<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 27, 1999
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PSINet Inc.
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(Exact name of registrant as specified in its charter)
New York 0-25812 16-1353600
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
510 Huntmar Park Drive, Herndon, Virginia 20170
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 904-4100
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
In conformity with the requirements of the Integrated Disclosure System,
PSINet Inc. has elected to file by this Report on Form 8-K certain exhibits in
connection with PSINet's Registration Statement on Form S-3, Registration No.
333-75579, as amended by Amendment No. 1 and Amendment No. 2, which was declared
effective on February 12, 1999.
Page 2 of 5
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
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Exhibit 1.1 Preliminary form of Underwriting Agreement,
among PSINet and Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill
Lynch & Co., Bear, Stearns & Co., Inc.,
BancBoston Robertson Stephens Inc. and Legg
Mason Wood Walker Incorporated relating to
PSINet's offering of common stock.
Exhibit 1.2 Preliminary form of Underwriting Agreement
among PSINet and Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill
Lynch & Co., Bear, Stearns & Co., Inc.,
BancBoston Robertson Stephens Inc. and
Chase Securities Inc. relating to PSINet's
offering of preferred stock.
Exhibit 3.1 Preliminary form of Certificate of
Amendment of Certificate of Incorporation
designating the ___% Series C Cumulative
Convertible Preferred Stock
Exhibit 4.1 Preliminary form of __% Series C Cumulative
Convertible Preferred Stock Certificate
Exhibit 4.2 Preliminary form of Deposit Agreement
between PSINet and Wilmington Trust
Company, as deposit agent
Exhibit 5.1 Opinion of Nixon, Hargrave, Devans & Doyle
LLP
Exhibit 7.1 Opinion of Nixon, Hargrave, Devans & Doyle
LLP regarding tax matters (contained in
Exhibit 5.1)
Exhibit 10.1 Employment Agreement dated March 19, 1999
between PSINet and Nadir Desai.
Exhibit 10.2 Lease Agreement dated July 8, 1998 between
Ballymore Properties Limited and Cordoba
Holdings Limited and Thomas Charles
Cembrinck
Exhibit 23.1 Consent of Nixon, Hargrave, Devans & Doyle
LLP (contained in Exhibit 5.1)
Page 3 of 5
<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 27, 1999 PSINET INC.
By: /s/ David N. Kunkel
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David N. Kunkel
Executive Vice President and
General Counsel
Page 4 of 5
<PAGE>
EXHIBIT INDEX
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<TABLE>
<CAPTION>
Exhibit
Number Exhibit Name Location
- ------------------------- ----------------------------------------------- ----------------------
<S> <C> <C>
Exhibit 1.1 Preliminary form of Underwriting Agreement, Filed Herewith
among PSINet and Donaldson, Lufkin & Jenrette
Securities Corporation, Merrill Lynch & Co.,
Bear, Stearns & Co., Inc., BancBoston
Robertson Stephens Inc. and Legg Mason Wood
Walker Incorporated relating to PSINet's
offering of common stock.
Exhibit 1.2 Preliminary form of Underwriting Agreement Filed Herewith
among PSINet and Donaldson, Lufkin & Jenrette
Securities Corporation, Merrill Lynch & Co.,
Bear, Stearns & Co., Inc., BancBoston
Robertson Stephens Inc. and Chase Securities
Inc. relating to PSINet's offering of
preferred stock.
Exhibit 3.1 Preliminary form of Certificate of Amendment Filed Herewith
of Certificate of Incorporation designating
the ___% Series C Cumulative Convertible
Preferred Stock
Exhibit 4.1 Preliminary form of __% Series C Cumulative Filed Herewith
Convertible Preferred Stock Certificate
Exhibit 4.2 Preliminary form of Deposit Agreement between Filed Herewith
PSINet and Wilmington Trust Company, as
deposit agent
Exhibit 5.1 Opinion of Nixon, Hargrave, Devans & Doyle LLP Filed Herewith
Exhibit 7.1 Opinion of Nixon, Hargrave, Devans & Doyle LLP
regarding tax matters (contained in Exhibit
5.1)
Exhibit 10.1 Employment Agreement dated March 19, 1999 Filed Herewith
between PSINet and Nadir Desai.
Exhibit 10.2 Lease Agreement dated July 8, 1998 between Filed Herewith
Ballymore Properties Limited and Cordoba
Holdings Limited and Thomas Charles Cembrinck
Exhibit 23.1 Consent of Nixon, Hargrave, Devans & Doyle LLP
(contained in Exhibit 5.1)
</TABLE>
Page 5 of 5
<PAGE>
Exhibit 1.1
PSINET INC.
___________ Shares of Common Stock
(___________ Additional Shares)
UNDERWRITING AGREEMENT
----------------------
April [28], 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Ladies and Gentlemen:
PSINet Inc., a New York corporation (the "Company"), proposes to issue and
sell ___________ shares of its common stock, par value $.01 per share (the "Firm
Shares"), to the several underwriters named in Schedule I hereto (the
"Underwriters"). The Company also proposes to issue and sell to the several
<PAGE>
April [____], 1999
Page 2
Underwriters not more than an additional [___________] shares of its common
stock (the "Additional Shares") if requested by the Underwriters as provided in
Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter
referred to collectively as the "Shares." The shares of common stock of the
Company to be outstanding after giving effect to the sales contemplated hereby
are hereinafter referred to as the "Common Stock."
Section 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3, including a
related preliminary prospectus, and each supplement thereto (collectively, the
"Preliminary Prospectus"), relating to the Shares. The Company may have filed
one or more amendments thereto, including the related preliminary prospectus,
and each supplement thereto, each which has previously been furnished to you.
The Company will cause the prospectus, properly completed, and any supplement
thereto to be filed with the Commission pursuant to Rule 424(b) within the time
period prescribed and will provide the Underwriters with satisfactory evidence
of timely filing. The Company has complied with the conditions for the use of
Form S-3. The registration statement, as amended at the time it became
effective, including all exhibits thereto and the information (if any) deemed to
be part of the registration statement at the time of effectiveness pursuant to
Rule 430A under the Act, is hereinafter referred to as the "Registration
Statement"; and the prospectus, and each supplement thereto, in the forms first
used to confirm sales of Shares are hereinafter collectively referred to as the
"Prospectus." If the Company has filed or is required pursuant to the terms
hereof to file a registration statement pursuant to Rule 462(b) under the Act
registering additional shares of Common Stock (a "Rule 462(b) Registration
Statement"), then, unless otherwise specified, any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462(b)
Registration Statement.
Section 2. Agreements to Sell and Purchase and Lock-Up Agreements. On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $[______] (the "Purchase Price") the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto.
<PAGE>
April [____], 1999
Page 3
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to [_________] Additional Shares from
the Company at the Purchase Price. Additional Shares may be purchased solely
for the purpose of covering over-allotments made in connection with the offering
of the Firm Shares. The Underwriters may exercise their right to purchase
Additional Shares in whole or in part from time to time by giving written notice
thereof to the Company within 30 days after the date of this Agreement. You
shall give any such notice on behalf of the Underwriters and such notice shall
specify the aggregate number of Additional Shares to be purchased pursuant to
such exercise and the date for payment and delivery thereof, which date shall be
a business day (i) no earlier than two business days after such notice has been
given (and, in any event, no earlier than the Closing Date (as hereinafter
defined)) and (ii) no later than ten business days after such notice has been
given. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you may determine) which bears the same proportion to the total number of
Additional Shares to be purchased from the Company as the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I bears to the total
number of Firm Shares.
The Company hereby agrees not to (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 120 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period the Company may (i) grant stock options
pursuant to the Company's Executive Stock Incentive Plan, Executive Stock
Options Plan, Directors Stock Incentive Plan and Strategic Stock Incentive Plan,
(ii) issue shares of Common Stock upon the exercise of an option or warrant or
the conversion of a security outstanding on the date hereof, (iii) issue up to
[_____] shares of Common Stock under an effective registration statement which
will be filed for the sole purpose of registering shares
<PAGE>
April [____], 1999
Page 4
of Common Stock to be issued in consideration for the acquisition of, or
investment in, another entity (the "Acquisition Registration Statement"), and
which are being issued solely for such purpose, (iv) issue shares of Common
Stock under an effective registration statement which will be filed for the sole
purpose of registering shares of Common Stock to be issued (A) pursuant to the
conversion of shares of the Company's ___% Series C Cumulative Convertible
Preferred Stock (the "Series C Preferred Stock") or (B) in lieu of the payment
of any cash dividend on, or in consideration of any cash payment from the
deposit account established in respect of, the Series C Preferred Stock (the
"Series C Shares Registration Statement"), and which are being issued solely for
such purposes, or (v) issue such securities and take such other actions pursuant
to the Rights Agreement dated as of May 8, 1996 between the Company and First
Chicago Trust Company of New York, as Rights Agent, as amended. Except for the
Acquisition Registration Statement and the Series C Shares Registration
Statement, the Company also agrees not to file any registration statement with
respect to any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock for a period of 120 days after the
date of the Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. The Company shall, prior to or concurrently
with the execution of this Agreement, deliver an agreement substantially in the
form of Exhibit A hereto executed by each of the directors and officers of the
Company listed on Annex I hereto to the effect that such person will not,
subject to the exceptions contained therein, during the period commencing on the
date such person signs such agreement and ending 120 days after the date of the
Prospectus, without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, (A) engage in any of the transactions described in the
first sentence of this paragraph or (B) make any demand for, or exercise any
right with respect to, the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock.
Section 3. Terms of Public Offering. The Company is advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
Section 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date (as
defined
<PAGE>
April [____], 1999
Page 5
below) or the applicable Option Closing Date (as defined below), as the
case may be. The Company shall deliver the Shares, with any transfer taxes
thereon duly paid by the Company, to Donaldson, Lufkin & Jenrette Securities
Corporation through the facilities of The Depository Trust Company ("DTC"), for
the respective accounts of the several Underwriters, against payment to the
Company of the Purchase Price therefor by wire transfer of Federal or other
funds immediately available in New York City. The certificates representing the
Shares shall be made available for inspection not later than 9:30 a.m., New York
City time, on the business day prior to the Closing Date or the applicable
Option Closing Date, as the case may be, at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of delivery and payment
for the Firm Shares shall be 9:00 a.m., New York City time, on [________], 1999
or such other time on the same or such other date as Donaldson, Lufkin &
Jenrette Securities Corporation and the Company shall agree in writing. The
time and date of delivery and payment for the Firm Shares are hereinafter
referred to as the "Closing Date." The time and date of delivery and payment
for any Additional Shares to be purchased by the Underwriters shall be 9:00
a.m., New York City time, on the date specified in the applicable exercise
notice given by you pursuant to Section 2 or such other time on the same or such
other date as Donaldson, Lufkin & Jenrette Securities Corporation and the
Company shall agree in writing. The time and date of delivery and payment for
any Additional Shares are hereinafter referred to as an "Option Closing Date."
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of Donaldson, Lufkin & Jenrette Securities
Corporation, 227 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, and the Shares shall be delivered at the Designated Office, all on
the Closing Date or such Option Closing Date, as the case may be.
Section 5. Agreements of the Company. The Company agrees with you:
(a) To advise you immediately and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any post-effective
amendment thereto or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction, or the initiation, or the threatening, of
any proceeding for such purposes, (iii) when any amendment to the Registration
Statement
<PAGE>
April [____], 1999
Page 6
becomes effective, (iv) if the Company has filed or is required to
file a Rule 462(b) Registration Statement, when the Rule 462(b) Registration
Statement has become effective and (v) of the happening of any event during the
period referred to in Section 5(d) below which makes any statement of a material
fact made in the Registration Statement or the Prospectus untrue or which
requires any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at any
time the Commission shall propose to issue or issues any stop order suspending
the effectiveness of the Registration Statement, the Company will use its best
efforts to prevent the issuance, or obtain the withdrawal or lifting, of such
order at the earliest possible time.
(b) To furnish to you five signed copies of the Registration Statement as
first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the Commission
within the applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 a.m., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the reasonable opinion of counsel for the Underwriters a Prospectus
is required by law to be delivered in connection with sales by an Underwriter or
a dealer, to furnish in New York City to each Underwriter and any dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.
<PAGE>
April [____], 1999
Page 7
(e) If during the period specified in Section 5(d), any event shall occur
or condition shall exist as a result of which, in the reasonable opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if, in the reasonable opinion of counsel for the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with applicable law,
forthwith to prepare and file with the Commission an appropriate amendment or
supplement to the Prospectus so that the statements in the Prospectus, as so
amended or supplemented, will not in the light of the circumstances when it is
so delivered, be misleading, or so that the Prospectus will comply with
applicable law, and to furnish to each Underwriter and to any dealer as many
copies thereof as such Underwriter or dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you and
counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, the Preliminary Prospectus or the offering or sale of the Shares, in
any jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending
[__________], 2000 that shall satisfy the provisions of Section 11(a) of the
Act, and to advise you in writing when such statement has been so made
available.
(h) During the period of three years after the date of this Agreement, to
furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities
<PAGE>
April [____], 1999
Page 8
of the Company is listed and such other publicly available information
concerning the Company and its subsidiaries as you may reasonably request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel
and the Company's accountants in connection with the registration and delivery
of the Shares under the Act and all other fees and expenses in connection with
the preparation, printing, duplication, filing and distribution of the
Registration Statement (including financial statements and exhibits), the
Preliminary Prospectus, the Prospectus and all amendments and supplements to any
of the foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers in the quantities specified herein, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii) all reasonable
document production charges and related expenses of counsel for the Underwriters
(but not including their fees for professional services) related to producing
this Agreement and any other agreements or documents produced by them in
connection with the offering, purchase, sale or delivery of the Shares, (iv) all
expenses in connection with the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the several states and
all costs of printing or producing any Preliminary and Supplemental Blue Sky
Memoranda in connection therewith (including the filing fees and reasonable fees
and disbursements of counsel for the Underwriters in connection with such
registration or qualification and memoranda relating thereto), (v) the filing
fees and disbursements of counsel for the Underwriters in connection with the
review and clearance of the offering of the Shares by the National Association
of Securities Dealers, Inc., (vi) and all costs and expenses incident to the
listing of the Shares on the Nasdaq National Market, (vii) the cost of printing
certificates representing the Shares, (viii) the costs and charges of any
transfer agent, registrar and/or depositary and (ix) all other costs and
expenses incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section.
