4.09(a) hereof
and (ii) no Default or Event of Default would occur or be continuing; provided,
however, that the foregoing restriction shall not apply to a Person which
becomes a Restricted Subsidiary as a result of (a) an Investment described in
clause (ix) of the definition of "Permitted Investments" in Section 1.01 hereof
or (b) an Investment described in clause (vii) of Section 4.13(b) hereof.
Subject to this Section 4.17(b), an Unrestricted Subsidiary may be redesignated
as a Restricted Subsidiary.
(c) The designation of a Subsidiary of the Company as an
Unrestricted Subsidiary or the designation of an Unrestricted Subsidiary of the
Company as a Restricted Subsidiary shall be made by the Board of Directors as
evidenced by a Board Resolution delivered to the Trustee and shall be effective
as of the date specified in such Board Resolution, which shall not be prior to
the date such Board Resolution is delivered to the Trustee.
SECTION 4.18. Reports. Whether or not the Company is subject to
Section 13(a) or Section 15(d) of the Exchange Act, or any successor provision
thereto, the Company shall file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to Section 13(a) or Section 15(d) of the
Exchange Act or any successor provision thereto if the Company were subject
thereto, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been required to file them. The Company shall also (whether or not it is
required to file reports with the Commission), within 30 calendar days of each
Required Filing Date, (i) transmit by mail to all holders of Notes, as their
names and addresses appear in the Security Register and to any Persons that
request such reports in writing, without cost to such holders or Persons and
(ii) file with the Trustee, copies of the annual reports, quarterly reports and
other documents (without exhibits) which the Company has filed or would have
filed with the Commission pursuant to Section 13(a) or Section 15(d) of the
Exchange Act, any successor provisions thereto or this Section 4.18. The Company
shall not be required to file any report with the Commission if the Commission
does not permit such filing. In addition to the foregoing, commencing with the
unaudited information for the fiscal quarter ended September 30, 1997, the
Company will file with the Commission and will thereafter transmit by mail to
the Holders and file with the Trustee within the same time periods as set forth
in the second next preceding sentence, unaudited information, on an aggregate
Fiber Network basis (before headquarter allocations) segmented by the calendar
year in which each such Fiber Network became operational, setting forth the
investment in plant, property and equipment to date, revenue, EBITDA, EBIT,
access lines, fiber miles, route miles, buildings connected and voice grade
equivalents; provided, however, that the Company will provide such unaudited
information with respect to (i) all Fiber Networks that were initially
operational at any time prior to December 31, 1995 (all such Fiber Networks
shall be deemed to have become operational in calendar year 1995) and (ii) all
Fiber Networks that were initially opera-
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tional in each succeeding calendar year (including all or any portion of the
then current year); and provided, further, that the Company need no longer
comply with the information requirements of this sentence after four consecutive
fiscal quarters for which the ratio of EBITDA of the Company to Consolidated
Interest Expense (other than dividends or distributions with respect to
Preferred Stock or Disqualified Stock of the Company) of the Company is greater
than 1.0 or after the occurrence of a Change of Control.
SECTION 4.19. Compliance Certificate; Notice of Default or Event of
Default. The Company shall deliver to the Trustee within 120 calendar days after
the end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate stating whether or not, to the best knowledge of such
officer, the Company has complied with all conditions and covenants under this
Indenture, and, if the Company shall be in Default, specifying all such Defaults
and the nature thereof of which such officer may have knowledge.
For the purposes of this Section 4.19, compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
The Company shall deliver written notice to the Trustee within 30
calendar days after any executive officer of the Company becomes aware of the
occurrence of any event which constitutes, or with the giving of notice or the
lapse of time or both would constitute, a Default or Event of Default,
describing such Default or Event of Default, its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 4.20. Limitation on Construction of Fiber Networks. The
Company may construct Fiber Networks in no more than 45 Metropolitan Areas until
the earlier of such time as (i) the ratio of EBITDA of the Company to
Consolidated Interest Expense (other than dividends or distributions with
respect to Preferred Stock or Disqualified Stock of the Company) of the Company
is greater than 1.0 for four consecutive fiscal quarters and (ii) the occurrence
of a Change of Control.
ARTICLE V
CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER
SECTION 5.01. Merger, Consolidation or Sale of Assets. The Company
shall not in any transaction or series of related transactions, consolidate
with, or merge with or into, any other Person or permit any other Person to
merge with or into the Company (other than a merger of a Restricted Subsidiary
of the Company into the Company in which the Company is the continuing
corporation), or sell, convey, assign, transfer, lease or otherwise dispose of
all or substantially all of the Property and assets of the Company and its
Restricted Subsidiaries taken as a whole to any other Person, unless:
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(a) either (i) the Company shall be the continuing corporation or
(ii) the corporation (if other than the Company) formed by such
consolidation or into which the Company is merged, or the Person which
acquires, by sale, assignment, conveyance, transfer, lease or disposition,
all or substantially all of the Property and assets of the Company and its
Restricted Subsidiaries taken as a whole (any such corporation or Person
being the "Surviving Entity") shall be a corporation organized and validly
existing under the laws of the United States of America, any political
subdivision thereof, any state thereof or the District of Columbia, and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form reasonably satisfactory to the Trustee,
the due and punctual payment of the principal of (and premium, if any) and
interest on all the Notes and the performance of every covenant and
obligation in this Indenture on the part of the Company to be performed or
observed;
(b) immediately after giving effect to such transaction or series of
related transactions on a pro forma basis (including, without limitation,
any Indebtedness incurred or anticipated to be incurred in connection with
or in respect of such transaction or series of related transactions), no
Default or Event of Default shall have occurred and be continuing or would
result therefrom; and
(c) immediately after giving effect to such transaction or series of
related transactions on a pro forma basis (including, without limitation,
any Indebtedness incurred or anticipated to be incurred in connection with
or in respect of such transaction or series of transactions), the Company
(or the Surviving Entity, if the Company is not continuing) would (A) be
permitted to incur $1.00 of additional Indebtedness under Section 4.09(a)
hereof or (B) have a Total Market Capitalization of at least
$1,000,000,000 and total Indebtedness in an amount less than 40 percent of
its Total Market Capitalization.
In connection with any consolidation, merger, conveyance, lease or
other disposition contemplated by this Section 5.01, the Company shall deliver,
or cause to be delivered, to the Trustee, in form reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, conveyance, lease or disposition and any
supplemental indenture in respect thereto comply with this Article V and that
all conditions precedent herein provided for relating to such transaction have
been complied with.
SECTION 5.02. Successor Corporation Substituted. Upon any
consolidation with, or merger by the Company with or into, any other
corporation, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the Property and assets of the
Company and its Restricted Subsidiaries taken as a whole in accor-
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dance with Section 5.01 hereof, the successor corporation formed by such
consolidation or into which the Company is merged, or the Person to which such
sale, conveyance, assignment, transfer, lease, conveyance or other disposition
is made, shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
successor Person has been named as the Company herein; and thereafter the
predecessor corporation shall be relieved of all obligations and covenants under
this Indenture and the Notes, except for the obligation to pay the principal of
(and premium, if any) and interest on the Notes.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. "Event of Default," wherever used
herein with respect to the Notes, means any one of the following events
(whatever the reason for such event, and whether it shall be voluntary or
involuntary, or be effected by operation of law, pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of interest on any Note when the same
becomes due and payable, and the continuance of such Default for a period
of 30 calendar days; or
(b) default in the payment of the principal of (or premium, if any,
on) any Note when the same becomes due and payable whether upon Maturity,
optional redemption, required repurchase (including pursuant to a Change
of Control Offer or an Asset Sale Offer) or otherwise, or the failure to
make an offer to purchase any Note as herein required; or
(c) default in the performance, or breach, of any covenant or
agreement contained in Section 4.07, Section 4.08, Section 4.09, Section
4.12, Section 4.13 or Article V hereof; or
(d) default in the performance, or breach, of any covenant or
warranty of the Company contained in this Indenture or the Notes (other
than a covenant or warranty addressed in Section 6.01(a), Section 6.01(b)
or Section 6.01(c) hereof), and the continuance of such Default or breach
for a period of 30 calendar days after written notice thereof has been
given to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25 percent of the aggregate principal amount of
the outstanding Notes specifying such Default and stating that such notice
is a "Notice of Default" delivered in connection with this Indenture; or
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(e) a default or defaults under any bond, debenture, note or other
evidence of Indebtedness by the Company or any Restricted Subsidiary of
the Company (or under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness by the Company or any such Restricted Subsidiary) having,
individually or in the aggregate, a principal or similar amount
outstanding of at least $10,000,000, whether such indebtedness now exists
or shall hereafter be created, which default or defaults shall have
resulted in the acceleration of the maturity of such Indebtedness prior to
its express maturity or shall constitute a failure to pay such
Indebtedness when due and payable after the expiration of any applicable
grace period with respect thereto or shall have resulted in such
Indebtedness becoming or being declared due and payable; or
(f) a final judgment or final judgments for the payment of money
(other than to the extent covered by insurance as to which the insurance
company has acknowledged coverage and other than to the extent covered by
an indemnity given by an insurance company) is entered against the Company
or any Restricted Subsidiary of the Company in an aggregate amount in
excess of $10,000,000 by a court or courts of competent jurisdiction,
which judgment is not discharged, waived, stayed, bonded or satisfied for
a period of 60 consecutive calendar days; or
(g) the entry by a court having jurisdiction in the premises of (i)
a decree or order for relief in respect of the Company or any Significant
Restricted Subsidiary of the Company in an involuntary case or proceeding
under United States bankruptcy laws, as now or hereafter constituted, or
any other applicable Federal, state, or foreign bankruptcy, insolvency, or
other similar law or (ii) a decree or order adjudging the Company or any
Significant Restricted Subsidiary of the Company a bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of, or in respect of, the Company
or any Significant Restricted Subsidiary of the Company under United
States bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal, state or foreign bankruptcy, insolvency, or similar
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Restricted Subsidiary of the Company or of any substantial part of the
Property or assets of the Company or any Significant Restricted Subsidiary
of the Company, or ordering the winding-up or liquidation of the affairs
of the Company or any Significant Restricted Subsidiary of the Company,
and the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
consecutive calendar days; or
(h) (i) commencement by the Company or any Significant Restricted
Subsidiary of the Company of a voluntary case or proceeding under United
States bankruptcy
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laws, as now or hereafter constituted, or any other applicable Federal,
state, or foreign bankruptcy, insolvency or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent; or
(ii) the consent by the Company or any Significant Restricted Subsidiary
of the Company to the entry of a decree or order for relief in respect of
the Company or any Significant Restricted Subsidiary of the Company in an
involuntary case or proceeding under United States bankruptcy laws, as now
or hereafter constituted, or any other applicable Federal, state, or
foreign bankruptcy, insolvency, or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
the Company or any Significant Restricted Subsidiary of the Company; or
(iii) the filing by the Company or any Significant Restricted Subsidiary
of the Company of a petition or answer or consent seeking reorganization
or relief under United States bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal, state or foreign bankruptcy,
insolvency or other similar law; or (iv) the consent by the Company or any
Significant Restricted Subsidiary of the Company to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Company or any Significant Restricted Subsidiary of the Company or
of any substantial part of the Property or assets of the Company or any
Significant Restricted Subsidiary of the Company, or the making by the
Company or any Significant Restricted Subsidiary of the Company of an
assignment for the benefit of creditors; or (v) the admission by the
Company or any Significant Restricted Subsidiary of the Company in writing
of its inability to pay its debts generally as they become due; or (vi)
the taking of corporate action by the Company or any Significant
Restricted Subsidiary of the Company in furtherance of any such action.
SECTION 6.02. Acceleration. If any Event of Default (other than an
Event of Default specified in Section 6.01(g) or Section 6.01(h) hereof) occurs
and is continuing, then and in every such case, the Trustee by a notice in
writing to the Company, or the Holders of not less than 25 percent of the
outstanding aggregate principal amount of Notes by a notice in writing to the
Company and the Trustee, may declare all unpaid principal and any accrued and
unpaid interest on all Notes then outstanding to be immediately due and payable.
Upon any such declaration, all unpaid principal and any accrued and unpaid
interest on all Notes then outstanding will become and be immediately due and
payable.
If an Event of Default specified in Section 6.01(g) or Section
6.01(h) hereof occurs, all unpaid principal and any accrued and unpaid interest
on all Notes then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder of Notes.
In the event of a declaration of acceleration because an Event of
Default set forth in Section 6.01(e) hereof has occurred and is continuing, such
declaration of accelera-
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tion shall be automatically rescinded and annulled if the event of default
triggering such Event of Default pursuant to Section 6.01(e) hereof shall be
remedied, or cured, or waived by the holders of the relevant Indebtedness,
within 60 calendar days after such event of default; provided no judgment or
decree for the payment of the money due on the Notes has been obtained by the
Trustee as hereinafter in this Article VI provided.
At any time after a declaration of acceleration with respect to
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Trustee as hereinafter in this Article VI provided, the
Holders of a majority in principal amount of the outstanding Notes, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if,
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue installments of interest on all Notes,
(ii) the principal of (and premium, if any, on) any Notes which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate or rates prescribed therefor in such Notes,
(iii) to the extent that payment of such interest is lawful,
interest on the Defaulted Interest at the rate prescribed therefor in the
Notes and this Indenture, and
(iv) all moneys paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and all other amounts due to the Trustee
pursuant to Section 7.07 hereof; and
(b) all Events of Default with respect to the Notes, other than the
non-payment of the principal of Notes which have become due solely by such
declaration of acceleration, have been cured or waived by the Holders as
provided herein.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
SECTION 6.03. Other Remedies. The Company covenants that if an Event
of Default specified in Section 6.01(a) or Section 6.01(b) occurs the Company
shall, upon demand of the Trustee, pay to the Trustee, for the benefit of the
Holders, the whole amount then due and payable on the Notes for principal (and
premium, if any) and interest and, to the extent that payment of such interest
shall be legally enforceable, interest upon the overdue principal (and premium,
if any) and upon Defaulted Interest, at the rate or rates prescribed
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therefor in such Notes; and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel and all other amounts due to the Trustee pursuant to
Section 7.07 hereof.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Notes and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
Property and assets of the Company or any other obligor upon such Notes,
wherever situated.
If an Event of Default with respect to the Notes occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders by such appropriate judicial proceedings as
the Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
SECTION 6.04. Waiver of Past Defaults. The Holders of not less than
a majority in principal amount of the outstanding Notes may, on behalf of the
Holders of all the Notes, waive any past Default and its consequences under this
Article VI, except Default (a) in the payment of the principal of (or premium,
if any) or interest on, any Note, or (b) in respect of a covenant or provision
hereof which under Section 9.02 hereof cannot be modified or amended without the
consent of the Holders of not less than 75 percent in principal amount of the
outstanding Notes, or (c) in respect of a covenant or provision hereof which
under Section 9.02 hereof cannot be modified or amended without the consent of
the Holder of each outstanding Note affected; provided that with respect to any
past Default referred to in clause (b) of this paragraph, the Holders of not
less than 75 percent in principal amount of the outstanding Notes may waive such
Default.
SECTION 6.05. Control by Majority. The Holders of not less than a
majority in principal amount of the outstanding Notes shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee; provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture or unduly prejudicial to the rights of other Holders
and would not subject the Trustee to personal liability, and
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(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 6.06. Limitation on Suits. No Holder of Notes shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Notes;
(b) the Holders of not less than 25 percent in principal amount of
the outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee security or
indemnity satisfactory to the Trustee in its reasonable discretion against
the costs, expenses and liabilities to be incurred in compliance with such
request;
(d) the Trustee for 30 calendar days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 30-day period by the Holders of a
majority in principal amount of the outstanding Notes;
in any event, it being understood and intended that no one or more Holders of
Notes shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the rights
of any other Holders of Notes, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all Holders of Notes.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of (premium, if any) and interest on the Notes held by such
Holder, on or after the respective due dates expressed in the Notes or the
redemption dates or purchase dates provided for therein, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall be
absolute and unconditional and shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, ad-
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justment, composition or other judicial proceedings, or any voluntary or
involuntary case under United States bankruptcy laws, as now or hereafter
constituted, relative to the Company or any other obligor upon the Notes or the
Property and assets of the Company or of such other obligor or their creditors,
the Trustee (irrespective of whether the principal of such Notes shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise, (i) to file and
prove a claim for the whole amount of principal (and premium, if any) and
interest owing and unpaid in respect of the Notes, to file such other papers or
documents and to take such other actions, including participating as a member or
otherwise in any official committee of creditors appointed in the matter, 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 all other amounts due to the Trustee
pursuant to Section 7.07 hereof) and of the Holders allowed in such judicial
proceeding, and (ii) to collect and receive any moneys or other Property payable
or deliverable on any such claims and to distribute the same; and any receiver,
assignee, trustee, custodian, liquidator, sequestrator (or other similar
official) in any such 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 it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. Nothing contained herein shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.09. Priorities. Any money collected by the Trustee
pursuant to this Article VI shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money on
account of principal (premium, if any) or interest, upon presentation of the
Notes and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
7.07 hereof;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Notes, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Notes for principal (and premium, if any) and
interest, respectively; and
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THIRD: To the Company.
The Trustee may fix a record date and payment date for any payment
to Holders pursuant to this Section 6.09. At least 15 calendar days before such
record date, the Company shall mail to each Holder and the Trustee a notice that
states such record date, the payment date and amount to be paid. The Trustee may
mail such notice in the name and at the expense of the Company.
SECTION 6.10. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, 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, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Holder, or group
of Holders, holding in the aggregate more than 10 percent in principal amount of
the outstanding Notes, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Note on or after its Stated Maturity.
SECTION 6.11. Waiver of Stay or Extension Laws. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 6.12. Trustee May Enforce Claims Without Possession of the
Notes. All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name, as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Notes.
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SECTION 6.13. Restoration of Rights and Remedies. If the Trustee or
any Holder of Notes has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such Holder,
then and in every such case the Company, the Trustee and the Holders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 6.14. Rights and Remedies Cumulative. Except as otherwise
provided in Section 2.07 hereof, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 6.15. Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article VI or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE VII
TRUSTEE
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and shall use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and (ii) in the absence
of bad faith on its part, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; provided that in the case of any such
certificates or opinions that by any provision of this Indenture are
specifically required to be furnished to the Trustee, the Trustee shall ex-
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amine such certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, provided that: (i) this paragraph (c) shall not limit the effect of
paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and (iii) the
Trustee shall not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction received by it pursuant to Section
6.05 hereof.
(d) 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.
(e) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(f) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk of liability is
not reasonably assured to it.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Article VII and to the provisions of the Trust
Indenture Act.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper Person. Except as provided in Section 7.01(b) hereof, the Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on any
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any such agent; provided that such agent was
appointed with due care by the Trustee.
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(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided that the Trustee's conduct does not constitute willful
misconduct or negligence.
(e) The Trustee shall not be charged with knowledge of any Default
or Event of Default under Sections 6.01(c), 6.01(d), 6.01(e) or 6.01(f) hereof,
of the identity of any Restricted Subsidiary or of the existence of any Change
of Control or Asset Sale unless either (i) a Trust Officer shall have actual
knowledge thereof, or (ii) the Trustee shall have received notice thereof in
accordance with Section 10.02 hereof from the Company or any Holder of Notes.
(f) The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(g) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture or other paper or document, but the Trustee, in its discretion may
make such further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee, any Paying
Agent or Registrar, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee, Paying
Agent or Registrar hereunder, as the case may be; provided that the Trustee must
in any event comply with Section 7.10 and Section 7.11 hereof.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Company's use
of the proceeds from the Notes, and it shall not be responsible (a) for any
statement of the Company in this Indenture, including the recitals contained
herein, or in any document issued in connection with the sale of the Notes or in
the Notes other than the Trustee's certificate of authentication or (b) for
compliance by the Company with the Registration Rights Agreement.
SECTION 7.05. Notice of Defaults. Within 90 calendar days after the
occurrence of any Default hereunder with respect to the Notes, the Trustee shall
transmit by
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mail to all Holders, as their names and addresses appear in the Security
Register, notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided that, except in the case of a
Default in the payment of the principal of (or premium, if any) or interest on
any Note, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors and/or Trust Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders.
SECTION 7.06. Preservation of Information; Reports by Trustee to
Holders.
(a) The Company shall furnish or cause to be furnished to the
Trustee:
(i) semiannually, not less than 10 calendar days prior to each
Interest Payment Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of the Record Date
immediately preceding such Interest Payment Date, and
(ii) at such other times as the Trustee may request in writing,
within 30 calendar days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more than 15
calendar days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Registrar for
the Notes, no such list need be furnished with respect to the Notes.
(b) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 7.06(a) hereof and
the names and addresses of Holders received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.06(a) hereof upon receipt of a new list so furnished.
(c) Holders may communicate as provided in Section 312(b) of the
Trust Indenture Act with other Holders with respect to their rights under this
Indenture or under the Notes.
(d) Each Holder of Notes, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee shall
be held accountable by reason of the disclosure of any such information as to
the names and addresses of the Holders in accordance with this Section 7.06,
regardless of the source from which such in-
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formation was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under this Section
7.06.
(e) Within 60 calendar days after April 15 of each year commencing
with the year 1998, the Trustee shall transmit by mail to all Holders of Notes,
a brief report dated as of such April 15 if and to the extent required under
Section 313(a) of the Trust Indenture Act.
(f) The Trustee shall comply with Sections 313(b) and 313(c) of the
Trust Indenture Act.
(g) A copy of each report described in Section 7.06(e) hereof shall,
at the time of its transmission to Holders, be filed by the Trustee with each
stock exchange, if any, upon which the Notes are then listed, with the
Commission and also with the Company. The Company shall promptly notify the
Trustee of any stock exchange upon which the Notes are listed.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time reasonable compensation for its services. The
Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection, in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents and counsel. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust.
The Company shall indemnify the Trustee for, and hold it harmless
against, any and all loss, liability or expense (including reasonable attorneys'
fees) arising out of or incurred by it in connection with the acceptance or
administration of the trust created by this Indenture and the performance of its
duties hereunder, except as set forth in the next paragraph. 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 any such claim and the
Trustee shall cooperate in the defense of such claim. 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.
The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
willful misconduct, negligence or bad faith.
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To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a Lien prior to the Notes on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of, premium, if any, and interest on, particular Notes.
The Company's payment obligations pursuant to this Section
7.07 shall survive the resignation or removal of the Trustee and discharge of
this Indenture. Subject to any other rights available to the Trustee under
applicable bankruptcy law, when the Trustee incurs expenses after the occurrence
of a Default specified in Section 6.01(g) or Section 6.01(h) hereof, the
expenses are intended to constitute expenses of administration under bankruptcy
law.
SECTION 7.08. Replacement of Trustee. (a) No resignation or
removal of the Trustee and no appointment of a successor Trustee pursuant to
this Article VII shall become effective until the acceptance of appointment by
the successor Trustee under this Section 7.08.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 calendar days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the outstanding Notes, delivered to
the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 310(b) of
the Trust Indenture Act after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Note for at least
six months, unless the Trustee's duty to resign is stayed in accordance
with the provisions of Section 310(b) of the Trust Indenture Act; or
(ii) the Trustee shall cease to be eligible under Section 7.10
hereof and shall fail to resign after written request therefor by the
Company or by any such Holder; or
(iii) the Trustee shall become incapable of acting or a decree
or order for relief by a court having jurisdiction in the premises
shall have been entered in respect of the Trustee in an involuntary
case under the United States bankruptcy laws, as now
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or hereafter constituted, or any other applicable Federal or state
bankruptcy, insolvency or similar law; or a decree or order by a court
having jurisdiction in the premises shall have been entered for the
appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Trustee or of its
Property and assets or affairs, or any public officer shall take charge
or control of the Trustee or of its Property and assets or affairs for
the purpose of rehabilitation, conservation, winding up or liquidation;
or
(iv) the Trustee shall commence a voluntary case under the
United States bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal or state bankruptcy, insolvency or similar law
or shall consent to the appointment of or taking possession by a
receiver, custodian, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Trustee or its Property and assets or
affairs, or shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts generally as they
become due, or shall take corporate action in furtherance of any such
action,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to the Notes, or (ii) subject to Section 6.10 hereof, any
Holder who has been a bona fide Holder of a Note for at least six months may, on
behalf of such Holder and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee for the Notes.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by or pursuant to a Board Resolution, shall promptly
appoint a successor Trustee. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by the Holders of a majority in principal amount of the outstanding
Notes delivered to the Company and the retiring Trustee, the successor Trustee
so appointed shall, forthwith upon its acceptance of such appointment in
accordance with this Section 7.08, become the successor Trustee and to that
extent replace any successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and shall
have accepted appointment in the manner hereinafter provided, any Holder that
has been a bona fide Holder of a Note for at least six months may, subject to
Section 6.10 hereof, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such resignation, removal and appointment by first class mail,
postage prepaid, to the Holders as their names and addresses appear in the
Security Register. Each notice shall include the name of
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the successor Trustee with respect to the Notes and the address of its Corporate
Trust Administration Office.
(g) In the event of an appointment hereunder of a successor
Trustee, each such successor Trustee so appointed shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly assign, transfer and
deliver to such successor Trustee all Property and money held by such former
Trustee hereunder, subject to its Lien, if any, provided for in Section 7.07
hereof.
(h) Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and trusts
referred to in Section 7.08(g) hereof.
(i) No successor Trustee shall accept its appointment unless
at the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article VII and under the Trust Indenture Act.
SECTION 7.09. Successor Trustee by Merger. Any corporation
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder; provided that such
corporation shall be otherwise qualified and eligible under this Article VII and
under the Trust Indenture Act, without the execution or filing of any paper or
any further act on the part of any of the parties hereto. In case any Notes
shall have been authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Notes so authenticated
with the same effect as if such successor Trustee had itself authenticated such
Notes. In the event that any Notes shall not have been authenticated by such
predecessor Trustee, any such successor Trustee may authenticate and deliver
such Notes, in either its own name or that of its predecessor Trustee, with the
full force and effect which this Indenture provides for the certificate of
authentication of the Trustee.
SECTION 7.10. Eligibility; Disqualification. There shall at
all times be a Trustee hereunder which shall be
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(i) a corporation organized and doing business under the laws
of the United States of America, any State or Territory thereof or the
District of Columbia, authorized under such laws to exercise corporate
trust powers, and subject to supervision or examination by Federal,
State, Territorial or District of Columbia authority, or
(ii) a corporation or other Person organized and doing
business under the laws of a foreign government that is permitted to
act as Trustee pursuant to a rule, regulation or order of the
Commission, authorized under such laws to exercise corporate trust
powers, and subject to supervision or examination by authority of such
foreign government or a political subdivision thereof substantially
equivalent to supervision or examination applicable to United States
institutional trustees,
in either case having a combined capital and surplus of at least $50,000,000.
If such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 7.10, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. Neither the Company nor any Affiliate of the Company shall serve as
Trustee hereunder. If at any time the Trustee shall cease to be eligible to
serve as Trustee hereunder pursuant to the provisions of this Section 7.10, it
shall resign immediately in the manner and with the effect specified in this
Article VII.
If the Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and
the Company shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing
with the Commission the application referred to in the penultimate paragraph of
Section 310(b) of the Trust Indenture Act.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship listed in Section 311(b) of the Trust
Indenture Act. A Trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent indicated therein.
ARTICLE VIII
DEFEASANCE
SECTION 8.01. Company's Option to Effect Legal Defeasance or
Covenant Defeasance. The Company may elect, at its option, at any time, to have
Section 8.02 or
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Section 8.03 hereof applied to the outstanding Notes (in whole and not in part)
upon compliance with the conditions set forth below in this Article VIII, such
election shall be evidenced by a Board Resolution delivered to the Trustee.
SECTION 8.02. Legal Defeasance and Discharge. Upon the
Company's exercise of its option to have this Section 8.02 applied to the
outstanding Notes (in whole and not in part), the Company shall be deemed to
have been discharged from its obligations with respect to such Notes as provided
in this Section 8.02 on and after the date the conditions set forth in Section
8.04 hereof are satisfied (hereinafter called "Defeasance"). For this purpose,
such Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by such Notes and to have
satisfied all its other obligations under such Notes and this Indenture insofar
as such Notes are concerned (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), subject to the
following which shall survive until otherwise terminated or discharged
hereunder:
(a) the rights of Holders of such Notes to receive, solely
from the trust fund described in Section 8.04 hereof and as more fully
set forth in such Section 8.04 payments in respect of the principal of
and any premium and interest on such Notes when payments are due,
(b) the Company's obligations with respect to such Notes under
Sections 2.06, 2.07, 2.09, 4.02, 4.03 and 4.04 hereof,
(c) the rights, powers, trusts, duties and immunities of the
Trustee under this Indenture,
(d) Article III hereof, and
(e) this Article VIII.
Subject to compliance with this Article VIII, the Company may
exercise its option to have this Section 8.02 applied to the outstanding Notes
(in whole and not in part) notwithstanding the prior exercise of its option to
have Section 8.03 hereof applied to such Notes.
SECTION 8.03. Covenant Defeasance. Upon the Company's exercise
of its option to have this Section 8.03 applied to the outstanding Notes (in
whole and not in part), (i) the Company shall be released from its obligations
under Section 5.01(c), Sections 4.05 through 4.18, inclusive, and any covenant
added to this Indenture subsequent to the Issue Date pursuant to Section 9.01
hereof, (ii) the occurrence of any event specified in Section 6.01(c) or Section
6.01(d) hereof, with respect to any of Section 5.01(c), Sections 4.05
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through 4.18, inclusive, and any covenant added to this Indenture subsequent to
the Issue Date pursuant to Section 9.01 hereof, shall be deemed not to be or
result in an Event of Default, in each case with respect to such Notes as
provided in this Section 8.03 on and after the date the conditions set forth in
Section 8.04 hereof are satisfied (hereinafter called "Covenant Defeasance").
For this purpose, such Covenant Defeasance means that, with respect to such
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such specified
Section (to the extent so specified in the case of Sections 6.01(c) and 6.01(d)
hereof), whether directly or indirectly by reason of any reference elsewhere
herein to any such Section or by reason of any reference in any such Section to
any other provision herein or in any other document; but the remainder of this
Indenture and such Notes shall be unaffected thereby.