(j) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market and to maintain the listing of the Shares on the Nasdaq
National Market for a period of three years after the date of this Agreement.
<PAGE>
April [____], 1999
Page 9
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b) by 10:00 p.m., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
Section 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) As filed, the Registration Statement, as amended, and the final
Prospectus, shall include all information required by Rule 430A to be included
therein, together with all other such required information, with respect to the
Shares, and the offering thereof, and except to the extent the Underwriters
shall agree in writing to a modification, shall be in all substantive respects
in the form furnished to you prior to the Closing Date. At the time the Company
first filed the Registration Statement, and on the date hereof, the Company
complied with the conditions for use of Form S-3.
(b) (i) On the effective date thereof, the Registration Statement did, and
when the Prospectus is first filed in accordance with Rule 424(b) and on the
Closing Date, the Prospectus will, comply in all material respects with the
applicable requirements of the Act, and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and on the effective date thereof the Registration
Statement did not contain and, as amended, if applicable, will not contain any
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,
(ii) if the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement or if it has filed a Rule 462(b)
Registration Statement before the effectiveness of this Agreement, such Rule
462(b) Registration Statement and any amendments thereto, when they become
effective (or when they became effective) (A) will not (or did not) contain any
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
(B) will
<PAGE>
April [____], 1999
Page 10
(or did) comply in all material respects with the Act, and (iii) the Preliminary
Prospectus did not and the Prospectus does not, and, as amended or supplemented,
if applicable, will not, contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (b) shall not apply
to statements in or omissions from the Registration Statement, the Prospectus or
a Rule 462(b) Registration Statement based upon information relating to the
Underwriters furnished to the Company in writing by the Underwriters expressly
for use therein.
(c) Each of the Company and its subsidiaries has been duly incorporated or
formed, is validly existing as a corporation and is in good standing under the
laws of its jurisdiction of incorporation or formation and has the corporate
power and authority to carry on its business as described in the Prospectus and
to own, lease and operate its respective properties. The Company and each of
its subsidiaries is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified or in good standing
would not have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole (a "Material Adverse Effect").
(d) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or, except as specified on
Schedule A-2, liens granted or issued by the Company or any of its subsidiaries
- ------------
relating to or entitling any person to purchase or otherwise to acquire any
shares of the capital stock or other equity interest of the Company or any of
its subsidiaries, except as otherwise disclosed in the Prospectus.
(e) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid, non-assessable, subject to
Section 630 of the New York Business Corporation Law (the "BCL").
(f) The entities listed on Schedule A-1 hereto are the only subsidiaries,
------------
direct or indirect, of the Company. The only significant subsidiaries of the
Company, within the meaning of Rule 1-02(w) of Regulation S-X under the Act, are
as set forth on Schedule A-2 hereto (the "Significant Subsidiaries"). Except as
------------
specified on Schedule A-2: all of the outstanding shares of capital stock of
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<PAGE>
April [____], 1999
Page 11
each of the Company's subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable, subject, in the case of subsidiaries
incorporated in the State of New York, to Section 630 of the BCL, and provided
that the shares of each subsidiary incorporated or formed in jurisdictions
outside the United States of America (the "U.S.") continue to be held by at
least the minimum number of record owners necessary to ensure that such
subsidiary will enjoy limited liability status under the laws of such
jurisdiction, and are owned by the Company, directly or indirectly through one
or more subsidiaries, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature (each, a "Lien").
(g) This Agreement has been duly authorized, executed and delivered by the
Company.
(h) The Shares have been duly authorized and, when issued and delivered to
the Underwriters against payment therefor as provided by this Agreement, will be
validly issued, fully paid and non-assessable, subject to Section 630 of the
BCL, and the issuance of such Shares will not be subject to any preemptive or
similar rights.
(i) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(j) Neither the Company nor any of its subsidiaries is in violation of its
respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, which violation or default
would have a Material Adverse Effect.
(k) The execution, delivery and performance of this Agreement by the
Company, compliance by the Company with all provisions hereof and the
consummation by the Company of the transactions contemplated hereby will not (i)
require any consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except such as may be required
under applicable federal, state and foreign securities laws), including without
limitation the Federal Communication Commission (the "FCC"), (ii) conflict with
<PAGE>
April [____], 1999
Page 12
or constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company or any of its subsidiaries or any
indenture, loan agreement, mortgage, lease or other agreement or instrument that
is material to the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound, (iii) assuming the
Shares are offered, sold, issued and delivered under the circumstances
contemplated by the Prospectus and this Agreement, violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any court
or any governmental body or agency having jurisdiction over the Company, any of
its subsidiaries or their respective property, (iv) result in the imposition or
creation of (or the obligation to create or impose) a Lien under, any agreement
or instrument, to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or their respective property is
bound, (v) result in the termination, suspension or revocation of any
Authorization (as defined below) of the Company or any of its subsidiaries or
result in any other impairment of the rights of the holder of any such
Authorization.
(l) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of its
subsidiaries is or could reasonably be expected to become a party or to which
any of their respective property is or could reasonably be expected to become
subject, which could reasonably be expected to result, singly or in the
aggregate, in a Material Adverse Effect that are required to be described in the
Registration Statement and Prospectus and are not so described.
(m) Neither the Company nor, to the knowledge of the Company, any of its
subsidiaries has violated any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), any provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), except for such violations which,
singly or in the aggregate, would not have a Material Adverse Effect.
(n) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
Material
<PAGE>
April [____], 1999
Page 13
Adverse Effect that are required to be described in the Registration Statement
or Prospectus and are not so described.
(o) Each of the Company and its subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except those which have been
commenced but not completed in respect of the recordation of title to certain
real property in Switzerland or where the failure to have any such Authorization
or to make any such filing or notice would not, singly or in the aggregate, have
a Material Adverse Effect. Each such Authorization is valid and in full force
and effect and each of the Company and its subsidiaries is in compliance in all
material respects with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows or,
after notice or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or lapse of
time or both, would result in any other impairment of the rights of the holder
of any such Authorization; except in the case of any of the foregoing, where
such failure to be valid and in full force and effect or to be in compliance or
the occurrence of any such event would not, singly or in the aggregate, have a
Material Adverse Effect.
(p) The Company has obtained competitive local exchange carrier ("CLEC")
authorization or regulatory approval to provide CLEC services in each of the
following states: New York, Virginia, Colorado and Texas. No such regulatory
approval has been withdrawn, modified or suspended and, to the Company's
knowledge, no such regulatory approval is the subject of any legal challenge
(except as disclosed in the Prospectus).
(q) The accountants, PriceWaterhouse Coopers LLP, that have certified the
financial statements included or incorporated by reference in the Registration
Statement and Prospectus, are independent public accountants with respect to the
Company, as required by the Act and the Exchange Act. The historical financial
statements, together with related notes, set forth in the Prospectus comply as
to
<PAGE>
April [____], 1999
Page 14
form in all material respects with the requirements applicable to registration
statements on Form S-1 under the Act.
(r) The historical financial statements, together with related schedules
and notes, forming part of the Registration Statement and Prospectus (and any
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiaries on the basis stated in the Prospectus at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data relating to the Company and its subsidiaries set forth in
or incorporated by reference in the Registration Statement and Prospectus (and
any amendment or supplement thereto) are, in all material respects, fairly
presented and, to the extent derived therefrom, prepared on a basis consistent
with such financial statements and the books and records of the Company.
(s) The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the net proceeds thereof as described in
the Registration Statement and Prospectus, will not be, an "investment company,"
as such term is defined in the Investment Company Act of 1940, as amended.
(t) Neither the Company nor any of its subsidiaries nor any agent thereof
acting on the behalf of them has taken, and none of them will take, any action
that might cause this Agreement or the issuance or sale of the Shares to violate
Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation
U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
(u) Since the respective dates as of which information is given in the
Registration Statement and Prospectus other than as set forth in the
Registration Statement and Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement), (i) there has not
occurred any material adverse change or any development that is reasonably
expected to result in a material adverse change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there has not been any material
adverse change or any development that is reasonably expected to result in a
material adverse change in the capital
<PAGE>
April [____], 1999
Page 15
stock of the Company or any of its subsidiaries or the consolidated long-term
debt of the Company and its subsidiaries and (iii) neither the Company nor any
of its subsidiaries has incurred any liability or obligation, direct or
contingent, which could reasonably be expected to have a Material Adverse
Effect.
(v) Each certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters on the Closing Date shall be
deemed to be a representation and warranty by the Company to the Underwriters as
of the date thereof (or such other date specified therein) as to the matters
certified thereby.
(w) The Common Stock (including the Shares) is registered pursuant to
Section 12(g) of the Exchange Act and is listed for quotation on the Nasdaq
National Market. The Company has taken no action designed to, or likely to have
the effect of, terminating the registration of the Common Stock under the
Exchange Act or delisting the Common Stock from the Nasdaq National Market, nor
has the Company received any notification that the Commission or the Nasdaq
National Market is contemplating terminating such registration or listing.
(x) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, all patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names ("intellectual property") currently employed by them in connection
with the business now operated by them, except where the failure to own or
possess or otherwise be able to acquire such intellectual property would not,
singly or in the aggregate, have a Material Adverse Effect; and neither the
Company nor any of its subsidiaries has received any notice of infringement of
or conflict with asserted rights of others with respect to any of such
intellectual property which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.
(y) The Company and its subsidiaries have good and marketable title to all
real property owned by them and good and valid title to all personal property
owned by them which is material to the business of the Company and its
subsidiaries, in each case, free and clear or all Liens and defects, except such
as are described in the Registration Statement and Prospectus or referenced to
on Schedule A-2 and such others as do not, singly or in the aggregate,
------------
materially affect the value of such property and do not interfere with the use
made and
<PAGE>
April [____], 1999
Page 16
proposed to be made of such property by the Company and its subsidiaries; and
any real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as do not materially interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries.
(z) The Company and its subsidiaries are in compliance in all material
respects with all applicable laws, statutes, ordinances, rules or regulations of
any applicable jurisdiction, the enforcement of which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(aa) The Company has filed with the Commission all documents required to
have been filed by the Company pursuant to the Exchange Act. Each such
document, when filed with the Commission, conformed in all material respects to
the requirements of the Exchange Act and did 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 light of the circumstances under
which they were made, not misleading.
(bb) The Company and its subsidiaries carry or are entitled to the
benefits of insurance in such amounts and covering such risks as is generally
deemed by the Company to be adequate for their business, and all such insurance
is in full force and effect.
(cc) The Company and its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general and specific
authorizations; (ii) transactions are recorded as necessary to permit the
preparation of financial statements in conformity with U.S. generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorizations; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(dd) No relationship, direct or indirect, exists between or among any of
the Company or any affiliate of the Company, on the one hand, and any director,
officer, shareholder, customer or supplier of any of them, on the other hand,
<PAGE>
April [____], 1999
Page 17
which is required by the Act to be described in the Registration Statement and
Prospectus which is not described as required.
(ee) Neither the Company nor to the knowledge of the Company, any of its
officers, directors, partners, employees or affiliates has directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price or services concessions to customers) to any customer,
supplier, employee or agent of a customer or supplier, official or employee of
any governmental agency (domestic or foreign), instrumentality of any government
(domestic or foreign) or other person who was, is or is reasonably likely to be
in a position to help or hinder the business of the Company (or assist the
Company in connection with any actual or proposed transaction) which (a) would
reasonably be expected to subject the Company to any damage or penalty in any
civil, criminal or governmental litigation or proceeding (domestic or foreign),
which would reasonably be expected to have a Material Adverse Effect (b) if not
given in the past, would reasonably be expected to have had a Material Adverse
Effect or (c) if not continued in the future, would reasonably be expected to
have a Material Adverse Effect.
(ff) All material tax returns required to be filed by the Company in all
jurisdictions have been so filed, except insofar as the failure to file such
returns would not have a Material Adverse Effect, or appropriate extensions for
such filings have been obtained as required by law. All taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company have been paid, other than those being contested in good faith and for
which adequate reserves have been provided. To the knowledge of the Company,
there are no material proposed additional tax assessments against the Company or
the assets or property of the Company. The Company has made adequate charges,
accruals and reserves in accordance with generally accepted accounting
principles in the applicable financial statements included in the Prospectus in
respect of all federal, state and foreign income and franchise taxes for all
periods as to which the tax liability of the Company has not been finally
determined.
(gg) The Company has not (i) taken, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (ii) since the date of the
Preliminary Prospectus, except for underwriting fees, discounts and commissions
agreed to by
<PAGE>
April [____], 1999
Page 18
the Company in connection with the offering of the Shares and the concurrent
offering of the Series C Preferred Stock, (1) sold, bid for, purchased or paid
any person any compensation for soliciting purchases of, the Shares or (2) paid
or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(hh) Except pursuant to this Agreement, there are no contracts, agreements
or understandings between the Company and any other person that would give rise
to a valid claim against the Company or either of the Underwriters for a
brokerage commission, finder's fee or like payment in connection with the
issuance, purchase and sale of the Shares.
(ii) The statements (including the assumptions described therein) included
in the Prospectus, to the extent such statements constitute forward looking
statements as defined in Rule 175(c) under the Act, (a) are to the Company's
knowledge and belief, within the coverage of Rule 175(b) under the Act and (b)
were made by the Company with a reasonable basis and reflect the Company's good
faith estimate of the matters described therein.
(jj) To the knowledge of the Company, (a) no action has been taken and no
statue, rule, regulation or order has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Shares or prevents or
suspends the use of the Prospectus; (b) no injunction, restraining order or
order of any nature by a federal or state court of competent jurisdiction has
been issued that prevents the issuance of the Shares, prevents or suspends the
sale of the Shares in any jurisdiction referred to in Section 4(d) hereof or
that could adversely affect the consummation of the transactions contemplated by
this Agreement or the Prospectus; and (c) every request of any securities
authority or agency of any jurisdiction for additional information has been
complied with in all material respects.
(kk) The disclosures in the Registration Statement and Prospectus related
to Year 2000 compliance comply in all material respects with the requirements of
SEC Release 33-7558.
The Company acknowledges that the Underwriters and, for purposes of the
opinions to be delivered to the Underwriters pursuant to Section 8(e) hereof,
counsel to the Company and counsel to the Representatives will rely upon the
<PAGE>
April [____], 1999
Page 19
accuracy and truth of the foregoing representations and warranties and hereby
consents to such reliance.
Section 7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter,
its directors, its officers and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages, expenses,
liabilities and judgments (including, without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action, that could give rise to any such losses, claims, damages,
expenses, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement (or
any amendment thereto), the Prospectus (or any amendment or supplement thereto)
or the Preliminary Prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, expenses, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company by
or on behalf of such Underwriter through you expressly for use therein;
provided, however, that the foregoing indemnity agreement with respect to the
Preliminary Prospectus shall not inure to the benefit of any Underwriter who
failed to deliver a Prospectus, as then amended or supplemented (so long as the
Prospectus and any amendments or supplements thereto was provided by the Company
to the several Underwriters in the requisite quantity and on a timely basis to
permit proper delivery on or prior to the Closing Date), to the person asserting
any losses, claims, damages, expenses, liabilities or judgments caused by any
untrue statement or alleged untrue statement of a material fact contained in
such Preliminary Prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, if such material misstatement or omission
or alleged material misstatement or omission was cured in the Prospectus, as so
amended or supplemented, and such Prospectus was required by law to be delivered
at or prior to the written confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
<PAGE>
April [____], 1999
Page 20
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to such Underwriter but only with
reference to information relating to such Underwriter furnished in writing to
the Company by such Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or the Preliminary Prospectus; provided,
--------
however, that in no case shall any Underwriter be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter hereunder.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
(but the failure so to notify an indemnifying party shall not relieve the
indemnifying party from any liability wich it may have under this Section 7,
except to the extent that the indemnifying party has been prejudiced in any
material respect by such failure, or from any liability that it may have
otherwise) and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all reasonable fees and expenses of such counsel, as
incurred (except that in the case of any action in respect of which indemnity
may be sought pursuant to both Sections 7(a) and 7(b), the Underwriter shall not
be required to assume the defense of such action pursuant to this Section 7(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of such Underwriter). Any indemnified party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party
<PAGE>
April [____], 1999
Page 21
shall not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by Donaldson, Lufkin & Jenrette Securities
Corporation, in the case of parties indemnified pursuant to Section 7(a), and by
the Company, in the case of parties indemnified pursuant to Section 7(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, expenses, liabilities and
judgments by reason of any settlement of any action (i) effected with its
written consent or (ii) effected without its written consent if the settlement
is entered into more than twenty business days after the indemnifying party
shall have received a request from the indemnified party for reimbursement for
the fees and expenses of counsel (in any case where such fees and expenses are
at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, expenses, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, expenses, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 7(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 7(d)(i) above but also the
relative
<PAGE>
April [____], 1999
Page 22
fault of the Company on the one hand and the Underwriters on the other hand in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other hand shall be deemed to be in
the same proportion as the total net proceeds from the offering (after deducting
underwriting discounts and commissions, but before deducting expenses) received
by the Company, and the total underwriting discounts and commissions received by
the Underwriters, bear to the total price to the public of the Shares, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company on the one hand and the Underwriters on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, expenses, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
expenses, damages, liabilities or judgments. Notwithstanding the provisions of
this Section 7, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 7(d) are several in
proportion to the respective number of Shares purchased by each of the
Underwriters hereunder and not joint.
<PAGE>
April [____], 1999
Page 23
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
Section 8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 p.m., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate, dated the
Closing Date, signed, on behalf of the Company, by William L. Schrader and
Edward D. Postal, in their capacities as the Chairman and Chief Executive
Officer and Senior Vice President and Chief Financial Officer, respectively, of
the Company, confirming the matters set forth in Sections 6(s), 8(a) and 8(b)
and stating that, to the best of their knowledge based upon reasonable
investigation, the Company has complied with all of the agreements and satisfied
all of the conditions herein contained and required to be complied with or
satisfied by the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries taken as
a whole, (ii) there shall not have been any change or any development involving
a prospective change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 8(d)(i),
8(d)(ii) or 8(d)(iii), in your judgment, is material and
<PAGE>
April [____], 1999
Page 24
adverse and makes it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of Nixon, Hargrave, Devans & Doyle LLP, counsel for the Company (or, as to
matters relating to foreign subsidiaries, such other local counsel as may be
satisfactory to the Underwiters) to the effect that:
(i) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of New York
and has the corporate power and authority to carry on its business as
described in the Registration Statement and the Prospectus and to own,
lease and operate its properties as described in the Registration
Statement and the Prospectus;
(ii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in the Commonwealth of Virginia
and in each other U.S. jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to be
in good standing would not have a Material Adverse Effect;
(iii) the authorized capital stock of the Company consists of (i)
30,000,000 shares of preferred stock of the Company, par value $.01 per
share, 1,000,000 shares of which have been designated Series A Junior
Participating Preferred Stock; and [___________] of which have been
designated [____]% Series C Cumulative Convertible Preferred Stock; and
(ii) 250,000,000 shares of common stock of the Company, par value $.01
per share;
(iv) all the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and, to such counsel's
knowledge, are fully paid, non-assessable (subject to Section 630 of the
BCL) and not subject to any preemptive or similar rights.
<PAGE>
April [____], 1999
Page 25
(v) Each of the Significant Subsidiaries (each, a "Significant
Subsidiary" and collectively, the "Significant Subsidiaries") has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement
and the Prospectus and is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure
so to qualify or to be in good standing would not have a Material Adverse
Effect; except as provided on Schedule A-2: all of the issued and
------------
outstanding capital stock of each such Significant Subsidiary has been
duly authorized and validly issued, and, to such counsel's knowledge, is
fully paid and non-assessable, subject, in the case of each Significant
Subsidiary incorporated in the State of New York, to Section 630 of the
BCL, and provided that the shares of each subsidiary incorporated in
jurisdictions outside the U.S. continue to be held by at least the
minimum number of record owners necessary to ensure that such subsidiary
will enjoy limited liability status under the laws of such jurisdiction;
to the knowledge of such counsel, except as specifically noted, all of
the issued and outstanding capital stock of each such Significant
Subsidiary is owned by the Company, directly or through subsidiaries,
except for such shares as are held by a minimum number of recordholders
to ensure that such subsidiary will enjoy limited liability status under
the laws of its jurisdiction of incorporation, free and clear of any
security interest or adverse claim (as defined in Article 8 of the
Uniform Commercial Code).
(vi) the Shares have been duly authorized and when issued,
delivered and sold by the Company against payment therefor in accordance
with this Agreement will be duly authorized, validly issued and
outstanding, fully paid and non-assessable, (subject to Section 630 of
the BCL) and to the knowledge of such counsel, and will not be subject to
any preemptive rights of any shareholder of the Company or any similar
rights. Upon delivery of certificates evidencing the Shares and payment
therefor as contemplated hereby, the Underwriters will acquire good,
valid and marketable title to the
<PAGE>
April [____], 1999
Page 26
Shares (and the Additional Shares, if any) free of any adverse claim,
assuming the Underwriters are acting in good faith and without notice of
any adverse claim. The Shares and the Additional Shares conform in all
material respects as to legal matters to the descriptions thereof
contained in the Registration Statement and the Prospectus under the
caption "Description of Common Stock." The form of certificate evidencing
the Shares to be delivered hereunder complies as to form in all material
respects with the requirements of the BCL.
(vii) such counsel is of the opinion ascribed to it in the
Prospectus under the caption "Important U.S. Tax Consequences to Non-U.S.
Holders," subject to the qualifications and limitations contained
thereunder;
(viii) to such counsel's knowledge, neither the Company nor any of
its Significant Subsidiaries is in violation of its respective
certificate of incorporation or by-laws, except to the extent any such
violation would not have a Material Adverse Effect;
(ix) to such counsel's knowledge, the Company and its Significant
Subsidiaries are in compliance with all judgments, decrees and orders of
any court to which they are subject, except to the extent any such
violation or noncompliance would not have a Material Adverse Effect;
(x) the execution, delivery and performance of this Agreement by
the Company, and the consummation by the Company of the transactions
contemplated hereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under
applicable federal, state and local securities laws), (ii) to such
counsel's knowledge, constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company
or any of the Significant
<PAGE>
April [____], 1999
Page 27
Subsidiaries or any material indenture, loan agreement or mortgage filed
or incorporated by reference as an exhibit to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998 known to such counsel
to which the Company or any of the Significant Subsidiaries is a party or
by which the Company or any of the Significant Subsidiaries or their
respective property is bound, (iii) to such counsel's knowledge, assuming
the Shares are offered, sold, issued and delivered under the
circumstances contemplated by the Prospectus and this Agreement, violate
or conflict with any applicable law or any rule or regulation which in
such counsel's experience is normally applicable to transactions of the
type contemplated by this Agreement, or any judgment, order or decree
known to such counsel of any court or any governmental body or agency
having jurisdiction over the Company, any of the Significant Subsidiaries
or their respective property, (iv) to such counsel's knowledge, except as
disclosed in the Registration Statement and the Prospectus, result in the
imposition or creation of (or the obligation to create or impose) a Lien
under, any material agreement, lease, instrument or indenture filed or
incorporated by reference as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, or (v) to such counsel's
knowledge, result in the termination, suspension or revocation of any
material Authorization (as defined above) of the Company or any of its
Significant Subsidiaries or result in any other impairment of the rights
of the holder of any such Authorization, in each case in clause (ii),
(iii), (iv) or (v) above (except in the case of the Shares), where the
conflict, breach, default, imposition or violation, considered alone or
taken together with all such other conflicts, breaches, impositions or
violations, might have a Material Adverse Effect ;
(xi) except as disclosed in the Registration Statement and the
Prospectus, such counsel does not know of any action, suit or proceeding
pending or threatened to which the Company or any of its subsidiaries is
a party or to which any of their respective property is subject, before
or brought by any court or governmental agency or body, which could
reasonably be expected to result, singly or in the aggregate, in a
Material Adverse Effect;
(xii) the Company is not and, after giving effect to the offering
and sale of the Shares and the application of the net proceeds thereof as
described in the Registration Statement and Prospectus, will not be, an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended;
<PAGE>
April [____], 1999
Page 28
(xiii) this Agreement has been duly authorized, executed and
delivered by the Company;
(xiv) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and, to
such counsel's knowledge, no proceedings for that purpose are, pending
before or threatened by the Commission;
(xv) the statements under the captions "Description of Common
Stock" and "Underwriting" in the Prospectus except for the matters set
forth in the third, fourth, sixth, thirteenth and fourteenth paragraphs
under the caption "Underwriting", as to which such counsel need express
no opinion, in each case insofar as such statements constitute a summary
of the legal matters, documents or proceedings referred to therein,
fairly present in all material respects the information called for with
respect to such legal matters, documents and proceedings;
(xvi) to such counsel's knowledge, there are no written contracts
or agreements between the Company and any person granting such person the
right to require the Company to file a registration statement under the
Act with respect to any securities of the Company except as described in
the Registration Statement and the Prospectus, and no person has the
right which has not been waived to require the Company to include any
securities with the Shares registered pursuant to the Registration
Statement; and
(xvii) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for the financial statements,
noted thereto and supporting schedules and other financial, numerical,
statistical and accounting information and data included or incorporated
by reference therein, as to which no opinion need be expressed) comply as
to form in all material respects with the Act.
The opinion of Nixon, Hargrave, Devans & Doyle LLP described in Section
8(e) above shall be rendered to you at the request of the Company and shall so
state therein. In rendering such opinion, such counsel may (i) rely on
certificates of the Company or of officers of the Company as to matters of fact
and on certificates of and other information from governmental officials, and
(ii)
<PAGE>
April [____], 1999
Page 29
state that it is opining only as to matters of federal and New York law
and, with respect to certain of the Significant Subsidiaries, the General
Corporation Law of the State of Delaware. In giving its opinion described in
Section 8(e), such counsel shall also state that, although such counsel has not
undertaken to determine independently, and therefore does not assume any
responsibility, explicitly or implicitly, for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (and any amendments or supplements thereto), such counsel has
participated in the preparation of the Registration Statement and the Prospectus
(and any amendments or supplements thereto), including review and discussion of
the contents thereof and that, based upon and subject to the foregoing, nothing
has come to their attention that causes them to believe that, as of the
respective dates of the Registration Statement and the Prospectus, the
Registration Statement and the Prospectus, as amended or supplemented, contained
or contains an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, not
misleading, and that the Prospectus as of the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Such counsel need
make no statement as to the financial statements (including, without limitation,
pro forma financial statements), notes thereto and supporting schedules and
other financial, numerical, statistical and accounting information and data
(including, without limitation, other pro forma financial, numerical,
statistical and accounting information and data) included in the Registration
Statement and the Prospectus (and any amendments or supplements thereto) or
omitted therefrom.
In giving such opinion with respect to the matters covered by Section 8(e)
counsel for the Company may state that its opinion and belief are based upon its
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification except as
specified.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Paul, Hastings, Janofsky & Walker LLP, counsel for the
Underwriters, in form and substance reasonably satisfactory to the Underwriters.
(g) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
<PAGE>
April [____], 1999
Page 30
form and substance satisfactory to you, from PricewaterhouseCoopers LLP,
independent public accountants, containing the information and statements of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus, [including, without
limitation, an examination of "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in accordance with Statement on Standards
for Attestation Engagements No. 8.]
(h) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(i) The Shares shall have been duly listed for quotation on the Nasdaq
National Market.
(j) The Company shall not have failed on or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
Section 9. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
<PAGE>
April [____], 1999
Page 31
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each non-
defaulting Underwriter shall be obligated severally, in the proportion which the
number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the number of Firm Shares or Additional
Shares, as the case may be, which any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 9 by an
amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased by all Underwriters and arrangements satisfactory to you
and the Company for purchase of such Firm Shares are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter and the Company. In any such case which does
not result in termination of this
<PAGE>
April [____], 1999
Page 32
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. If, on an Option Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Additional Shares to be purchased on such date, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
such Additional Shares or (ii) purchase not less than the number of Additional
Shares that such non-defaulting Underwriters would have been obligated to
purchase on such date in the absence of such default. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of any such Underwriter under this Agreement.