SECTION 8.04. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section 8.02 or
Section 8.03 hereof to the outstanding Notes:
(a) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for,
and dedicated solely to the benefits of the Holders of such Notes, (i)
money in an amount, or (ii) U.S. Government Obligations which through
the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before
the due date of any payment, money in an amount, or (iii) a combination
thereof, in each case sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of and any
installment of interest on such Notes on the respective Stated
Maturities thereof, in accordance with the terms of this Indenture and
such Notes.
(b) In the event of an election to have Section 8.02 hereof
apply to the outstanding Notes, 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 or (ii) since the date of this Indenture, there has been a
change in the applicable Federal income tax law, in either case (i) or
(ii) to the effect that, and based thereon such opinion shall confirm
that, the Holders of such Notes will not recognize gain or loss for
Federal income tax purposes as a result of the deposit, Defeasance and
discharge to be effected with respect to such Notes and will be subject
to Federal income tax on the same amount, in the same manner and at the
same times as would be the case if such deposit, Defeasance and
discharge were not to occur.
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(c) In the event of an election to have Section 8.03 hereof
apply to the outstanding Notes, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of such
Notes will not recognize gain or loss for Federal income tax purposes
as a result of the deposit and Covenant Defeasance to be effected with
respect to such Notes and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would be the
case if such deposit and Covenant Defeasance were not to occur.
(d) No Default or Event of Default with respect to the
outstanding Notes shall have occurred and be continuing at the time of
such deposit after giving effect thereto or at any time on or prior to
the 91st calendar day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until
after such 91st calendar day).
(e) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming for the purpose of this clause (e) that all
Notes are in default within the meaning of such Act).
(f) Such Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(g) Such Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act of 1940, as amended,
unless such trust shall be registered under such Act or exempt from
registration thereunder.
(h) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant
Defeasance have been complied with.
SECTION 8.05. Deposited Money and U.S. Government Obligations to be
Held in Trust; Miscellaneous Provisions. All money and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee pursuant
to Section 8.04 hereof in respect of the outstanding Notes shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any such
Paying Agent as the Trustee may determine, to the Holders of such Notes, of all
sums due and to become due thereon in respect of principal and any premium and
interest, but money so held in trust need not be segregated from other funds
except to the extent required by law. The Company shall pay and indemnify the
Trustee against any tax, fee
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or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 8.04 hereof or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of outstanding Notes.
Anything in this Article VIII to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon Company
Order any money or U.S. Government Obligations held by it as provided in Section
8.04 hereof which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof that would then be required to be
deposited to effect the Defeasance or Covenant Defeasance, as the case may be,
with respect to the outstanding Notes.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money in accordance with this Article VIII with respect to
any Notes by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application then
the obligations under this Indenture and such Notes from which the Company has
been discharged or released pursuant to Section 8.02 or 8.03 hereof shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article VIII with respect to such Notes, until such time as the Trustee or
Paying Agent is permitted to apply all money held in trust pursuant to Section
8.05 hereof with respect to such Notes in accordance with this Article VIII;
provided that if the Company makes any payment of principal of or any premium or
interest on any such Note following such reinstatement of its obligations, the
Company shall be subrogated to the rights (if any) of the Holders of such Notes
to receive such payment from the money so held in trust.
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may, at any time, and from time to time, without notice to or consent of
any Holder of Notes, enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the
Company and the assumption by such successor of the covenants of the
Company herein and contained in the Notes; or
(b) to add to the covenants of the Company, for the benefit of
the Holders of all of the Notes, or to surrender any right or power
herein conferred upon the Company; or
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(c) to add any additional Events of Default; or
(d) to provide for uncertificated Notes in addition to or in
place of Certificated Notes; or
(e) to evidence and provide for the acceptance of appointment
hereunder of a successor Trustee; or
(f) to secure the Notes; or
(g) to cure any ambiguity herein, or to correct or supplement
any provision hereof which may be inconsistent with any other provision
hereof or to add any other provisions with respect to matters or
questions arising under this Indenture; provided that such actions
shall not adversely affect the interests of the Holders of Notes in any
material respect; or
(h) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act.
SECTION 9.02. With Consent of Holders. With the consent of the
Holders of not less than a majority in principal amount of the outstanding
Notes, by Act of said Holders delivered to the Company and the Trustee, the
Company and the Trustee may enter into one or more indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders; provided that no such supplemental indenture
shall, without the consent of the Holders of not less than 75 percent in
principal amount of the outstanding Notes, modify in any manner the obligations
of the Company to make offers to purchase Notes and purchase Notes pursuant to
Section 4.07 or Section 4.08 hereof; and provided, further, that no such
supplemental indenture shall, without the consent of the Holder of each
outstanding Note,
(a) change the Stated Maturity of the principal of, or any
installment of Interest on, any Note, or reduce the principal amount
thereof (or any premium, if any), or the interest thereon, that would
be due and payable upon Maturity thereof, or change the place of
payment where, or the coin or currency in which, any Note or any
premium or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Maturity thereof; or
(b) reduce the percentage in principal amount of the
outstanding Notes, the consent of whose Holders is required for any
such supplemental indenture; or
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(c) modify any of the provisions of Section 6.04 hereof,
except to increase any percentage set forth therein 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) subordinate in right of payment, or otherwise subordinate,
the Notes to any other Indebtedness; or
(e) modify any of the provisions of this Section 9.02, except
to increase any percentage set forth herein or to provide that certain
other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Note affected thereby.
It shall not be necessary for any Act of Holders under this
Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 9.03. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article IX, this Indenture
shall be modified in accordance therewith, and such supplemental indenture shall
form a part of this Indenture for all purposes; and every Holder of Notes
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 9.04. Compliance with Trust Indenture Act. Every
amendment or supplement to this Indenture or the Notes shall comply with the
Trust Indenture Act as then in effect.
SECTION 9.05. Revocation and Effect of Consents and Waivers. A
consent to an amendment, supplement or a waiver by a Holder of a Note shall bind
the Holder and every subsequent Holder of such Note or portion of such Note that
evidences the same debt as the consenting Holder's Note, even if notation of the
consent or waiver is not made on such Note; provided that any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Note or
portion of such Note if the Trustee receives the notice of revocation before the
date the amendment, supplement or waiver becomes effective. After an amendment,
supplement or waiver becomes effective pursuant to this Article IX, it shall
bind every Holder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders 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
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were Holders 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. No such consent shall be valid or
effective for more than 120 calendar days after such record date.
SECTION 9.06. Notation on or Exchange of Notes. If a
supplemental indenture changes the terms of a Note, the Trustee may require the
Holder thereof to deliver such Note to the Trustee. The Trustee may place an
appropriate notation on such Note regarding the changed terms and return it to
the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for such Note shall issue and the Trustee shall authenticate
a new Note that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Note shall not affect the validity of such amendment
or supplement.
SECTION 9.07. Trustee to Execute Supplemental Indentures. The
Trustee shall execute any supplemental indenture authorized pursuant to this
Article IX if such supplemental indenture does not adversely affect the rights,
duties, liabilities or immunities of the Trustee. If it does, the Trustee may,
but shall not be required to, execute such supplemental indenture. In executing
any supplemental indenture, the Trustee shall be entitled to receive indemnity
reasonably satisfactory to it and to receive, and (subject to Section 7.01
hereof) shall be fully protected in relying upon, an Officers' Certificate
(which need only cover the matters set forth in clause (a) below) and an Opinion
of Counsel provided by the Company stating that:
(a) such supplemental indenture is authorized or permitted by
this Indenture and that all conditions precedent to the execution,
delivery and performance of such supplemental indenture have been
satisfied;
(b) the Company has all necessary corporate power and
authority to execute and deliver the supplemental indenture and that
the execution, delivery and performance of such supplemental indenture
has been duly authorized by all necessary corporate action of the
Company;
(c) the execution, delivery and performance of the
supplemental indenture do not conflict with, or result in the breach of
or constitute a default under any of the terms, conditions or
provisions of (i) the Indenture, (ii) the charter documents and by-laws
of the Company, or (iii) any material agreement or instrument to which
the Company is subject;
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(d) to the best knowledge and belief of legal counsel writing
such Opinion of Counsel, the execution, delivery and performance of the
supplemental indenture do not conflict with, or result in the breach of
any of the terms, conditions or provisions of (i) any law or regulation
applicable to the Company, or (ii) any material order, writ, injunction
or decree of any court or governmental instrumentality applicable to
the Company;
(e) such supplemental indenture has been duly and validly
executed and delivered by the Company, and the Indenture together with
such supplemental indenture constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and general equitable
principles; and
(f) the Indenture together with such amendment or supplement
complies with the Trust Indenture Act.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls. If and to the
extent that any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by, or with another provision (an "incorporated provision")
included in this Indenture by operation of, Sections 310 to 318, inclusive, of
the Trust Indenture Act, such imposed duties or incorporated provision shall
control.
SECTION 10.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first class mail, postage
prepaid, addressed as follows: if to the Company: American Communications
Services, Inc., 131 National Business Parkway, Suite 100, Annapolis Junction,
Maryland 20701, Attention: Secretary; if to the Trustee: The Chase Manhattan
Bank, 450 West 33rd Street, Fifteenth Floor, New York, New York 10001-2697,
Attention: Corporate Trustee Administration Department.
The Company or the Trustee, by notice to the other, may
designate additional or different addresses for subsequent notices or
communications. Any notice or communication mailed to a Holder shall be sent to
the Holder by first class mail, postage prepaid, at the Holder's address as it
appears in the Security Register and shall be duly given if so sent within the
time prescribed. Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed to the Company, the Trustee or a Holder in
the manner provided above, it is duly given, whether or not the addressee
receives it. In case by reason of the suspension
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of regular mail service or by reason of any other cause it shall be
impracticable to give notice by mail to Holders, then such notification as shall
be made with the approval of the Trustee shall constitute a sufficient
notification for every purpose hereunder.
SECTION 10.03. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee: (a) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and (b) an
Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 10.04. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture (other than pursuant to Section 4.19
hereof) shall include: (a) a statement that the individual 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 individual, such person has
made such examination or investigation as is necessary to enable such person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (d) a statement as to whether or not, in the opinion of
such individual, such covenant or condition has been complied with.
SECTION 10.05. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of Holders, and
any Registrar and Paying Agent may make reasonable rules for their functions;
provided that no such rule shall conflict with terms of this Indenture or the
Trust Indenture Act.
SECTION 10.06. Payments on Business Days. If a payment
hereunder is scheduled to be made on a date that is not a Business Day, payment
shall be made on the next succeeding day that is a Business Day, and no interest
shall accrue with respect to that payment during the intervening period. If a
regular record date is a date that is not a Business Day, such record date shall
not be affected.
SECTION 10.07. Governing Law. THIS INDENTURE AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
SECTION 10.08. No Recourse Against Others. No director,
officer, employee, incorporator or stockholder of the Company, as such, shall
have any liability for any
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obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation,
solely by reason of its status as a director, officer, employee, incorporator or
stockholder of the Company. By accepting a Note, each Holder waives and releases
all such liability (but only such liability) as part of the consideration for
issuance of such Note to such Holder.
SECTION 10.09. Successors. All agreements of the Company in
this Indenture and the Notes shall bind its successors and assigns whether so
expressed or not. All agreements of the Trustee in this Indenture shall bind its
successors and assigns whether so expressed or not.
SECTION 10.10. Counterparts. This Indenture may be executed in
any number of counterparts and by the parties thereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
SECTION 10.11. Table of Contents; Headings. 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
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
SECTION 10.12. Severability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 10.13. Further Instruments and Acts. Upon request of
the Trustee, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
<PAGE> 101
-S1-
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
AMERICAN COMMUNICATIONS SERVICES, INC.
By:
------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
-------------------------
THE CHASE MANHATTAN BANK, as Trustee
By:
------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
-------------------------
<PAGE> 102
STATE OF )
) SS.:
COUNTY OF )
On the day of , 1997, before me personally came
, to me known, who, being by me duly sworn, did depose and say that
he is of American Communications Services, Inc., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
-----------------------------------
Notary Public
State of
My commission expires / /
[SEAL]
<PAGE> 103
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the day of , 1997, before me personally came
, to me known, who, being by me duly sworn, did depose and say that
he is of The Chase Manhattan Bank, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
------------------------------------
Notary Public
State of
My commission expires / /
[SEAL]
<PAGE> 104
EXHIBIT A
FORM OF INITIAL GLOBAL NOTE
AMERICAN COMMUNICATIONS SERVICES, INC.
No._______ CUSIP No.
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR
TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY, IF
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<PAGE> 105
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF
THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY TO AMERICAN COMMUNICATIONS SERVICES,
INC. OR THE REGISTRAR FOR REGISTRATION OF TRANSFER OR EXCHANGE AND ANY
NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
INTERESTS IN THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE
INDENTURE, DATED AS OF JULY 23, 1997, BETWEEN AMERICAN COMMUNICATIONS
SERVICES, INC. AND THE TRUSTEE NAMED THEREIN, PURSUANT TO WHICH THIS
NOTE WAS ISSUED.
GLOBAL NOTE
REPRESENTING 13-3/4% SENIOR NOTES DUE 2007
American Communications Services, Inc., a Delaware corporation, for
value received, hereby promises to pay to CEDE & CO., or its registered assigns,
the principal sum indicated on Schedule A hereof, on July 15, 2007.
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<PAGE> 106
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purposes.
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<PAGE> 107
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed.
Dated:
AMERICAN COMMUNICATIONS
SERVICES, INC.
By:
-------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THE CHASE MANHATTAN BANK,
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:
----------------------------
Authorized Officer
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<PAGE> 108
REVERSE SIDE OF FORM OF INITIAL GLOBAL NOTE
AMERICAN COMMUNICATIONS SERVICES, INC.
GLOBAL NOTE
REPRESENTING 13-3/4% SENIOR NOTES DUE 2007
1. Indenture.
This Note is one of a duly authorized issue of debt securities
of the Company (as defined below) designated as its "13-3/4% Senior Notes due
2007" (herein called the "Notes") limited in aggregate principal amount at
Stated Maturity to $220,000,000, issued under an indenture dated as of July 23,
1997 (as amended or supplemented from time to time, the "Indenture") between the
Company and The Chase Manhattan Bank, as trustee (the "Trustee," which term
includes any successor Trustee under the Indenture), to which Indenture
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and each
Holder of Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered. The summary of the terms of this Note contained
herein does not purport to be complete and is qualified by reference to the
Indenture. All terms used in this Note which are not defined herein shall have
the meanings assigned to them in the Indenture.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
enter into or permit certain transactions with Affiliates, create or incur
Liens, enter into or permit certain Sale and Leaseback Transactions and make
Asset Sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or permit any
other Person to merge with or into the Company, or sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of the Property
of the Company to any other Person and on the ability of the Company's
Restricted Subsidiaries to issue Capital Stock.
2. Principal and Interest.
American Communications Services, Inc., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture, being
herein called the "Company"), promises to pay the principal amount set forth on
Schedule A of this Note to the Holder hereof on July 15, 2007.
The Company shall pay interest at a rate of 13-3/4%, per
annum, from July 23, 1997, or from the most recent Interest Payment Date
thereafter to which interest has been paid or duly provided for, semiannually on
January 15 and July 15 of each year,
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<PAGE> 109
commencing on January 15, 1998, in cash, to the Holder hereof until the
principal amount hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, subject to certain exceptions provided in the Indenture, be paid to the
Person in whose name this Note (or the Note in exchange or substitution for
which this Note was issued) is registered at the close of business on the Record
Date for interest payable on such Interest Payment Date. The Record Date for any
interest payment is the close of business on January 1 or July 1, as the case
may be, whether or not a Business Day, immediately preceding the Interest
Payment Date on which such interest is payable. Any such interest not so
punctually paid or duly provided for ("Defaulted Interest") shall forthwith
cease to be payable to the Holder on such Record Date and shall be paid as
provided in Section 2.11 of the Indenture. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
Each payment of interest in respect of an Interest Payment
Date will include interest accrued through the day before such Interest Payment
Date. If an Interest Payment Date falls on a day that is not a Business Day, the
interest payment to be made on such Interest Payment Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is exchanged in an Exchange Offer (as such term
is defined in the Registration Rights Agreement (as defined herein)) prior to
the Record Date for the first Interest Payment Date following such exchange,
accrued and unpaid interest, if any, on this Note, up to but not including the
date of issuance of the Exchange Note or Exchange Notes issued in exchange for
this Note, shall be paid on the first Interest Payment Date for such Exchange
Note or Exchange Notes to the Holder or Holders of such Exchange Note or
Exchange Notes on the first Record Date with respect to such Exchange Note or
Exchange Notes. If this Note is exchanged in an Exchange Offer subsequent to the
Record Date for the first Interest Payment Date following such exchange but on
or prior to such Interest Payment Date, then any such accrued and unpaid
interest with respect to this Note and any accrued and unpaid interest on the
Exchange Note or Exchange Notes issued in exchange for this Note, through the
day before such Interest Payment Date, shall be paid on such Interest Payment
Date to the Holder of this Note on such Record Date.
3. Additional Interest.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated July 23, 1997, among the Company and the
Initial Purchasers (the "Registration Rights Agreement"), which agreement is
attached to the Indenture as Exhibit E thereto.
If the Company fails to file a Registration Statement within
the time periods specified in the Registration Rights Agreement or if the
Exchange Offer Registration State-
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<PAGE> 110
ment or the Shelf Registration Statement fails to become effective, then, as
liquidated damages, additional interest (the "Additional Interest") shall become
payable in respect of the Notes as follows:
(a) if (A) neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement is filed with the Commission within 60 days
following the Issue Date or (B) notwithstanding that the Company has consummated
or will consummate a Exchange Offer, the Company is required to file a Shelf
Registration Statement and such Shelf Registration Statement is not filed on or
prior to the date required by the Registration Rights Agreement, then commencing
on the day after either such required filing date, Additional Interest shall be
paid on the principal amount of the Notes at a rate per annum equal to 0.5% of
the principal amount of the Notes; or
(b) if (A) neither the Exchange Offer Registration Statement
nor a Shelf Registration Statement is declared effective by the Commission
within 120 days following the Closing Date or (B) notwithstanding that the
Company has consummated or will consummate a Exchange Offer, the Company is
required to file a Shelf Registration Statement and such Shelf Registration
Statement is not declared effective by the Commission on or prior to the 120th
day following the Closing Date, then, commencing on the day after either such
required effective date, Additional Interest shall be paid on the principal
amount of the Notes at a rate per annum equal to 0.5% of the principal amount of
the Notes; or
(c) if applicable, the Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be effective
at any time prior to the third anniversary of the Issue Date (other than after
such time as all Notes have been disposed of thereunder and other than during
any Suspension Period (as defined in the Registration Right Agreement)), then
Additional Interest shall be paid on the principal amount of the Notes at a rate
per annum equal to 0.5% of the principal amount of the Notes commencing on the
day such Shelf Registration Statement ceases to be effective;
provided, however that the Additional Interest rate on the
Notes may not exceed in the aggregate 1.5% per annum of the principal amount;
provided, further, however, that (1) upon the filing of the Exchange Offer
Registration Statement or a Shelf Registration Statement (in the case of clause
(a) above), (2) upon the effectiveness of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of clause (b) above),
or (3) upon the effectiveness of the Shelf Registration Statement which had
ceased to remain effective (in the case of clause (c) above), Additional
Interest on the Notes as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue and the terms of the Notes
shall revert to their original terms.
Any amounts of Additional Interest due pursuant to clause (a),
(b) or (c) above will be payable in cash on January 15 and July 15 of each year.
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<PAGE> 111
Except as expressly provided in this paragraph 3, Additional
Interest shall be treated as interest and any date on which Additional Interest
is due and payable shall be treated as an Interest Payment Date, for all
purposes under this Note and the Indenture.
4. Method of Payment.
The Company, through the Paying Agent, shall pay interest on
this Note to the registered Holder of this Note, as provided above. The Holder
must surrender this Note to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States of America
that at the time of payment is legal tender for payment of all debts public and
private. Principal and interest will be payable at the office of the Paying
Agent but, at the option of the Company, interest may be paid by check mailed to
the registered Holders at their registered addresses.
5. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar
under the Indenture. The Company may, upon written notice to the Trustee,
appoint and change any Paying Agent or Registrar. The Company or any of its
subsidiaries may act as Paying Agent or Registrar.
6. Optional Redemption.
The Notes may not be redeemed prior to July 15, 2002.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 calendar days, nor more than
60 calendar days' notice, at the prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon (if any) at
the applicable Redemption Date, if redeemed during the twelve-month period
beginning July 15 of the years indicated below:
Year Percentage
---- ----------
2002 106.875%
2003 105.156%
2004 103.438%
2005 101.719%
2006 and thereafter 100.000%
Notwithstanding the foregoing, at any time prior to July 15,
2000, the Company may redeem up to 35% of the aggregate principal amount of
Notes with the net proceeds of one or more Equity Offerings of the Company at a
redemption price equal to 113.750% of the aggregate principal amount thereof, on
the date of redemption; provided, however, that, after giving effect to any such
redemption, at least $143 million aggregate principal amount of the Notes remain
outstanding.
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<PAGE> 112
7. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days
before a Redemption Date, the Company will send a notice of redemption,
first-class mail, postage prepaid, to Holders of Notes to be redeemed at the
addresses of such Holders as they appear in the Security Register.
If less than all of the Notes are to be redeemed at any time,
the Notes to be redeemed will be chosen by the Trustee in accordance with the
Indenture. If any Note is redeemed subsequent to a Record Date with respect to
any Interest Payment Date specified above and on or prior to such Interest
Payment Date, then any accrued interest will be paid on such Interest Payment
Date to the Holder of the Note on such Record Date. If money in an amount
sufficient to pay the Redemption Price of all Notes (or portions thereof) to be
redeemed on the Redemption Date is deposited with the Paying Agent on or before
the applicable Redemption Date and certain other conditions are satisfied,
interest on the Notes to be redeemed on the applicable Redemption Date will
cease to accrue.
The Notes are not subject to any sinking fund.
8. Repurchase at the Option of Holders upon Change of Control.
Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to purchase such Holder's
Notes, in whole, or in part in a principal amount that is an integral multiple
of $1,000, pursuant to a Change of Control Offer, at a purchase price in cash
equal to 101% of the aggregate principal amount thereof on any Change of Control
Payment Date, plus accrued and unpaid interest, if any, to the Change of Control
Payment Date.
Within 30 calendar days following any Change of Control, the
Company shall send, or cause to be sent, by first-class mail, postage prepaid, a
notice regarding the Change of Control Offer to each Holder of Notes. The Holder
of this Note may elect to have this Note or a portion hereof in an authorized
denomination purchased by completing the form entitled "Option of Holder to
Require Purchase" appearing below and tendering this Note pursuant to the Change
of Control Offer. Unless the Company defaults in the payment of the Change of
Control Purchase Price with respect thereto, all Notes or portions thereof
accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest from and after the Change of Control Payment Date.
9. Repurchase at the Option of Holders upon Asset Sale.
If at any time the aggregate amount of Excess Proceeds
(including any Net Cash Proceeds to be applied to the permanent reduction of
Indebtedness represented by the 2005 Notes and the 2006 Notes) calculated as of
such date exceeds $10 million, the Company shall, within 30 days of the date the
amount of Excess Proceeds exceeds $10 million,
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<PAGE> 113
use such Excess Proceeds to make an offer to purchase (an "Asset Sale Offer") on
a pro rata basis, from all holders, outstanding Notes, 2005 Notes and 2006 Notes
in an aggregate principal amount equal to the maximum principal amount that may
be purchased out of Excess Proceeds, at a purchase price (the "Offer Purchase
Price") in cash equal to (a) with respect to the Existing Notes, 100% of the
Accreted Value thereof (as defined in the relevant indenture) and (b) with
respect to the Notes, 100% of the principal amount thereof, plus, in each case,
accrued and unpaid interest, if any, to the purchase date, in accordance with
the procedures set forth in the relevant indenture. Upon completion of an Asset
Sale Offer (including payment of the Offer Purchase Price), any surplus Excess
Proceeds that were the subject of such offer shall cease to be Excess Proceeds,
and the Company may then use such amounts for general corporate purposes.
Within 30 calendar days of the date the amount of Excess
Proceeds exceeds $10,000,000, the Company shall send, or cause to be sent, by
first-class mail, postage prepaid, a notice regarding the Asset Sale Offer to
each Holder of Notes. The Holder of this Note may elect to have this Note or a
portion hereof in an authorized denomination purchased by completing the form
entitled "Option of Holder to Require Purchase" appearing below and tendering
this Note pursuant to the Asset Sale Offer. Unless the Company defaults in the
payment of the Offer Purchase Price with respect thereto, all Notes or portions
thereof selected for payment pursuant to the Asset Sale Offer will cease accrue
interest from and after the Asset Sale Payment Date.
10. The Global Note.
So long as this Global Note is registered in the name of the
Depositary or its nominee, members of, or participants in, the Depositary
("Agent Members") shall have no rights under the Indenture with respect to this
Global Note held on their behalf by the Depositary or the Trustee as its
custodian, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of this Global Note
for all purposes. Notwithstanding the foregoing, nothing herein shall (i)
prevent the Company, the Trustee or any agent of the Company or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or (ii) impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a Holder of Notes.
The Holder of this Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests in this Global Note through Agent Members, to take any action which a
Holder of Notes is entitled to take under the Indenture or the Notes.
Whenever, as a result of optional redemption by the Company, a
Change of Control Offer, an Asset Sale Offer, a Registered Exchange Offer or an
exchange for Certificated Notes, this Global Note is redeemed, repurchased or
exchanged in part, this Global
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<PAGE> 114
Note shall be surrendered by the Holder thereof to the Trustee who shall cause
an adjustment to be made to Schedule A hereof so that the principal amount of
this Global Note will be equal to the portion not redeemed, repurchased or
exchanged and shall thereafter return this Global Note to such Holder; provided
that this Global Note shall be in a principal amount of $1,000 or an integral
multiple of $1,000.
11. The Registered Exchange Offer.
Any Initial Notes represented by this Global Note which are
presented to the Registrar for exchange pursuant to the Registered Exchange
Offer shall be exchanged for a Global Note representing Exchange Notes of equal
principal amount upon surrender of this Global Note to the Registrar in
accordance with the terms of the Registered Exchange Offer and the Indenture.
12. Transfer and Exchange.
By its acceptance of any Note represented by a certificate
bearing the Private Placement Legend, each Holder of, and beneficial owner of an
interest in, such a Note acknowledges the restrictions on transfer of such a
Note set forth in the Private Placement Legend and under the heading "Transfer
Restrictions" in the Final Memorandum, and agrees that it will transfer such a
Note only in accordance with the Private Placement Legend and the restrictions
set forth under the heading "Transfer Restrictions" in the Final Memorandum.
In connection with any registration of transfer of a Note
bearing the Private Placement Legend other than to a Person whom the Holder
reasonably believes to be a "qualified institutional buyer" under the Securities
Act, such Holder shall deliver to the Company such satisfactory evidence, which
may include an opinion of independent counsel licensed to practice law in the
State of New York, as reasonably may be requested by the Company to confirm that
such transfer is being made in accordance with the limitations set forth in the
Private Placement Legend. In the event the Company reasonably determines that
any such transfer is not in accordance with the Private Placement Legend, the
Company shall so inform the Registrar who shall not register such transfer;
provided that the Registrar shall not be required to determine (but may rely on
a determination made by the Company with respect to) the sufficiency of any such
evidence.
Upon the registration of transfer, exchange or replacement of
a Note not bearing the Private Placement Legend, the Trustee shall deliver a
Note that does not bear the Private Placement Legend. Upon the registration of
transfer, exchange or replacement of a Note bearing the Private Placement
Legend, the Trustee shall deliver a Note bearing the Private Placement Legend,
unless such legend may be removed from such Note as provided in the next
sentence. The Private Placement Legend may be removed from a Note if there is
delivered to the Company such satisfactory evidence, which may include an
opinion of independent counsel licensed to practice law in the State of New
York, as reasonably
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<PAGE> 115
may be requested by the Company to confirm that neither such legend nor the
restrictions on transfer set forth therein are required to ensure that transfers
of such Note will not violate the registration and prospectus delivery
requirements of the Securities Act; provided that the Trustee shall not be
required to determine (but may rely on a determination made by the Company with
respect to) the sufficiency of any such evidence. Upon provision of such
evidence, the Trustee shall authenticate and deliver in exchange for such Note,
a Note or Notes (representing the same aggregate principal amount of the Note
being exchanged) without such legend. If the Private Placement Legend has been
removed from a Note, as provided above, no other Note issued in exchange for all
or any part of such Note shall bear such legend, unless the Company has
reasonable cause to believe that such other Note represents a "restricted
security" within the meaning of Rule 144 and instructs the Trustee to cause a
legend to appear thereon.
The Holder of this Global Note shall, by acceptance of this
Global Note, agree that transfers of beneficial interests in this Global Note
may be effected only through a book entry system maintained by such Holder (or
its agent), and that ownership of a beneficial interest in the Notes represented
thereby shall be required to be reflected in book entry form.
Transfers of this Global Note shall be limited to transfers in
whole, and not in part, to the Depositary, its successors and their respective
nominees. Interests of beneficial owners in this Global Note may be transferred
in accordance with the rules and procedures of the Depositary (or its
successors).
This Global Note will be exchanged by the Company for one or
more Certificated Notes if (a) the Depositary (i) has notified the Company that
it is unwilling or unable to continue as, or ceases to be, a clearing agency
registered under Section 17A of the Exchange Act and (ii) a successor to the
Depositary registered as a clearing agency under Section 17A of the Exchange Act
is not able to be appointed by the Company within 90 calendar days or (b) the
Depositary is at any time unwilling or unable to continue as Depositary and a
successor to the Depositary is not able to be appointed by the Company within 90
calendar days. If an Event of Default occurs and is continuing, the Company
shall, at the request of the Holder hereof, exchange all or part of this Global
Note for one or more Certificated Notes; provided that the principal amount of
each of such Certificated Notes and this Global Note, after such exchange, shall
be $1,000 or an integral multiple thereof. Whenever this Global Note is
exchanged as a whole for one or more Certificated Notes, it shall be surrendered
by the Holder to the Trustee for cancellation. Whenever this Global Note is
exchanged in part for one or more Certificated Notes, it shall be surrendered by
the Holder to the Trustee and the Trustee shall make the appropriate notations
thereon pursuant to Section 2.05(c) of the Indenture. All Certificated Notes
issued in exchange for this Global Note or any portion hereof shall be
registered in such names as the Depositary shall instruct the Trustee. Any
Certificated Notes issued in exchange for this Global Note shall include the
Private Placement Legend except as set forth in Section 2.06(a)(iii) of the In-
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<PAGE> 116
denture. Interests in this Global Note may not be exchanged for Certificated
Notes other than as provided in this paragraph.