Section 10. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to PSINet
Inc., 510 Huntmar Park Drive, Herndon, Virginia 20170 Attention: David N.
Kunkel, Executive Vice President and General Counsel, with a copy to Nixon,
Hargrave, Devans & Doyle LLP, 437 Madison Avenue, New York, New York 10022,
Attention: Richard F. Langan, Jr. and (ii) if to any Underwriter or to you, to
you c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue,
New York, New York 10172, Attention: Syndicate Department, or in any case to
such other address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any person controlling any Underwriter, the Company, the officers
or directors of the Company or any person controlling the Company, (ii)
acceptance of the Shares and payment for them hereunder and (iii) termination of
this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the reasonable fees and
<PAGE>
April [____], 1999
Page 33
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse
the several Underwriters, their directors and officers and any persons
controlling any of the Underwriters for any and all fees and expenses
(including, without limitation, the reasonable fees and disbursements of
counsel) incurred by them in connection with enforcing their rights hereunder
(including, without limitation, pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' directors and officers, any controlling persons referred to
herein, the Company's directors and officers who sign the Registration Statement
and their respective successors and assigns, all as and to the extent provided
in this Agreement, and no other person shall acquire or have any right under or
by virtue of this Agreement. The term "successors and assigns" shall not
include a purchaser of any of the Shares from any of the several Underwriters
merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York, without regard to the principles of the conflicts of
law thereof.
<PAGE>
April [____], 1999
Page 34
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
PSINET INC.
By:
-----------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By
-----------------------------
<PAGE>
SCHEDULE I
----------
Underwriters Number of Firm Shares
to be Purchased
Donaldson, Lufkin & Jenrette Securities
Corporation
Merrill Lynch & Co.
Bear, Stearns & Co. Inc.
BancBoston Robertson Stephens Inc.
Legg Mason Wood Walker Incorporated
Total
<PAGE>
Annex I
[To be determined]
<PAGE>
Exhibit A
---------
[FORM OF LOCK-UP LETTER]
[PSINET INC.]
[___________], 1999
PSINet Inc.
510 Huntmar Park Drive
Herndon, Virginia 20170
Donaldson, Lufkin & Jenrette Securities Corporation
Merrill Lynch & Co.
Bear, Stearns & Co. Inc.
BancBoston Robertson Stephens Inc.
Legg Mason Wood Walker Incorporated
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Re: Public Offering of Common Stock
-------------------------------
Dear Ladies and Gentlemen:
The undersigned understands that Donaldson, Lufkin & Jenrette Securities
Corporation, Merrill Lynch & Co., Bear, Stearns & Co. Inc., BancBoston Robertson
Stephens Inc., and Legg Mason Wood Walker Incorporated (together, the
"Underwriters"), propose to enter into an Underwriting Agreement with PSINet
Inc., a New York corporation (the "Company"), providing for the public offering
(the "Public Offering") by the Underwriters, including the Underwriters, of
[________] Million ([________]) shares of common stock value $0.01 per share, of
the Company (the "Common Stock").
In consideration of the Underwriters' agreement to purchase and undertake
the Public Offering of the Common Stock and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned agrees
not to (i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii)
<PAGE>
[______]
Page 2
enter into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to the Underwriting
Agreement, for a period of 120 days after the date of the Prospectus without the
prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation;
provided, however, that notwithstanding the foregoing, the undersigned may
- -------- -------
transfer shares of Common Stock pursuant to one or more bona fide gifts (such
transferred shares of Common Stock being referred to as the "Gift Shares")
provided that each donee of Gift Shares enters into a lock-up agreement (each, a
"Donee Lock-Up") substantially similar to this letter agreement except that this
proviso shall not be included in any Donee Lock-Up. The undersigned also agrees
not to make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock for a period of 120 days after the
date of the Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this letter agreement, and that, upon request,
the undersigned will execute any additional documents necessary or desirable in
connection with the enforcement hereof. All authority herein conferred or
agreed to be conferred shall survive the death or incapacity of the undersigned
and any obligation of the undersigned shall be binding upon the heirs, personal
Underwriters, successors, and assigns of the undersigned.
<PAGE>
Very truly yours,
--------------------------------------
(Signature)
--------------------------------------
(Name - Please Type)
--------------------------------------
(Address)
--------------------------------------
(Social Security or Taxpayer Identification No.)
Number of shares owned or subject to warrants, options or
convertible securities:
Certificate number:__________________
<PAGE>
Exhibit 1.2
PSINET INC.
[_________] Shares of [___]% Series C Cumulative
Convertible Preferred Stock
([_________] Additional Shares)
April [28], 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Ladies and Gentlemen:
PSINet Inc., a New York corporation (the "Company"), proposes to issue and
sell [_________] shares of its [__]% Series C Cumulative Preferred Stock, par
value $.01 per share (the "Firm Shares"), to the several underwriters named in
Schedule I hereto (the "Underwriters"). The Company also proposes to issue
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 2
and sell to the several Underwriters not more than an additional [_________]
shares of its preferred stock (the "Additional Shares") if requested by the
Underwriters as provided in Section 2 hereof. Shares of preferred stock may be
converted into shares of common stock, par value $0.01 per share, of the Company
(the "Common Stock"), in accordance with, and at the conversion rate specified
by, the Certificate of Amendment of the Certificate of Incorporation of the
Company (the "Certificate of Amendment"). The Firm Shares and the Additional
Shares are hereinafter referred to collectively as the "Shares." The shares of
preferred stock of the Company to be outstanding after giving effect to the
sales contemplated hereby are hereinafter referred to as the "Preferred Stock."
The Shares are to be issued pursuant to provisions of the Certificate of
Amendment which conforms substantially to the description thereof in the
Prospectus (as defined) and delivered and purchased pursuant to the terms of
this Agreement. The Shares and the Common Stock are more fully described in the
Registration Statement (as defined in the Prospectus).
Section 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3, including a
related preliminary prospectus, and each supplement thereto (collectively, the
"Preliminary Prospectus") relating to the Shares. The Company may have filed one
or more amendments thereto, including the related preliminary prospectus, and
each supplement thereto, each which has previously been furnished to you. The
Company will cause the prospectus, properly completed, and any supplement
thereto to be filed with the Commission pursuant to Rule 424(b) within the time
period prescribed and will provide the Underwriters with satisfactory evidence
of timely filing. The Company has complied with the conditions for the use of
Form S-3. The registration statement, as amended at the time it became
effective, including all exhibits thereto and the information (if any) deemed to
be part of the registration statement at the time of effectiveness pursuant to
Rule 430A under the Act, is hereinafter referred to as the "Registration
Statement"; and the prospectus, and each supplement thereto, in the forms first
used to confirm sales
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 3
of Shares are hereinafter collectively referred to as the "Prospectus." If the
Company has filed or is required pursuant to the terms hereof to file a
registration statement pursuant to Rule 462(b) under the Act registering
additional shares of Preferred Stock (a "Rule 462(b) Registration Statement"),
then, unless otherwise specified, any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462(b) Registration Statement.
Section 2. Agreements to Sell and Purchase and Lock-Up Agreements. On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $[______] (the "Purchase Price") the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to [_________] Additional Shares from
the Company at the Purchase Price. Additional Shares may be purchased solely
for the purpose of covering over-allotments made in connection with the offering
of the Firm Shares. The Underwriters may exercise their right to purchase
Additional Shares in whole or in part from time to time by giving written notice
thereof to the Company within 30 days after the date of this Agreement. You
shall give any such notice on behalf of the Underwriters and such notice shall
specify the aggregate number of Additional Shares to be purchased pursuant to
such exercise and the date for payment and delivery thereof, which date shall be
a business day (i) no earlier than two business days after such notice has been
given (and, in any event, no earlier than the Closing Date (as hereinafter
defined)) and (ii) no later than ten business days after such notice has been
given. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you may determine) which bears the same proportion to the total number of
Additional Shares to be
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 4
purchased from the Company as the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule I bears to the total number of Firm Shares.
The Company hereby agrees not to (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Preferred Stock or any
securities convertible into or exercisable or exchangeable for Preferred Stock
or (ii) enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any Preferred
Stock (regardless of whether any of the transactions described in clause (i) or
(ii) is to be settled by the delivery of Preferred Stock, or such other
securities, in cash or otherwise), except to the Underwriters pursuant to this
Agreement, for a period of 120 days after the date of the Prospectus without the
prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation.
Notwithstanding the foregoing, during such period the Company may (i) grant
stock options pursuant to the Company's Executive Stock Incentive Plan,
Executive Stock Options Plan, Directors Stock Incentive Plan and Strategic Stock
Incentive Plan, (ii) issue shares of Preferred Stock upon the exercise of an
option or warrant or the conversion of a security outstanding on the date
hereof, (iii) issue up to [_____] shares of Preferred Stock under an effective
registration statement which will be, filed for the sole purpose of registering
shares of Preferred Stock to be issued in consideration for the acquisition of,
or investment in, another entity (the "Acquisition Registration Statement"), and
which are being issued solely for such purpose, (iv) issue shares of Common
Stock under an effective registration statement which will be filed for the sole
purpose of registering shares of Common Stock to be issued (A) pursuant to the
conversion of shares of the Preferred Stock or (B) in lieu of the payment of any
cash dividend on, or in consideration of any cash payment from the deposit
account established in respect of, the Preferred Stock (the "Common Stock
Registration Statement"), and which are being issued solely for such purposes,
or (v) issue such securities and take such other actions pursuant to the Rights
Agreement dated as of May 8, 1996 between the Company and First Chicago Trust
Company of New York, as Rights Agent, as amended. Except for the Acquisition
Registration Statement and the Common Stock Registration
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 5
Statement, the Company also agrees not to file any registration statement with
respect to any shares of Preferred Stock or any securities convertible into or
exercisable or exchangeable for Preferred Stock for a period of 120 days after
the date of the Prospectus without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation. The Company shall, prior to or
concurrently with the execution of this Agreement, deliver an agreement
substantially in the form of Exhibit A hereto executed by each of the directors
and officers of the Company listed on Annex I hereto to the effect that such
person will not, subject to the exceptions contained therein, during the period
commencing on the date such person signs such agreement and ending 120 days
after the date of the Prospectus, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, (A) engage in any of the
transactions described in the first sentence of this paragraph or (B) make any
demand for, or exercise any right with respect to, the registration of any
shares of Preferred Stock or any securities convertible into or exercisable or
exchangeable for Preferred Stock.
Section 3. Terms of Public Offering. The Company is advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
Section 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date (as
defined below) or the applicable Option Closing Date (as defined below), as the
case may be. The Company shall deliver the Shares, with any transfer taxes
thereon duly paid by the Company, to Donaldson, Lufkin & Jenrette Securities
Corporation through the facilities of The Depository Trust Company ("DTC"), for
the respective accounts of the several Underwriters, against payment to the
Company of the Purchase Price therefor by wire transfer of Federal or other
funds immediately available in New York City. The certificates representing the
Shares shall be made available for inspection not later than 9:30 a.m., New York
City
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 6
time, on the business day prior to the Closing Date or the applicable Option
Closing Date, as the case may be, at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of delivery and payment
for the Firm Shares shall be 9:00 a.m., New York City time, on [________], 1999
or such other time on the same or such other date as Donaldson, Lufkin &
Jenrette Securities Corporation and the Company shall agree in writing. The time
and date of delivery and payment for the Firm Shares are hereinafter referred to
as the "Closing Date." The time and date of delivery and payment for any
Additional Shares to be purchased by the Underwriters shall be 9:00 a.m., New
York City time, on the date specified in the applicable exercise notice given by
you pursuant to Section 2 or such other time on the same or such other date as
Donaldson, Lufkin & Jenrette Securities Corporation and the Company shall agree
in writing. The time and date of delivery and payment for any Additional Shares
are hereinafter referred to as an "Option Closing Date."
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of Donaldson, Lufkin & Jenrette Securities
Corporation, 227 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, and the Shares shall be delivered at the Designated Office, all on
the Closing Date or such Option Closing Date, as the case may be.
Section 5. Agreements of the Company. The Company agrees with you:
(a) To advise you immediately and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any post-effective
amendment thereto or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction, or the initiation, or the threatening, of
any proceeding for such purposes, (iii) when any amendment to the Registration
Statement becomes effective, (iv) if the Company has filed or is required to
file a Rule 462(b) Registration Statement, when the Rule 462(b) Registration
Statement has
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 7
become effective and (v) of the happening of any event during the period
referred to in Section 5(d) below which makes any statement of a material fact
made in the Registration Statement or the Prospectus untrue or which requires
any additions to or changes in the Registration Statement or the Prospectus in
order to make the statements therein not misleading. If at any time the
Commission shall propose to issue or issues any stop order suspending the
effectiveness of the Registration Statement, the Company will use its best
efforts to prevent the issuance, or obtain the withdrawal or lifting, of such
order at the earliest possible time.
(b) To furnish to you five copies of the signed Registration Statement as
first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the Commission
within the applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 a.m., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the reasonable opinion of counsel for the Underwriters a Prospectus
is required by law to be delivered in connection with sales by an Underwriter or
a dealer, to furnish in New York City to each Underwriter and any dealer as many
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 8
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall occur
or condition shall exist as a result of which, in the reasonable opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if, in the reasonable opinion of counsel for the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with applicable law,
forthwith to prepare and file with the Commission an appropriate amendment or
supplement to the Prospectus so that the statements in the Prospectus, as so
amended or supplemented, will not in the light of the circumstances when it is
so delivered, be misleading, or so that the Prospectus will comply with
applicable law, and to furnish to each Underwriter and to any dealer as many
copies thereof as such Underwriter or dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you and
counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, the Preliminary Prospectus or the offering or sale of the Shares, in
any jurisdiction in which it is not now so subject.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 9
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending
[__________], 2000 that shall satisfy the provisions of Section 11(a) of the
Act, and to advise you in writing when such statement has been so made
available.
(h) During the period of three years after the date of this Agreement, to
furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Preferred Stock or furnished
to or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and its subsidiaries as you may reasonably
request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel
and the Company's accountants in connection with the registration and delivery
of the Shares under the Act and all other fees and expenses in connection with
the preparation, printing, duplication, filing and distribution of the
Registration Statement (including financial statements and exhibits), any
preliminary Prospectus, the Prospectus and all amendments and supplements to any
of the foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers in the quantities specified herein, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii) all reasonable
document production charges and related expenses of counsel for the Underwriters
(but not including their fees for professional services) related to producing
this Agreement and any other agreements or documents produced by them in
connection with the offering, purchase, sale or delivery of the Shares, (iv) all
expenses in connection with the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the several states and
all costs of printing or producing any Preliminary and Supplemental Blue Sky
Memoranda in connection therewith (including the filing fees and reasonable fees
and disbursements of
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 10
counsel for the Underwriters in connection with such registration or
qualification and memoranda relating thereto), (v) the filing fees and
disbursements of counsel for the Underwriters in connection with the review and
clearance of the offering of the Shares by the National Association of
Securities Dealers, Inc., (vi) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating to the
Preferred Stock and all costs and expenses incident to the listing of the Shares
on the Nasdaq National Market, (vii) the cost of printing certificates
representing the Shares, (viii) the costs and charges of any transfer agent,
registrar and/or depositary and (ix) all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which provision
is not otherwise made in this Section.
(j) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market and to maintain the listing of the Shares on the Nasdaq
National Market for a period of three years after the date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b) by 10:00 p.m., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
[(m) The Company prior to [______], shall have (a) sought approval from
the holders of a majority of the outstanding shares of Common Stock or (b)
sought to amend its Certificate of Incorporation, to permit payment of dividends
on the Preferred Stock in the form of Common Stock.]
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 11
Section 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) As filed, the Registration Statement, as amended, and the final
prospectus, shall include all information required by Rule 430A to be included
therein, together with all other such required information, with respect to the
Shares, and the offering thereof, and except to the extent the Underwriters
shall agree in writing to a modification, shall be in all substantive respects
in the form furnished to you prior to the Closing Date. At the time the Company
first filed the Registration Statement, and on the date hereof, the Company
complied with the conditions for use of Form S-3.
(b) (i) On the effective date thereof, the Registration Statement did, and
when the Prospectus is first filed in accordance with Rule 424(b) and on the
Closing Date, the Prospectus will, comply in all material respects with the
applicable requirements of the Act, and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and on the effective date thereof the Registration
Statement did not contain and, as amended, if applicable, will not contain any
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,
(ii) if the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement or if it has filed a Rule 462(b)
Registration Statement before the effectiveness of this Agreement, such Rule
462(b) Registration Statement and any amendments thereto, when they become
effective (or when they became effective) (A) will not (or did not) contain any
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
(B) will (or did) comply in all material respects with the Act, and (iii) the
Preliminary Prospectus did not and the Prospectus does not, and, as amended or
supplemented, if applicable, will not, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained in this
paragraph (b) shall not apply to
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 12
statements in or omissions from the Registration Statement, the Prospectus or a
Rule 462(b) Registration Statement based upon information relating to the
Underwriters furnished to the Company in writing by the Underwriters expressly
for use therein.
(c) Each of the Company and its subsidiaries has been duly incorporated or
formed, is validly existing as a corporation and is in good standing under the
laws of its jurisdiction of incorporation or formation and has the corporate
power and authority to carry on its business as described in the Prospectus and
to own, lease and operate its respective properties. The Company and each of
its subsidiaries is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified or in good standing
would not have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole (a "Material Adverse Effect").
(d) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or, except as specified on
Schedule A-2, liens granted or issued by the Company or any of its subsidiaries
- ------------
relating to or entitling any person to purchase or otherwise to acquire any
shares of the capital stock or other equity interest of the Company or any of
its subsidiaries, except as otherwise disclosed in the Prospectus.
(e) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid, non-assessable, subject to
Section 630 of the New York Business Corporation Law (the "BCL").
(f) The entities listed on Schedule A-1 hereto are the only subsidiaries,
------------
direct or indirect, of the Company. The only significant subsidiaries of the
Company, within the meaning of Rule 1-02(w) of Regulation S-X under the Act, are
as set forth on Schedule A-2 hereto (the "Significant Subsidiaries"). Except as
------------
specified on Schedule A-2: all of the outstanding shares of capital stock of
------------
each of the Company's subsidiaries have been duly authorized and validly issued
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 13
and are fully paid and non-assessable, subject, in the case of subsidiaries
incorporated in the State of New York, to Section 630 of the BCL, and provided
that the shares of each subsidiary incorporated or formed in jurisdictions
outside the United States of America (the "U.S.") continue to be held by at
least the minimum number of record owners necessary to ensure that such
subsidiary will enjoy limited liability status under the laws of such
jurisdiction, and are owned by the Company, directly or indirectly through one
or more subsidiaries, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature (each, a "Lien").
(g) Each of this Agreement, the deposit agreement between the Company and
the deposit agent set forth therein (the "Deposit Agreement"), the Certificate
of Amendment and the instruments contemplated herein and therein (collectively,
the "Operative Documents"), has been duly authorized, executed and delivered by
the Company, and each of this Agreement and the Deposit Agreement is a valid
obligation of the Company enforceable against the Company in accordance with its
terms, except as the enforceability hereof and thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting the enforcement of creditors rights generally and
by general equitable principles.
(h) The Shares have been duly authorized and, when issued and delivered to
the Underwriters against payment therefor as provided by this Agreement, will be
validly issued, fully paid and non-assessable, subject to Section 630 of the
BCL, and the issuance of such Shares will not be subject to any preemptive or
similar rights.
(i) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(j) Neither the Company nor any of its subsidiaries is in violation of its
respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 14
mortgage, lease or other agreement or instrument that is material to the Company
and its subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound, which violation or default would have a
Material Adverse Effect.
(k) The execution, delivery and performance of this Agreement and the
Operative Documents by the Company, compliance by the Company with all
provisions hereof and the consummation by the Company of the transactions
contemplated hereby will not (i) require any consent, approval, authorization or
other order of, or qualification with, any court or governmental body or agency
(except such as may be required under applicable federal, state and foreign
securities laws), including without limitation the Federal Communication
Commission (the "FCC"), (ii) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is material to the Company and its
subsidiaries, taken as a whole, to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or their
respective property is bound, (iii) assuming the Shares are offered, sold,
issued and delivered under the circumstances contemplated by the Prospectus and
this Agreement, violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Company, any of its subsidiaries or their
respective property, (iv) result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any agreement or instrument, to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or their respective property is bound, (v) result in
the termination, suspension or revocation of any Authorization (as defined
below) of the Company or any of its subsidiaries or result in any other
impairment of the rights of the holder of any such Authorization.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 15
(l) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of its
subsidiaries is or could reasonably be expected to become a party or to which
any of their respective property is or could reasonably be expected to become
subject, which could reasonably be expected to result, singly or in the
aggregate, in a Material Adverse Effect that are required to be described in the
Registration Statement and Prospectus and are not so described.
(m) Neither the Company nor, to the knowledge of the Company, any of its
subsidiaries has violated any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), any provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any provisions of the Foreign
Corrupt Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not have a
Material Adverse Effect.
(n) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
Material Adverse Effect that are required to be described in the Registration
Statement or Prospectus and are not so described.
(o) Each of the Company and its subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except those which have been
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 16
commenced but not completed in respect of the recordation of title to certain
real property in Switzerland or where the failure to have any such Authorization
or to make any such filing or notice would not, singly or in the aggregate, have
a Material Adverse Effect. Each such Authorization is valid and in full force
and effect and each of the Company and its subsidiaries is in compliance in all
material respects with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows or,
after notice or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or lapse of
time or both, would result in any other impairment of the rights of the holder
of any such Authorization; except in the case of any of the foregoing, where
such failure to be valid and in full force and effect or to be in compliance or
the occurrence of any such event would not, singly or in the aggregate, have a
Material Adverse Effect.
(p) The Company has obtained competitive local exchange carrier ("CLEC")
authorization or regulatory approval to provide CLEC services in each of the
following states: New York, Texas, Virginia and Colorado. No such regulatory
approval has been withdrawn, modified or suspended and, to the Company's
knowledge, no such regulatory approval is the subject of any legal challenge
(except as disclosed in the Prospectus).
(q) The accountants, PriceWaterhouse Coopers LLP, that have certified the
financial statements included or incorporated by reference in the Registration
Statement and Prospectus, are independent public accountants with respect to the
Company, as required by the Act and the Exchange Act. The historical financial
statements, together with related notes, set forth in the Prospectus comply as
to form in all material respects with the requirements applicable to
registration statements on Form S-1 under the Act.
(r) The historical financial statements, together with related schedules
and notes, forming part of the Registration Statement and Prospectus (and any
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 17
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiaries on the basis stated in the Prospectus at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data relating to the Company and its subsidiaries set forth in
or incorporated by reference in the Registration Statement and Prospectus (and
any amendment or supplement thereto) are, in all material respects, fairly
presented and, to the extent derived therefrom, prepared on a basis consistent
with such financial statements and the books and records of the Company.
(s) The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the net proceeds thereof as described in
the Registration Statement and Prospectus, will not be, an "investment company,"
as such term is defined in the Investment Company Act of 1940, as amended.
(t) Neither the Company nor any of its subsidiaries nor any agent thereof
acting on the behalf of them has taken, and none of them will take, any action
that might cause this Agreement or the issuance or sale of the Shares to violate
Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation
U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
(u) Since the respective dates as of which information is given in the
Registration Statement and Prospectus other than as set forth in the
Registration Statement and Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement), (i) there has not
occurred any material adverse change or any development that is reasonably
expected to result in a material adverse change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there has not been any material
adverse change or any development
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 18
that is reasonably expected to result in a material adverse change in the
capital stock of the Company or any of its subsidiaries or the consolidated
long-term debt of the Company and its subsidiaries and (iii) neither the Company
nor any of its subsidiaries has incurred any liability or obligation, direct or
contingent, which could reasonably be expected to have a Material Adverse
Effect.
(v) Each certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters on the Closing Date shall be
deemed to be a representation and warranty by the Company to the Underwriters as
of the date thereof (or such other date specified therein) as to the matters
certified thereby.
(w) The Preferred Stock (including the Shares) and the Dividend Shares,
the Conversion Shares and the Deposit Shares (each as defined below) are or, in
the case of the Dividend Shares, will be registered pursuant to Section 12(g) of
the Exchange Act and are listed for quotation on the Nasdaq National Market.
The Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Preferred Stock under the Exchange Act or
delisting the Preferred Stock from the Nasdaq National Market, nor has the
Company received any notification that the Commission or the Nasdaq National
Market is contemplating terminating such registration or listing.
(x) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, all patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names ("intellectual property") currently employed by them in connection
with the business now operated by them, except where the failure to own or
possess or otherwise be able to acquire such intellectual property would not,
singly or in the aggregate, have a Material Adverse Effect; and neither the
Company nor any of its subsidiaries has received any notice of infringement of
or conflict with asserted rights of others with respect to any of such
intellectual property which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 19
(y) The Company and its subsidiaries have good and marketable title to all
real property owned by them and good and valid title to all personal property
owned by them which is material to the business of the Company and its
subsidiaries, in each case, free and clear or all Liens and defects, except such
as are described in the Registration Statement and Prospectus or referenced to
on Schedule A-2 and such others as do not, singly or in the aggregate,
------------
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as do not materially interfere with the
use made and proposed to be made of such property and buildings by the Company
and its subsidiaries.
(z) The Company and its subsidiaries are in compliance in all material
respects with all applicable laws, statutes, ordinances, rules or regulations of
any applicable jurisdiction, the enforcement of which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(aa) The Company has filed with the Commission all documents required to
have been filed by the Company pursuant to the Exchange Act. Each such
document, when filed with the Commission, conformed in all material respects to
the requirements of the Exchange Act and did 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 light of the circumstances under
which they were made, not misleading.
(bb) The Company and its subsidiaries carry or are entitled to the benefits
of insurance in such amounts and covering such risks as is generally deemed by
the Company to be adequate for their business, and all such insurance is in full
force and effect.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 20
(cc) The Company and its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general and specific
authorizations; (ii) transactions are recorded as necessary to permit the
preparation of financial statements in conformity with U.S. generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorizations; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(dd) No relationship, direct or indirect, exists between or among any of
the Company or any affiliate of the Company, on the one hand, and any director,
officer, shareholder, customer or supplier of any of them, on the other hand,
which is required by the Act to be described in the Registration Statement and
Prospectus which is not described as required.
(ee) Neither the Company, nor, to the knowledge of the Company, any of its
officers, directors, partners, employees or affiliates has directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price or services concessions to customers) to any customer,
supplier, employee or agent of a customer or supplier, official or employee of
any governmental agency (domestic or foreign), instrumentality of any government
(domestic or foreign) or other person who was, is or is reasonably likely to be
in a position to help or hinder the business of the Company (or assist the
Company in connection with any actual or proposed transaction) which (a) would
reasonably be expected to subject the Company to any damage or penalty in any
civil, criminal or governmental litigation or proceeding (domestic or foreign),
which would reasonably be expected to have a Material Adverse Effect, (b) if not
given in the past, would reasonably be expected to have had a Material Adverse
Effect or (c) if not continued in the future, would reasonably be expected to
have a Material Adverse Effect.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 21
(ff) All material tax returns required to be filed by the Company in all
jurisdictions have been so filed except insofar as the failure to file such
returns would not have a Material Adverse Effect, or appropriate extensions for
such filings have been obtained as required by law. All taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company have been paid, other than those being contested in good faith and for
which adequate reserves have been provided. To the knowledge of the Company,
there are no material proposed additional tax assessments against the Company or
the assets or property of the Company. The Company has made adequate charges,
accruals and reserves in accordance with generally accepted accounting
principles in the applicable financial statements included in the Prospectus in
respect of all federal, state and foreign income and franchise taxes for all
periods as to which the tax liability of the Company has not been finally
determined.