Prior to the effectiveness of a Shelf Registration Statement
or following the suspension or termination thereof, the Holder of this Note (or
holders of interests therein) and prospective purchasers designated by such
Holder (or such holders of interests therein) shall have the right to obtain
from the Company upon request by such Holder (or such holders of interests) or
prospective purchasers, during any period in which the Company is not subject to
Section 13 or 15(d) of the Exchange Act, or exempt from reporting pursuant to
12g3-2(b) under the Exchange Act, the information required by paragraph
(d)(4)(i) of Rule 144A in connection with any transfer or proposed transfer of
such Note or interest.
13. Denominations.
The Notes are issuable only in registered form without coupons
in denominations of $1,000 and integral multiples thereof of principal amount.
14. 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 unless such abandoned property
law designates another Person.
15. Discharge and Defeasance.
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Notes and the Indenture if
the Company irrevocably 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.
16. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Notes may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Notes and
(ii) any past Default and its consequences may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder of Notes, the Company and the Trustee may
amend the Indenture or the Notes (i) to evidence the succession of another
Person to the Company and the assumption by such successor of the covenants of
the company under the Indenture and contained in the Notes; (ii) to add
additional covenants or to surrender rights and powers conferred on the Company;
(iii) to add any additional Events of Default; (iv) to provide for
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uncertificated Notes in addition to or in place of Certificated Notes; (v) to
evidence and provide for the acceptance of appointment under the Indenture of a
successor Trustee; (vi) to secure the Notes; (vii) to cure any ambiguity in the
Indenture, to correct or supplement any provision in the Indenture which may be
inconsistent with any other provision therein or to add any other provisions
with respect to matters or questions arising under the Indenture, provided that
such actions shall not adversely affect the interests of the Holders in any
material respect; or (viii) to comply with the requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
17. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Notes, subject to
certain limitations, may declare all the Notes to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Notes being immediately due and payable upon the occurrence
of such Events of Default without any further act of the Trustee or any Holder.
Holders of Notes 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 principal amount of the
Notes may direct the Trustee in its exercise of any trust or power under the
Indenture. The Holders of a majority in principal amount of the outstanding
Notes, by written notice to the Company and the Trustee, may rescind any
declaration of acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all Events of Default have been
cured or waived except nonpayment of principal and interest that has become due
solely because of the acceleration.
18. Individual Rights of Trustee.
Subject to certain limitations imposed by the Trust Indenture
Act, the Trustee or any Paying Agent or Registrar, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee, Paying Agent or Registrar, as the case may be, under the Indenture.
19. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Notes or the Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation, solely by reason of its
status as a director, officer, employee, incorporator or stockholder of the
Company. By accepting a Note, each Holder waives and releases all
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such liability (but only such liability) as part of the consideration for
issuance of such Note to such Holder.
20. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder of Notes 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:
American Communications Services, Inc.
131 National Business Parkway
Suite 100
Annapolis Junction, Maryland 20701
Attention: Secretary
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SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Note shall be $ .
The following decreases/increase in the principal amount of this Note have
been made:
<TABLE>
<CAPTION>
Total Principal Notation
Amount Made by
Date of Decrease in Increase in Following such or on
Decrease/ Principal Principal Decrease/ Behalf of
Increase Amount Amount Increase Trustee
- -------- -------- -------
<S> <C> <C> <C> <C>
- ---------------- ------------------ --------------- ------------------- --------------
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</TABLE>
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<PAGE> 120
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
---------------
PLEASE INSERT SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER OF TRANSFEREE
- ----------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint Attorney to transfer this Note
------------
on the Security Register, with full power of substitution.
- --------------------------------------------------------------------------------
Dated:
----------------------------
- ---------------------------------- --------------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
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<PAGE> 121
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
/ / In connection with the Change of Control Offer made pursuant to Section
4.07 of the Indenture, the undersigned hereby elects to have
/ / $ ($1,000 in principal amount or an integral multiple
thereof) of this Note
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or an amount in cash equal to
101% with respect to the principal amount indicated in the preceding
sentence or the principal amount indicated in the preceding sentences,
as the case may be, plus accrued and unpaid interest thereon, if any,
to the Change of Control Payment Date.
/ / In connection with the Asset Sale Offer made pursuant to Section 4.08
of the Indenture, the undersigned hereby elects to have
/ / $ ($1,000 in principal amount or an integral multiple
thereof) of this Note
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or an amount in cash equal to 100% with
respect to the principal amount indicated in the preceding sentence, plus
accrued and unpaid interest thereon, if any, to the Asset Sale Payment Date.
Dated:
-------------------
- -------------------------- ------------------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
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<PAGE> 122
EXHIBIT B
FORM OF INITIAL CERTIFICATED NOTE
AMERICAN COMMUNICATIONS SERVICES, INC.
No._______ CUSIP No.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR
TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY, IF
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<PAGE> 123
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
13-3/4% SENIOR NOTES DUE 2007
American Communications Services, Inc., a Delaware
corporation, for value received, hereby promises to pay to CEDE & CO., or its
registered assigns, $ , on July 15, 2007.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purposes.
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IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed.
Dated:
AMERICAN COMMUNICATIONS SERVICES, INC.
By:
----------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THE CHASE MANHATTAN BANK,
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:
------------------------------------
Authorized Officer
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<PAGE> 125
REVERSE SIDE OF FORM OF INITIAL CERTIFICATED NOTE
AMERICAN COMMUNICATIONS SERVICES, INC.
CERTIFICATED NOTE
13-3/4% SENIOR NOTES DUE 2007
1. Indenture.
This Note is one of a duly authorized issue of debt securities
of the Company (as defined below) designated as its "13-3/4% Senior Notes due
2007" (herein called the "Notes") limited in aggregate principal amount at
Stated Maturity to $220,000,000, issued under an indenture dated as of July 23,
1997 (as amended or supplemented from time to time, the "Indenture") between the
Company and The Chase Manhattan Bank, as trustee (the "Trustee," which term
includes any successor Trustee under the Indenture), to which Indenture
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and each
Holder of Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered. The summary of the terms of this Note contained
herein does not purport to be complete and is qualified by reference to the
Indenture. All terms used in this Note which are not defined herein shall have
the meanings assigned to them in the Indenture.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
enter into or permit certain transactions with Affiliates, create or incur
Liens, enter into or permit certain Sale and Leaseback Transactions and make
Asset Sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or permit any
other Person to merge with or into the Company, or sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of the Property
of the Company to any other Person and on the ability of the Company's
Restricted Subsidiaries to issue Capital Stock.
2. Principal and Interest.
American Communications Services, Inc., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture, being
herein called the "Company"), promises to pay $ to the Holder hereof on
July 15, 2007.
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<PAGE> 126
The Company shall pay interest at a rate of 13-3/4%, per
annum, from July 23, 1997, or from the most recent Interest Payment Date
thereafter to which interest has been paid or duly provided for, semiannually on
January 15 and July 15 of each year, commencing on January 15, 1998, in cash, to
the Holder hereof until the principal amount hereof is paid or made available
for payment. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, subject to certain exceptions provided in the
Indenture, be paid to the Person in whose name this Note (or the Note in
exchange or substitution for which this Note was issued) is registered at the
close of business on the Record Date for interest payable on such Interest
Payment Date. The Record Date for any interest payment is the close of business
on January 1 or July 1, as the case may be, whether or not a Business Day,
immediately preceding the Interest Payment Date on which such interest is
payable. Any such interest not so punctually paid or duly provided for
("Defaulted Interest") shall forthwith cease to be payable to the Holder on such
Record Date and shall be paid as provided in Section 2.11 of the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Each payment of interest in respect of an Interest Payment
Date will include interest accrued through the day before such Interest Payment
Date. If an Interest Payment Date falls on a day that is not a Business Day, the
interest payment to be made on such Interest Payment Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is exchanged in an Exchange Offer (as such term
is defined in the Registration Rights Agreement (as defined herein)) prior to
the Record Date for the first Interest Payment Date following such exchange,
accrued and unpaid interest, if any, on this Note, up to but not including the
date of issuance of the Exchange Note or Exchange Notes issued in exchange for
this Note, shall be paid on the first Interest Payment Date for such Exchange
Note or Exchange Notes to the Holder or Holders of such Exchange Note or
Exchange Notes on the first Record Date with respect to such Exchange Note or
Exchange Notes. If this Note is exchanged in an Exchange Offer subsequent to the
Record Date for the first Interest Payment Date following such exchange but on
or prior to such Interest Payment Date, then any such accrued and unpaid
interest with respect to this Note and any accrued and unpaid interest on the
Exchange Note or Exchange Notes issued in exchange for this Note, through the
day before such Interest Payment Date, shall be paid on such Interest Payment
Date to the Holder of this Note on such Record Date.
3. Additional Interest.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated July 23, 1997, among the Company and the
Initial Purchasers (the
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<PAGE> 127
"Registration Rights Agreement"), which agreement is attached to the Indenture
as Exhibit E thereto.
If the Company fails to file a Registration Statement within
the time periods specified in the Registration Rights Agreement or if the
Exchange Offer Registration Statement or the Shelf Registration Statement fails
to become effective, then, as liquidated damages, additional interest (the
"Additional Interest") shall become payable in respect of the Notes as follows:
(a) if (A) neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement is filed with the Commission within 60 days
following the Issue Date or (B) notwithstanding that the Company has consummated
or will consummate a Exchange Offer, the Company is required to file a Shelf
Registration Statement and such Shelf Registration Statement is not filed on or
prior to the date required by the Registration Rights Agreement, then commencing
on the day after either such required filing date, Additional Interest shall be
paid on the principal amount of the Notes at a rate per annum equal to 0.5% of
the principal amount of the Notes; or
(b) if (A) neither the Exchange Offer Registration Statement
nor a Shelf Registration Statement is declared effective by the Commission
within 120 days following the Closing Date or (B) notwithstanding that the
Company has consummated or will consummate a Exchange Offer, the Company is
required to file a Shelf Registration Statement and such Shelf Registration
Statement is not declared effective by the Commission on or prior to the 120th
day following the Closing Date, then, commencing on the day after either such
required effective date, Additional Interest shall be paid on the principal
amount of the Notes at a rate per annum equal to 0.5% of the principal amount of
the Notes; or
(c) if applicable, the Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be effective
at any time prior to the third anniversary of the Issue Date (other than after
such time as all Notes have been disposed of thereunder and other than during
any Suspension Period (as defined in the Registration Right Agreement)), then
Additional Interest shall be paid on the principal amount of the Notes at a rate
per annum equal to 0.5% of the principal amount of the Notes commencing on the
day such Shelf Registration Statement ceases to be effective;
provided, however that the Additional Interest rate on the
Notes may not exceed in the aggregate 1.5% per annum of the principal amount;
provided, further, however, that (1) upon the filing of the Exchange Offer
Registration Statement or a Shelf Registration Statement (in the case of clause
(a) above), (2) upon the effectiveness of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of clause (b) above),
or (3) upon the effectiveness of the Shelf Registration Statement which had
ceased to remain
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<PAGE> 128
effective (in the case of clause (c) above), Additional Interest on the Notes as
a result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue and the terms of the Notes shall revert to their original
terms.
Any amounts of Additional Interest due pursuant to clause (a),
(b) or (c) above will be payable in cash on January 15 and July 15 of each year.
Except as expressly provided in this paragraph 3, Additional
Interest shall be treated as interest and any date on which Additional Interest
is due and payable shall be treated as an Interest Payment Date, for all
purposes under this Note and the Indenture.
4. Method of Payment.
The Company, through the Paying Agent, shall pay interest on
this Note to the registered Holder of this Note, as provided above. The Holder
must surrender this Note to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States of America
that at the time of payment is legal tender for payment of all debts public and
private. Principal and interest will be payable at the office of the Paying
Agent but, at the option of the Company, interest may be paid by check mailed to
the registered Holders at their registered addresses.
5. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar
under the Indenture. The Company may, upon written notice to the Trustee,
appoint and change any Paying Agent or Registrar. The Company or any of its
subsidiaries may act as Paying Agent or Registrar.
6. Optional Redemption.
The Notes may not be redeemed prior to July 15, 2002.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 calendar days, nor more than
60 calendar days' notice, at the prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon (if any) at
the applicable Redemption Date, if redeemed during the twelve-month period
beginning July 15 of the years indicated below:
Year Percentage
---- ----------
2002 106.875%
2003 105.156%
2004 103.438%
2005 101.719%
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2006 and thereafter 100.000%
Notwithstanding the foregoing, at any time prior to July 15,
2000, the Company may redeem up to 35% of the aggregate principal amount of
Notes with the net proceeds of one or more Equity Offerings of the Company at a
redemption price equal to 13.750% of the aggregate principal amount thereof on
the date of redemption; provided, however, that, after giving effect to any such
redemption, at least $143 million aggregate principal amount of the Notes remain
outstanding.
7. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days
before a Redemption Date, the Company will send a notice of redemption,
first-class mail, postage prepaid, to Holders of Notes to be redeemed at the
addresses of such Holders as they appear in the Security Register.
If less than all of the Notes are to be redeemed at any time,
the Notes to be redeemed will be chosen by the Trustee in accordance with the
Indenture. If any Note is redeemed subsequent to a Record Date with respect to
any Interest Payment Date specified above and on or prior to such Interest
Payment Date, then any accrued interest will be paid on such Interest Payment
Date to the Holder of the Note on such Record Date. If money in an amount
sufficient to pay the Redemption Price of all Notes (or portions thereof) to be
redeemed on the Redemption Date is deposited with the Paying Agent on or before
the applicable Redemption Date and certain other conditions are satisfied,
interest on the Notes to be redeemed on the applicable Redemption Date will
cease to accrue.
The Notes are not subject to any sinking fund.
8. Repurchase at the Option of Holders upon Change of Control.
Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to purchase such Holder's
Notes, in whole, or in part in a principal amount that is an integral multiple
of $1,000, pursuant to a Change of Control Offer, at a purchase price in cash
equal to 101% of the aggregate principal amount thereof on any Change of Control
Payment Date, plus accrued and unpaid interest, if any, to the Change of Control
Payment Date.
Within 30 calendar days following any Change of Control, the
Company shall send, or cause to be sent, by first-class mail, postage prepaid, a
notice regarding the Change of Control Offer to each Holder of Notes. The Holder
of this Note may elect to have this Note or a portion hereof in an authorized
denomination purchased by completing
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<PAGE> 130
the form entitled "Option of Holder to Require Purchase" appearing below and
tendering this Note pursuant to the Change of Control Offer. Unless the Company
defaults in the payment of the Change of Control Purchase Price with respect
thereto, all Notes or portions thereof accepted for payment pursuant to the
Change of Control Offer will cease to accrue interest from and after the Change
of Control Payment Date.
9. Repurchase at the Option of Holders upon Asset Sale.
If at any time the aggregate amount of Excess Proceeds
(including any Net Cash Proceeds to be applied to the permanent reduction of
Indebtedness represented by the 2005 Notes and the 2006 Notes) calculated as of
such date exceeds $10 million, the Company shall, within 30 days of the date the
amount of Excess Proceeds exceeds $10 million, use such Excess Proceeds to make
an offer to purchase (an "Asset Sale Offer") on a pro rata basis, from all
holders, outstanding Notes, 2005 Notes and 2006 Notes in an aggregate principal
amount equal to the maximum principal amount that may be purchased out of Excess
Proceeds, at a purchase price (the "Offer Purchase Price") in cash equal to (a)
with respect to the Existing Notes, 100% of the Accreted Value thereof (as
defined in the relevant indenture) and (b) with respect to the Notes, 100% of
the principal amount thereof, plus, in each case, accrued and unpaid interest,
if any, to the purchase date, in accordance with the procedures set forth in the
relevant indenture. Upon completion of an Asset Sale Offer (including payment of
the Offer Purchase Price), any surplus Excess Proceeds that were the subject of
such offer shall cease to be Excess Proceeds, and the Company may then use such
amounts for general corporate purposes.
Within 30 calendar days of the date the amount of Excess
Proceeds exceeds $10,000,000, the Company shall send, or cause to be sent, by
first-class mail, postage prepaid, a notice regarding the Asset Sale Offer to
each Holder of Notes. The Holder of this Note may elect to have this Note or a
portion hereof in an authorized denomination purchased by completing the form
entitled "Option of Holder to Require Purchase" appearing below and tendering
this Note pursuant to the Asset Sale Offer. Unless the Company defaults in the
payment of the Offer Purchase Price with respect thereto, all Notes or portions
thereof selected for payment pursuant to the Asset Sale Offer will cease to
accrue interest from and after the Asset Sale Payment Date.
10. The Registered Exchange Offer.
Any Initial Notes represented by this Certificated Note which
are presented to the Registrar for exchange pursuant to the Registered Exchange
Offer shall be exchanged for a Certificated Note representing Exchange Notes of
equal principal amount upon surrender of this Certificated Note to the Registrar
in accordance with the terms of the Registered Exchange Offer and the Indenture.
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11. Transfer and Exchange.
By its acceptance of any Note represented by a certificate
bearing the Private Placement Legend, each Holder of, and beneficial owner of an
interest in, such a Note acknowledges the restrictions on transfer of such a
Note set forth in the Private Placement Legend and under the heading "Transfer
Restrictions" in the Final Memorandum, and agrees that it will transfer such a
Note only in accordance with the Private Placement Legend and the restrictions
set forth under the heading "Transfer Restrictions" in the Final Memorandum.
In connection with any registration of transfer of a Note
bearing the Private Placement Legend other than to a Person whom the Holder
reasonably believes to be a "qualified institutional buyer" under the Securities
Act, such Holder shall deliver to the Company such satisfactory evidence, which
may include an opinion of independent counsel licensed to practice law in the
State of New York, as reasonably may be requested by the Company to confirm that
such transfer is being made in accordance with the limitations set forth in the
Private Placement Legend. In the event the Company reasonably determines that
any such transfer is not in accordance with the Private Placement Legend, the
Company shall so inform the Registrar who shall not register such transfer;
provided that the Registrar shall not be required to determine (but may rely on
a determination made by the Company with respect to) the sufficiency of any such
evidence.
Upon the registration of transfer, exchange or replacement of
a Note not bearing the Private Placement Legend, the Trustee shall deliver a
Note that does not bear the Private Placement Legend. Upon the registration of
transfer, exchange or replacement of a Note bearing the Private Placement
Legend, the Trustee shall deliver a Note bearing the Private Placement Legend,
unless such legend may be removed from such Note as provided in the next
sentence. The Private Placement Legend may be removed from a Note if there is
delivered to the Company such satisfactory evidence, which may include an
opinion of independent counsel licensed to practice law in the State of New
York, as reasonably may be requested by the Company to confirm that neither such
legend nor the restrictions on transfer set forth therein are required to ensure
that transfers of such Note will not violate the registration and prospectus
delivery requirements of the Securities Act; provided that the Trustee shall not
be required to determine (but may rely on a determination made by the Company
with respect to) the sufficiency of any such evidence. Upon provision of such
evidence, the Trustee shall authenticate and deliver in exchange for such Note,
a Note or Notes (representing the same aggregate principal amount of the Note
being exchanged) without such legend. If the Private Placement Legend has been
removed from a Note, as provided above, no other Note issued in exchange for all
or any part of such Note shall bear such legend, unless the Company has
reasonable cause to believe that such other Note
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represents a "restricted security" within the meaning of Rule 144 and instructs
the Trustee to cause a legend to appear thereon.
Prior to the effectiveness of a Shelf Registration Statement
or following the suspension or termination thereof, the Holder of this Note (or
holders of interests therein) and prospective purchasers designated by such
Holder (or such holders of interests therein) shall have the right to obtain
from the Company upon request by such Holder (or such holders of interests) or
prospective purchasers, during any period in which the Company is not subject to
Section 13 or 15(d) of the Exchange Act, or exempt from reporting pursuant to
12g3-2(b) under the Exchange Act, the information required by paragraph
(d)(4)(i) of Rule 144A in connection with any transfer or proposed transfer of
such Note or interest.
12. Denominations.
The Notes are issuable only in registered form without coupons
in denominations of $1,000 and integral multiples thereof of principal amount.
13. 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 unless such abandoned property
law designates another Person. 14. Discharge and Defeasance. Subject to certain
conditions, the Company at any time may terminate some or all of its obligations
under the Notes and the Indenture if the Company irrevocably 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.
15. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Notes may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Notes and
(ii) any past Default and its consequences may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder of Notes, the Company and the Trustee may
amend the Indenture or the Notes (i) to evidence the succession of another
Person to the Company and the assumption by such successor of the covenants of
the company under the Indenture and
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<PAGE> 133
contained in the Notes; (ii) to add additional covenants or to surrender rights
and powers conferred on the Company; (iii) to add any additional Events of
Default; (iv) to provide for uncertificated Notes in addition to or in place of
Certificated Notes; (v) to evidence and provide for the acceptance of
appointment under the Indenture of a successor Trustee; (vi) to secure the
Notes; (vii) to cure any ambiguity in the Indenture, to correct or supplement
any provision in the Indenture which may be inconsistent with any other
provision therein or to add any other provisions with respect to matters or
questions arising under the Indenture, provided that such actions shall not
adversely affect the interests of the Holders in any material respect; or (viii)
to comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Notes, subject to
certain limitations, may declare all the Notes to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Notes being immediately due and payable upon the occurrence
of such Events of Default without any further act of the Trustee or any Holder.
Holders of Notes 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 principal amount of the
Notes may direct the Trustee in its exercise of any trust or power under the
Indenture. The Holders of a majority in principal amount of the outstanding
Notes, by written notice to the Company and the Trustee, may rescind any
declaration of acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all Events of Default have been
cured or waived except nonpayment of principal and interest that has become due
solely because of the acceleration.
17. Individual Rights of Trustee.
Subject to certain limitations imposed by the Trust Indenture
Act, the Trustee or any Paying Agent or Registrar, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee, Paying Agent or Registrar, as the case may be, under the Indenture.
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18. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Notes or the Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation, solely by reason of its
status as a director, officer, employee, incorporator or stockholder of the
Company. By accepting a Note, each Holder waives and releases all such liability
(but only such liability) as part of the consideration for issuance of such Note
to such Holder.
19. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder of Notes 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:
American Communications Services, Inc.
131 National Business Parkway
Suite 100
Annapolis Junction, Maryland 20701
Attention: Secretary
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<PAGE> 135
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
---------------
PLEASE INSERT SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER OF TRANSFEREE
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint Attorney to transfer this Note
------------
on the Security Register, with full power of substitution.
- --------------------------------------------------------------------------------
Dated:
------------------
- ------------------------------- -------------------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
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<PAGE> 136
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
/ / In connection with the Change of Control Offer made pursuant to Section
4.07 of the Indenture, the undersigned hereby elects to have
/ / $ ($1,000 in principal amount or an integral multiple thereof)
of this Note
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or an amount in cash equal to
101% with respect to the principal amount indicated in the preceding
sentence or the principal amount indicated in the preceding sentences,
as the case may be, plus accrued and unpaid interest thereon, if any,
to the Change of Control Payment Date.
/ / In connection with the Asset Sale Offer made pursuant to Section 4.08
of the Indenture, the undersigned hereby elects to have
/ / $ ($1,000 in principal amount or an integral multiple thereof)
of this Note
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or an amount in cash equal to
100% with respect to the principal amount indicated in the preceding
sentence plus accrued and unpaid interest thereon, if any, to the Asset
Sale Payment Date.
Dated:
---------------
- ---------------------------- -------------------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
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<PAGE> 137
EXHIBIT C
FORM OF EXCHANGE GLOBAL NOTE
AMERICAN COMMUNICATIONS SERVICES, INC.
No. CUSIP No.
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY TO AMERICAN COMMUNICATIONS SERVICES, INC. OR THE
REGISTRAR FOR REGISTRATION OF TRANSFER OR EXCHANGE AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS HAS BEEN REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF INTERESTS IN THIS
GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE, DATED AS OF JULY 23,
1997, BETWEEN AMERICAN COMMUNICATIONS SERVICES, INC. AND THE TRUSTEE NAMED
THEREIN, PURSUANT TO WHICH THIS NOTE WAS ISSUED.
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<PAGE> 138
GLOBAL NOTE
REPRESENTING 13-3/4% SENIOR NOTES DUE 2007
American Communications Services, Inc., a Delaware
corporation, for value received, hereby promises to pay to CEDE & CO., or its
registered assigns, the principal sum indicated on Schedule A hereof, on July
15, 2007.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purposes.
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<PAGE> 139
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed.
Dated:
AMERICAN COMMUNICATIONS SERVICES, INC.
By:
-------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THE CHASE MANHATTAN BANK,
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:
------------------------------
Authorized Officer
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<PAGE> 140
REVERSE SIDE OF FORM OF EXCHANGE GLOBAL NOTE
AMERICAN COMMUNICATIONS SERVICES, INC.
GLOBAL NOTE
REPRESENTING 13-3/4% SENIOR NOTES DUE 2007
1. Indenture.
This Note is one of a duly authorized issue of debt securities of
the Company (as defined below) designated as its "13-3/4% Senior Notes due 2007"
(herein called the "Notes") limited in aggregate principal amount at Stated
Maturity to $220,000,000, issued under an indenture dated as of July 15, 1997
(as amended or supplemented from time to time, the "Indenture") between the
Company and The Chase Manhattan Bank, as trustee (the "Trustee," which term
includes any successor Trustee under the Indenture), to which Indenture
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and each
Holder of Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered. The summary of the terms of this Note contained
herein does not purport to be complete and is qualified by reference to the
Indenture. All terms used in this Note which are not defined herein shall have
the meanings assigned to them in the Indenture.
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
enter into or permit certain transactions with Affiliates, create or incur
Liens, enter into or permit certain Sale and Leaseback Transactions and make
Asset Sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or permit any
other Person to merge with or into the Company, or sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of the Property
of the Company to any other Person and on the ability of the Company's
Restricted Subsidiaries to issue Capital Stock.
2. Principal and Interest.
American Communications Services, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture, being herein
called the "Company"), promises to pay the principal amount set forth on
Schedule A of this Note to the Holder hereof on July 15, 2007.
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<PAGE> 141
The Company shall pay interest at a rate of 13-3/4%, per annum, from
July 23, 1997, or from the most recent Interest Payment Date thereafter to which
interest has been paid or duly provided for, semiannually on January 15 and July
15 of each year, commencing on January 15, 1998, in cash, to the Holder hereof
until the principal amount hereof is paid or made available for payment. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, subject to certain exceptions provided in the Indenture, be
paid to the Person in whose name this Note (or the Note in exchange or
substitution for which this Note was issued) is registered at the close of
business on the Record Date for interest payable on such Interest Payment Date.
The Record Date for any interest payment is the close of business on January 1
or July 1, as the case may be, whether or not a Business Day, immediately
preceding the Interest Payment Date on which such interest is payable. Any such
interest not so punctually paid or duly provided for ("Defaulted Interest")
shall forthwith cease to be payable to the Holder on such Record Date and shall
be paid as provided in Section 2.11 of the Indenture. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
Each payment of interest in respect of an Interest Payment Date will
include interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
3. Method of Payment.
The Company, through the Paying Agent, shall pay interest on this
Note to the registered Holder of this Note, as provided above. The Holder must
surrender this Note to a Paying Agent to collect principal payments. The Company
will pay principal and interest in money of the United States of America that at
the time of payment is legal tender for payment of all debts public and private.
Principal and interest will be payable at the office of the Paying Agent but, at
the option of the Company, interest may be paid by check mailed to the
registered Holders at their registered addresses.
4. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar under
the Indenture. The Company may, upon written notice to the Trustee, appoint and
change any Paying Agent or Registrar. The Company or any of its subsidiaries may
act as Paying Agent or Registrar.
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<PAGE> 142
5. Optional Redemption.
The Notes may not be redeemed prior to July 15, 2002. Thereafter,
the Notes will be subject to redemption at the option of the Company, in whole
or in part, upon not less than 30 calendar days, nor more than 60 calendar days'
notice, at the prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest thereon (if any) at the applicable
Redemption Date, if redeemed during the twelve-month period beginning July 15 of
the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 106.875%
2003 105.156%
2004 103.438%
2005 101.719%
2006 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to July 15, 2000,
the Company may redeem up to 35% of the aggregate principal amount of Notes with
the net proceeds of one or more Equity Offerings of the Company at a redemption
price equal to 113.750% of the aggregate principal amount thereof on the date of
redemption; provided, however, that, after giving effect to any such redemption,
at least $143 million aggregate principal amount of the Notes remain
outstanding.
6. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days before
a Redemption Date, the Company will send a notice of redemption, first-class
mail, postage prepaid, to Holders of Notes to be redeemed at the addresses of
such Holders as they appear in the Security Register.
If less than all of the Notes are to be redeemed at any time, the
Notes to be redeemed will be chosen by the Trustee in accordance with the
Indenture. If any Note is redeemed subsequent to a Record Date with respect to
any Interest Payment Date specified above and on or prior to such Interest
Payment Date, then any accrued interest will be paid on such Interest Payment
Date to the Holder of the Note on such Record Date. If money in an amount
sufficient to pay the Redemption Price of all Notes (or portions thereof) to be
redeemed on the Redemption Date is deposited with the Paying Agent on or before
the applicable Redemption Date and certain other conditions are satisfied,
interest on the Notes to be redeemed on the applicable Redemption Date will
cease to accrue.
The Notes are not subject to any sinking fund.
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<PAGE> 143
7. Repurchase at the Option of Holders upon Change of Control.
Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to purchase such Holder's Notes, in
whole, or in part in a principal amount that is an integral multiple of $1,000,
pursuant to a Change of Control Offer, at a purchase price in cash equal to 101%
of the aggregate principal amount thereof on any Change of Control Payment Date,
plus accrued and unpaid interest, if any, to the Change of Control Payment Date.