(gg) The Company has not (i) taken, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (ii) since the date of the
Preliminary Prospectus, except for underwriting fees, discounts and commissions
agreed to by the Company in connection with the offering of the Shares and the
concurrent offering of the Common Stock (1) sold, bid for, purchased or paid any
person any compensation for soliciting purchases of, the Shares or (2) paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.
(hh) Except pursuant to this Agreement, there are no contracts, agreements
or understandings between the Company and any other person that would give rise
to a valid claim against the Company or either of the Underwriters for a
brokerage commission, finder's fee or like payment in connection with the
issuance, purchase and sale of the Shares.
(ii) The statements (including the assumptions described therein) included
in the Prospectus to the extent such statements, constitute forward looking
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 22
statements as defined in Rule 175(c) under the Act, (a) are to the Company's
knowledge and belief, within the coverage of Rule 175(b) under the Securities
Act and (b) were made by the Company with a reasonable basis and reflect the
Company's good faith estimate of the matters described therein.
(jj) To the knowledge of the Company (a) no action has been taken and no
statue, rule, regulation or order has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Shares or prevents or
suspends the use of the Prospectus; (b) no injunction, restraining order or
order of any nature by a federal or state court of competent jurisdiction has
been issued that prevents the issuance of the Shares, prevents or suspends the
sale of the Shares in any jurisdiction referred to in Section 4(d) hereof or
that could adversely affect the consummation of the transactions contemplated by
this Agreement or the Prospectus; and (c) every request of any securities
authority or agency of any jurisdiction for additional information has been
complied with in all material respects.
(kk) The disclosures in the Registration Statement and Prospectus related to
Year 2000 compliance comply in all material respects with the requirements of
SEC Release 33-7558.
(ll) The Company has reserved for issuance a sufficient amount of duly and
validly authorized securities to pay any and all dividends or other
distributions on the Preferred Stock payable in Common Stock pursuant to the
Certificate of Amendment (the "Dividend Shares") through [_________]. The
Dividend Shares, when authorized and issued in accordance with the Certificate
of Amendment, will have been duly and validly authorized and, when executed
countersigned and delivered in accordance with the Certificate of Amendment,
will be duly and validly issued and outstanding, fully paid and non-assessable
(subject to Section 630 of the BCL) and will not have been issued in violation
of or subject to any preemptive rights. On the Closing Date or any Option
Closing Date, the Dividend Shares will conform as to legal matters to the
description thereof contained in the Prospectus.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 23
(mm) The Company has reserved for issuance a sufficient amount of duly and
validly authorized securities to issue shares of Common Stock upon the
conversion of the Preferred Stock pursuant to the Certificate of Amendment (the
"Conversion Shares"). The Conversion Shares, when issued upon conversion of the
Preferred Stock in accordance with the Certificate of Amendment, will have been
duly and validly authorized and, when executed countersigned and delivered
against the delivery of shares of Preferred Stock therefor in accordance with
the Certificate of Amendment, will be duly and validly issued and outstanding,
fully paid and non-assessable (subject to Section 630 of the BCL) and will not
have been issued in violation of or subject to any preemptive rights. On the
Closing Date or any Option Closing Date, Conversion Shares will conform as to
legal matters in all material respects to the description thereof contained in
the Prospectus.
(nn) The Company has reserved for issuance a sufficient amount of duly and
validly authorized securities to issue and sell Common Stock pursuant to the
Deposit Agreement (the "Deposit Shares"). The Deposit Shares, when authorized
and issued in accordance with the Deposit Agreement, will have been duly and
validly authorized and, when executed, countersigned and delivered against
payment therefor in accordance with the Deposit Agreement, will be duly and
validly issued and outstanding, fully paid and non-assessable and will not have
been issued in violation of or subject to any preemptive rights. On the Closing
Date or any Option Closing Date, the Deposit Shares will conform to legal
matters in all material respects to the description thereof contained in the
Prospectus.
(oo) The Certificate of Amendment of the Certificate of Incorporation in
respect of the Preferred Stock has been, or will prior to Closing be, filed with
the Secretary of State of the State of New York, and has become, or will become
prior to Closing, effective in accordance with the provisions of the BCL.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 24
The Company acknowledges that the Underwriters and, for purposes of the
opinions to be delivered to the Underwriters pursuant to Section 8(e) hereof,
counsel to the Company and counsel to the Representatives will rely upon the
accuracy and truth of the foregoing representations and warranties and hereby
consents to such reliance.
Section 7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter,
its directors, its officers and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages, expenses,
liabilities and judgments (including, without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action, that could give rise to any such losses, claims, damages,
expenses, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement (or
any amendment thereto), the Prospectus (or any amendment or supplement thereto)
or the Preliminary Prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, expenses, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company by
or on behalf of such Underwriter through you expressly for use therein;
provided, however, that the foregoing indemnity agreement with respect to the
Preliminary Prospectus shall not inure to the benefit of any Underwriter who
failed to deliver a Prospectus, as then amended or supplemented (so long as the
Prospectus and any amendments or supplements thereto was provided by the Company
to the several Underwriters in the requisite quantity and on a timely basis to
permit proper delivery on or prior to the Closing Date), to the person asserting
any losses, claims, damages, expenses, liabilities or judgments caused by any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Prospectus, or caused by
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 25
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such material misstatement or omission or alleged material misstatement or
omission was cured in the Prospectus, as so amended or supplemented, and such
Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to such Underwriter but only with
reference to information relating to such Underwriter furnished in writing to
the Company by such Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary Prospectus; provided,
--------
however, that in no case shall any Underwriter be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter hereunder.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
(but the failure so to notify an indemnifying party shall not relieve the
indemnifying party from any liability wich it may have under this Section 7,
except to the extent that the indemnifying party has been prejudiced in any
material respect by such failure, or from any liability that it may have
otherwise) and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all reasonable fees and expenses of such counsel, as
incurred (except that in the case of any action in respect of which indemnity
may be sought pursuant to both Sections 7(a) and 7(b), the Underwriter shall not
be required to
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 26
assume the defense of such action pursuant to this Section 7(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by Donaldson, Lufkin & Jenrette Securities Corporation, in the case
of parties indemnified pursuant to Section 7(a), and by the Company, in the case
of parties indemnified pursuant to Section 7(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, expenses, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the settlement is entered into more than twenty
business days after the indemnifying party shall have received a request from
the indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 27
without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, expenses, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, expenses, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 7(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 7(d)(i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, claims, damages, expenses, liabilities or judgments, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand shall be deemed
to be in the same proportion as the total net proceeds from the offering (after
deducting underwriting discounts and commissions, but before deducting expenses)
received by the Company, and the total underwriting discounts and commissions
received by the Underwriters, bear to the total price to the public of the
Shares, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 28
material fact relates to information supplied by the Company or the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, expenses, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
expenses, damages, liabilities or judgments. Notwithstanding the provisions of
this Section 7, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 7(d) are several in
proportion to the respective number of Shares purchased by each of the
Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
Section 8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 29
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 p.m., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate, dated the
Closing Date, signed, on behalf of the Company, by William L. Schrader and
Edward D. Postal, in their capacities as the Chairman and Chief Executive
Officer and Senior Vice President and Chief Financial Officer, respectively, of
the Company, confirming the matters set forth in Sections 6(s), 8(a) and 8(b)
and stating that, to the best of their knowledge based upon reasonable
investigation, the Company has complied with all of the agreements and satisfied
all of the conditions herein contained and required to be complied with or
satisfied by the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries taken as
a whole, (ii) there shall not have been any change or any development involving
a prospective change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 8(d)(i),
8(d)(ii) or 8(d)(iii), in your judgment, is material and
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 30
adverse and, in your judgment, makes it impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of Nixon, Hargrave, Devans & Doyle LLP, counsel for the Company (or, as to
matters relating to foreign subsidiaries, such other local counsel as may be
satisfactory to the Underwiters) to the effect that:
(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of New York
and has the corporate power and authority to carry on its business as
described in the Registration Statement and Prospectus and to own, lease
and operate its properties as described in the Registration Statement and
the Prospectus;
(ii) the Company is duly qualified as a foreign corporation to
transact business and is in good standing in the Commonwealth of Virginia
and in each other U.S. jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to be
in good standing would not have a Material Adverse Effect;
(iii) the authorized capital stock of the Company consists of (i)
30,000,000 shares of preferred stock of the Company, par value $.01 per
share, 1,000,000 shares of which have been designated Series A Junior
Participating Preferred Stock; and [________] of which have been
designated [____]% Series C Cumulative Convertible Preferred Stock, and;
(ii) 250,000,000 shares of preferred stock of the Company, par value $.01
per share;
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 31
(iv) all the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and, to such counsel's
knowledge, are fully paid, non-assessable (subject to Section 630 of the
BCL) and not subject to any preemptive or similar rights;
(v) each of the Significant Subsidiaries (each, a "Significant
Subsidiary" and collectively, the "Significant Subsidiaries") has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement
and the Prospectus and is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure
so to qualify or to be in good standing would not have a Material Adverse
Effect; except as provided on Schedule A-2: all of the issued and
------------
outstanding capital stock of each such Significant Subsidiary has been
duly authorized and validly issued, and, to such counsel's knowledge, is
fully paid and non-assessable, subject, in the case of each Significant
Subsidiary incorporated in the State of New York, to Section 630 of the
BCL, and provided that the shares of each subsidiary incorporated in
jurisdictions outside the U.S. continue to be held by at least the
minimum number of record owners necessary to ensure that such subsidiary
will enjoy limited liability status under the laws of such jurisdiction;
to the knowledge of such counsel, except as specifically noted, all of
the issued and outstanding capital stock of each such Significant
Subsidiary is owned by the Company, directly or through subsidiaries,
except for such shares as are held by a minimum number of recordholders
to ensure that such subsidiary will enjoy limited liability status under
the laws of its jurisdiction of
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 32
incorporation, free and clear of any security interest or adverse claim
(as defined in Article 8 of the Uniform Commercial Code);
(vi) the Shares have been duly authorized and when issued,
delivered and sold by the Company against payment therefor in accordance
with this Agreement will be duly authorized, validly issued and
outstanding, fully paid and non-assessable (subject to Section 630 of the
BCL) and to the knowledge of such counsel, and will not be subject to any
preemptive rights or any shareholder of the Company or any similar
rights. Upon delivery of certificates evidencing the Shares and payment
therefor as contemplated hereby, the Underwriters will acquire good,
valid and marketable title to the Shares (and the Additional Shares, if
any) free of any adverse claim, assuming the Underwriters are acting in
good faith and without notice of any adverse claim. The Shares and the
Additional Shares conform in all material respects as to legal matters to
the descriptions thereof contained in the Registration Statement and the
Prospectus under the caption "Description of Preferred Stock." The form
of certificate evidencing the Shares to be delivered hereunder complies
as to form in all material respects with the requirements of the BCL.
(vii) such counsel is of the opinion ascribed to it in the
Prospectus under the caption Important U.S.Tax Consequences, to Non-U.S.
Holders" subject to the qualifications and limitations contained
thereunder;
(viii) to such counsel's knowledge, neither the Company nor any of
its Significant Subsidiaries is in violation of its respective
certificate of incorporation or by-laws, except to the extent any such
violation would not have a Material Adverse Effect;
(ix) to such counsel's knowledge, the Company and its Significant
Subsidiaries are in compliance with all judgments,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 33
decrees and orders of any court to which they are subject, except to the
extent any such violation or noncompliance would not have a Material
Adverse Effect;
(x) the execution, delivery and performance of this Agreement by
the Company, and the consummation by the Company of the transactions
contemplated hereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under
applicable federal, state and local securities laws), (ii) to such
counsel's knowledge, constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company
or any of the Significant Subsidiaries or any material indenture, loan
agreement or mortgage filed or incorporated by reference as an exhibit to
the Company's Annual Report on Form 10-K for the year ended December 31,
1998 known to such counsel to which the Company or any of the Significant
Subsidiaries is a party or by which the Company or any of the Significant
Subsidiaries or their respective property is bound, (iii) to such
counsel's knowledge, assuming the Shares are offered, sold, issued and
delivered under the circumstances contemplated by the Prospectus and this
Agreement, violate or conflict with any applicable law or any rule or
regulation which in such counsel's experience is normally applicable to
transactions of the type contemplated by this Agreement, or any judgment,
order or decree known to such counsel of any court or any governmental
body or agency having jurisdiction over the Company, any of the
Significant Subsidiaries or their respective property, (iv) to such
counsel's knowledge, except as disclosed in the Registration Statement
and the Prospectus, result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any material agreement,
lease, instrument or indenture filed or incorporated by reference as an
exhibit to the Company's Annual Report on Form 10-K for the year
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 34
ended December 31, 1998, or (v) to such counsel's knowledge, result in
the termination, suspension or revocation of any material Authorization
(as defined above) of the Company or any of its Significant Subsidiaries
or result in any other impairment of the rights of the holder of any such
Authorization, in each case in clause (ii), (iii), (iv) or (v) above
(except in the case of the Shares), where the conflict, breach, default,
imposition or violation, considered alone or taken together with all such
other conflicts, breaches, impositions or violations, might have a
Material Adverse Effect ;
(xi) except as disclosed in the Registration Statement and the
Prospectus, such counsel does not know of any action, suit or proceeding
pending or threatened to which the Company or any of its subsidiaries is
a party or to which any of their respective property is subject, before
or brought by any court or governmental agency or body, which could
reasonably be expected to result, singly or in the aggregate, in a
Material Adverse Effect;
(xii) the Company is not and, after giving effect to the offering
and sale of the Shares and the application of the net proceeds thereof as
described in the Registration Statement and Prospectus, will not be, an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended;
(xiii) this Agreement has been duly authorized, executed and
delivered by the Company;
(xiv) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and, to
such counsel's knowledge, no proceedings for that purpose are, pending
before or threatened by the Commission;
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 35
(xv) the statements under the captions "Description of Preferred
Stock" and "Underwriting" in the Prospectus except for the matters set
forth in the third, fourth, sixth, thirteenth and fourteenth paragraphs
under the caption "Underwriting", as to which such counsel need express
no opinion in the Prospectus in each case, insofar as such statements
constitute a summary of the legal matters, documents or proceedings
referred to therein, fairly present in all material respects the
information called for with respect to such legal matters, documents and
proceedings;
(xvi) to such counsel's knowledge, there are no written contracts
or agreements between the Company and any person granting such person the
right to require the Company to file a registration statement under the
Act with respect to any securities of the Company except as described in
the Registration Statement and the Prospectus, and no person has the
right which has not been waived to require the Company to include any
securities with the Shares registered pursuant to the Registration
Statement;
(xvii) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for the financial statements,
notes thereto and supporting schedules, and other financial, numerical,
statistical and accounting information or data included or incorporated
by reference therein as to which no opinion need be expressed) comply as
to form in all material respects with the Act;
(xviii) the Company has reserved for issuance a sufficient amount of
Dividend Shares through [_______]. The Dividend Shares, when authorized
and issued in accordance with the Certificate of Amendment, will have
been duly and validly authorized and, when executed, countersigned and
delivered in accordance with the Certificate of Amendment, will be duly
and validly issued and outstanding, fully paid and non-assessable
(subject to Section 630 of
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 36
the BCL) and will not have been issued in violation of or subject to any
preemptive rights; provided that prior to any such distribution of
Dividend Shares, the Company's Certificate of Incorporation shall have
been amended to permit such distribution to the holders of the Preferred
Stock or the Company shall have obtained the approval for such
distribution by affirmative vote or the written consent of the holders of
a majority of the outstanding shares of the Common Stock. On the Closing
Date or any Option Closing Date, the Dividend Shares will conform as to
legal matters to the description thereof contained in the Prospectus;
(xix) the Company has reserved for issuance a sufficient amount of
Conversion Shares. The Conversion Shares, when issued upon conversion of
the Preferred Stock in accordance with the Certificate of Amendment at a
conversion price not less than the par value per share of the Common
Stock, will have been duly and validly authorized and, when executed,
countersigned and delivered against the delivery of shares of Preferred
Stock therefor in accordance with the Certificate of Amendment, will be
duly and validly issued and outstanding, fully paid and non-assessable
and will not have been issued in violation of or subject to any
preemptive rights. On the Closing Date or any Option Closing Date, the
Conversion Shares will conform as to legal matters to the description
thereof contained in the Prospectus.
(xx) the Company has reserved for issuance a sufficient amount of
Deposit Shares. The Deposit Shares, when authorized and issued in
accordance with the Deposit Agreement, will have been duly and validly
authorized and, when executed, countersigned and delivered against
payment therefor in accordance with the Deposit Agreement, will be duly
and validly issued and outstanding, fully paid and non-assessable
(subject to Section 630 of the BCL) and will not have been issued in
violation of or subject to any preemptive rights;
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 37
provided that prior to any such distribution of Deposit Shares, the
Company's Certificate of Incorporation shall have been amended to permit
such distribution to the holders of the Preferred Stock or the Company
shall have obtained the approval for such distribution by the affirmative
vote or the written consent of the holders of a majority of the
outstanding shares of the Common Stock. On the Closing Date or any Option
Closing Date, the Deposit Shares will conform to legal matters in all
material respects to the description thereof contained in the Prospectus.
The opinion of Nixon, Hargrave, Devans & Doyle LLP described in Section
8(e) above shall be rendered to you at the request of the Company and shall so
state therein. In rendering such opinion, such counsel may (i) rely on
certificates of the Company or of officers of the Company as to matters of fact
and on certificates of and other information from governmental officials, and
(ii) state that it is opining only as to matters of federal and New York law
and, with respect to certain of the Significant Subsidiaries, the General
Corporation Law of the State of Delaware. In giving its opinion described in
Section 8(e), such counsel shall also state that, although such counsel has not
undertaken to determine independently, and therefore does not assume any
responsibility, explicitly or implicitly, for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus (and any amendments or supplements thereto), such counsel has
participated in the preparation of the Registration Statement and the Prospectus
(and any amendments or supplements thereto), including review and discussion of
the contents thereof and that, based upon and subject to the foregoing, nothing
has come to their attention that causes them to believe that, as of the
respective dates of the Registration Statement and the Prospectus the
Registration Statement or the Prospectus, as amended or supplemented, contained
or contains an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 38
statements therein, not misleading, and that the Prospectus as of the Closing
Date, contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Such counsel need make no statement as to the financial statements
(including, without limitation, pro forma financial statements), notes thereto
and supporting schedules and other financial, numerical, statistical and
accounting information and data (including, without limitation, other pro forma
financial, numerical, statistical and accounting information and data) included
in the Registration Statement and the Prospectus (and any amendments or
supplements thereto) or omitted therefrom.
In giving such opinion with respect to the matters covered by Section 8(e)
counsel for the Company may state that its opinion and belief are based upon its
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification except as
specified.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Paul, Hastings, Janofsky & Walker, LLP counsel for the
Underwriters, in form and substance reasonably satisfactory to you.
(g) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from PricewaterhouseCoopers LLP,
independent public accountants, containing the information and statements of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus, [including, without
limitation, an examination of "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in accordance with Statement on Standards
for Attestation Engagements No. 8.]
(h) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 39
(i) The Shares shall have been duly listed for quotation on the Nasdaq
National Market.
(j) The Company shall not have failed on or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
Section 9. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 40
or other governmental authority which in your opinion materially and adversely
affects, or will materially and adversely affect, the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each non-
defaulting Underwriter shall be obligated severally, in the proportion which the
number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the number of Firm Shares or Additional
Shares, as the case may be, which any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 9 by an
amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased by all Underwriters and arrangements satisfactory to you
and the Company for purchase of such Firm Shares are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter and the Company. In any such case which does
not result in termination of this
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 41
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. If, on an Option Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Additional Shares to be purchased on such date, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
such Additional Shares or (ii) purchase not less than the number of Additional
Shares that such non-defaulting Underwriters would have been obligated to
purchase on such date in the absence of such default. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of any such Underwriter under this Agreement.
Section 10. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to PSINet
Inc., 510 Huntmar Park Drive, Herndon, Virginia 20170, Attention: David N.
Kunkel, Executive Vice President and General Counsel, with a copy to Nixon,
Hargrave, Devans & Doyle LLP, 437 Madison Avenue, New York, New York, 10022,
Attention: Richard F. Langan, Jr., and (ii) if to any Underwriter or to you, to
you c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue,
New York, New York 10172, Attention: Syndicate Department, or in any case to
such other address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any person controlling any Underwriter, the Company, the officers
or directors of the
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 42
Company or any person controlling the Company, (ii) acceptance of the Shares and
payment for them hereunder and (iii) termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the reasonable fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse
the several Underwriters, their directors and officers and any persons
controlling any of the Underwriters for any and all fees and expenses
(including, without limitation, the reasonable fees and disbursements of
counsel) incurred by them in connection with enforcing their rights hereunder
(including, without limitation, pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' directors and officers, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement, and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Shares from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York, without regard to the principles of the conflicts of
laws thereof.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April [28], 1999
Page 43
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
PSINET INC.
By:
---------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By
-----------------------------
<PAGE>
SCHEDULE I
----------
Underwriters Number of Firm Shares
to be Purchased
Donaldson, Lufkin & Jenrette Securities
Corporation
Merrill Lynch & Co.
Bear, Stearns & Co. Inc.
BancBoston Robertson Stephens Inc.
Chase Securities Inc.
Total
<PAGE>
Annex I
[To be determined]
<PAGE>
Exhibit A
---------
[FORM OF LOCK-UP LETTER]
[PSINET INC.]
[___________], 1999
PSINet Inc.
510 Huntmar Park Drive
Herndon, Virginia 20170
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Re: Public Offering of Preferred Stock
----------------------------------
Dear Ladies and Gentlemen:
The undersigned understands that Donaldson, Lufkin & Jenrette Securities
Corporation, Merrill Lynch & Co., Bear, Stearns & Co. Inc., BancBoston Robertson
Stephens Inc., and Chase Securities Inc. (together, the "Underwriters"), propose
to enter into an Underwriting Agreement with PSINet Inc., a New York corporation
(the "Company"), providing for the public offering (the "Public Offering") by
the Underwriters, including the Underwriters, of [________] Million
([_________]) shares of preferred stock, par value $0.01 per share, of the
Company (the "Preferred Stock").
In consideration of the Underwriters' agreement to purchase and undertake
the Public Offering of the Preferred Stock and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned agrees
not to (i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Preferred Stock or any
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
[________], 1999
Page 2
securities convertible into or exercisable or exchangeable for Preferred Stock
or (ii) enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any Preferred
Stock (regardless of whether any of the transactions described in clause (i) or
(ii) is to be settled by the delivery of Preferred Stock, or such other
securities, in cash or otherwise), except to the Underwriters pursuant to the
Underwriting Agreement, for a period of 120 days after the date of the
Prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation; provided, however, that notwithstanding the foregoing,
the undersigned may transfer shares of Common Stock pursuant to one or more bona
fide gifts (such transferred shares of Common Stock being referred to as the
"Gift Shares") provided that each donee of Gift Shares enters into a lock-up
agreement (each, a "Donee Lock-Up") substantially similar to this letter
agreement except that this proviso shall not be included in any Donee Lock-Up.
The undersigned also agrees not to make any demand for, or exercise any right
with respect to, the registration of any shares of Preferred Stock or any
securities convertible into or exercisable or exchangeable for Preferred Stock
for a period of 120 days after the date of the Prospectus without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this letter agreement, and that, upon request,
the undersigned will execute any additional documents necessary or desirable in
connection with the enforcement hereof. All authority herein conferred or
agreed to be conferred shall survive the death or incapacity of the undersigned
and any obligation of the undersigned shall be binding upon the heirs, personal
Underwriters, successors, and assigns of the undersigned.
<PAGE>
Very truly yours,
-------------------------------------
(Signature)
-------------------------------------
(Name - Please Type)
-------------------------------------
(Address)
-------------------------------------
(Social Security or Taxpayer Identification No.)
number of shares owned or subject to warrants, options
or convertible securities:
Certificate number:_________________
<PAGE>
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
PSINET INC.
Under Section 805 of the Business Corporation Law
The undersigned, being the Senior Vice President and Chief Financial
Officer of PSINet Inc. (the "Corporation"), respectively, in order to amend the
Corporation's Certificate of Incorporation, do hereby certify that:
FIRST: The name of the Corporation is PSINet Inc.
-----
SECOND: The Certificate of Incorporation of the Corporation was
------
filed by the Department of State of the State of New York on October 21, 1988
under the name Graphic Specialty Finishers, Inc.
THIRD: The Certificate of Incorporation is hereby amended to effect
-----
the following amendment authorized by the Business Corporation Law to amend
Paragraph FOURTH, relating to the aggregate number of shares which the
Corporation shall have authority to issue, to add a provision stating the
number, designation, relative rights, preferences and limitations of a new
series of Preferred Stock, as fixed by the Board of Directors of the
Corporation, which shall be designated as [____]% Series C Cumulative
Convertible Preferred Stock, par value $.01 per share, and to set forth in full
the text of such provision.
FOURTH: Paragraph FOURTH is hereby amended to add the following at
------
the end of such Paragraph FOURTH:
[ ]% Series C Cumulative Convertible Preferred Stock
- ----------------------------------------------------
<PAGE>
The Corporation is hereby authorized to establish a series of
Preferred Stock of the Corporation of the designation and number of shares, and
having the relative rights, preferences and limitations thereof (in addition to
the provisions set forth in this Certificate of Incorporation which are
applicable to all classes and series of Preferred Stock) as set forth in the
following Sections 1 through 13 and in Exhibit A attached hereto and made a part
hereof.
Section 1. Designation, Amount and Par Value. The series of preferred
---------------------------------
stock shall be designated as the [___]% Series C Cumulative Convertible
Preferred Stock (the "Series C Preferred Stock"), and the number of shares so
------------------------
designated shall be [_______] (each registered holder of shares of Series C
Preferred Stock, a "Holder" and together with all other Holders, the "Holders").
------ -------
Each share of Series C Preferred Stock shall have a par value of $.01 per share
and a stated value of $50.00 per share. As used in this Section 1 and the
immediately following Sections 2 through 13, all references to a "Section" or
"Sections" shall be to any one or more of this Section 2 and such Sections 2
through 13, as appropriate, and not to any other provision of this Certificate
of Incorporation.
Section 2. Dividends.
---------
2.1 Holders of Series C Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available therefor, dividends on the Series C Preferred Stock at a rate per
annum equal to [_____]% of the Liquidation Preference per share.
(a) All dividends will be cumulative, whether or not earned or
declared and payable quarterly out of assets legally available therefor, on
[________], [________], [________], and [________] of each year, commencing
[_________], 2002 (each such date being referred to herein as a "Dividend
--------
Payment Date"). Dividends on the Series C Preferred Stock will accrue from
- ------------
[________], 2002 (or earlier if the Deposit Account is terminated[ in which
event dividends will accrue for the Past Deposit Payment Date]). Each
distribution in the form of a dividend shall be payable in arrears to Holders of
record as they appear on the stock books of the Corporation on each record date
as established by the Board of Directors of the Corporation (the "Dividend
--------
Payment Record Date") not more than 60 nor less than ten days preceding a
- -------------------
Dividend Payment Date.
(i) Dividends payable on the Series C Preferred Stock for each
full dividend period will be computed by dividing the annual dividend rate
by four. Dividends payable on the Series C Preferred Stock for any period
less than a full dividend period will be computed on the basis of a 360-day
year consisting of twelve 30-day months.
(ii) The Series C Preferred Stock will not be entitled to any
dividend, whether payable in cash, property or securities, in excess of the
full accumulated and unpaid dividends.
(iii) No interest, or sum of money in lieu of interest, will be
payable in respect of any accumulated and unpaid dividends.
2
<PAGE>
(b) Dividends, to the extent declared by the Corporation's Board of
Directors, may, at the option of the Corporation, be paid in cash, by delivery
of fully paid and nonassessable shares of Common Stock, or a combination thereof
(subject, in each case, to applicable law). If the Corporation elects to pay
dividends in shares of Common Stock, the number of shares of Common Stock to be
distributed will be calculated by dividing such payment by 95% of the Market
Value as of the Dividend Payment Record Date.