Within 30 calendar days following any Change of Control, the Company
shall send, or cause to be sent, by first-class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder of Notes. The Holder of
this Note may elect to have this Note or a portion hereof in an authorized
denomination purchased by completing the form entitled "Option of Holder to
Require Purchase" appearing below and tendering this Note pursuant to the Change
of Control Offer. Unless the Company defaults in the payment of the Change of
Control Purchase Price with respect thereto, all Notes or portions thereof
accepted for payment pursuant to the Change of Control Offer will cease accrue
interest from and after the Change of Control Payment Date.
8. Repurchase at the Option of Holders upon Asset Sale.
If at any time the aggregate amount of Excess Proceeds (including
any Net Cash Proceeds to be applied to the permanent reduction of Indebtedness
represented by the 2005 Notes and the 2006 Notes) calculated as of such date
exceeds $10 million, the Company shall, within 30 days of the date the amount of
Excess Proceeds exceeds $10 million, use such Excess Proceeds to make an offer
to purchase (an "Asset Sale Offer") on a pro rata basis, from all holders,
outstanding Notes, 2005 Notes and 2006 Notes in an aggregate principal amount
equal to the maximum principal amount that may be purchased out of Excess
Proceeds, at a purchase price (the "Offer Purchase Price") in cash equal to (a)
with respect to the Existing Notes, 100% of the Accreted Value thereof (as
defined in the relevant indenture) and (b) with respect to the Notes, 100% of
the principal amount thereof, plus, in each case, accrued and unpaid interest,
if any, to the purchase date, in accordance with the procedures set forth in the
relevant indenture. Upon completion of an Asset Sale Offer (including payment of
the Offer Purchase Price), any surplus Excess Proceeds that were the subject of
such offer shall cease to be Excess Proceeds, and the Company may then use such
amounts for general corporate purposes.
Within 30 calendar days of the date the amount of Excess Proceeds
exceeds $10,000,000, the Company shall send, or cause to be sent, by first-class
mail, postage prepaid, a notice regarding the Asset Sale Offer to each Holder of
Notes. The Holder of this Note may elect to have this Note or a portion hereof
in an authorized denomination pur-
C-7
<PAGE> 144
chased by completing the form entitled "Option of Holder to Require Purchase"
appearing below and tendering this Note pursuant to the Asset Sale Offer. Unless
the Company defaults in the payment of the Offer Purchase Price with respect
thereto, all Notes or portions thereof selected for payment pursuant to the
Asset Sale Offer will cease to accrue interest from and after the Asset Sale
Payment Date.
9. The Global Note.
So long as this Global Note is registered in the name of the
Depositary or its nominee, members of, or participants in, the Depositary
("Agent Members") shall have no rights under the Indenture with respect to this
Global Note held on their behalf by the Depositary or the Trustee as its
custodian, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of this Global Note
for all purposes. Notwithstanding the foregoing, nothing herein shall (i)
prevent the Company, the Trustee or any agent of the Company or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or (ii) impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a Holder of Notes.
The Holder of this Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests in this Global Note through Agent Members, to take any action which a
Holder of Notes is entitled to take under the Indenture or the Notes.
Whenever, as a result of optional redemption by the Company, a
Change of Control Offer, an Asset Sale Offer or an exchange for Certificated
Notes, this Global Note is redeemed, repurchased or exchanged in part, this
Global Note shall be surrendered by the Holder thereof to the Trustee who shall
cause an adjustment to be made to Schedule A hereof so that the principal amount
of this Global Note will be equal to the portion not redeemed, repurchased or
exchanged and shall thereafter return this Global Note to such Holder; provided
that this Global Note shall be in a principal amount of $1,000 or an integral
multiple of $1,000.
10. Transfer and Exchange.
The Holder of this Global Note shall, by acceptance of this Global
Note, agree that transfers of beneficial interests in this Global Note may be
effected only through a book entry system maintained by such Holder (or its
agent), and that ownership of a beneficial interest in the Notes represented
thereby shall be required to be reflected in book entry form.
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<PAGE> 145
Transfers of this Global Note shall be limited to transfers in
whole, and not in part, to the Depositary, its successors and their respective
nominees. Interests of beneficial owners in this Global Note may be transferred
in accordance with the rules and procedures of the Depositary (or its
successors).
This Global Note will be exchanged by the Company for one or more
Certificated Notes if (a) the Depositary (i) has notified the Company that it is
unwilling or unable to continue as, or ceases to be, a clearing agency
registered under Section 17A of the Exchange Act and (ii) a successor to the
Depositary registered as a clearing agency under Section 17A of the Exchange Act
is not able to be appointed by the Company within 90 calendar days or (b) the
Depositary is at any time unwilling or unable to continue as Depositary and a
successor to the Depositary is not able to be appointed by the Company within 90
calendar days. If an Event of Default occurs and is continuing, the Company
shall, at the request of the Holder hereof, exchange all or part of this Global
Note for one or more Certificated Notes; provided that the principal amount of
each of such Certificated Notes and this Global Note, after such exchange, shall
be $1,000 or an integral multiple thereof. Whenever this Global Note is
exchanged as a whole for one or more Certificated Notes, it shall be surrendered
by the Holder to the Trustee for cancellation. Whenever this Global Note is
exchanged in part for one or more Certificated Notes, it shall be surrendered by
the Holder to the Trustee and the Trustee shall make the appropriate notations
thereon pursuant to Section 2.05(c) of the Indenture. All Certificated Notes
issued in exchange for this Global Note or any portion hereof shall be
registered in such names as the Depositary shall instruct the Trustee. Interests
in this Global Note may not be exchanged for Certificated Notes other than as
provided in this paragraph.
11. Denominations.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof of principal amount.
12. 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 unless such abandoned property
law designates another Person.
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<PAGE> 146
13. Discharge and Defeasance.
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Notes and the Indenture if the Company
irrevocably 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.
14. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the outstanding Notes and (ii) any
past Default and its consequences may be waived with the written consent of the
Holders of at least a majority in principal amount of the outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of Notes, the Company and the Trustee may amend the Indenture or the
Notes (i) to evidence the succession of another Person to the Company and the
assumption by such successor of the covenants of the company under the Indenture
and contained in the Notes; (ii) to add additional covenants or to surrender
rights and powers conferred on the Company; (iii) to add any additional Events
of Default; (iv) to provide for uncertificated Notes in addition to or in place
of Certificated Notes; (v) to evidence and provide for the acceptance of
appointment under the Indenture of a successor Trustee; (vi) to secure the
Notes; (vii) to cure any ambiguity in the Indenture, to correct or supplement
any provision in the Indenture which may be inconsistent with any other
provision therein or to add any other provisions with respect to matters or
questions arising under the Indenture, provided that such actions shall not
adversely affect the interests of the Holders in any material respect; or (viii)
to comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes, subject to certain
limitations, may declare all the Notes to be immediately due and payable.
Certain events of bankruptcy or insolvency are Events of Default and shall
result in the Notes being immediately due and payable upon the occurrence of
such Events of Default without any further act of the Trustee or any Holder.
Holders of Notes 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 principal amount of the Notes may
direct the Trustee in its exercise of any
C-10
<PAGE> 147
trust or power under the Indenture. The Holders of a majority in principal
amount of the outstanding Notes, by written notice to the Company and the
Trustee, may rescind any declaration of acceleration and its consequences if the
rescission would not conflict with any judgment or decree, and if all Events of
Default have been cured or waived except nonpayment of principal and interest
that has become due solely because of the acceleration.
16. Individual Rights of Trustee.
Subject to certain limitations imposed by the Trust Indenture Act,
the Trustee or any Paying Agent or Registrar, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Company or its Affiliates with the same rights it would have if it were not
Trustee, Paying Agent or Registrar, as the case may be, under the Indenture.
17. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation, solely by reason of its status as
a director, officer, employee, incorporator or stockholder of the Company. By
accepting a Note, each Holder waives and releases all such liability (but only
such liability) as part of the consideration for issuance of such Note to such
Holder.
18. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder of Notes 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:
American Communications Services, Inc.
131 National Business Parkway
Suite 100
Annapolis Junction, Maryland 20701
Attention: Secretary
C-11
<PAGE> 148
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Note shall be $ . The following
decreases/increase in the principal amount of this Note have been made:
<TABLE>
<CAPTION>
Total Principal Notation
Amount Made by
Date of Decrease in Increase in Following such or on
Decrease/ Principal Principal Decrease/ Behalf of
Increase Amount Amount Increase Trustee
- -------- -------- -------
<S> <C> <C> <C> <C>
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
_______________ _______________ ______________ _________________ ________________
</TABLE>
C-12
<PAGE> 149
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint ____________ Attorney to transfer this Note
on the Security Register, with full power of substitution.
- --------------------------------------------------------------------------------
Dated:_______________
- ------------------------------- ----------------------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
C-13
<PAGE> 150
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
/ / In connection with the Change of Control Offer made pursuant to
Section 4.07 of the Indenture, the undersigned hereby elects to
have
/ / $ ($1,000 in principal amount or an integral multiple
thereof) of this Note
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or an amount in cash equal
to 101% with respect to the principal amount indicated in the
preceding sentence or the principal amount indicated in the
preceding sentences, as the case may be, plus accrued and unpaid
interest thereon, if any, to the Change of Control Payment Date.
/ / In connection with the Asset Sale Offer made pursuant to Section
4.08 of the Indenture, the undersigned hereby elects to have
/ / $ ($1,000 in principal amount or an integral multiple
thereof) of this Note
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or an amount in cash equal
to 100% with respect to the principal amount indicated in the
preceding sentence, plus accrued and unpaid interest thereon, if
any, to the Asset Sale Payment Date.
Dated:_________________________
_______________________________ ________________________________________
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
C-14
<PAGE> 151
EXHIBIT D
FORM OF EXCHANGE CERTIFICATED NOTE
AMERICAN COMMUNICATIONS SERVICES, INC.
No.________ CUSIP No.____
13-3/4% SENIOR NOTE DUE 2007
American Communications Services, Inc., a Delaware corporation, for
value received, hereby promises to pay to CEDE & CO., or its registered assigns,
$ , on July 15, 2007.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purposes.
D-1
<PAGE> 152
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
Dated:
AMERICAN COMMUNICATIONS SERVICES, INC.
By:___________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THE CHASE MANHATTAN BANK,
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:______________________
Authorized Officer
D-2
<PAGE> 153
REVERSE SIDE OF FORM OF EXCHANGE CERTIFICATED NOTE
AMERICAN COMMUNICATIONS SERVICES, INC.
CERTIFICATED NOTE
13-3/4% SENIOR NOTES DUE 2007
1. Indenture.
This Note is one of a duly authorized issue of debt securities of the Company
(as defined below) designated as its "13-3/4% Senior Notes due 2007" (herein
called the "Notes") limited in aggregate principal amount at Stated Maturity to
$220,000,000, issued under an indenture dated as of July 23, 1997 (as amended or
supplemented from time to time, the "Indenture") between the Company and The
Chase Manhattan Bank, as trustee (the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture reference is hereby
made for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and each Holder of Notes and
of the terms upon which the Notes are, and are to be, authenticated and
delivered. The summary of the terms of this Note contained herein does not
purport to be complete and is qualified by reference to the Indenture. All terms
used in this Note which are not defined herein shall have the meanings assigned
to them in the Indenture.
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
enter into or permit certain transactions with Affiliates, create or incur
Liens, enter into or permit certain Sale and Leaseback Transactions and make
Asset Sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or permit any
other Person to merge with or into the Company, or sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of the Property
of the Company to any other Person and on the ability of the Company's
Restricted Subsidiaries to issue Capital Stock.
2. Principal and Interest.
American Communications Services, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture, being herein
called the "Company"), promises to pay $ to the Holder hereof on
July 15, 2007.
D-3
<PAGE> 154
The Company shall pay interest at a rate of 13-3/4%, per annum, from
July 23, 1997, or from the most recent Interest Payment Date thereafter to which
interest has been paid or duly provided for, semiannually on January 15 and July
15 of each year, commencing on January 15, 1998, in cash, to the Holder hereof
until the principal amount hereof is paid or made available for payment. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, subject to certain exceptions provided in the Indenture, be
paid to the Person in whose name this Note (or the Note in exchange or
substitution for which this Note was issued) is registered at the close of
business on the Record Date for interest payable on such Interest Payment Date.
The Record Date for any interest payment is the close of business on January 1
or July 1, as the case may be, whether or not a Business Day, immediately
preceding the Interest Payment Date on which such interest is payable. Any such
interest not so punctually paid or duly provided for ("Defaulted Interest")
shall forthwith cease to be payable to the Holder on such Record Date and shall
be paid as provided in Section 2.11 of the Indenture. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
Each payment of interest in respect of an Interest Payment Date will
include interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
3. Method of Payment.
The Company, through the Paying Agent, shall pay interest on this
Note to the registered Holder of this Note, as provided above. The Holder must
surrender this Note to a Paying Agent to collect principal payments. The Company
will pay principal and interest in money of the United States of America that at
the time of payment is legal tender for payment of all debts public and private.
Principal and interest will be payable at the office of the Paying Agent but, at
the option of the Company, interest may be paid by check mailed to the
registered Holders at their registered addresses.
4. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar under
the Indenture. The Company may, upon written notice to the Trustee, appoint and
change any Paying Agent or Registrar. The Company or any of its subsidiaries may
act as Paying Agent or Registrar.
D-4
<PAGE> 155
5. Optional Redemption.
The Notes may not be redeemed prior to July 15, 2002. Thereafter,
the Notes will be subject to redemption at the option of the Company, in whole
or in part, upon not less than 30 calendar days, nor more than 60 calendar days'
notice, at the prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest thereon (if any) at the applicable
Redemption Date, if redeemed during the twelve-month period beginning July 15 of
the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 106.875%
2003 105.156%
2004 103.438%
2005 101.719%
2006 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to July 15, 2000,
the Company may redeem up to 35% of the aggregate principal amount of Notes with
the net proceeds of one or more Equity Offerings of the Company at a redemption
price equal to 113.750% of the aggregate principal amount thereof on the date of
redemption; provided, however, that, after giving effect to any such redemption,
at least $143 million aggregate principal amount of the Notes remain
outstanding.
6. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days before
a Redemption Date, the Company will send a notice of redemption, first-class
mail, postage prepaid, to Holders of Notes to be redeemed at the addresses of
such Holders as they appear in the Security Register.
If less than all of the Notes are to be redeemed at any time, the
Notes to be redeemed will be chosen by the Trustee in accordance with the
Indenture. If any Note is redeemed subsequent to a Record Date with respect to
any Interest Payment Date specified above and on or prior to such Interest
Payment Date, then any accrued interest will be paid on such Interest Payment
Date to the Holder of the Note on such Record Date. If money in an amount
sufficient to pay the Redemption Price of all Notes (or portions thereof) to be
redeemed on the Redemption Date is deposited with the Paying Agent on or before
the applicable Redemption Date and certain other conditions are satisfied,
interest on the Notes to be redeemed on the applicable Redemption Date will
cease to accrue.
The Notes are not subject to any sinking fund.
D-5
<PAGE> 156
7. Repurchase at the Option of Holders upon Change of Control.
Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to purchase such Holder's Notes, in
whole, or in part in a principal amount that is an integral multiple of $1,000,
pursuant to a Change of Control Offer, at a purchase price in cash equal to 101%
of the aggregate principal amount thereof on any Change of Control Payment Date,
plus accrued and unpaid interest, if any, to the Change of Control Payment Date.
Within 30 calendar days following any Change of Control, the Company
shall send, or cause to be sent, by first-class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder of Notes. The Holder of
this Note may elect to have this Note or a portion hereof in an authorized
denomination purchased by completing the form entitled "Option of Holder to
Require Purchase" appearing below and tendering this Note pursuant to the Change
of Control Offer. Unless the Company defaults in the payment of the Change of
Control Purchase Price with respect thereto, all Notes or portions thereof
accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest from and after the Change of Control Payment Date.
8. Repurchase at the Option of Holders upon Asset Sale.
If at any time the aggregate amount of Excess Proceeds (including
any Net Cash Proceeds to be applied to the permanent reduction of Indebtedness
represented by the 2005 Notes and the 2006 Notes) calculated as of such date
exceeds $10 million, the Company shall, within 30 days of the date the amount of
Excess Proceeds exceeds $10 million, use such Excess Proceeds to make an offer
to purchase (an "Asset Sale Offer") on a pro rata basis, from all holders,
outstanding Notes, 2005 Notes and 2006 Notes in an aggregate principal amount
equal to the maximum principal amount that may be purchased out of Excess
Proceeds, at a purchase price (the "Offer Purchase Price") in cash equal to (a)
with respect to the Existing Notes, 100% of the Accreted Value thereof (as
defined in the relevant indenture) and (b) with respect to the Notes, 100% of
the principal amount thereof, plus, in each case, accrued and unpaid interest,
if any, to the purchase date, in accordance with the procedures set forth in the
relevant indenture. Upon completion of an Asset Sale Offer (including payment of
the Offer Purchase Price), any surplus Excess Proceeds that were the subject of
such offer shall cease to be Excess Proceeds, and the Company may then use such
amounts for general corporate purposes.
Within 30 calendar days of the date the amount of Excess Proceeds
exceeds $10,000,000, the Company shall send, or cause to be sent, by first-class
mail, postage prepaid, a notice regarding the Asset Sale Offer to each Holder of
Notes. The Holder of this Note may elect to have this Note or a portion hereof
in an authorized denomination pur-
D-6
<PAGE> 157
chased by completing the form entitled "Option of Holder to Require Purchase"
appearing below and tendering this Note pursuant to the Asset Sale Offer. Unless
the Company defaults in the payment of the Offer Purchase Price with respect
thereto, all Notes or portions thereof selected for payment pursuant to the
Asset Sale Offer will cease to accrue interest from and after the Asset Sale
Payment Date.
9. Transfer and Exchange.
A Holder may transfer a Note only upon the surrender of such Note
for registration of transfer. No such transfer shall be effected until, and such
transferee shall succeed to the rights of a Holder only upon, final acceptance
and registration of the transfer in the Security Register by the Registrar. When
Notes are presented to the Registrar with a request to register the transfer of,
or to exchange, such Notes, the Registrar shall register the transfer or make
such exchange as requested if its requirements for such transactions and any
applicable requirements hereunder are satisfied.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer of Notes.
10. Denominations.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof of principal amount.
11. 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 unless such abandoned property
law designates another Person.
12. Discharge and Defeasance.
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Notes and the Indenture if the Company
irrevocably 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.
D-7
<PAGE> 158
13. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the outstanding Notes and (ii) any
past Default and its consequences may be waived with the written consent of the
Holders of at least a majority in principal amount of the outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of Notes, the Company and the Trustee may amend the Indenture or the
Notes (i) to evidence the succession of another Person to the Company and the
assumption by such successor of the covenants of the company under the Indenture
and contained in the Notes; (ii) to add additional covenants or to surrender
rights and powers conferred on the Company; (iii) to add any additional Events
of Default; (iv) to provide for uncertificated Notes in addition to or in place
of Certificated Notes; (v) to evidence and provide for the acceptance of
appointment under the Indenture of a successor Trustee; (vi) to secure the
Notes; (vii) to cure any ambiguity in the Indenture, to correct or supplement
any provision in the Indenture which may be inconsistent with any other
provision therein or to add any other provisions with respect to matters or
questions arising under the Indenture, provided that such actions shall not
adversely affect the interests of the Holders in any material respect; or (viii)
to comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
14. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes, subject to certain
limitations, may declare all the Notes to be immediately due and payable.
Certain events of bankruptcy or insolvency are Events of Default and shall
result in the Notes being immediately due and payable upon the occurrence of
such Events of Default without any further act of the Trustee or any Holder.
Holders of Notes 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 principal amount of the Notes may
direct the Trustee in its exercise of any trust or power under the Indenture.
The Holders of a majority in principal amount of the outstanding Notes, by
written notice to the Company and the Trustee, may rescind any declaration of
acceleration and its consequences if the rescission would not conflict with any
judgment or decree, and if all Events of Default have been cured or waived
except nonpayment of principal and interest that has become due solely because
of the acceleration.
D-8
<PAGE> 159
15. Individual Rights of Trustee.
Subject to certain limitations imposed by the Trust Indenture Act,
the Trustee or any Paying Agent or Registrar, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Company or its Affiliates with the same rights it would have if it were not
Trustee, Paying Agent or Registrar, as the case may be, under the Indenture.
16. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation, solely by reason of its status as
a director, officer, employee, incorporator or stockholder of the Company. By
accepting a Note, each Holder waives and releases all such liability (but only
such liability) as part of the consideration for issuance of such Note to such
Holder.
17. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder of Notes 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:
American Communications Services, Inc.
131 National Business Parkway
Suite 100
Annapolis Junction, Maryland 20701
Attention: Secretary
D-9
<PAGE> 160
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER OF TRANSFEREE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint ____________ Attorney to transfer this Note
on the Security Register, with full power of substitution.
- --------------------------------------------------------------------------------
Dated:_______________
- ----------------------------- -------------------------------------
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
D-10
<PAGE> 161
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
/ / In connection with the Change of Control Offer made pursuant to
Section 4.07 of the Indenture, the undersigned hereby elects to
have
/ / $ ($1,000 in principal amount or an integral multiple
thereof) of this Note
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or an amount in cash equal
to 101% with respect to the principal amount indicated in the
preceding sentence or the principal amount indicated in the
preceding sentences, as the case may be, plus accrued and unpaid
interest thereon, if any, to the Change of Control Payment Date.
/ / In connection with the Asset Sale Offer made pursuant to Section
4.08 of the Indenture, the undersigned hereby elects to have
/ / $ ($1,000 in principal amount or an integral multiple
thereof) of this Note
repurchased by the Company. The undersigned hereby directs the
Trustee or Paying Agent to pay it or an amount in cash equal
to 100% with respect to the principal amount indicated in the
preceding sentence plus accrued and unpaid interest thereon, if any,
to the Asset Sale Payment Date.
Dated:______________________
____________________________ ________________________________________
Signature of Holder Signature Guaranteed:
Commercial Bank or Trust Company
or Member Firm of the New York
Stock Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
D-11
<PAGE> 162
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
E-1
<PAGE> 163
EXHIBIT F
TERMS OF SUBORDINATED INDEBTEDNESS
The provisions set forth in Sections 2 through 9 of this Exhibit F
set shall be the terms on which the Subordinated Indebtedness (as defined below)
is subordinated to the Notes and shall be set forth in any agreement or evidence
of Indebtedness relating to the Subordinated Indebtedness.
1. Definitions. Terms used but not defined in this Exhibit F shall
have the meanings assigned such terms in the Indenture. The
following terms shall have the meanings indicated:
"Subordinated Indebtedness" means the Indebtedness required to be
subordinated to the Notes on the terms set forth in this Exhibit F pursuant to
the Indenture.
"Subordination Provisions" means the provisions set forth in
Sections 2 through 9 of this Exhibit F.
2. Agreement to Subordinate. The Company agrees and each holder of
the Subordinated Indebtedness, by such holder's acceptance of any note or other
evidence of such Subordinated Indebtedness, likewise agrees, that the payment of
the principal of, premium, if any, and interest on the Subordinated Indebtedness
is subordinated in right of payment, to the extent and in the manner provided
herein, to the prior payment in full, in cash or cash equivalents, of all Notes,
that such subordination is for the benefit of, and shall be enforceable directly
by, any Holder of Notes or the Trustee, and that each Holder of Notes shall be
deemed to have acquired Notes in reliance upon the covenants and provisions
contained herein.
All of the provisions of any agreement, note or other evidence of
indebtedness relating to the Subordinated Indebtedness shall be subject to the
Subordination Provisions.
The Subordination Provisions as they apply to the Subordinated
Indebtedness may not be amended without the consent of the Holders of two-thirds
in principal amount of the outstanding Notes obtained in the manner set forth in
the Indenture.
The Subordination Provisions shall remain in full force and effect
so long as there are any Notes outstanding.
3. Liquidation; Dissolution; Bankruptcy. (a) Upon any payment or
distribution of assets of the Company to creditors upon a liquidation or a total
or partial dissolution of the Company, or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding
F-1
<PAGE> 164
relating to the Company or its Property or assets, all Notes shall first be paid
in full (including interest after the commencement of any such proceeding at the
rate specified in the Notes), in cash or cash equivalents, before holders of the
Subordinated Indebtedness shall be entitled to receive any payment of principal
of, premium, if any, or interest on, or any other distribution with respect to,
the Subordinated Indebtedness. Until all Notes are paid in full, in cash or cash
equivalents, any distribution to which holders of the Subordinated Indebtedness
would be entitled but for the Subordination Provisions shall be made by the
Company or by any receiver, trustee in bankruptcy, custodian, liquidating
trustee, agent or other Person making such payment or distribution directly to
the Trustee for the benefit of the Holders of Notes. For purposes of the
Subordination Provisions `paid in full," as used with respect to the Notes,
means the receipt of cash or cash equivalents of the principal amount of the
Notes and premium, if any, interest and fees thereon to the date of such
payment.
(b) If a holder of the Subordinated Indebtedness does not FILE a
proper claim or proof of debt in the form required in any proceeding
contemplated by this Section 3 prior to 20 calendar days before the expiration
of the time to file such claims or proofs, then, so long as any Notes are
outstanding, the Trustee or any Holder of Notes is hereby authorized, and shall
have the right, to file an appropriate claim or proof of debt on behalf of such
holder of the Subordinated Indebtedness.
4. Default on Notes. (a) The Company may not, directly or
indirectly, make any payment of principal of, premium, if any, or interest on
the Subordinated Indebtedness in cash, Property or other assets and may not
acquire any note or other evidence of the Subordinated Indebtedness for cash,
Property or other assets (other then Indebtedness subordinated to the Notes to
at least the same extent as the Subordinated Indebtedness or Common Stock of the
Company) until all Notes have been paid in full, in cash or cash equivalents,
if:
(i) a Default in the payment of any principal of, premium, if
any, or interest on any Note occurs and is continuing, whether at
Stated Maturity or at a date fixed for payment or by acceleration or
otherwise; or
(ii) a Default on the Notes (other than described in clause
(a)(i) of this Section 4) occurs and is continuing that permits
Holders of Notes to accelerate such Notes and notice of such Default
is given to the Company by any Holder of Notes or the Trustee.
(b) The Company may resume payments on the Subordinated Indebtedness
when:
F-2
<PAGE> 165
(i) the Default is cured or waived in accordance with the
terms of the Notes and the Indenture, or
(ii) 180 days pass after the notice is given pursuant to
Section 4(a)(ii) and judicial proceedings relating to such Default
have not been commenced or the Notes have not been accelerated,
if the other Subordination Provisions permit the payment or acquisition of the
Subordinated Indebtedness at that time.
5. Acceleration of the Loans. (a) If payment of the Subordinated
Indebtedness is accelerated, the Company shall promptly notify the Holders of
Notes and the Trustee of such acceleration.
(b) Upon the occurrence of an event of default with respect to the
Subordinated Indebtedness, if any Notes shall then be outstanding, holders of
the Subordinated Indebtedness shall not be permitted to accelerate the maturity
of the Subordinated Indebtedness or take any other action to collect the
repayment of the Subordinated Indebtedness prior to maturity or to marshal
assets, to exercise any right of set off or to take any other remedy with
respect to the Subordinated Indebtedness, until the earlier of (i) 180 days
after each Holder of Notes and the Trustee have received from the Company notice
of such event of default or (ii) the date on which the Notes shall have been
paid in full. Nothing in this Section 5 shall affect or impair the ability of
holders of the Subordinated Indebtedness to accelerate the maturity of the
Subordinated Indebtedness upon the occurrence of an event of default with
respect to the Subordinated Indebtedness caused by any event described in
Section 6.01(g) or 6.01(h) of the Indenture.
6. When Distribution Must Be Paid Over. In the event that,
notwithstanding the foregoing provisions prohibiting such payment or
distribution, holders of the Subordinated Indebtedness or any agent of such
holders shall have received any payment on account of the principal, premium, if
any, or interest on the Subordinated Indebtedness at a time when such payment is
prohibited by the Subordination Provisions, such payment shall be received and
held in trust for the benefit of, and shall be paid forthwith over and delivered
to, the Trustee, for application to the payment of all Notes then remaining
unpaid to the extent necessary to pay all Notes in full, in cash or cash
equivalents, in accordance with their terms and the Indenture, after giving
effect to any concurrent payment or distribution to or for the Holders of Notes.
7. Notice by Company. The Company shall promptly notify holders of
the Subordinated Indebtedness of any facts known to the Company that would cause
a pay-
F-3
<PAGE> 166
ment of principal of, premium, if any, or interest on the Subordinated
Indebtedness to violate the Subordination Provisions.
8. Subrogation. After all Notes are paid in full in cash or cash
equivalents, and until the Subordinated Indebtedness is paid in full, the
holders of the Subordinated Indebtedness shall be subrogated to the rights of
Holders of Notes to receive distributions applicable to Notes to the extent that
distributions otherwise payable to holders of the Subordinated Indebtedness have
been applied to payment of Notes. A distribution made under the Subordination
Provisions to Holders of Notes that otherwise would have been made to holders of
the Subordinated Indebtedness is not, as between the Company and the holders of
the Subordinated Indebtedness, a payment by the Company on the Subordinated
Indebtedness.
9. Subordination May Not Be Impaired by Company. No right of any
current or future Holder of Notes or the Trustee to enforce the Subordination
Provisions shall be impaired by any act or failure to act by the Company or by
its failure to comply with the Subordination Provisions or any agreement or
evidence of indebtedness relating to the Subordinated Indebtedness.
F-4
<PAGE> 167
EXHIBIT G
ESCROW AND DISBURSEMENT AGREEMENT
F-1
<PAGE> 168
SCHEDULE A
TO
INDENTURE
DATED AS OF JULY 23, 1997
BY AND BETWEEN
AMERICAN COMMUNICATIONS SERVICES, INC.
AND
THE CHASE MANHATTAN BANK, AS TRUSTEE
(EXISTING INDEBTEDNESS)
The Company and certain of its subsidiaries have letters of
credit for the benefit of several cities, rights-of-way providers and others
which guarantee franchise terms compliance. To, date the Company and such
subsidiaries have pledged $2,000,000 in cash to secure approximately $5,000,000
of these potential liabilities.
Pursuant to an agreement (the "LG&E Agreement") between
American Communication Services Louisville, Inc. ("ACSL") and Louisville Gas &
Electric Company, effective as of June 28, 1994, the first 12 strands of all
installed fiber optic cable in the Extended System (as defined in the LG&E
Agreement) are subject to a security interest as collateral security for
performance of the obligations of the Company and ACSL under the LG&E Agreement.
Pursuant to a Stock Purchase Agreement, dated as of November
28, 1994, by and among the Company, City Link Corp., and the former directors
and shareholders of City Link Corp., as amended August 3, 1995, the Company has
an obligation to repurchase 10,636 shares of its common stock for a purchase
price of $7.00 per share.
Pursuant to a Stock Purchase Agreement, dated as of May 12,
1995, by and among the Company, Piedmont Teleport, Inc., Randal Holcombe and
Karen Holcombe, as amended, the Company has an obligation to repurchase 62,000
shares of its common stock for a purchase price of $2.50 per share.
Pursuant to the terms of an Agreement with Louisville Gas &
Electric Company (LG&E"), if LG&E exercises its option to purchase up to 500,000
shares of the Pledgor's common stock after a transaction in which 50% or more of
the Pledgor's stock is purchased by a combination of existing shareholders
and/or management in a transaction which results in the Pledgor no longer being
listed on a national securities market, then LG&E shall have the option,
exercisable at any time by written notice to the Pledgor
<PAGE> 169
2
prior to the first anniversary of the exercise of the option, to put its shares
to the Pledgor for a cash purchase equal to that tendered in the "going private"
transaction.
Pursuant to a Third Amended and Restated Employment Agreement
(the "Pompliano Agreement"), dated June 30, 1995, with Mr. Anthony J. Pompliano,
Mr. Pompliano shall have the right for a period of 90 days after the termination
of his employment with the Company (unless such employment is terminated by the
Company "for cause" (as defined in the Pompliano Agreement) or Mr. Pompliano
voluntarily resigns), to sell to the Company and the Company is required to
purchase, the shares of Common Stock issued or issuable pursuant to options
granted to Mr. Pompliano under the Pompliano Agreement, at a price equal to the
publicly traded price of the Common Stock (as defined in the Pompliano
Agreement), less the exercise price of the options with respect to unexercised
options. The aggregate purchase price paid by the Company for such shares shall
not exceed $1 million (which amount shall be reduced by the net proceeds
received by Mr. Pompliano from his sales of shares of Common Stock in the market
or otherwise). This right may be exercised by Mr. Pompliano only if at the time
of exercise the aggregate value (based on the publicly traded price) of the
Company's outstanding shares of Common Stock and the shares of Common stock
issuable pursuant to options, warrants and other convertible securities which
have an exercise or conversion price which is equal to or less than the then
publicly traded price of the Common Stock is greater than $200 million and at
least 5,000,000 outstanding shares of Common Stock are neither held by
"affiliates" (as defined in Rule 405 under the Securities Act of 1933, as
amended (the "Securities Act")) of the Company nor "restricted securities" (as
defined in Rule 144 under the Securities Act).
Pursuant to a Third Amended and Restated Employment Agreement
(the "Kozak Agreement"), dated June 30, 1995, with Mr. Richard A. Kozak, Mr.
Kozak shall have the right for a period of 90 days after the termination of his
employment with the Company (unless such employment is terminated by the Company
"for cause" (as defined in the Kozak Agreement) or Mr. Kozak voluntarily
resigns), to sell to the Company and the Company is required to purchase, the
shares of Common Stock issued or issuable pursuant to options granted to Mr.
Kozak under the Kozak Agreement, at a price equal to the publicly traded price
of the Common Stock (as defined in the Kozak Agreement), less the exercise price
of the options with respect to unexercised options. The aggregate purchase price
paid by the Company for such shares shall not exceed $1 million (which amount
shall be reduced
<PAGE> 170
3
by the net proceeds received by Mr. Kozak from his sales of shares of Common
Stock in the market or otherwise). This right may be exercised by Mr. Kozak only
if at the time of exercise the aggregate value (based on the publicly traded
price) of the Company's outstanding shares of Common Stock and the shares of
Common Stock issuable pursuant to options, warrants and other convertible
securities which have an exercise or conversion price which is equal to or less
than the then publicly traded price of the Common Stock is greater than $200
million and at least 5,000,000 outstanding shares of Common Stock are neither
held by "affiliates" (as defined in Rule 405 under the Securities Act) of the
Company nor "restricted securities" (as defined in Rule 144 under the Securities
Act).
Pursuant to an indenture dated as of November 14, 1995,
between the Company and Chemical Bank, as trustee, as amended or supplemented
(the "2005 Indenture"), the Company issued 13% senior discount notes due 2005
(the "2005 Notes"). The 2005 Notes accrete at a rate of 13%, compounded
semi-annually to an aggregate principal amount of $190 million by November 1,
2000. Cash interest does not accrue on the 2005 Notes prior to November 1, 2000.
Commencing May 1, 2001, cash interest will be payable semi-annually on the 2005
Notes at the rate of 13% per annum (approximately $24.7 million per year). The
full accreted value of the 2005 Notes of an aggregate of $190 million will
become due on November 1, 2005. The 2005 Indenture also provides, under certain
circumstances, for repurchase of the 2005 Notes by the Company and special
interest provisions.
Pursuant to an indenture dated as of March 26, 1996, between
the Company and Chemical Bank, as trustee, as amended or supplemented (the "2006
Indenture"), the Company issued 12-3/4% senior discount notes due 2006 (the
"2006 Notes"). The 2006 Notes accrete at a rate of 12-3/4%, compounded
semi-annually to an aggregate principal amount of $120 million by April 1, 2001.
Cash interest does not accrue on the 2006 Notes prior to April 1, 2001.
Commencing October 1, 2001, cash interest will be payable semi-annually on the
2006 Notes at the rate of 12-3/4% per annum (approximately $15.3 million per
year). The full accreted value of the 2006 Notes of an aggregate of $120 million
will become due on April 1, 2006. The 2006 Indenture also provides, under
certain circumstances, for repurchase of the 2006 Notes by the Company and
special interest provisions.
<PAGE> 171
4
SCHEDULE B
TO
INDENTURE
DATED AS OF JULY 23, 1997
BY AND BETWEEN
AMERICAN COMMUNICATIONS SERVICES, INC.
AND
THE CHASE MANHATTAN BANK, AS TRUSTEE
(REQUIRED INVESTMENTS)
All Investments required pursuant to the Secured Credit
Facility as such Secured Credit Facility is set forth on Schedule C. For
purposes of the definition of "Permitted Investments", all such Investments are
considered to be in effect on the Issue Date.
<PAGE> 172
5
SCHEDULE C
TO
INDENTURE
DATED AS OF JULY 23, 1997
BY AND BETWEEN
AMERICAN COMMUNICATIONS SERVICES, INC.
AND
THE CHASE MANHATTAN BANK, AS TRUSTEE
(SECURED CREDIT FACILITY AGREEMENTS)
AT&T Credit Facility
In October 1994, the Company entered into the AT&T Credit
Facility pursuant to which AT&T Credit Corporation ("AT&T") has agreed to
provide up to $31,324,454 in financing for the development and construction of
fiber optic networks by the Company's subsidiaries. In connection with each loan
under the AT&T Credit Facility, each funded subsidiary enters into a Loan and
Security Agreement, and AT&T purchases 7.25% of the capital stock of the funded
subsidiary pursuant to a Common Stock Purchase Agreement. In connection with
each such financing, the Company is required to have made a capital contribution
to the funded subsidiary. Additionally, pursuant to a Parent Pledge and Support
Agreement, as amended, the Company (i) is required to pledge to AT&T all of the
shares of capital stock of the funded subsidiary of which it is the beneficial
owner, (ii) is bound by certain restrictive covenants and (iii) may be required
to execute a guarantee in favor of AT&T in the future in certain circumstances.
The Company and the funded subsidiary are also required to enter into a Co-Sale
agreement with AT&T. In the event there is a change in control of any funded
subsidiary, AT&T can require that funded subsidiary to prepay the loan and all
other amounts due under the loan agreement along with a change in control
premium.
As of July 23, 1997, the following subsidiaries of the Company
had entered into financing arrangements with AT&T Credit Corporation as of the
dates and for the maximum credit facilities listed:
1. Loan and Security Agreement, dated as of October 17, 1994, between AT&T
Credit Corporation and American Communication Services of Louisville,
Inc., as amended, credit facility up to $5,795,824.
<PAGE> 173
6
2. Loan and Security Agreement, dated as of February 28, 1995, between
AT&T Credit Corporation and American Communication Services of Fort
Worth, Inc., as amended, credit facility up to $7,405,582.
3. Loan and Security Agreement, dated as of June 30, 1995, between AT&T
Credit Corporation and American Communication Services of Greenville,
Inc. and American Communication Services of Columbia, Inc., as amended,
credit facility up to an aggregate of $11,979,285.
4. Loan and Security Agreement, dated as of September 8, 1995, between
AT&T Credit Corporation and American Communication Services of El Paso,
Inc., as amended, credit facility up to $6,143,763.
The Company and the subsidiaries have also entered into
various amendments of the foregoing documents and certain additional amendments
are currently being negotiated.
<PAGE> 174
7
SCHEDULE D
TO
INDENTURE
DATED AS OF JULY 23, 1997
BY AND BETWEEN
AMERICAN COMMUNICATIONS SERVICES, INC.
AND
THE CHASE MANHATTAN BANK, AS TRUSTEE
(CONTRACTS WITH AFFILIATES)
As of July 1, 1992 American Lightwave, Inc. entered into a
Registration Rights Agreement among American Lightwave, Inc. and persons named
therein (including the persons referenced below in the following three
paragraphs).
On July 1, 1992, Russell T. Stern, Jr., Patrick J. Haynes and
Willard McNitt, the stockholders of Alabama Lightwave, Inc., North Carolina
Lightwave, Inc., Chicago Lightwave, Inc., Delaware Lightwave, Inc., and Virginia
Lightwave, Inc. (collectively referred to as the "ALI subsidiaries") entered
into stock exchange agreements with ALI. Under these agreements, the
stockholders of the ALI subsidiaries received 650 shares of ALI mandatorily
redeemable, non-voting, cumulative Series A preferred stock (the "ALI Preferred
Stock") and 103,920 shares of ALI common stock (the "ALI Common Stock").
Additionally, ALI issued 363,720 shares of ALI Common Stock to existing
stockholders for $.0042 per share.
At the time of the exchange agreements, ALI also entered into
a share subscription agreement under which an aggregate 500 shares of ALI
Preferred Stock and an aggregate 181,860 shares of ALI Common Stock were issued
to Apex Investment Fund I, L.P. ("Apex"), The Productivity Fund II, L.P.
("Productivity") and Brian Boyer for a total of $500,875.
On December 15, 1992, 100 additional shares of ALI Preferred
Stock and 36,372 shares of ALI Common Stock were issued to Apex, Productivity
and Brian Boyer for a total of $100,175, under the stock subscription agreement
noted above.
On September 15, 1993, the Company's former subsidiary, ALI,
issued promissory notes to Apex, Productivity, Russell T. Stern, Jr. and Brian
Boyer for $68,825, $68,825, $7,083 and $1,350, respectively (the "ALI
<PAGE> 175
8
Notes"). These ALI Notes were originally due September 15, 1994, but ALI had the
option to extend the maturity date to September 15, 1995. Interest was payable
on the notes at ten percent (10%) per annum. The noteholders had warrants to
purchase, at any time up to September 14, 1996, shares of ALI Common Stock at a
price of $181.86 per share, subject to antidilution adjustments. ALI elected to
extend the maturity date to September 14, 1995, and the number of ALI shares
that the noteholder could purchase pursuant to the warrant increased as provided
therein. The holders of ALI Notes converted the ALI Notes and warrants into
notes and warrants substantially similar to notes and warrants issued by the
Company on or about September 14, 1993. These notes together with accrued
interest were repaid on the maturity date. The converted warrants along with the
additional warrants issued upon the extension of the ALI Notes gave the four
holders listed above the right to purchase an aggregate of 36,500 shares of the
Company's Common Stock at a price of $0.875 per share. The unexpired term of the
three-year warrants carried over to the converted warrants. In connection with
the October 1994 Private Placement (as defined below), Apex and Productivity
agreed to reduce the number of warrants held by each of them by 50% in exchange
for the exercise price of 50% of such remaining warrants being reduced to $0.44
and 50% of such remaining warrants being reduced to $0.01. Apex and Productivity
each exercised warrants for 8,353 shares of Common Stock at $0.44 per share
during November 1994 and each exercised warrants for 8,353 shares of Common
Stock at $0.01 per share during December 1994.
In November 1993, the Company executed a financial consulting
and advisory agreement with The Thurston Group, Inc. for a period of six months.
The Company believes that Russell T. Stern, Jr., who, as of December 31, 1995,
owned in excess of 5% of the Company's outstanding voting stock and was a
director of the Company at the time the consulting agreement was executed, and
Patrick J. Haynes, who at the time the consulting agreement was executed was an
executive officer of the Company and owned in excess of 5% of the Company's
outstanding voting stock, had controlling interests in The Thurston Group, Inc.
In consideration, The Thurston Group, Inc. or its transferees received warrants
to purchase 300,000 shares of ACSI Common Stock, exercisable at $.875 per share.
The holders of these warrants had the right to resell the shares to ACSI for
$2.25 per share through October 25, 1995. Pursuant to an Assignment and
Assumption Agreement dated June 21, 1995 (as described below), Apex Investment
Fund II, L.P. ("Apex II") assumed the Company's obligation to purchase such
shares for a purchase price of $2.25 per share.
<PAGE> 176
9
On June 1, 1994, the Company entered into a Stock Exchange
Agreement, with the following holders of 1,700 shares of its preferred stock,
some of whom were affiliates of the Company: Apex--247.5 shares;
Productivity--247.5 shares; Brian Boyer--5 shares; Russell T. Stern, Jr.--550
shares and The Thurston Group, Inc.--650 shares. George Middlemas, who is a
director of the Company, is a general partner of a partnership which is the
general partner of Apex. Productivity, until the closing of the October 1994
Private Placement owned in excess of 5% of the Company's outstanding voting
stock. Brian Boyer is a former officer and director of the Company. Russell T.
Stern, Jr. owned in excess of 5% of the Company's outstanding voting stock as of
December 31, 1995, and was a director of the Company at the time such exchange
was effective. The Company believes that Mr. Stern is also a principal
stockholder of The Thurston Group, Inc. The preferred stock had a face value of
$1,000 per share, and represented all of the then issued and outstanding shares
of the Company's preferred stock. As of June 30, 1994, none of the preferred
stock remained outstanding. The Company exchanged each share of such preferred
stock for the number of shares of Common Stock determined by dividing the face
amount of such shares of preferred stock by $3.10 (which equals the average of
the high bid and low ask prices for the Company's Common Stock during the five
trading days immediately preceding June 1, 1994). The preferred stockholders
were granted piggy-back registration rights for the Common Stock received in the
exchange, and demand registration rights on two occasions for the two-year
period, June 1, 1995, to June 1, 1997, upon written request of 60% of the
holders of such Common Stock received in the exchange. The preferred
stockholders also each executed a general release in favor of the Company.
On June 9, 1994, the Company issued Secured Convertible Notes
to, and executed Security Agreements with, Apex, Productivity and Russell T.
Stern, Jr. The notes, which were repaid immediately following the October 1994
Private Placement, had principal amounts of $264,680, $264,680 and $77,281,
respectively, with an interest rate of 15% per annum. The notes were secured
pari passu by the tangible assets of the Company's subsidiaries in the first two
cities to complete construction of networks, American Communication Services of
Louisville, Inc. and American Communication Services of Little Rock, Inc. The
Company paid the principal and accrued interest on Mr. Stern's note in cash and
paid Apex and Productivity in shares of its 9% Series A Convertible Preferred
Stock (the "Series A Preferred Stock"). Under the terms of the notes, because
the notes held by Apex and Productivity were paid in shares
<PAGE> 177
10
of Series A Preferred Stock valued at $90 per share, the Company was obligated
to pay an additional $77,250 each to Apex and Productivity, payable also in
shares of Series A Preferred Stock valued at $90 per share.
Also in June 1994, Apex, Productivity and William G. Salatich,
then a director of the Company, purchased notes with the aggregate principal
amount of $1,300,720. These notes paid interest at a rate of 15% per annum and
were originally due December 31, 1994. The principal of these notes was
converted into 14,453 shares of Series A Preferred Stock as part of the October
1994 Private Placement and the holders thereof received warrants to purchase
173,428 shares of Common Stock, which warrants were exercised. The accrued
interest of $62,736 on these notes as of October 21, 1994, was paid by the
Company in cash.
On June 16, 1994, the Company entered into a financial
consulting agreement with Thurston Partners, Inc. and Global Capital, Inc., both
of which the Company believes to be affiliates of Patrick J. Haynes, a former
executive officer of the Company and a principal shareholder at that time and
Russell T. Stern, Jr. The Company agreed to pay $153,750 for consulting services
rendered through the date of the agreement, and a monthly payment of $7,500
continuing for a period of two years following the closing of the October 1994
Private Placement.
Effective June 1, 1994, the Company engaged SGC Advisory
Services, Inc. ("SGC") as a financial and business consultant for three years.
SGC is an affiliate of Steven G. Chrust, a former director of the Company.
Pursuant to the agreement, the Company will compensate SGC as follows: (1) a
monthly fee of $5,000; (2) options to purchase up to 50,000 shares of the
Company's Common Stock which vest on July 1, 1997, and are exercisable on or
before July 1, 1999; and (3) a fee equal to 4% of the total aggregate
consideration received by the Company or its shareholders, in any transaction
which the Company completes with a strategic partner, merger partner or buyer if
SGC is the finder of such entity; or in the case where SGC is not the finder but
proves instrumental in completing the transaction then a fee of 2% will be
payable to SGC. In either case, 50% of the fee will be payable in cash at the
time of closing and 50% will be payable in warrants to purchase securities or
instruments similar to those received by the Company or its shareholders, unless
the entire purchase price is paid in cash. In the latter case, the entire fee
will be payable in cash at closing. Any warrants will have an exercise life of
five years from the date of issuance or vesting, whichever is later, and be
exercisable
<PAGE> 178
11
at the same price as established by the transaction which generates the warrant
fee. At the end of each month of the term of the agreement, SGC earns a credit
against the exercise price of the options referred to in (2) above equal to
1/36th of the exercise price. The shares issued upon exercise of the options
were priced at the average of the high bid and low asked price on the closing
date of the October 1994 Private Placement and have piggy-back registration
rights.
In August, 1994, Apex II loaned the Company $250,000. The
terms of this loan were 15% per annum interest on a note due December 31, 1994,
the grant of a security interest in the tangible assets of the Company's
operating subsidiary which was then constructing a CAP network, and the issuance
of the Company's warrants in the amount of $250,000 to purchase shares of Series
A Preferred Stock at $90 per share. Apex II converted the principal of this loan
into 2,778 shares of Series A Preferred Stock at $90 per share as part of the
October 1994 Private Placement. In addition, Apex II received warrants to
purchase 3,333 shares of Common Stock at $1.125 per share and warrants to
purchase 3,333 shares of Common Stock at $0.01 per share in connection with this
conversion. All of these warrants were exercised.
In October 1994, the Company completed a private placement
(the "October 1994 Private Placement") in which it sold an aggregate of 186,664
shares of its Series A Preferred Stock and issued warrants to purchase an
aggregate of 2,674,506 shares of Common Stock for an aggregate consideration of
$16.8 million, including the conversion of $4.3 million of outstanding debt.
Each share of the Series A Preferred Stock is convertible into 40 shares of
Common Stock, subject to anti-dilution adjustments, generally at the option of
the holder. The Huff Alternative Income Fund, L.P. ("Huff") acquired control of
the Company through its purchase of 138,889 shares of the Series A Preferred
Stock for an aggregate purchase price of $12.5 million and its receipt of
warrants to purchase 77,000 and 1,414,222 shares of Common Stock at prices of
$1.125 and $0.01 per share, respectively, all of which were exercised in
November 1994. Huff is an investment limited partnership and the consideration
for the Series A Preferred Stock was obtained from its general and limited
partners through capital calls for investments by the fund. Upon completion of
these transactions, Huff owned approximately 55.1% of the Company's outstanding
voting stock.
On June 21, 1995 the Company entered into an Assignment and
Assumption Agreement between the Company and
<PAGE> 179
12
Apex II wherein Apex II assumed the Company's obligation to purchase from
certain stockholders an aggregate of 300,000 shares of Common Stock at a
purchase price of $2.25 per share.
On June 26, 1995 the Company completed a private placement
(the "June 1995 Private Placement") of its 9% Series B-1 Convertible Preferred
Stock ("Series B-1 Preferred Stock"), 9% Series B-2 Convertible Preferred Stock
("Series B-2 Preferred Stock") and 9% Series B-3 Convertible Preferred Stock
("Series B-3 Preferred Stock") (collectively, the "Series B Preferred Stock").
In the June 1995 Private Placement ING Equity Partners, L.P. I (ING") purchased
an aggregate of 100,000 shares of Company's Series B-1 Preferred Stock, warrants
to purchase 428,571 shares of Common Stock at an exercise price of $0.01 per
share and a warrant to purchase 100,000 shares Common Stock at an exercise price
of $2.50 per share. In connection with the June 1995 Private Placement, the
Company's Series A Preferred Stock was exchanged for an identical number of 9%
Series A-1 Convertible Preferred Stock (the "Series A-1 Preferred Stock," and
the Series A-1 Preferred Stock together with the Series B Preferred Stock, the
"Preferred Stock") and subsequently retired. Huff and certain of its affiliates
purchased and aggregate of 100,975 shares of Series B-2 Preferred Stock,
warrants to purchase 432,749 shares of Common Stock at an exercise price of
$0.01 per share, a warrant to purchase 100,000 shares of Common Stock at an
exercise price of $1.79 per share and a warrant to purchase 100,000 shares of
Common Stock at an exercise price of $2.50 per share. Apex II and certain of its
affiliates purchased an aggregate of 21,000 shares of Series B-3 Preferred Stock
and warrants to purchase an aggregate of 90,000 shares of Common Stock at an
exercise price of $.01 per share. Each warrant to purchase Common Stock at an
exercise price of $.01 per share that was issued pursuant to the June 1995
Private Placement was exercised. The price per unit in the June 1995 Private
Placement was $100. On November 14, 1995, pursuant to the Purchase Agreement
(the "Series B Purchase Agreement") dated as of June 26, 1995 among the Company,
Huff, ING, Apex, Apex II and other purchasers, ING purchased 50,000 shares of
the Company's 9% Series B-4 Convertible Preferred Stock and a warrant (exercised
on that date) entitling ING to purchase 214,286 shares of Common Stock at an
exercise price of $0.01 per share. In connection with the June 1995 Private
Placement, the Company entered into the Registration Rights Agreement dated June
26, 1995, among the holders of the Preferred Stock, certain holders of Common
Stock and certain holders of options or warrants convertible into Common Stock
(the "Registration Rights Agreement") wherein the parties were
<PAGE> 180
13
granted piggy-back registration rights with respect to any registration
statements (other than Registration Statements filed on Forms S-4 or S-8) filed
by the Company with the Commission at any time prior to the sixth anniversary of
the Registration Rights Agreement, and certain demand registration rights
following the occurrence of, among other things, a fully distributed, firm
commitment underwritten public offering of the Company's Common Stock registered
under the Securities Act of 1933, as amended, in which the gross proceeds to the
Company is at least $15,000,000 and the initial price to the public per share of
Common Stock is at least $5.00 and the result of which is the inclusion of the
Common Stock in the NASDAQ National Market System or listing on the New York
Stock Exchange.
The Company also has entered into the Stockholder's Agreement
(the "Stockholder's Agreement"), dated as of June 26, 1995, with the holders of
the Preferred Stock, Anthony J. Pompliano and Richard A. Kozak. The Stockholders
Agreement, among other things, generally restricts the transfer of Common and
Preferred Stock owned by the parties to the Stockholders Agreement with the
exception of stock sold: (i) in a public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii) in the public market pursuant to Rule 144 under the
Securities Act. The Stockholders Agreement further provides the stockholders
with rights of first refusal in the case of sales initiated by stockholders that
are parties to the Stockholders Agreement and certain "tag-along" rights, which
allow the stockholders to sell a proportionate amount of their stock in the
event a stockholder proposes to sell such stock to an unrelated purchaser.
As of June 30, 1995, the Company entered into an Amended and
Restated Management Registration Rights Agreement, as amended, wherein the
Company's executive officers Anthony J. Pompliano, Jack E. Reich, Riley M.
Murphy, George M. Tronsrue, III and Douglas R. Hudson were granted piggy-back
registration rights with respect to registration statements (other than
Registration Statements filed on Form S-4) filed by the Company with the
Commission at any time prior to the sixth anniversary of the Registration Rights
Agreement, and certain demand registration rights, with respect to shares of
Common Stock underlying options granted to them under their respective
employment agreements with the Company.
The Company entered into Indemnity Agreements with the
following Directors and Executive Officers providing for the Company's
indemnification of such Directors and
<PAGE> 181
14
Executive Officers (each dated as of the date specified following such
Director's or Executive Officer's name):
David L. Piazza: March 24, 1997
Edwin M. Banks: June 26, 1995
Peter C. Bentz: June 26, 1995
Christopher L. Rafferty: June 26, 1995
Benjamin P. Giess: June 26, 1995
Olivier L. Trouveroy: June 26, 1995
Jack E. Reich: November 24, 1996
Anthony J. Pompliano: June 26, 1995
Riley M. Murphy: June 26, 1995
George M. Tronsrue: June 26, 1995
George M. Middlemas: June 26, 1995
On November 8, 1995, the Company entered into a Governance
Agreement (the "Governance Agreement") with Huff, ING, Apex, Apex II and other
holders of the Preferred Stock. Pursuant to the Governance Agreement, until June
26, 1996, the Board was to consist of eleven members, four of whom were elected
by holders of the Common Stock and seven of whom were elected by holders of the
Preferred Stock. On February 26, 1996, the Company and the same parties to the
Governance Agreement signed a Supplemental Governance Agreement pursuant to
which the Board was reduced to seven members, four of whom were elected by
holders of the Common Stock and three of whom were elected by holders of the
Preferred Stock.
On April 10, 1997, the Company entered into a Purchase
Agreement with Huff, ING, Apex and Apex II (the "Direct Purchasers") to sell an
aggregate of 3,600,000 shares of the Company's Common Stock directly to the
Direct Purchasers at a price of $4.70 per share.
On April 28, 1997, the Company extended a loan in the
principal amount of $195,000 to George M. Tronsrue, III, the Company's President
and Chief Operating Officer--Strategy and Technology Development. The loan bears
interest at 8% per annum and is due and payable no later than April 28, 1999.
Mr. Tronsrue must prepay all amounts outstanding if his employment terminates
earlier than April 28, 1999, and he must use the net proceeds from the sale of
any of his shares of Common Stock prior to April 28, 1999 to prepay any
principal and interest then outstanding.
On July 10, 1997, the Company entered into a Purchase
Agreement with The Huff Alternative Income Fund, L.P. ("Huff"), General Motors
Domestic Group Pension Trust ("G.M."), Societe Generale Securities Corporation
<PAGE> 182
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("SOCGEN"), ING Baring (U.S.) Securities, Inc. ("ING Baring") and McDermott Inc.
Master Trust ("McDermott")(the "Company Purchasers"), relating to the sale by
the Company to certain initial purchasers and the Company Purchasers of 75,000
Units (the "Units"), consisting of $75,000,000 of 14-3/4% Redeemable Preferred
Stock due 2008 (the "Preferred Stock") and 75,000 Warrants (the "Warrants"),
each Warrant initially to purchase 80.318 shares of common stock, par value $.01
per share (the "Common Stock"), of the Company (the "Initial Warrant Shares"),
subject to an increase of 22.645 additional shares of Common Stock (the
"Additional Warrant Shares" and, together with the Initial Warrant Shares, the
"Warrant Shares") in the event the Company fails to raise net proceeds of at
least $50,000,000 through the issue and sale of its qualified capital stock
(other than preferred stock) on or before December 31, 1998. In connection with
the offering of the Units, the Company also entered into a Supplemental
Registration Rights Agreement dated as of July 10, 1997, with Huff, G.M. and
McDermott to provide for certain demand registration rights with respect to the
Units. Additionally, the Company entered into a fee letter agreement dated July
10, 1997, with ING Baring and SOCGEN to provide for the payment to each such
entity of a fee in the amount of $337,500 in connection with the sale to each
such entity of 7,500 Units.
On July 23, 1997, in connection with the sale of the Notes,
the Company entered into a fee letter agreement with Huff Asset Management Co.,
L.L.C. ("W.R. Huff") to pay W.R. Huff, on behalf of investment management
accounts for which W.R. Huff acts as investment advisor, a fee of $750,000 with
respect to the $50,000,000 of Notes purchased by W.R. Huff, on behalf of
investment management accounts for which W.R. Huff acts as investment advisor,
from the Initial Purchasers. In addition, on July 23, 1997, the Company entered
into a Supplemental Registration Rights Agreement with W.R. Huff, on behalf of
investment management accounts for which W.R. Huff acts as investment advisor,
to provide for certain demand registration rights with respect to the Notes.
<PAGE> 1
EXHIBIT 4.7
ESCROW AND DISBURSEMENT AGREEMENT
This escrow and disbursement agreement (this "Agreement"),
dated as of July 23, 1997, among The Bank of New York, as escrow agent (the
"Escrow Agent"), The Chase Manhattan Bank, as Trustee (the "Trustee") under the
Indenture (as defined herein), and American Communications Services, Inc., a
Delaware corporation (the "Company").
RECITALS
A. Pursuant to the Indenture, dated as of July 23, 1997 (the
"Indenture"), between the Company and the Trustee, the Company is issuing
$220,000,000 aggregate principal amount of its 13-3/4% Senior Notes due 2007,
including any notes issued in exchange therefor in connection with one or more
registration statements (the "Notes").
B. As security for certain of its obligations under the Notes
and the Indenture, the Company hereby grants to the Trustee, for the benefit of
the holders of the Notes, a security interest, subject to and pending
disbursement pursuant to this Agreement, in the Escrow Account (as defined
herein).
C. The parties have entered into this Agreement in order to
set forth the conditions upon which, and the manner in which, funds will be
disbursed from the Escrow Account and released from the security interest and
lien described above.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows;
1. Defined Terms. In addition to any other defined terms used herein,
the following terms shall constitute defined terms for purposes of this
Agreement and shall have the meanings set forth below:
"Affiliate" means, as to any Person (as defined in the Indenture),
any other Person which directly or indirectly controls, or is under common
control with, or is controlled by, such Person; provided that each Unrestricted
Subsidiary (as defined in the Indenture) shall be deemed to be an Affiliate of
the Company and of each other Subsidiary (as defined in the Indenture) of the
Company; provided, further, neither the Company nor any of its Restricted
Subsidiaries (as defined in the Indenture) shall be deemed to be Affiliates of
each other. For purposes this definition, "control" (including, with correlative
meanings, the terms "controlling," "under common control with" and "controlled
by"),
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and as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of
management or policies of such Person, whether through the ownership of Voting
Stock (as defined in the Indenture), by agreement or otherwise; provided that
beneficial ownership of 10 percent or more of the Voting Stock of a Person shall
be deemed to be control.
"Applied" means that disbursed funds have been applied (i) to
the payment of interest on the Notes, (ii) to the payment of principal of and
premium, if any, on the Notes, upon a repurchase or redemption thereof in
accordance with Section 4.07 of the Indenture; (iii) to the release to the
Company of interest payments on Retired Notes; (iv) to the release to the
Company following payment of the fifth interest payment in accordance with
Section 3(d) hereof; or (v) to any combination of the foregoing.
"Available Funds" means (A) the sum of (i) the Initial Escrow
Amount and (ii) interest earned or dividends paid on the funds in the Escrow
Account (including holdings of Marketable Securities), less (B) the aggregate
disbursements previously made pursuant to this Agreement.
"Business Day" shall have the meaning given such term in the
Indenture.
"Collateral" shall have the meaning given in Section 6(a)
hereof.
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500 million or its
equivalent in foreign currency, whose debt is rated "A" (or higher) according to
Standard & Poor's Ratings Services ("S&P") or Moody's Investors Service, Inc.
("Moody's") at the time as of which any investment or rollover therein is made.
"Escrow Account" shall mean an escrow account established
pursuant to Section 2 hereof.
"Escrow Account Statement" shall have the meaning given in
section 2(f) hereof.
"Initial Escrow Amount" shall mean $70,000,000 of the proceeds
from the offering of the Notes.
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"Interest Payment Date" means January 15 and July 15 of each
year, commencing on January 15, 1998, or if any such day is not a Business Day,
the next succeeding Business Day.
"Issue Date" means July 23, 1997.
"Marketable Securities" means
(i) U.S. Government Securities maturing not more than two
years after the date of acquisition;
(ii) any certificate of deposit maturing not more than 270
days after the date of acquisition issued by or time
deposit of an Eligible Institution;
(iii) commercial paper maturing not more than 270 days after
the date of acquisition issued by a corporation (other
than an Affiliate of the Company) with a rating, at the
time as of which any investment therein is made, of "A-1"
(or higher) according to S&P's or "P-1" (or higher)
according to Moody's;
(iv) any banker's acceptances or money market deposit accounts
issued or offered by an Eligible Institution; and
(v) any fund investing exclusively in investments of the
types described in clauses (i) through (iv) above.
"Payment Notice and Disbursement Request" means a notice sent
by the Trustee to the Escrow Agent notifying the Escrow Agent of an upcoming
Interest Payment Date or other payment date in respect of the Notes and
requesting a disbursement, in substantially the form of Exhibit A hereto. Each
Payment Notice and Disbursement Request shall be signed by an officer of the
Trustee designated in a certificate of the Trustee setting forth specimen
signatures of authorized officers delivered to the Escrow Agent.
"Retired Notes" means Notes that have been permanently retired
by the Company and with respect to which no funds have been distributed (other
than to the Company) from the Escrow Account in respect of future interest
payments.
2. Escrow Account; Escrow Agent.
(a) Appointment of Escrow Agent; Establishment of Escrow
Account. The Company and the Trustee hereby appoint the Es-
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crow Agent, and the Escrow Agent hereby accepts appointment, as escrow agent,
under the terms and conditions of this Agreement.
Concurrently with the execution and delivery hereof, the
Escrow Agent shall establish the Escrow Account at its office located at 101
Barclay Street, New York, NY 10286. Subject to Section 3, Section 5 and the
other terms and conditions of this Agreement, all funds accepted by the Escrow
Agent pursuant to this Agreement shall be held in the Escrow Account for the
ratable benefit of the holders of the Notes. All such funds shall be held in the
Escrow Account until disbursed in accordance with the terms hereof. The Escrow
Account shall be under the sole dominion and control of the Escrow Agent for the
ratable benefit of the holders of the Notes. Concurrently with the execution and
delivery hereof, the Company shall deliver the Initial Escrow Amount to the
Escrow Agent for deposit into the Escrow Account against the Escrow Agent's
written acknowledgment and receipt of the Initial Escrow Amount.
(b) Escrow Agent Compensation. The Company shall pay to the
Escrow Agent such compensation for services to be performed by it under this
Agreement as the Company and the Escrow Agent may agree in writing from time to
time. The Escrow Agent shall be entitled to disburse from the Escrow Account all
such amounts due to the Escrow Agent as agreed upon by the Company and the
Escrow Agent (including the reasonable expenses described in the next succeeding
paragraph).
The Company shall reimburse the Escrow Agent upon request for
all reasonable expenses, disbursements, and advances incurred or made by the
Escrow Agent in implementing any of the provisions of this Agreement, including
reasonable compensation, expenses and disbursements of its counsel (such
compensation, expenses and disbursements of counsel not to exceed $5,000 in the
aggregate), except any such expense, disbursement, or advance as may arise from
its gross negligence or willful misconduct.
(c) Investment of Funds in Escrow Account. Funds deposited in
the Escrow Account shall be invested and reinvested upon the following terms and
conditions:
(i) Acceptable Investments. All funds deposited in the
Escrow Account shall be initially invested by the Escrow Agent in
cash items (including, without limitation, interest bearing
deposit accounts) and Marketable Securities in accordance with
the Company's written instructions to the Escrow Agent.
Thereafter, the Escrow Agent shall invest all funds (including
proceeds of any such in-
<PAGE> 5
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vestments at maturity and interest earned and dividends paid on
any such investments) in the Escrow Account in cash items or
Marketable Securities designated by the Company in writing from
time to time. All Marketable Securities shall be assigned to and
held in the possession of, or, in the case of Marketable
Securities maintained in book entry form with the Federal Reserve
Bank, transferred to a book entry account in the name of, the
Escrow Agent, for the ratable benefit of the holders of the Notes
(subject to Section 3 and Section 5), with such guarantees as are
customary, except that Marketable Securities maintained in book
entry form with the Federal Reserve Bank shall be transferred to
a book entry account in the name of the Escrow Agent at the
Federal Reserve Bank that includes only Marketable Securities
held by the Escrow Agent for its customers and segregated by
separate recordation in the books and records of the Escrow
Agent, subject to the provisions of Section 5 hereof.
(ii) Security Interest in Investments. No investment of
funds in the Escrow Account shall be made unless the Company has
certified to the Escrow Agent and the Trustee that, upon such
investment, the Trustee, for the ratable benefit of the holders
of the Notes, will have a first priority perfected security
interest in the applicable investment. A certificate as to a
class of investments need not be issued with respect to
individual investments in securities in that class if the
certificate applicable to the class remains accurate with respect
to such individual investments. On the date hereof, and on each
anniversary of the Issue Date thereafter until the date upon
which the balance of the Available Funds shall have been reduced
to zero, each of the Trustee and the Escrow Agent shall receive
an Opinion of Counsel (as such term is defined in the Indenture)
to the Company, dated the date hereof or thereof, as the case may
be, to the effect that the Escrow Agreement creates a valid,
perfected first priority security interest in favor of the
Trustee, for the ratable benefit of the holders of the Notes, in
the Escrow Account and the Collateral (as defined below).
(iii) Interest and Dividends. All interest earned and
dividends paid on funds invested in Marketable Securities shall
be deposited in the Escrow Account as additional Collateral for
the benefit of the holders of the Notes (subject to Section 3 and
Section 5) and shall be reinvested in accordance with the terms
hereof at the Company's written instruction.
(iv) Limitation on Escrow Agent's Responsibilities. The
Escrow Agent's sole responsibilities under this Section
<PAGE> 6
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2 shall be (A) to retain possession of certificated Marketable
Securities (except, however, that the Escrow Agent may surrender
possession to the issuer of any such Marketable Security for the
purposes of effecting assignment, crediting interest, or
reinvesting such security or reducing such security to cash) and
to be the registered or designated owner of Marketable Securities
which are not certificated, (B) to follow the Company's written
instructions given in accordance with Section 2(d)(i) hereof, (C)
to invest and reinvest funds pursuant to this Section 2(d) and
(D) to use its best efforts to reduce to cash such Marketable
Securities as may be required to fund any disbursement in
accordance with Section 3 hereof. In connection with clause (A)
above, the Escrow Agent will maintain continuous possession in
the State of New York of certificated Marketable Securities and
cash included in the Collateral and will cause uncertificated
Marketable Securities to be registered in the book-entry system
of, and transferred to an account of the Escrow Agent at, the
Federal Reserve Bank of New York.
(d) Substitution of Escrow Agent. The Escrow Agent may resign
by giving no less than 30 days' prior written notice to the Company and the
Trustee. Such resignation shall take effect upon the later to occur of (i)
delivery of all funds and Marketable Securities maintained by the Escrow Agent
hereunder and copies of all books, records, plans and other documents in the
Escrow Agent's possession relating to such funds or Marketable Securities or
this Agreement to a successor escrow agent appointed by the Company and (ii) the
Company, the Trustee and such successor escrow agent entering into this
Agreement or any written successor agreement no less favorable to the interests
of the holders of the Notes and the Trustee than this Agreement; and the Escrow
Agent shall thereupon be discharged of all obligations under this Agreement and
shall have no further duties, obligations or responsibilities in connection
herewith. If a successor escrow agent has not been appointed or has not accepted
such appointment within 30 days after notice of resignation is given to the
Company, the Escrow Agent may apply to a court of competent jurisdiction for the
appointment of a successor escrow agent and no such resignation shall take
effect until such appointment of a successor escrow agent is made and the terms
of the second sentence of this Section 2(d) have been complied with.
(e) Escrow Account Statement. Each month, the Escrow Agent
shall deliver to the Company and the Trustee a statement of the Escrow Agent in
a form satisfactory to the Company and the Trustee setting forth with reasonable
particularity the balance of funds then in the Escrow Account and the manner in
which such funds have been and are invested (the "Escrow Account State-
<PAGE> 7
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ment"). The parties hereto irrevocably instruct the Escrow Agent that on the
first date upon which the balance in the Escrow Account (including the holdings
of all Marketable Securities) is reduced to zero, the Escrow Agent shall deliver
to the Company and to the Trustee a written notice that the balance in the
Escrow Account has been reduced to zero.
3. Disbursements.
(a) Payment Notice and Disbursement Request; Disbursements.
The Trustee shall, five Business Days prior to an Interest Payment Date with
respect to the five regularly scheduled interest payments due on the Notes from
January 15, 1998 through January 15, 2000 or to a date of redemption or
repurchase (if prior to the payment of the fifth interest payment on the Notes)
pursuant to Section 4.07 of the Indenture in respect of the Notes, submit to the
Escrow Agent a completed Payment Notice and Disbursement Request substantially
in the form of Exhibit A hereto.
The Escrow Agent's disbursement pursuant to any Payment Notice
and Disbursement Request shall be subject to the satisfaction of the applicable
conditions set forth in Section 3(b) hereof. Provided such Payment Notice and
Disbursement Request is not rejected by it for failure to comply with Section
3(b), the Escrow Agent, within two (2) Business Days following receipt of such
Payment Notice and Disbursement Request, shall disburse the funds requested in
such Payment Notice and Disbursement Request by wire or book-entry transfer of
immediately available funds to the account of the Trustee for the benefit of the
holders of the Notes. The Escrow Agent shall notify the Trustee as soon as
reasonably possible (but not later than two (2) Business Days from the date of
receipt of the Payment Notice and Disbursement Request) if any Payment Notice
and Disbursement Request is rejected for failure to comply with Section 3(b) and
the reasons therefor. In the event such rejection is based upon nonsatisfaction
of the condition in Section 3(b)(A) below, the Trustee shall thereupon resubmit
the Payment Notice and Disbursement Request with appropriate changes.
(b) Conditions Precedent to Disbursement. The Escrow Agent's
payment of any disbursement shall be made only if: (A) the Trustee shall have
submitted, in accordance with the provisions of Section 3(a) herein, a completed
Payment Notice and Disbursement Request to the Escrow Agent substantially in the
form of Exhibit A hereto with blanks appropriately filled in and (B) the Escrow
Agent shall not have received any notice from the Trustee that as a result of an
Event of Default (as defined in the Indenture) the indebtedness represented by
the Notes has been
<PAGE> 8
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accelerated and has become due and payable (in which event the Escrow Agent
shall apply all Available Funds as required by Section 6(b)(iii) hereof).
(c) Retired Notes. In the event a portion of the Notes has
been retired by the Company (and with respect to which no funds previously have
been disbursed from the Escrow Account in respect of future interest payments),
funds representing the interest payments on the retired Notes shall, upon the
submission to the Escrow Agent of a completed Payment Notice and Disbursement
Request substantially in the form of Exhibit A hereto, be paid to the Company.
(d) Final Interest Payment. In the event there are any
Available Funds following the disbursement to be made in connection with the
interest payment on the Notes due January 15, 2000, such Available Funds
(including Marketable Securities) shall be paid to the Company immediately upon
the submission to the Escrow Agent of a completed Payment Notice and
Disbursement Request substantially in the form of Exhibit A hereto. Furthermore,
upon payment in full of the five regularly scheduled interest payments due on
the Notes from January 15, 1998 through January 15, 2000, the security interest
in the Collateral evidenced by this Escrow Agreement shall terminate and be of
no further force and effect. In addition, upon release of any Collateral from
the Escrow Account in accordance with the terms of this Escrow Agreement, the
security interest evidenced by this Escrow Agreement in the Collateral so
released shall terminate and be of no further force and effect.
4. Escrow Agent.
Limitation of the Escrow Agent's Liability; Responsibilities
of the Escrow Agent. The Escrow Agent's responsibility and liability under this
Agreement shall be limited as follows: (i) the Escrow Agent does not represent,
warrant or guaranty to the holders of the Notes from time to time the
performance of the Company; (ii) the Escrow Agent shall have no responsibility
to the Company or the holders of the Notes or the Trustee from time to time as a
consequence of the performance by the Escrow Agent hereunder, except for any
gross negligence or willful misconduct of the Escrow Agent and except with
respect to claims based upon such gross negligence or wilfull misconduct that
are successfully asserted against the Escrow Agent; (iii) the Company shall
remain solely responsible for all aspects of the Company's business and conduct;
and (iv) the Escrow Agent is not obligated to supervise, inspect, or inform the
Company or any third party of any matter referred to above.
<PAGE> 9
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No implied covenants or obligations shall be inferred from
this Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by
the provisions of any agreement beyond the specific term hereof. Specifically
and without limiting the foregoing, the Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any funds or Marketable
Securities held by it hereunder, including without limitation any liability for
any delay not resulting from gross negligence or willful misconduct in such
investment, reinvestment or liquidation, or for any loss of principal or income
incident to any such delay.
The Escrow Agent shall be entitled to rely upon any judicial
order or judgment, upon any written opinion of counsel or upon any
certification, instruction, notice, or other writing delivered to it by the
Company or the Trustee in compliance with the provisions of this Agreement
without being required to determine the authenticity or the correctness of any
fact stated therein or the propriety or validity of service thereof. The Escrow
Agent may act in reliance upon any instrument comportinq with the provisions of
this Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
At any time, the Escrow Agent may request in writing an
instruction in writing from the Company, and may at its own option include in
such request the course of action it proposes to take and the date on which it
proposes to act, regarding any matter arising in connection with its duties and
obligations hereunder; provided, however, that the Escrow Agent shall state in
such request that it believes in good faith that such proposed course of action
is consistent with another identified provision of this Agreement. The Escrow
Agent shall not be liable to the Company for acting without the Company's
consent in accordance with such a proposal on or after the date specified
therein if (i) the specified date is at least two Business Days after the
Company receives the Escrow Agent's request for instructions and its proposed
course of action, which instructions shall have been delivered to the Company at
least two Business Days prior to such action and (ii) prior to so acting, the
Escrow Agent has not received the written instructions requested from the
Company, which instructions shall have been delivered to the Company at least
two Business Days prior to such action.
The Escrow Agent may act pursuant to the written advice of
counsel chosen by it with respect to any matter relating to
<PAGE> 10
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this Agreement and (subject to this Section 4) shall not be liable for any
action taken or omitted in accordance with such advice.
The Escrow Agent shall not be called upon to advise any party
as to selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this
Agreement with respect to any funds or property deposited hereunder, the Escrow
Agent shall be entitled to refuse to comply with any and all claims, demands or
instructions with respect to such property or funds, and the Escrow Agent shall
not be or become liable for its failure or refusal to comply with conflicting
claims, demands or instructions. The Escrow Agent shall be entitled to refuse to
act until either any conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by agreement
between the conflicting claimants as evidenced in a writing, satisfactory to the
Escrow Agent, in which event the Escrow Agent shall act in accordance with such
determination or agreement.
No provision of this Agreement shall require the Escrow Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder.
The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to initiate or defend any
legal proceedings which may be instituted against it in respect of the subject
matter of this Agreement. If the Escrow Agent does elect to act it will do so
only to the extent that it is indemnified to its satisfaction against the cost
and expense of such defense or initiation.
5. Indemnity. The Company shall indemnify, hold harmless and defend the
Escrow Agent and its directors, officers, agents, employees and controlling
persons, from and against any and all claims, actions, obligations, liabilities
and expenses, including defense costs, investigative fees and costs, reasonable
legal fees, and claims for damages, arising from the Escrow Agent's performance
under this Agreement, except to the extent that such liability, cost, legal fee,
obligation, action, expense or claim is directly attributable to the gross
negligence or willful misconduct of any of the foregoing persons. In connection
with any claim, action, obligation, liability or expense for which
indemnification is sought by the Escrow Agent hereunder, the Escrow Agent shall
be entitled to recover its costs from funds available
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in the Escrow Account as provided in Section 2(c), provided, however, that the
Company agrees to pay such costs if and to the extent funds in the Escrow
Account are insufficient. The provisions of this Section shall survive any
termination, satisfaction or discharge of this Agreement as well as the
resignation or removal of the Escrow Agent.
6. Grant of Security Interest; Instructions to Escrow Agent.
(a) The Company hereby irrevocably grants, for the term of
this Agreement, a first priority security interest in, pledges, assigns and sets
over to the Trustee all of the Company's right, title and interest in the Escrow
Account, all funds held therein and all Marketable Securities held by (or
otherwise maintained in the name of) the Escrow Agent pursuant to Section 2
hereof, as well as all rights of the Company under this Agreement (collectively,
the "Collateral"), in order to secure certain obligations and indebtedness of
the Company under the Notes owed by the Company under the Indenture for the
ratable benefit of the holders of the Notes or to the Trustee. The Company shall
take all actions necessary on its part to insure the continuance of a first
priority security interest, for the term of this Agreement, in the Collateral in
favor of the Trustee for the ratable benefit of the holders of the Notes in
order to secure such obligations and indebtedness. Each of the Trustee and the
Escrow Agent shall have received an Opinion from Counsel to the Company, on the
date hereof, and annually, for the term of this Agreement, on the anniversary of
the Issue Date to the effect that the Escrow Agreement creates a valid,
perfected first priority security interest in favor of the Trustee for the
ratable benefit of the holders of the Notes in the Escrow Account and the
Collateral.
(b) The Company and the Trustee hereby irrevocably instruct
the Escrow Agent to, and the Escrow Agent will, (i) (A) maintain sole dominion
and control over funds in the Escrow Account for the benefit of the Trustee to
the extent specifically required herein, (B) maintain, or cause its agent within
the State of New York to maintain, possession of all certified Marketable
Securities purchased hereunder that are physically possessed by the Escrow Agent
in order for the Trustee for the ratable benefit of the holders of the Notes to
enjoy a continuous perfected first priority security interest therein under the
laws of the State of New York (the Company hereby agreeing that in the event any
certificated Marketable Securities are in the possession of the Company or a
third party, the Company shall use its commercially reasonable efforts to
deliver all such certificates to the Escrow Agent for the benefit of the
Trustee), (C) take all commercially reasonable steps to cause the Trustee to
enjoy a
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continuous perfected first priority security interest under the New York Uniform
Commercial Code and any applicable law of the State of New York in all
Marketable Securities purchased hereunder that are not certificated and (D)
maintain the Collateral free and clear of all liens, security interests,
safekeeping or other charges, demands and claims against the Escrow Agent of any
nature now or hereafter existing in favor of anyone other than the Trustee; (ii)
promptly notify the Trustee if the Escrow Agent receives written notice that any
person other than the Trustee has a lien or security interest upon any portion
of the Collateral (other than any claim which Escrow Agent may have against the
Escrow Account for unpaid fees and expenses) and (iii) in addition to disbursing
amounts held in escrow pursuant to any Payment Notice and Disbursement Requests
given to it by the Trustee pursuant to Section 3, upon receipt of written notice
from the Trustee of the acceleration of the maturity of the Notes or the failure
by the Company to pay principal on the Notes upon such acceleration, and
direction from the Trustee to disburse all Available Funds to the Trustee, as
promptly as practicable, after following the procedures set forth in the fourth
paragraph of Section 4, disburse all funds held in the Escrow Account to the
Trustee and transfer title to all Marketable Securities held by the Escrow Agent
hereunder to the Trustee. The lien and security interest provided for by this
Section 6 shall automatically terminate and cease as to, and shall not extend or
apply to, and the Trustee shall have no security interest in, any funds
disbursed by the Escrow Agent to the Company pursuant to this Agreement. The
Escrow Agent shall act solely as the Trustee's agent in connection with the
duties under this Section 6, notwithstanding any other provision contained in
this Agreement, without any right to receive compensation from the Trustee and
without any authority to obligate the Trustee or to compromise or pledge its
security interest hereunder.
(c) Any money and Marketable Securities collected by the
Trustee pursuant to Section 6(b)(iii) shall be applied as provided in the
Indenture.
(d) The Company will execute and deliver to the Trustee such
instruments and documents as may be required or as the Trustee may reasonably
deem necessary or advisable to confirm or perfect the rights of the Trustee
under this Agreement and the Trustee's interest in the Collateral. The Company
will take all necessary action to preserve and protect the security interest
created hereby as a lien and encumbrance upon the Collateral.
(e) The Company hereby appoints the Trustee as its
attorney-in-fact effective upon and during the continuance of an Event of
Default under the Indenture with full power of substitu-
<PAGE> 13
-13-
tion to do any act which the Company is obligated hereto to do, and the Trustee
may exercise such rights as the Company might exercise with respect to the
Collateral and to take any action in the Company's name to protect the Trustee's
security interest hereunder. Prior to the occurrence of an Event of Default
known to the Trustee, the Trustee shall have no duty or obligation to verify or
maintain the perfection of any security interest created hereby.
7. Termination. This Agreement shall terminate automatically following
disbursement of all funds remaining in the Escrow Account (including Marketable
Securities), unless sooner terminated by agreement of the parties hereto (in
accordance with the terms hereof and not in violation of the Indenture);
provided, however, that the obligations of the Company under Section 5 (and any
existing claims thereunder) shall survive termination of this Agreement or the
resignation of the Escrow Agent.
8. Miscellaneous.
(a) Waiver. Any party hereto may specifically waive any breach of
this Agreement by any other party, but no such waiver shall be deemed to have
been given unless such waiver is in writing, signed by the waiving party and
specifically designating the breach waived, nor shall any such waiver constitute
a continuing waiver of similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties hereto,
and the rights and duties of any party hereunder shall not be assignable except
with the prior written consent of the other parties. Notwithstanding the
foregoing, this Agreement shall inure to and be binding upon the parties and
their successors and permitted assigns.
(d) Benefit. The parties hereto and their successors and permitted
assigns, but no others, shall be bound hereby and entitled to the benefits
hereof; provided, however, that the holders of the Notes and their permitted
assigns shall be entitled to the benefits hereof and to enforce this Agreement.
<PAGE> 14
-14-
(e) Time. Time is of the essence of each provision of this
Agreement.
(f) Entire Agreement; Amendments. This Agreement, the Indenture and
the terms of the Notes thereunder contain the entire agreement among the parties
with respect to the subject matter hereof and supersede any and all prior
agreements, understandings and commitments, whether oral or written. This
Agreement may be amended only by a writing signed by a duly authorized
representative of each party hereto.
(g) Notices. All notices and other communications required or
permitted to be given or made under this Agreement sha1l be in writing and shall
be deemed to have been duly given and received, regardless of when and whether
received, either: (a) on the day of hand delivery; (b) three Business Days
following the day sent, when sent by United States certified mail, postage and
certification fee prepaid, return receipt requested, addressed as follows; (c)
when transmitted by telecopy with verbal confirmation of receipt by the telecopy
operator; or (d) one Business Day following the day timely delivered to a
next-day air courier:
To Escrow Agent:
The Bank of New York
101 Barclay St.
12 East
New York, NY 10286
Attn: Matt Louis
Insurance Trust and Escrow Unit
Telecopy: (212) 815-7181
Telephone: (212) 815-7172
To Trustee:
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, NY 10001-2697
Attn: Corporate Trust Administration Department
Telecopy: (212) 946-3348
Telephone: (212) 946-8159
To the Company:
<PAGE> 15
-15-
American Communications Services, Inc.
131 National Business Parkway, Suite 100
Annapolis Junction, MD 20701
Attn: David Piazza
Telecopy: (301)617-4277
Telephone: (301)617-4200
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
(h) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(j) Choice of Law. The existence, validity, construction,
operation and effect of any and all terms and provisions of this Agreement shall
be determined in accordance with and governed by the laws of the State of New
York. The parties to this Agreement hereby agree that jurisdiction over such
parties and over the subject matter of any action or proceeding arising under
this Agreement may be exercised by a competent Court of the State of New York,
or by a United States Court sitting in New York City. The Company hereby submits
to the personal jurisdiction of such courts, hereby waives personal service of
process upon it and consents that any such service of process may be made by
certified or registered mail, return-receipt requested, directed to the Company
at its address last specified for notices hereunder, and service so made shall
be deemed completed five (5) days after the same shall have been so mailed. All
actions and proceedings brought by the Company, or the Trustee against the
Escrow Agent relating to or arising from, directly or indirectly, this Agreement
shall be litigated only in Federal or New York State courts within the State of
New York.
(k) The Company hereby represents and warrants that this
Agreement has been duly authorized, executed and delivered on its behalf and
constitutes the legal, valid and binding obligation of the Company. The
execution, delivery and performance of this Agreement by the Company does not
violate any applicable law or regulation to which the Company is subject and
does not require the consent of any governmental or other regulatory body to
which the Company is subject, except for such consents and approvals as have
been obtained and are in full force and effect.
<PAGE> 16
-16-
(l) Each of the Escrow Agent and the Trustee hereby represents
and warrants that this Agreement has been duly authorized, executed and
delivered on its behalf and constitutes its legal, valid and binding obligation.
<PAGE> 17
-S1-
IN WITNESS WHEREOF, the parties have executed and delivered
this Escrow and Disbursement Agreement as of the day first above written.
ESCROW AGENT: THE BANK OF NEW YORK
By: ______________________________
Name:
Title:
TRUSTEE: THE CHASE MANHATTAN BANK, as Trustee
By: ______________________________
Name:
Title:
COMPANY: AMERICAN COMMUNICATIONS SERVICES, INC.
By: ______________________________
Name:
Title:
<PAGE> 18
EXHIBIT A TO ESCROW AND DISBURSEMENT AGREEMENT
Form of Payment Notice and Disbursement Request
(Letterhead of the Trustee)
[Date]
Attn: The Bank of New York
101 Barclay St.
12 East
New York, NY 10286
Matt Louis
Insurance Trust and Escrow Unit
Re: Disbursement Request No. ________________________
(indicate whether revised)
Ladies and Gentlemen:
We refer to the Escrow and Disbursement Agreement, dated as of
July 23, 1997 (the "Escrow Agreement") among you (the "Escrow Agent"), the
undersigned as Trustee, and American Communications Services, Inc., a Delaware
corporation (the "Company"). Capitalized terms used herein shall have the
meaning given in the Escrow Agreement.
This letter constitutes a Payment Notice and Disbursement
Request under the Escrow Agreement.
[choose one of the following, as applicable]
[The undersigned hereby notifies you that a scheduled interest
payment in the amount of $____________ is due and payable on ___________ , ____
and requests a disbursement of funds contained in the Escrow Account in such
amount.]
[The undersigned hereby notifies you that a payment of
$_______ will be due and payable on ___________ __, ____ (not more than 5
Business Days from the date of this request) in connection with a repurchase or
redemption of Notes, plus accrued and unpaid interest, if any, pursuant to the
provisions of Section 4.07 of the Indenture and in connection therewith requests
a disbursement of funds contained in the Escrow Account in the amount of
$_____________ .]
[The undersigned hereby notifies you that Notes equaling
$____________ in aggregate principal amount have been retired and authorizes you
to release $_____________ of funds in the Escrow Account to the Company (to an
account designated by the Com-
<PAGE> 19
-2-
pany in writing), which amount represents the interest payments on such Retired
Notes and is not duplicative of any amounts previously disbursed.]
[The undersigned hereby authorizes you, pursuant to Section
3(d) of the Escrow Agreement, to release $_____________of funds (representing
all Available Funds) in the Escrow Account to the Company (to an account
designated by the Company in writing) and to release all Marketable Securities
in the Escrow Account to the Company (to an account designated by the Company in
writing).]
In connection with the requested disbursement, the undersigned
hereby notifies you that:
1. The Notes have not, as a result of an Event of Default (as
defined in the Indenture), been accelerated and become due and payable.
2. All prior disbursements from the Escrow Account have been
Applied.
3. [add wire instructions]
The Escrow Agent is entitled to rely on the foregoing in
disbursing funds relating to this Payment Notice and Disbursement Request.
THE CHASE MANHATTAN BANK, as
Trustee
By:____________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.1
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of July 10, 1997
between
AMERICAN COMMUNICATIONS SERVICES, INC.
as Issuer
and
BT SECURITIES CORPORATION,
ALEX. BROWN & SONS INCORPORATED
and the Other Parties Signatory hereto
14.75% Redeemable Preferred Stock due 2008
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
1. Definitions...................................................... 1
2. Shelf Notice..................................................... 4
3. Shelf Registration............................................... 4
4. Additional Dividends............................................. 6
5. Registration Procedures.......................................... 6
6. Registration Expenses............................................ 14
7. Indemnification.................................................. 14
8. Rules 144 and 144A............................................... 18
9. Miscellaneous.................................................... 19
(a) No Inconsistent Agreements............................. 19
(b) Adjustments Affecting Registrable Preferred Stock...... 19
(c) Amendments and Waivers................................. 19
(d) Notices................................................ 19
(e) Successors and Assigns................................. 21
(f) Counterparts........................................... 21
(g) Headings............................................... 22
(h) Governing Law.......................................... 22
(i) Severability........................................... 22
(j) Securities Held by the Company......................... 22
(k) Third Party Beneficiaries.............................. 22
(l) Entire Agreement....................................... 22
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated
as of July 10, 1997, among American Communications Services, Inc., a Delaware
corporation (the "Company"), BT Securities Corporation and Alex. Brown & Sons
Incorporated (together, the "Initial Purchasers")and the other parties signatory
hereto (the "Other Purchasers" and with the Initial Purchasers the
"Purchasers").
This Agreement is entered into in connection with each of the
respective Purchase Agreements, dated July 3, 1997, between and among the
Company and the Initial Purchasers and between and among the Company and the
Other Purchasers (collectively, the "Purchase Agreements"), which provide for
the issuance and sale by the Company to the Purchasers of, among other things,
29,000 shares and 46,000 shares, respectively, of the Company's 14.75%
Redeemable Preferred Stock due 2008 (including any additional shares of
Preferred Stock issuable in lieu of cash dividends thereon, the "Preferred
Stock"). In order to induce the Purchasers to enter into the Purchase
Agreements, the Company has agreed to provide the registration rights set forth
in this Agreement for the benefit of the Purchasers and their direct and
indirect transferees and assigns. The execution and delivery of this Agreement
is a condition to the Purchasers' obligation to purchase the Preferred Stock
under the Purchase Agreements.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Dividends: See Section 4 hereof.
Advice: See Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Certificate of Designation: The Certificate of Designation
governing the Preferred Stock, as filed with the Secretary of State of the State
of Delaware, as amended from time to time.
Certificated Shares: See Section 10 hereof.
<PAGE> 4
-2-
Closing Date: The Closing Date as defined in the Purchase
Agreement.
Company: See the introductory paragraphs hereto.
Effectiveness Date: The 225th day after the Issue Date.
Effectiveness Period: See Section 3 hereof.
Event Date: See Section 4 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Filing Date: Within 150 days after the Issue Date.
Holder: Any holder of Registrable Preferred Stock.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Initial Purchasers: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(o) hereof.
Issue Date: The date on which the original Preferred Stock was
issued and sold to the Purchasers pursuant to the Purchase Agreement.
NASD: See Section 5(r) hereof.
Other Purchasers: See the introductory paragraphs hereto.
Participant: See Section 7(a) hereof.
Person: An individual, partnership, corporation, limited
liability company, unincorporated association, trust or joint venture, or a
governmental agency or political subdivision thereof.
<PAGE> 5
-3-
Preferred Stock: See the introductory paragraphs hereto.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereto.
Purchasers: See the introductory paragraphs hereto.
Records: See Section 5(o) hereof.
Registrable Preferred Stock: Each share of Preferred Stock
(including any additional shares of Preferred Stock issued in lieu of cash
dividends thereon) upon original issuance thereof and at all times subsequent
thereto, until in the case of any such shares of Preferred Stock, the earliest
to occur of (i) in the case of any share, the date on which such share has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement, (ii) the date on which such Preferred
Stock is distributed to the public pursuant to Rule 144 under the Securities Act
or is saleable pursuant to Rule 144(k) under the Securities Act and (iii) the
date on which no Preferred Stock is outstanding.
Registration Statement: Any registration statement of the
Company filed with the SEC pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such
<PAGE> 6
-4-
securities being free of the registration and prospectus delivery requirements
of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
Transfer Agent: The Transfer Agent for the Preferred Stock,
the Exchange Preferred Stock and/or the Private Exchange Preferred Stock, as the
context may require.
Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
2. Shelf Notice
At any time within 120 days of the Issue Date, the Company
shall deliver to the Holders written notice (the "Shelf Notice") that the
Company shall file a Shelf Registration pursuant to Section 3 hereof.
3. Shelf Registration
After a Shelf Notice is delivered as required by Section 2
hereof, then:
(a) Shelf Registration. The Company shall as promptly as
reasonably practicable file with the SEC a Registration Statement for an
offering to be made on a continuous
<PAGE> 7
-5-
basis pursuant to Rule 415 covering all of the Registrable Preferred Stock (the
"Initial Shelf Registration"). The Company shall use its commercially reasonable
efforts to file with the SEC the Initial Shelf Registration on or prior to the
Filing Date. The Initial Shelf Registration shall be on an appropriate form
permitting registration of such Registrable Preferred Stock for resale by
Holders.
The Company shall use its commercially reasonable efforts to
cause the Initial Shelf Registration to be declared effective under the
Securities Act on or prior to the Effectiveness Date and to keep the Initial
Shelf Registration continuously effective under the Securities Act until the
date that is 36 months from the Issue Date (the "Effectiveness Period"), or such
shorter period ending when (i) all Registrable Preferred Stock covered by the
Initial Shelf Registration has been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Registration covering all of the Registrable Preferred Stock has been declared
effective under the Securities Act or (iii) there is no longer any Registrable
Preferred Stock outstanding.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder or there is no longer any
Registrable Preferred Stock outstanding), the Company shall use its commercially
reasonable efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 90 days of such cessation
of effectiveness amend the Initial Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Preferred Stock (a "Subsequent Shelf Registration"). If a
Subsequent Shelf Registration is filed, the Company shall use its commercially
reasonable efforts to cause the Subsequent Shelf Registration to be declared
effective under the Securities Act as soon as practicable after such filing and
to keep such Registration Statement continuously effective until the end of the
Effectiveness Period. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Company shall use
commercially reasonable efforts to supplement and amend the Shelf Registration
if required by the rules, regulations or in-
<PAGE> 8
-6-
structions applicable to the registration form used for such Shelf Registration,
if required by the Securities Act, or if reasonably requested by the Holders of
a majority of shares of the Registrable Preferred Stock covered by such
Registration Statement or if reasonably requested by an underwriter, if any, of
such Registrable Preferred Stock.
(d) Suspension of Shelf Registration. The Company's obligation
to keep the Shelf Registration effective and usable for offers and sales of the
Preferred Stock may be suspended by the Company in good faith for valid business
reasons, including, without limitation, a pending acquisition or divestiture of
assets. Any such period during which the Company fails to keep the Shelf
Registration effective and usable for offers and sales of Preferred Stock is
referred to as a "Suspension Period." A Suspension Period shall commence on and
include the date that the Company gives notice that the Shelf Registration is no
longer effective or the prospectus included therein is no longer usable for
offers and sales of Preferred Stock and shall end on the date when each Holder
of Preferred Stock covered by such registration statement either receives the
copies of the supplemented or amended prospectus contemplated by Section 3(c)
hereof or is advised in writing by the Company that use of the prospectus may be
resumed. During the pendency of any Suspension Period, the Company may not issue
any securities, whether or not in a public offering, except for issuances of
Common Stock pursuant to an acquisition or other business combination
transaction or upon exercise of options or warrants outstanding prior to such
Suspension Period.
4. Additional Dividends
The Company and the Purchasers agree that the Holders of
Preferred Stock will suffer damages if the Company fails to fulfill its
obligations under Section 3 hereof and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, the Company
agrees to pay, as liquidated damages, additional dividends on the Preferred
Stock (in either case, "Additional Dividends") under the circumstances and to
the extent set forth in the Certificate of Designation.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Section 3 hereof, the Company shall effect such registrations to
permit the sale of the securities covered thereby in accordance with the
intended method or meth-
<PAGE> 9
-7-
ods of disposition thereof, and pursuant thereto and in connection with any
Registration Statement filed by the Company hereunder the Company shall:
(a) Prepare and file with the SEC prior to the Filing Date, a
Registration Statement as prescribed by Section 3 hereof, and use its
commercially reasonable efforts to cause such Registration Statement to become
effective and remain effective as provided herein; provided, however, that,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall furnish to and afford the Holders of the
Registrable Preferred Stock covered by such Registration Statement, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including, if requested in writing, copies
of any documents to be incorporated by reference therein and all exhibits
thereto) proposed to be filed (in each case at least five business days prior to
such filing). The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto if the Holders of a majority
of shares of Registrable Preferred Stock covered by such Registration Statement,
their counsel, or the managing underwriters, if any, shall reasonably object
within two business days after the receipt thereof. Notwithstanding anything to
the contrary contained in this Agreement, the Company shall not be required to
engage in more than one underwritten offering, if any, pursuant to this
Agreement.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration, as may be necessary to
keep such Registration Statement continuously effective for the Effectiveness
Period; cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated under
the Securities Act; and comply with the provisions of the Securities Act and the
Exchange Act applicable to it with respect to the disposition of all securities
covered by such Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the selling Holders of Registrable Preferred Stock,
their counsel and the managing underwriters, if any, reasonably promptly (but in
any event within five business days), and confirm such notice in writing, (i)
when a Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become ef-
<PAGE> 10
-8-
fective under the Securities Act, (ii) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the initiation
of any proceedings for that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Preferred Stock the representations and warranties of the Company
contained in any agreement (including an underwriting agreement, if any),
contemplated by Section 5(m) hereof cease to be true and correct, (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or any
of the Registrable Preferred Stock for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or any information
becoming known that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in or amendments or supplements to such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading and
(vi) of the Company's determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) Use its commercially reasonable efforts to prevent the
issuance of any order suspending the effectiveness of a Registration Statement
or of any order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the Registrable
Preferred Stock for sale in any jurisdiction, and, if any such order is issued,
to use its commercially reasonable best efforts to obtain the withdrawal of any
such order at the earliest possible moment.
(e) If requested by the managing underwriter or underwriters
(if any), or the Holders of a majority of shares of Registrable Preferred Stock
being sold in connection with an underwritten offering, if any, (i) promptly
incorporate in a
<PAGE> 11
-9-
prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters (if any), such Holders, or its counsel
determine is reasonably necessary to be included therein and (ii) make all
required filings of such prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment.
(f) Furnish to each selling Holder of Registrable Preferred
Stock who so requests in writing and to counsel and each managing underwriter,
if any, at the sole expense of the Company, one conformed copy of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and, if
requested in writing, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits.
(g) Deliver to each selling Holder of Registrable Preferred
Stock, its respective counsel, and the underwriters, if any, at the sole expense
of the Company, as many copies of the Prospectus (including each form of
preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request in writing; and, subject to the last paragraph of this Section 5, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Registrable Preferred Stock
and the underwriters or agents, if any, and dealers (if any), in connection with
the offering and sale of the Registrable Preferred Stock covered by, such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Preferred
Stock, to use its commercially reasonable efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Preferred Stock, the managing
underwriter or underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Preferred Stock for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder, or the managing underwriter or reasonably request; provided,
however, that where Registrable Preferred Stock offered other than through an
underwritten offering, the Company agrees to cause the Company's counsel to
perform Blue Sky investigations, if necessary, and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep each
<PAGE> 12
-10-
such registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Preferred Stock covered by
the Registration Statement; provided, however, that the Company shall not be
required to qualify as a foreign corporation or to execute a general consent to
service of process in any jurisdiction or be subject to taxation in any
jurisdiction in which it is not so subject.
(i) Cooperate with the selling Holders of Registrable
Preferred Stock and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Preferred Stock to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Registrable Preferred Stock to be in
such denominations and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request.
(j) Use its commercially reasonable efforts to cause the
Registrable Preferred Stock covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof or the underwriter
or underwriters, if any, to consummate the disposition of such Registrable
Preferred Stock except as may be required solely as a consequence of the nature
of such selling Holder's business, in which case the Company will cooperate in
all reasonable respects with the filing of such Registration Statement and the
granting of such approvals.
(k) Upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to
Sections 3(d) and 5(a) hereof) file with the SEC, at the sole expense of the
Company, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Preferred
Stock being sold thereunder, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
<PAGE> 13
-11-
(l) Prior to the effective date of the first Registration
Statement relating to the Registrable Preferred Stock, (i) provide the Transfer
Agent with certificates for the Registrable Preferred Stock in a form eligible
for deposit with The Depository Trust Company and (ii) provide a CUSIP number
for the Registrable Preferred Stock.
(m) In connection with an underwritten offering, if any, of
Registrable Preferred Stock pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings of securities
similar to the Preferred Stock and take all such other actions as are reasonably
requested by the managing underwriter or underwriters in order to expedite or
facilitate the registration or the disposition of such Registrable Preferred
Stock and, in such connection, (i) make such representations and warranties to,
and covenants with, the underwriters with respect to the business of the Company
and its subsidiaries (including any acquired business, properties or entity, if
applicable) and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten offerings of
securities similar to the Preferred Stock, and confirm the same in writing if
and when requested; (ii) obtain the written opinion of counsel to the Company
and written updates thereof in form, scope and substance reasonably satisfactory
to the managing underwriter or underwriters, addressed to the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings of securities similar to the Preferred Stock and such other matters as
may be reasonably requested by the managing underwriter or underwriters; (iii)
if entitled, obtain "cold comfort" letters and updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to each of
the underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of securities similar to the Preferred Stock and such
other matters as reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures in customary form and
covering matters customarily
<PAGE> 14
-12-
covered in connection with underwritten offerings of securities similar to the
Preferred Stock (or such other provisions and procedures acceptable to Holders
of a majority of shares of Registrable Preferred Stock covered by such
Registration Statement and the managing underwriter or underwriters or agents)
with respect to all parties to be indemnified pursuant to said Section. The
above shall be done at each closing under such underwriting agreement, or as and
to the extent required thereunder.
(n) Make available for inspection by any selling Holder of
such Registrable Preferred Stock being sold, an underwriter, if any,
participating in any such disposition of Registrable Preferred Stock, and any
attorney, accountant or other agent retained by any such selling Holder or
underwriter (collectively, the "Inspectors"), at the offices where normally
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and instruments of the Company and its
subsidiaries (collectively, the "Records") as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities, and cause
the officers, directors and employees of the Company and its subsidiaries to
supply all information reasonably requested by any such Inspector in connection
with such Registration Statement. Records that the Company determines, in good
faith, to be confidential and any Records that it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless upon five business
days' prior written notice and (i) the disclosure of such Records is necessary
to avoid or correct a misstatement or omission in such Registration Statement,
(ii) the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, (iii) disclosure of such
information is, in the reasonable opinion of counsel for any Inspector,
necessary or advisable in connection with any action, claim, suit or proceeding,
directly or indirectly, involving or potentially involving such Inspector and
arising out of, based upon, relating to, or involving this Agreement or any
transactions contemplated hereby or arising hereunder or (iv) the information in
such Records has been made generally available to the public (other than as a
result of an impermissible disclosure or failure to safeguard by the
Inspectors). Each selling holder of such Registrable Preferred Stock will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company unless and
until such information is generally available to the public (other than as a
result of an impermissible disclosure or failure to safeguard
<PAGE> 15
-13-
by such person). Each selling Holder of such Registrable Preferred Stock will be
required to further agree that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company to undertake appropriate action to prevent
disclosure of the Records deemed confidential at the Company's sole expense.
(o) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than 45 days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) commencing on the first day
of the first fiscal quarter of the Company after the effective date of a
Registration Statement, which statements shall cover said 12-month periods.
(p) Cooperate with each seller of Registrable Preferred Stock
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Preferred Stock and their
respective counsel in connection with the filings, if any, required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
(q) Use its commercially reasonable efforts to take all other
steps necessary or advisable to effect the registration of the Registrable
Preferred Stock covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Preferred
Stock as to which any registration is being effected to furnish to the Company
such information regarding such seller and the distribution of such Registrable
Preferred Stock as the Company may, from time to time, reasonably request. The
Company may exclude from such registration the Registrable Preferred Stock of
any seller who fails to furnish such information within a reasonable time (but
in no event later than 20 business days) after receiving such request. Each
seller as to which any Shelf Registration is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such seller not
materially misleading.
Each Holder of Registrable Preferred Stock agrees by
acquisition of such Registrable Preferred Stock, that, upon ac-
<PAGE> 16
-14-
tual receipt of any notice from the Company of the happening of any event of the
kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Preferred
Stock covered by such Registration Statement or Prospectus to be sold by such
Holder until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(k) hereof, or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and has received copies of any amendments or supplements
thereto.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not a Shelf Registration is filed or becomes effective.
Notwithstanding the foregoing, the Holders of any shares of Preferred Stock
being registered shall pay all underwriting discounts, commissions and placement
agent fees attributable to the sale of such securities.
(b) The Company shall reimburse the Holders of the Registrable
Preferred Stock being registered in a Shelf Registration for the reasonable fees
and disbursements of not more than two counsel (in addition to appropriate local
counsel) chosen by the Holders of Registrable Preferred Stock to be included in
such Registration Statement, all such reasonable fees and expenses not to exceed
$30,000 in the aggregate (provided such fees do not exceed $10,000 per counsel
in the event Holders choose three counsel, and $15,000 per counsel in the event
Holders choose two counsel).
7. Indemnification
(a) The Company agrees to indemnify and hold harmless each
Holder of shares of Registrable Preferred Stock, the officers and directors of
each such Person, and each Person, if any, who controls any such Person within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, the reasonable
legal fees and other expenses actually incurred in connection with any suit,
action or proceeding or any claim asserted) caused by, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto) or Prospectus
(as amended or supplemented if the Com-
<PAGE> 17
-15-
pany shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by, arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the Company
in writing by such Participant expressly for use therein; provided, however,
that the Company will not be required to indemnify a Participant if such untrue
statement or omission or alleged untrue statement or omission was contained or
made in any preliminary prospectus and corrected in the Prospectus or any
amendment or supplement thereto and it is established in the related proceeding
that such Participant failed to deliver or provide a copy of the Prospectus (as
amended or supplemented) to such Person with or prior to the confirmation of the
sale of such Registrable Preferred Stock sold to such Person if required by
applicable law, unless such failure to deliver or provide a copy of the
Prospectus (as amended or supplemented) shall have been determined by a court of
competent jurisdiction by final and non-appealable judgment (or stipulated in a
settlement agreement reached by all parties involved in any action or proceeding
related to such claim) to have been the result of noncompliance by the Company
with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors and officers who sign the
Registration Statement and each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each Participant,
but only (i) with reference to information relating to such Participant
furnished to the Company in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus or (ii) with respect to any untrue statement or
representation made by such Participant in writing to the Company. The liability
of any Participant under this paragraph shall in no event exceed the proceeds
received by such Participant from sales of Registrable Preferred Stock or
Exchange Preferred Stock giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand
<PAGE> 18
-16-
shall be brought or asserted against any Person in respect of which indemnity
may be sought pursuant to either of the two preceding paragraphs, such Person
(the "Indemnified Person") shall promptly notify the Person against whom such
indemnity may be sought (the "Indemnifying Person") in writing, and the
Indemnifying Person, upon request of the Indemnified Person, shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may reasonably
designate in such proceeding and shall pay the reasonable fees and expenses
actually incurred by such counsel related to such proceeding; provided, however,
that the failure to so notify the Indemnifying Person shall not relieve it of
any obligation or liability which it may have hereunder or otherwise (unless and
to the extent such Indemnifying Person has been materially prejudiced by such
failure, including, without limitation, that such failure results in the
forfeiture by the Indemnifying Person of substantial rights and defenses). In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed in writing to the contrary, (ii)
the Indemnifying Person has failed to retain counsel reasonably satisfactory to
the Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both the Indemnifying Person and the
Indemnified Person and the Indemnified Person shall have been advised by counsel
that representation of both parties by the same counsel would be inappropriate
under applicable standards of professional conduct due to differing interests
between them. It is understood that, unless there exists a conflict among
Indemnified Persons, the Indemnifying Person shall not, in connection with any
one such proceeding or separate but substantially similar related proceeding in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such fees and expenses shall be reimbursed promptly as they are incurred.
Any such separate firm for the Participants and such control Persons of
Participants shall be designated in writing by Participants who sold a majority
of shares of Registrable Preferred Stock sold by all such Participants and any
such separate firm for the Company, its directors, its officers and such control
Persons of the Company shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its prior written consent (which consent shall not be
unreasonably withheld or delayed), but if
<PAGE> 19
-17-
settled with such consent or if there be a final non-appealable judgment for the
plaintiff for which the Indemnified Person is entitled to indemnification
pursuant to this Agreement, the Indemnifying Person agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Person shall, without the
prior written consent of the Indemnified Person, effect any settlement or
compromise of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party, or indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement (A) includes
an unconditional written release of such Indemnified Person, in form and
substance reasonably satisfactory to such Indemnified Person, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of any Indemnified Person.
(d) If the indemnification provided for in the first and
second paragraphs of this Section 7 is for any reason unavailable to, or
insufficient to hold harmless, an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder and in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect (i) the relative benefits received by the Indemnifying
Person or Persons on the one hand and the Indemnified Person or Persons on the
other from the offering of the Preferred Stock or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by applicable law, not
only such relative benefits but also the relative fault of the Indemnifying
Person or Persons on the one hand and the Indemnified Person or Persons on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or such
Participant or such other Indemnified Person, as the case may be, on the other,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such state-
<PAGE> 20
-18-
ment or omission, and any other equitable considerations appropriate in the
circumstances.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Preferred
Stock exceeds the amount of any damages that such Participant has otherwise been
required to pay or has paid by reason of such untrue or alleged untrue statement
or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability that the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
So long as any shares of Registrable Preferred Stock are
outstanding, the Company will provide to holders of the Registrable Preferred
Stock and file with the Commission copies of the annual reports and any of the
information, documents and other reports that the Company would have been
required to file with the Commission pursuant to Sections 13 or 15(d) of the
Exchange Act regardless of whether the Company is obligated to file such
reports. The Company further covenants for so long as any Registrable Preferred
Stock remains outstanding, to make available to any Holder or beneficial owner
of Registrable Preferred Stock in connection with any sale thereof and any
prospective purchaser of such Registrable Preferred Stock from such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit re-
<PAGE> 21
-19-
sales of such Registrable Preferred Stock pursuant to Rule 144A.
9. Miscellaneous
(a) No Inconsistent Agreements. The Company shall not, after
the date of this Agreement, enter into any agreement with respect to any of its
securities that conflicts with the provisions hereof.
(b) Adjustments Affecting Registrable Preferred Stock. The
Company shall not, directly or indirectly, take any action with respect to the
Registrable Preferred Stock as a class that would adversely affect the ability
of the Holders of Registrable Preferred Stock to include such Registrable
Preferred Stock in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, otherwise than with the
prior written consent of the Holders of not less than a majority of the then
outstanding shares of Registrable Preferred Stock; provided, however, that
Section 7 and this Section 10(c) may not be amended, modified or supplemented
without the prior written consent of each Holder (including any person who was a
Holder of Registrable Preferred Stock disposed of pursuant to any Registration
Statement). Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Preferred Stock whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Preferred Stock may be given by Holders of at least a majority of shares of the
Registrable Preferred Stock being sold by such Holders pursuant to such
Registration Statement; provided, however, that the provisions of this sentence
may not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
<PAGE> 22
-20-
1. if to a Holder of the Registrable Preferred
Stock, at the most current address of such Holder on the stock books of
the Company with a copy in like manner to the Initial Purchasers as
follows:
BT Securities Corporation
Alex. Brown & Sons Incorporated
c/o BT Securities Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-72001
Attention: Corporate Finance Department
with copies to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No: (212) 269-5420
Attention: William B. Gannett, Esq.
The Huff Alternative Income Fund L.P.
1776 On the Green
67 Park Place
Morristown, NJ 07960
Facsimile No: (201) 984-5818
Attention: Joseph Thornton
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Facsimile No: (212) 969-2900
Attention: Peter Samuels, Esq.
McDermott Inc. Master Trust
P.O. Box N7796
Norfolk House
Frederick Street
Nassau, Bahamas
Attention: Richard Tyner
General Motors Domestic
Group Pension Trust
One Mellon Bank Center
500 Grant Street 3700
Pittsburgh, PA 15258-0001
Attention: Lauri Adams
<PAGE> 23
-21-
and
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Facsimile No: (212) 259-6333
Attention: Jonathan Freedman, Esq.
2. if to the Initial Purchasers, at the addresses
specified in Section 10(d)(1);
3. if to the Company, at the address as follows:
American Communications Services, Inc.
131 National Business Parkway
Suite 100
Annapolis Junction, MD 20701
Facsimile No: (301) 617-4279
Attention: Riley M. Murphy, Esq.
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Facsimile No: (212) 474-3700
Attention: George W. Bilicic, Jr., Esq.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, including the Holders; provided, however, that this Agreement shall not
inure to the benefit of or be binding upon a successor or assign of a Holder
unless and to the extent such successor or assign holds Registrable Preferred
Stock.
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be
<PAGE> 24
-22-
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by the Company. Whenever the consent or
approval of Holders of a specified percentage of shares of Registrable Preferred
Stock is required hereunder, Registrable Preferred Stock held by the Company or
its subsidiaries shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(k) Third Party Beneficiaries. Holders of Registrable
Preferred Stock and Participants are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained
<PAGE> 25
-23-
herein and therein and any and all prior oral or written agreements,
representations, or warranties, contracts, understandings, correspondence,
conversations and memoranda between the Purchasers on the one hand and the
Company on the other, or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest
with respect to the subject matter hereof and thereof are merged herein and
replaced hereby.
<PAGE> 26
-S1-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
AMERICAN COMMUNICATIONS SERVICES, INC.
By:________________________________
Name:
Title:
BT SECURITIES CORPORATION
By:________________________________
Name:
Title:
ALEX. BROWN & SONS INCORPORATED
By:________________________________
Name:
Title:
<PAGE> 27
-S2-
THE HUFF ALTERNATIVE INCOME FUND L.P.
By:________________________________
Name:
Title:
GENERAL MOTORS DOMESTIC GROUP PENSION
TRUST
By: Mellon Bank, N.A. solely in its
capacity as Trustee for the General
Motors Domestic Group Pension Trust (as
directed by General Motors Investment
Management Corp.) and not in its
individual capacity
By:________________________________
Name:
Title:
McDERMOTT INC. MASTER TRUST
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.2
AMERICAN COMMUNICATIONS SERVICES, INC.
$220,000,000
13-3/4% SENIOR NOTES DUE 2007
REGISTRATION RIGHTS AGREEMENT
New York, New York
July 23, 1997
BT Securities Corporation
As Representative of the Initial Purchasers
One Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Ladies and Gentlemen:
American Communications Services, Inc., a Delaware corporation
(the "Company"), proposes to issue and sell (the "Initial Placement") to the
Initial Purchasers, upon the terms set forth in the Purchase Agreement dated
July 18, 1997 (the "Purchase Agreement") among the Initial Purchasers and the
Company, its 13-3/4% Senior Notes due 2007 (the "Notes"). As an inducement to
the Initial Purchasers to enter into the Purchase Agreement and purchase the
Notes and in satisfaction of a condition to your obligations under the Purchase
Agreement, the Company agrees with you for the benefit of the holders from time
to time of the Notes (including the Initial Purchasers) (each of the foregoing a
"Holder" and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"Additional Interest" has the meaning set forth in Section 7
hereof.
"Affiliate" of any specified person means any other person
that, directly or indirectly, is in control of, is con-
<PAGE> 2
-2-
trolled by, or is under common control with, such specified person. For purposes
of this definition, control of a person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such person
whether by contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
"Commission" means the Securities and Exchange Commission.
"Company" has the meaning set forth in the preamble hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Notes" has the meaning set forth in Section 2
hereof.
"Exchange Offer" means the proposed offer to the Holders to
issue and deliver to such Holders, in exchange for the Notes, a like principal
amount of Exchange Notes.
"Exchange Offer Registration Period" means the 180 day period
following the consummation of the Exchange Offer, exclusive of any period during
which any stop order shall be in effect suspending the effectiveness of the
Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration
statement of the Company on an appropriate form under the Securities Act with
respect to the Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Expiration Date" means the date the Exchange Offer is
consummated.
"Final Memorandum" has the meaning set forth in the Purchase
Agreement.
"Holder" has the meaning set forth in the preamble hereto.
<PAGE> 3
-3-
"Indenture" means the indenture relating to the Notes and the
New Notes, to be dated as of the Closing Date, between the Company and The Chase
Manhattan Bank, as trustee, as the same may be amended or supplemented from time
to time in accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Initial Purchasers" has the meaning set forth in the Purchase
Agreement.
"Issue Date" means July 23, 1997.
"Losses" has the meaning set forth in Section 6(d) hereto.
"Majority Holders" means the Holders of a majority of the
aggregate principal amount of notes registered under a Registration Statement.
"Managing Underwriters" means the investment banker or
investment bankers and manager or managers that shall administer an underwritten
offering under a Shelf Registration Statement.
"New Notes" means debt securities of the Company identical in
all material respects to the Notes (except that the interest rate step-up
provisions and the transfer restrictions pertaining to such Notes will be
modified or eliminated, as appropriate), to be issued under the Indenture,
including Exchange Notes and Private Exchange Notes.
"Notes" has the meaning set forth in the preamble hereto.
"Participating Broker-Dealer" means any Holder (which may
include the Initial Purchasers) which is a broker-dealer electing to exchange
Notes acquired for its own account as a result of market-making activities or
other trading activities for New Notes.
"Private Exchange Notes" has the meaning given in Section 2(f)
hereof.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a
<PAGE> 4
-4-
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Notes or the New Notes covered by such Registration Statement, and all
amendments and supplements to the Prospectus, including post-effective
amendments.
"Purchase Agreement" has the meaning set forth in the preamble
hereto.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Notes or the
New Notes pursuant to the provisions of this Agreement, amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto,
and all material incorporated by reference therein.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in
Section 3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof, which
covers some or all of the Notes or New Notes, as applicable, on an appropriate
form under Rule 415 under the Securities Act, or any similar rule that may be
adopted by the Commission, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto, and all material
incorporated by reference therein.
"Trustee" means the trustee with respect to the Notes or New
Notes, as applicable, under the Indenture.
"underwriter" means any underwriter of Notes in connection
with an offering thereof under a Shelf Registration Statement.
<PAGE> 5
-5-
2. Exchange Offer; Resales of New Notes by Participating
Broker-Dealers; Private Exchange. (a) The Company shall (i) within 60 days after
the Issue Date, file a registration statement on an appropriate registration
form (the "Exchange Offer Registration Statement") with respect to the offer to
exchange the Notes for New Notes pursuant to such Exchange Offer Registration
Statement (the "Exchange Offer"), which Notes (the "Exchange Notes") will have
terms substantially identical in all material respects to the Notes (except that
the Exchange Notes will not contain terms with respect to transfer restrictions)
and (ii) use commercially reasonable efforts to cause the Exchange Offer
Registration Statement to become effective under the Securities Act within 120
days after the Issue Date.
(b) Upon the Exchange Offer Registration Statement being
declared effective, the Company shall offer the Exchange Notes for surrender of
the Notes. For each of the Notes surrendered to the Company pursuant to the
Exchange Offer, the Holder who surrendered such Notes will receive an Exchange
Note or Notes having a principal amount equal to that of the surrendered Notes.
Interest on each Exchange Note will accrue (A) from the later of (i) the last
interest payment date on which interest was paid on the Note surrendered in
exchange therefor, or (ii) if the Note is surrendered for exchange on a date in
a period which includes the record date for an interest payment date to occur on
or after the date of such exchange and as to which interest will be paid, the
date of such interest payment date or (B) if no interest has been paid on the
Notes, from the Issue Date.
(c) In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 20 business
days (or longer if required by applicable law) after the date notice
thereof is mailed to the Holders;
(iii) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York; and
(iv) comply in all material respects with all applicable laws.
<PAGE> 6
-6-
(d) As soon as practicable after the close of the Exchange
Offer, the Company shall:
(i) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to
each Holder Exchange Notes equal in principal amount to the Notes of
such Holder so accepted for exchange.
(e) The Initial Purchasers and the Company acknowledge that,
pursuant to interpretations by the staff of the Commission of Section 5 of the
Securities Act, and in the absence of an applicable exemption therefrom, each
Participating Broker-Dealer is required to deliver a Prospectus in connection
with a sale of any Exchange Notes received by such Participating Broker-Dealer
pursuant to the Exchange Offer in exchange for Notes acquired for its own
account as a result of market-making activities or other trading activities.
Accordingly, the Company shall:
(i) include the information set forth in Annex A hereto on the
cover of the Exchange Offer Registration Statement, in Annex B hereto
in the forepart of the Exchange Offer Registration Statement in a
section setting forth details of the Exchange Offer, in Annex C hereto
in the underwriting or plan of distribution section of the Prospectus
forming a part of the Exchange Offer Registration Statement, and in
Annex D hereto in the letter of transmittal delivered pursuant to the
Exchange Offer; and
(ii) use its commercially reasonable efforts to keep the
Exchange Offer Registration Statement continuously effective under the
Securities Act during the Exchange Offer Registration Period for
delivery by Participating Broker-Dealers in connection with sales of
Exchange Notes received pursuant to the Exchange Offer, as contemplated
by Section 4(h) below.
(f) If, prior to consummation of the Exchange Offer, any
Holder holds any Notes acquired by it that have, or that are reasonably likely
to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Exchange
Offer, the Com-
<PAGE> 7
-7-
pany upon the request of any such Holder shall simultaneously with the delivery
of the Exchange Notes in the Exchange Offer, issue and deliver to any such
Holder, in exchange (the "Private Exchange") for such Notes held by any such
Holder, a like principal amount of unregistered New Notes (the "Private Exchange
Notes") of the Company that are identical in all material respects to the
Exchange Notes, but will continue to bear all applicable legends with respect to
transfer. The Private Exchange Notes shall be issued pursuant to the same
indenture as the Exchange Notes and bear the same CUSIP number as the Exchange
Notes.
(g) Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to New Notes that are Private Exchange
Notes, Exchange Notes as to which Section 2(h)(iv) is applicable and Exchange
Notes held by Initial Purchasers (as defined), and the Company shall have no
further obligation to register Notes (other than Private Exchange Notes and
other than in respect of any Exchange Notes as to which clause 2(h)(iv) hereof
applies) pursuant to Section 3 hereof. No securities other than the Exchange
Notes shall be included in the Exchange Offer Registration Statement.
(h) If,(i) because of any change in law or in currently
prevailing interpretations of the staff of the Commission, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Exchange Offer, (ii) for any reason other than that specified in clause (i)
above, the Exchange Offer Registration Statement is not declared effective
within 120 days of the Issue Date, (iii) a Holder of Private Exchange Notes so
requests, or (iv) in the case of any Holder that participates in the Exchange
Offer, such Holder does not receive Exchange Notes on the date of the exchange
that may be sold without restriction under state and federal securities laws
(other than due solely to the status of such Holder as an affiliate of the
Company within the meaning of the Securities Act), then in the case of each of
clauses (i) to and including (iv) of this sentence, the Company shall promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
Notice") and shall file a Shelf Registration pursuant to Section 3 hereof.
3. Shelf Registration. If at any time a Shelf Notice is
delivered as contemplated by Section 2(h) hereof, then:
(a) The Company shall (x) as promptly as practicable deliver
to the Holders and the Trustee written notice thereof
<PAGE> 8
-8-
and (y) at its sole expense, as promptly as practicable (but in no event more
than 60 days after the Issue Date), file with the Commission a Shelf
Registration Statement relating to the offer and sale of the Notes or the New
Notes, as applicable, by the Holders from time to time in accordance with the
methods of distribution elected by such Holders and set forth in such Shelf
Registration Statement and Rule 415 under the Securities Act; provided that with
respect to Private Exchange Notes received by an Initial Purchaser in exchange
for Notes constituting any portion of an unsold allotment, the Company may, if
permitted by current interpretations by the Commission's staff, file a
post-effective amendment to the Exchange Offer Registration Statement containing
the information required by Regulation S-K Items 507 and/or 508, as applicable,
in satisfaction of its obligations under this paragraph (a) with respect
thereto, and any such Exchange Offer Registration Statement, as so amended,
shall be referred to herein as, and governed by the provisions herein applicable
to, a Shelf Registration Statement.
(b) The Company shall use commercially reasonable efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act, and keep the Shelf Registration Statement continuously effective
in order to permit the Prospectus contained therein to be usable by Holders for
a period of three years from the Closing Date or such shorter period that will
terminate when all the Notes or New Notes, as applicable, covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement (in any such case, such period being called the "Shelf Registration
Period"). Notwithstanding, anything to the contrary herein, the Company may
include any of its securities in the Shelf Registration Statement.
(c) Suspension of Shelf Registration. The Company's obligation
to keep the Shelf Registration Statement effective and usable for offers and
sales of the Notes may be suspended by the Company in good faith for valid
business reasons, including, without limitation, a pending acquisition or
divestiture of assets. Any such period during which the Company fails to keep
the Shelf Registration Statement effective and usable for offers and sales of
Notes is referred to as a "Suspension Period." A Suspension Period shall
commence on and include the date that the Company gives notice that the Shelf
Registration Statement is no longer effective or the prospectus included therein
is no longer usable for offers and sales of Notes and shall end on the date when
each Holder of Notes covered by such registration statement either receives the
copies of the sup-
<PAGE> 9
-9-
plemented or amended prospectus contemplated by Section 4(p) hereof or is
advised in writing by the Company that use of the prospectus may be resumed.
During the pendency of any Suspension Period, the Company may not issue any
securities, whether or not in a public offering, except for issuances of Common
Stock pursuant to an acquisition or other business combination transaction or
upon exercise of options or warrants outstanding prior to such Suspension
Period.
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing
thereof with the Commission, a copy of any Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the Prospectus
included therein and shall use its best efforts to reflect in each such
document, when so filed with the Commission, such comments as you reasonably may
propose in a timely manner.
(b) The Company shall ensure that:
(i) any Registration Statement and any amendment thereto and
any Prospectus contained therein and any amendment or supplement
thereto complies in all material respects with the Securities Act and
the rules and regulations thereunder,
(ii) any Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(iii) any Prospectus forming part of any Registration Statement
and any amendment or supplement to such Prospectus does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) (1) The Company shall advise you and, in the case of a
Shelf Registration Statement, the Holders of notes covered thereby, and, if
requested by you or any such Holder, confirm such advice in writing:
<PAGE> 10
-10-
(i) when a Registration Statement and any amendment thereto
has been filed with the Commission and when the Registration Statement
or any post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) The Company shall advise you and, in the case of a Shelf
Registration Statement, the Holders of notes covered thereby, and, in the case
of an Exchange Offer Registration Statement, any Participating Broker-Dealer
that has provided in writing to the Company a telephone or facsimile number and
address for notices, and, if requested by you or any such Holder or
Participating Broker-Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the notes included
therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(iii) of the happening of any event that requires the making of
any changes in the Registration Statement or the Prospectus so that, as
of such date, the statements therein are not misleading and do not omit
to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of
the circumstances under which they were made) not misleading (which
advice shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made).
(d) The Company shall use its commercially reasonable efforts
to obtain the withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of notes covered
by any Shelf Registration Statement, without charge, at least one copy of such
Shelf Registration Statement and any post-effective amendment thereto, including
financial
<PAGE> 11
-11-
statements and schedules, and, if the Holder so requests in writing, all
exhibits thereto (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of notes covered by any Shelf Registration Statement,
without charge, as many copies of the Prospectus (including each preliminary
Prospectus) included in such Shelf Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request; and the Company
consents to the use of the Prospectus or any amendment or supplement thereto by
each of the selling Holders of notes in connection with the offering and sale of
the notes covered by the Prospectus or any amendment or supplement thereto.
(g) The Company shall furnish to each Participating
Broker-Dealer that so requests, without charge, at least one copy of the
Exchange Offer Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, any documents incorporated by
reference therein, and, if the Participating Broker-Dealer so requests in
writing, all exhibits thereto (including those incorporated by reference).
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Participating Broker-Dealer, without charge, as
many copies of the Prospectus included in such Exchange Offer Registration
Statement and any amendment or supplement thereto as such Participating
Broker-Dealer may reasonably request for delivery by such Participating
Broker-Dealer in connection with a sale of New Notes received by it pursuant to
the Exchange Offer; and the Company consents to the use of the Prospectus or any
amendment or supplement thereto by any such Participating Broker-Dealer, as
provided in Section (2)(e) above.
(i) Prior to the Exchange Offer or any other offering of notes
pursuant to any Registration Statement, the Company shall register or qualify or
cooperate with the Holders of notes included therein and their respective
counsel in connection with the registration or qualification of such notes for
offer and sale under the securities or blue sky laws of such jurisdictions as
any such Holders reasonably request in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such jurisdictions
of the notes covered by such Registration Statement; provided, however, that the
Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified
<PAGE> 12
-12-
or to take any action that would subject it to general service of process or to
taxation in any such jurisdiction where it is not then so subject.
(j) The Company shall cooperate with the Holders of Notes to
facilitate the timely preparation and delivery of certificates representing
notes to be sold pursuant to any Registration Statement free of any restrictive
legends and in denominations of $1,000 or an integral multiple thereof and
registered in such names as Holders may request prior to sales of notes pursuant
to such Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 3, the Company shall promptly prepare a
post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or file any other required document so
that, as thereafter delivered to purchasers of the notes included therein, the
Prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the Notes or
New Notes, as the case may be, registered under such Registration Statement, and
provide the Trustee with printed certificates for such Notes or New Notes, in a
form eligible for deposit with The Depository Trust Company.
(m) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement satisfying
the provisions of Section 11(a) of the Securities Act.
(n) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner.
(o) The Company may require each Holder of notes to be sold
pursuant to any Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of such notes as the
Company may from time to time reasonably require for inclusion in such
Registration Statement.
<PAGE> 13
-13-
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement such information as the Managing Underwriters and Majority Holders
reasonably agree should be included therein and shall make all required filings
of such Prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment.
(q) In the case of any Shelf Registration Statement, the
Company shall enter into such agreements (including underwriting agreements) and
take all other appropriate actions in order to expedite or facilitate the
registration or the disposition of any notes included therein, and in connection
therewith, if an underwriting agreement is entered into, cause the same to
contain indemnification provisions and procedures no less favorable than those
set forth in Section 6 (or such other provisions and procedures acceptable to
the Majority Holders and the Managing Underwriters, if any) with respect to all
parties to be indemnified pursuant to Section 6.
(r) In the case of an underwritten offering, if any, of Notes
pursuant to a Shelf Registration Statement, the Company shall:
(i) make reasonably available for inspection by the Holders of
notes to be registered thereunder, any underwriter participating in any
disposition pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by the Holders or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries;
(ii) cause the Company's officers, directors and employees to
supply all relevant information reasonably requested by the Holders or
any such underwriter, attorney, accountant or agent in connection with
any such Registration Statement as is customary for similar due
diligence examinations; provided, however, that any information that is
designated in writing by the Company, in good faith, as confidential at
the time of delivery of such information shall be kept confidential by
the Holders or any such underwriter, attorney, accountant or agent,
unless such disclosure is made in connection with a court proceeding or
required by law, or such information becomes available to the public
generally or through a third party without an accompanying obligation
of confidentiality; and make such
<PAGE> 14
-14-
representatives of the Company as shall be reasonably requested by the
Initial Purchasers available for discussion of any such Registration
Statement;
(iii) make such representations and warranties to the Holders of
notes registered thereunder and the underwriters, if any, in form,
substance and scope as are customarily and appropriately made by
issuers to underwriters in primary underwritten offerings and covering
matters set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Managing Underwriters, if any)
addressed to each selling Holder and the underwriters, if any, covering
such matters as are customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters;
(v) obtain "comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required
to be, included in the Registration Statement), addressed to each
selling Holder of notes registered thereunder and the underwriters, if
any, in customary form and covering matters of the type customarily
covered in "comfort" letters in connection with primary underwritten
offerings; and
(vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing
Underwriters, if any, including those to evidence compliance with
Section 4(k) and with any conditions contained in the underwriting
agreement or other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v)
and (vi) of this Section 4(r) shall be performed at (A) the effectiveness of
such Registration Statement and each post-effective amendment thereto and (B)
each closing under any underwriting or similar agreement as and to the extent
required thereunder.
<PAGE> 15
-15-
5. Registration Expenses. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections 2,
3 and 4 hereof and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel designated by the Majority Holders to act as counsel for the Holders in
connection therewith, and, in the case of any Exchange Offer Registration
Statement, will reimburse the Initial Purchasers for the reasonable fees and
disbursements of counsel acting in connection therewith, all such reasonable
fees and expenses hereunder not to exceed $30,000 in the aggregate.
6. Indemnification and Contribution. (a) In connection with
any Registration Statement, the Company agrees to indemnify and hold you
harmless and, with respect to any Prospectus delivery as contemplated by
Sections 2(e) and 4(h) hereof, each Participating Broker-Dealer, your and any
Participating Broker-Dealer's directors, officers, employees and agents and each
person who controls you or any Participating Broker-Dealer within the meaning of
either the Securities Act or the Exchange Act, against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other Federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement as originally filed
or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or
in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (in the case of
the Prospectus, in the light of the circumstances under which they were made)
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any case to the extent that any such loss, claim, damage or liability arises out
of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any such
Holder specifically for inclusion therein. This indemnity agreement
<PAGE> 16
-16-
will be in addition to any liability that the Company may otherwise have.
The Company also agrees to indemnify any selling Holders and
any underwriters of Notes registered under a Shelf Registration Statement, their
employees, officers, directors and agents and each person who controls such
selling Holders or underwriters on the same basis as that of the indemnification
of the Initial Purchasers provided in this Section 6(a) and shall, if requested
by any Holder, enter into an underwriting agreement reflecting such agreement,
as provided in Section 4(q) hereof.
(b) Each Holder of notes covered by a Registration Statement
(including each Initial Purchaser and, with respect to any Prospectus delivery
as contemplated by Sections 2(e) and 4(h) hereof, each Participating
Broker-Dealer) severally agrees to indemnify and hold harmless (i) the Company,
(ii) each of its directors, (iii) each of its officers who signs such
Registration Statement and (iv) each person who controls the Company within the
meaning of either the Securities Act or the Exchange Act to the same extent as
the foregoing indemnity from the Company to each such Holder, but only with
respect to written information relating to such Holder furnished to the Company
by or on behalf of such Holder specifically for inclusion in the documents
referred to in the foregoing indemnity. This indemnity agreement will be in
addition to any liability that any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 or notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve the indemnifying party from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of substantial
rights and defenses, and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel (including local
counsel) of the indemnifying party's choice at the indemnifying party's expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses
<PAGE> 17
-17-
of any separate counsel retained by the indemnified party or parties except as
set forth below); provided, however, that such counsel shall be satisfactory to
the indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the indemnified
party shall have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Registration Statement that resulted in such Losses; provided, however, that in
no case shall any Initial Purchaser or any subsequent Holder of any
<PAGE> 18
-18-
Note or New Note be responsible, in the aggregate, for any amount in excess of
the purchase discount or commission applicable to such Note, or in the case of a
New Note, applicable to the Note that was exchangeable into such New Note, as
set forth on the cover page of the Final Memorandum, nor shall any underwriter
be responsible for any amount in excess of the underwriting discount or
commission applicable to the notes purchased by such underwriter under the
Registration Statement that resulted in such Losses. If the allocation provided
by the immediately preceding sentence is unavailable for any reason, the
indemnifying party and the indemnified party shall contribute in such proportion
as is appropriate to reflect not only such relative benefits but also the
relative fault of such indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the sum of (x)
the total net proceeds from the Initial Placement (before deducting expenses) as
set forth on the cover page of the Final Memorandum and (y) the total amount of
additional interest that the Company was not required to pay as a result of
registering the notes covered by the Registration Statement that resulted in
such Losses. Benefits received by the Initial Purchasers shall be deemed to be
equal to the total purchase discounts and commissions as set forth on the cover
page of the Final Memorandum, and benefits received by any other Holders shall
be deemed to be equal to the value of receiving Notes or New Notes, as
applicable, registered under the Securities Act. Benefits received by any
underwriter shall be deemed to be equal to the total underwriting discounts and
commissions, as set forth on the cover page of the Prospectus forming a part of
the Registration Statement that resulted in such Losses. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the indemnifying party, on the one hand, or
by the indemnified party, on the other hand. The parties agree that it would not
be just and equitable if contribution were determined by pro rata allocation or
any other method of allocation that did not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person who controls a
Holder within the meaning of either the Securities Act or the Exchange Act and
each director, officer, employee and agent of such Holder shall have the same
rights to
<PAGE> 19
-19-
contribution as such Holder, and each person who controls the Company within the
meaning of either the Securities Act or the Exchange Act, each officer of the
Company who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company, subject
in each case to the applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder
or the Company or any of the officers, directors or controlling persons referred
to in Section 6 hereof, and will survive the sale by a Holder of notes covered
by a Registration Statement.
7. Additional Interest. If the Company fails to file a
Registration Statement within the time periods specified in this Agreement or if
the Exchange Offer Registration Statement or the Shelf Registration Statement
fails to become effective, then, as liquidated damages, additional interest (the
"Additional Interest") shall become payable in respect of the Notes as follows:
(a) if (A) neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement if filed with the Commission within 60 days
following the Closing Date or (B) notwithstanding that the Company has
consummated or will consummate a Exchange Offer, the Company is required to file
a Shelf Registration Statement and such Shelf Registration Statement is not
filed on or prior to the date required by this Agreement, then commencing on the
day after either such required filing date, Additional Interest shall be paid on
the principal amount of the Notes at a rate per annum equal to 0.5% of the
principal amount of the Notes; or
(b) if (A) neither the Exchange Offer Registration Statement
nor a Shelf Registration Statement is declared effective by the Commission
within 120 days following the Closing Date or (B) notwithstanding that the
Company has consummated or will consummate a Exchange Offer, the Company is
required to file a Shelf Registration Statement and such Shelf Registration
Statement is not declared effective by the Commission on or prior to the 120th
day following the Closing Date, then, commencing on the day after either such
required effective date, Additional Interest shall be paid on the principal
amount of the Notes at a rate per annum equal to 0.5% of the principal amount of
the Notes; or
<PAGE> 20
-20-
(c) if applicable, the Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be effective
at any time prior to the third anniversary of the Issue Date (other than after
such time as all Notes have been disposed of thereunder and other than during
any Suspension Period), then Additional Interest shall be paid on the principal
amount of the Notes at a rate per annum equal to 0.5% of the principal amount of
the Notes commencing on the day such Shelf Registration Statement ceases to be
effective;
provided, however that the Additional Interest rate on the
Notes may not exceed in the aggregate 1.5% per annum of the principal amount;
provided, further, however, that (1) upon the filing of the Exchange Offer
Registration Statement or a Shelf Registration Statement (in the case of clause
(a) above), (2) upon the effectiveness of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of clause (b) above),
or (3) upon the effectiveness of the Shelf Registration Statement which had
ceased to remain effective (in the case of clause (c) above), Additional
Interest on the Notes as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue and the terms of the Notes
shall revert to their original terms.
Any amounts of Additional Interest due pursuant to clause (a),
(b) or (c) above will be payable in cash on January 15 and July 15 of each year.
8. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not, after
the date hereof, enter into any agreement that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then-outstanding aggregate
principal amount of Notes (or, after the consummation of any Exchange Offer in
accordance with Section 2 hereof, of New Notes); provided, however, that any
amendment, qualification, modification, supplement, waiver or consent relating
to the Shelf Registration Statement shall require the written consent of the
Holders of at least two-thirds of the then outstanding aggregate principal
amount of Notes (including the
<PAGE> 21
-21-
consent of the Holders which were not able to participate in the Exchange
Offer). Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose notes are being sold pursuant to an Exchange Offer
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by the Majority Holders, determined on the
basis of notes being sold rather than registered under such Exchange Offer
Registration Statement.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such
holder to the Company in accordance with the provisions of this Section
8(c), which address initially is, with respect to each Holder, the
address of such Holder maintained by the Registrar under the Indenture.
(ii) if to you, initially at the respective addresses set forth
in the Purchase Agreement; and
(iii) if to the Company, initially at its address set forth in
the Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given when received. You or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Notes and/or New Notes. The Company
hereby agrees to extend the benefits of this Agreement to any Holder of Notes
and/or New Notes and any such Holder may specifically enforce the provisions of
this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
<PAGE> 22
-22-
(f) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Notes or
New Notes is required hereunder, Notes or New Notes, as applicable, held by the
Company or its Affiliates (other than subsequent Holders of Notes or New Notes
if such subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such Notes or New Notes) shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
<PAGE> 23
S-1
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
AMERICAN COMMUNICATIONS SERVICES, INC.
By: __________________________________
Name:
Title:
The forgoing Agreement is hereby
accepted as of the date first above written.
BT SECURITIES CORPORATION,
as Representative of the Initial Purchasers
By: _________________________________
Name:
Title:
<PAGE> 24
-A-1-
ANNEX A
Based on interpretations by the staff of the Securities and Exchange Commission
(the "Commission"), as set forth in no-action letters issued to third parties,
the Company believes that the New Notes issued pursuant to the Exchange Offer
may be offered for resale, resold or otherwise transferred by holders thereof
(other than any holder that is an "affiliate" of the Company as defined under
Rule 405 of the Securities Act), provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders are not engaged
in, and do not intend to engage in, a distribution of such New Notes and have no
arrangement or understanding with any person to participate in the distribution
of such New Notes. However, the staff of the Commission has not considered the
Exchange Offer in the context of a no-action letter, and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. By tendering
the Notes in exchange for New Notes, each holder, other than a broker-dealer,
will represent to the Company that: (i) it is not an affiliate of the Company
(as defined under Rule 405 of the Securities Act); (ii) any New Notes to be
received by it were acquired in the ordinary course of its business; and (iii)
it is not engaged in, and does not intend to engage in, a distribution of such
New Notes and has no arrangement or understanding to participate in a
distribution of the New Notes.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Notes where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. The Company has
agreed that, starting on the Expiration Date (as defined in the Registration
Rights Agreement) and ending on the close of business one year after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
<PAGE> 25
-B-1-
ANNEX B
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, the Company believes that holders of
Notes (other than any holder that is an "affiliate" of the Company as defined
under Rule 405 of the Securities Act) who exchange their Notes for New Notes
pursuant to the Exchange Offer may offer such New Notes for resale, resell such
New Notes and otherwise transfer such New Notes without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holders'
business and such New Notes and have no arrangement or understanding with any
person to participate in the distribution of such New Notes. However, the staff
of the Commission has not considered the Exchange Offer in the context of a
no-action letter, and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer.
Each broker-dealer that receives New Notes for its own account in exchange for
Notes, where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
<PAGE> 26
-C-1-
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Notes where such Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that, starting on the
Expiration Date and ending on the close of business 180 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until ________, 199__, all dealers effecting transactions in the New
Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New
Notes by broker-dealers. New Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit of any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 27
-C-2-
For a period of 180 days after the Expiration Date, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the Holders of the Notes) other than commissions or concessions of any
brokers or dealers and will indemnify the Holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
[If applicable, add information required by Regulation S-K
Items 507 and/or 508.]
<PAGE> 28
-D-1-
ANNEX D
Rider A
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
______________________________________________
Address:
______________________________________________
______________________________________________
Rider B
The undersigned acknowledges that this Exchange Offer is being made by the
Company based upon the Company's understanding of an interpretation by the staff
of the Securities and Exchange Commission (the "Commission") as set forth in
no-action letters issued to third parties, that the New Notes issued in exchange
by holders thereof (other than any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that: (1) such holders are not affiliates of the
Company within the meaning of Rule 405 under the Securities Act; (2) such New
Notes are acquired in the ordinary course of such holders' business; and (3)
such holders are not engaged in, and do not intend to engage in, a distribution
of such New Notes and have no arrangement or understanding with any person to
participate in the distribution of such New Notes. However, the staff of the
Commission has not considered the Exchange Offer in the context of a no-action
letter and there can be no assurance that the staff of the Commission would make
a similar determination with respect to the Exchange Offer as in other
circumstances. If a holder of Notes is an affiliate of the Company, and is
engaged in or intends to engage in a distribution of the New Notes or has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such holder could not rely on the
applicable interpretations of the staff of the Commission and must comply with
the registration and prospectus
<PAGE> 29
-D-2-
delivery requirements of the Securities Act in connection with any secondary
resale transaction. If the undersigned is a broker-dealer that will receive New
Notes for its own account in exchange for Notes, it represents that the Notes to
be exchanged for New Notes were acquired by it as a result of market-making
activities or other trading activities and acknowledges that it will deliver a
prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
<PAGE> 1
EXHIBIT 11
AMERICAN COMMUNICATIONS SERVICES, INC.
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
Three Months ended June 30, Six Months ended June 30,
NET LOSS 1996 1997 1996 1997
- ------------------------------------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1 Net Loss $ 8,761,765 $25,652,058 $17,902,909 $49,675,632
2 Less: Preferred Stock Accretion 1,061,344 106,201 2,016,833 1,094,839
------------ ------------ ------------ ------------
3 Net Loss to Common Stockholders 9,823,109 25,758,259 19,919,742 50,770,471
4 Add: Effect on Interest Income & expense $245,578 $643,956 $995,987 $2,538,524
Add: Convertible Preferred Dividends Saved 1,061,344 106,201 2,016,833 1,094,839
------------ ------------ ------------ ------------
5 Net Loss to Common Stockholders, Anti-Dilutive Basis $ 8,516,187 $25,008,102 $16,906,922 $47,137,108
============ ============ ============ ============
AVERAGE SHARES OUTSTANDING
- ------------------------------------------------------
6 Weighted Average Number of
Common Shares Outstanding 6,605,501 28,025,238 6,572,061 17,994,579
7 Net additional shares assuming stock options and
warrants exercised and proceeds used first to
purchase treasury shares to 20% of shares out-
standing at period end, the balance to reduce
long-term debt 1,329,138 6,185,380 1,329,138 6,185,380
Additional shares assuming conversion of
preferred shares 17,377,278 - 17,377,278 -
------------ ------------ ------------ ------------
8 Weighted average number of common
and common equivalent
shares outstanding 25,311,917 34,210,618 25,278,477 24,179,959
============ ============ ============ ============
PER SHARE AMOUNTS
- ------------------------------------------------------
9 Net loss per common share as
presented in statements of
operations (3 / 6) $ (1.49) $ (0.92) $ (3.03) $ (2.82)
============ ============ ============ ============
10 Net loss per share as antidilutive basis (5 / 8) $ (0.34) $ (0.73) $ (0.67) $ (1.95)
============ ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 13,655,373
<SECURITIES> 0
<RECEIVABLES> 7,945,946
<ALLOWANCES> (1,292,021)
<INVENTORY> 1,461,345
<CURRENT-ASSETS> 21,770,643
<PP&E> 219,933,362
<DEPRECIATION> (17,029,394)
<TOTAL-ASSETS> 243,380,976
<CURRENT-LIABILITIES> 35,044,542
<BONDS> 223,753,180
0
0
<COMMON> 359,269
<OTHER-SE> (18,584,796)
<TOTAL-LIABILITY-AND-EQUITY> 243,380,976
<SALES> 0
<TOTAL-REVENUES> 19,792,511
<CGS> 18,026,390
<TOTAL-COSTS> 28,866,029
<OTHER-EXPENSES> 9,202,561
<LOSS-PROVISION> 952,400
<INTEREST-EXPENSE> 12,420,763
<INCOME-PRETAX> (49,675,632)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49,675,632)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,675,632)
<EPS-PRIMARY> (2.82)
<EPS-DILUTED> 0
</TABLE>