2.2(a) Subject to this Section 2.2, no dividends may be declared or
paid or funds set apart for the payment of dividends on any Parity Securities
for any period, unless:
(i) full cumulative dividends on the Series C Preferred Stock
shall have been or contemporaneously are declared and paid in full through
the immediately preceding Dividend Payment Date; and
(ii) if the dividend on the Parity Securities is declared as
payable in cash, a sum in cash is set apart for the next succeeding payment
on the Series C Preferred Stock at the next succeeding Dividend Payment
Date.
If full dividends are not so paid, the Series C Preferred Stock will
share dividends pro rata with any Parity Securities.
(b) No dividends may be paid or set apart for payment on Parity
Securities or Junior Securities, except dividends:
(i) on Junior Securities payable in additional shares of Junior
Securities; and
(ii) on Parity Securities payable in additional shares of Parity
Securities or Junior Securities, provided, however, that, notwithstanding
the provisions of Sections 2.2(a)(ii), 2.2(b)(i) and 2.2(b)(ii), whether or
not full dividends have been or will be paid on the shares of the Series C
Preferred Stock, the Corporation shall be entitled to declare and pay cash
dividends on Parity Securities and Junior Securities to the extent that:
(1) the funds for such cash dividend payments are derived,
directly or indirectly, from the proceeds of an offering of Parity
Securities or Junior Securities with respect to which such cash
dividends are to be paid (or a concurrent offering of related
securities); and
(2) provided that in connection with such offering it is
disclosed to the purchasers of such Parity Securities or Junior
Securities, as the case may be, in an offering memorandum, prospectus,
or similar communication, that a portion of the proceeds thereof may
be used for the payment of cash dividends on such securities (any
transaction in which the Corporation obtains the right to make cash
3
<PAGE>
dividend payments on Parity Securities or Junior Securities pursuant
to clauses 2.2(b)(1) and 2.2(b)(2) being referred to as a "Self-
----
Funding Event").
-------------
(c) No Junior Securities or Parity Securities may be purchased,
redeemed or otherwise acquired for any consideration nor may funds be set apart
for payment with respect thereto if full cumulative and unpaid dividends have
not been paid or declared on the Series C Preferred Stock through the
immediately preceding Dividend Payment Date terminating on or prior to the date
of such purchase, redemption or acquisition or contemporaneously paid or
declared a sum sufficient for payment thereof set apart for such payment;
provided that, notwithstanding the foregoing:
(i) cash dividends may be paid on Parity Securities and Junior
Securities to the extent permitted by Section 2.2(b); and
(ii) the Corporation may purchase, redeem or otherwise acquire
for consideration or set aside funds for those purposes with respect to
any Parity Securities or Junior Securities by conversion into or exchange
for or out of the net proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Corporation) of other Parity Securities or
Junior Securities, as the case may be, of the Corporation.
(d) Notwithstanding the foregoing, if full dividends have not been
declared and paid or set apart on the Series C Preferred Stock and any other
Parity Securities, dividends may be declared and paid on the Series C Preferred
Stock and such other Parity Securities so long as the dividends are declared and
paid pro rata so that the amounts of dividends declared per share on the Series
C Preferred Stock and such other Parity Securities will in all cases bear to
each other the same ratio that accrued and unpaid dividends per share on the
shares of the Series C Preferred Stock and such other Parity Securities bear to
each other; provided, that if such dividends are paid in cash on the other
Parity Securities, dividends will also be paid in cash on the Series C Preferred
Stock.
(e) (i) Except as provided in Clause (ii) of this Section 2.2(e),
the Holders of shares of the Series C Preferred Stock at the close of
business on a Dividend Payment Record Date will be entitled to receive the
dividend payment on those shares on the corresponding Dividend Payment Date
notwithstanding the subsequent conversion thereof or the Corporation's
default in payment of the dividend due on that Dividend Payment Date.
(ii) Holders of shares called for redemption on a Redemption Date
which falls between the Dividend Payment Record Date and the Dividend
Payment Date will be entitled to receive such dividend on such Redemption
Date and will not be entitled to such payment pursuant to Clause (i)
hereof.
(iii) Except as provided in Clauses (i) and (ii) of this Section
2.2(e), the Corporation shall make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or for dividends
on the shares of Common Stock issued upon conversion.
4
<PAGE>
3. Ranking.
-------
3.1 The Series C Preferred Stock will, with respect to dividend
distributions and distributions upon the liquidation, winding-up or dissolution
of the Corporation, rank:
(a) senior to all classes of Common Stock and to each series of
preferred stock existing on the date of this Certificate of Amendment and
each other class of capital stock or series of preferred stock issued by
the Corporation, which is established after the date of this Certificate of
Amendment, the terms of which do not expressly provide that such class or
series will rank senior to or on a parity with the Series C Preferred Stock
as to dividend distributions and distributions upon the liquidation,
winding-up or dissolution of the Corporation (collectively referred to as
the "Junior Securities");
-----------------
(b) subject to certain conditions, on a parity with any class of
capital stock or series of preferred stock issued by the Corporation, which
is established after the date of this Certificate of Amendment by the Board
of Directors, the terms of which expressly provide that such class or
series will rank on a parity with the Series C Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up
or dissolution of the Corporation (collectively referred to as the "Parity
------
Securities"); and
----------
(c) subject to certain conditions, junior to each class of
capital stock or series of preferred stock issued by the Corporation, which
is established after the date of this Certificate of Amendment by the Board
of Directors, the terms of which expressly provide that such class or
series will rank senior to the Series C Preferred Stock as to dividend
distributions and distributions upon liquidation, winding-up or dissolution
of the Corporation (collectively referred to as the "Senior Securities").
-----------------
3.2 Except as otherwise provided herein (including, without
limitation, Section 8.3 hereof), the Corporation is entitled to amend its
Certificate of Incorporation to authorize one or more additional series of
preferred stock, file certificates of amendment to its Certificate of
Incorporation, and issue without restriction, from time to time, any series of
Junior Securities, Parity Securities or Senior Securities.
4. Conversion.
----------
5
<PAGE>
4.1(a) Each Holder of Series C Preferred Stock shall have the
right, at its option, at any time and from time to time to convert, subject to
the terms and provisions of this Section 4, any or all of such Holder's shares
of Series C Preferred Stock. In such case, the shares of Series C Preferred
Stock shall be converted into such number of fully paid and nonassessable shares
of Common Stock (subject to Section 630 of the Business Corporation Law) as is
equal, subject to Section 4.6, to the product of the number of shares of Series
C Preferred Stock being so converted multiplied by the quotient of (i) the
Liquidation Preference divided by (ii) the Conversion Price then in effect,
except that with respect to any share which shall be called for redemption such
right shall terminate at the close of business on the second Business Day
preceding the Redemption Date unless the Corporation shall default in making the
payment due upon redemption thereof.
(b) The conversion right of a Holder of Series C Preferred Stock shall
be exercised by the Holder by the surrender of the certificates representing
shares to be converted to the Transfer Agent accompanied by the Conversion
Notice.
(i) Immediately prior to the close of business on the Conversion
Date, each converting Holder of Series C Preferred Stock shall be deemed to
be the Holder of record of Common Stock issuable upon conversion of such
Holder's Series C Preferred Stock notwithstanding that the share register
of the Corporation shall then be closed or that certificates representing
such Common Stock shall not then be actually delivered to such person.
(ii) Upon notice from the Corporation, each Holder of Series C
Preferred Stock so converted shall promptly surrender to the Transfer Agent
certificates representing the shares so converted (if not previously
delivered), duly endorsed in blank or accompanied by proper instruments of
transfer.
(iii) On any Conversion Date, all rights with respect to the
shares of Series C Preferred Stock so converted, including the rights, if
any, to receive notices, will terminate, except the rights of Holders
thereof to:
(1) receive certificates for the number of shares of Common
Stock into which such shares of Series C Preferred Stock have been
converted;
(2) the payment in cash or shares of Common Stock or a
combination thereof (subject, in each such case, to applicable law) of
any accumulated and unpaid dividends accrued thereon pursuant to and
subject to the terms of Section 4.2 hereof; and
(3) exercise the rights to which they are entitled as
Holders of Common Stock.
(c) If the Conversion Date shall not be a Business Day, then such
conversion right shall be deemed exercised on the next Business Day.
6
<PAGE>
4.2 When shares of Series C Preferred Stock are converted pursuant to
this Section 4, all accumulated and unpaid dividends (if declared) on the Series
C Preferred Stock so converted to (and not including) the Conversion Date (or
the date on which the Deposit Account is terminated, if earlier) may be paid, at
the Corporation's option,
(a) in cash;
(b) in a number of fully paid and nonassessable shares of Common
Stock equal to the quotient of (i) the amount of accumulated and unpaid
dividends payable to the Holders of Series C Preferred Stock hereunder,
divided by (ii) 95% of the Market Value for the period ending on the
Conversion Date; or
(c) a combination thereof (subject, in the case of such clauses
(a), (b) and (c), to applicable law).
4.3 The Conversion Price shall be subject to adjustment if any
Conversion Price Adjustment Event described in Section 4.3(a) occurs. The
adjustment will be accomplished from time to time as described in Section
4.3(b).
(a) In case the Corporation shall at any time or from time to time
after the Insurance Date:
(i) make a redemption payment or pay a dividend (or other
distribution) payable in shares of Common Stock to all Holders of any class
of Capital Stock of the Corporation (other than the issuance in connection
with the payment in redemption for, of dividends on, or the conversion of
the Series C Preferred Stock);
(ii) make any issuance to all holders of shares of Common Stock
of rights, options or warrants entitling them to subscribe for or purchase
shares of Common Stock or securities convertible into or exchangeable for
shares of Common Stock at less than Market Value as of the date of
conversion or exchange; provided, however, that no adjustment shall be made
with respect to such a distribution to the extent the Holders of shares of
Series C Preferred Stock would be entitled to receive such rights, options
or warrants upon conversion at any time of shares of Series C Preferred
Stock into Common Stock; and provided, further, that if such rights,
options or warrants are only exercisable upon the occurrence of certain
triggering events, then the Conversion Price will not be adjusted until
such triggering events occur;
(iii) make any subdivision, combination or reclassification of any
class of Common Stock;
(iv) make any distribution consisting exclusively of cash
(excluding any cash distributed upon a merger or consolidation to which
Section 4.3(a)(vi) applies) to all
7
<PAGE>
holders of shares of any class of Common Stock (which distribution is not
also being made to the Holders of the Series C Preferred Stock based on the
number of shares of Common Stock into which the Series C Preferred Stock is
then convertible unless the Common Stock does not share pro rata in such
distribution) in an aggregate amount that, combined together with (1) all
other such all cash distributions made within the then-preceding 12 months
in respect of which no adjustment has been made and (2) any cash and the
fair market value of other consideration paid or payable in respect of any
tender offer by the Corporation or any of its Subsidiaries for shares of
any class of Common Stock concluded within the then-preceding 12-months in
respect of which no adjustment has been made, exceeds 15% of the
Corporation's Market Capitalization on the record date of such
distribution;
(v) complete of a tender or exchange offer made by the
Corporation or any of its Subsidiaries for shares of any class of Common
Stock that involves an aggregate consideration that, together with (1) any
cash and other consideration payable in a tender or exchange offer by the
Corporation or any of its Subsidiaries for shares of any class of Common
Stock expiring within the then-preceding 12-months in respect of which no
adjustment has been made and (2) the aggregate amount of any such all-cash
distributions referred to in (iv) above to all holders of shares of any
class of Common Stock within the then-preceding 12-months in respect of
which no adjustments have been made, exceeds 15% of the Corporation's
Market Capitalization just prior to the expiration of such tender offer; or
(vi) make a distribution to all holders of any class of Common
Stock (which distribution is not also being made to the holders of the
Series C Preferred Stock based on the number of shares of Common Stock into
which the Series C Preferred Stock is then convertible unless the Common
Stock does not share pro rata in such distribution) consisting of evidences
of indebtedness, shares of capital stock other than Common Stock or assets,
including securities, but excluding those dividends, rights, options,
warrants and distributions referred to in clauses (i) through (v) above
(other than in connection with a merger effected solely to reflect a change
in the jurisdiction of incorporation of the Corporation).
(b) If any Conversion Price Adjustment Event occurs, the Corporation
will calculate the adjustment to the Conversion Price as follows for each
specific event. In the following descriptions, the variables have the following
definitions:
"C" equals the total number of shares of Series C Preferred Stock
outstanding at the time of the Conversion Price Adjustment Event;
"U" equals the number of shares of Common Stock underlying
rights, options, or warrants issued to all holders of Common Stock pursuant
to Section 4.3(a)(ii) entitling such holders to subscribe for or purchase
shares of Common Stock or securities convertible into or exchangeable for
shares of Common Stock issued in the Conversion Price Adjustment Event;
8
<PAGE>
"X" equals the total number of shares of Common Stock
outstanding immediately prior to the Conversion Price Adjustment Event (not
including unexercised options, warrants or rights);
"Y" equals the total number of shares of Common Stock outstanding
immediately after the Conversion Price Adjustment Event (not including
unexercised options, warrants or rights);
"Z" equals the total number of shares of Common Stock outstanding
at the time of the Conversion Price Adjustment Event;
"Cash" equals any distribution consisting exclusively of cash
(excluding any cash distributed upon a merger or consolidation to which
section 4.5 applies) to all holders of shares of Common Stock in an
aggregate amount that, combined together with (1) all other such all-cash
distributions made within the then-preceding 12-months in respect of which
no adjustment has been made and (2) any cash and the fair market value of
other consideration paid or payable in respect of any tender offer by the
Corporation or any of its Subsidiaries for shares of any class of Common
Stock concluded within the then-preceding 12-months in respect of which no
adjustment has been made pursuant to Section 4.3(a)(iv);
"ExP" equals the exercise price or other consideration to be paid
by the holder upon the exercise of or conversion of "U";
"MC" equals market capitalization;
"MV" equals market value per share of the Common Stock as of the
date of conversion or exchange of "U";
"#Sh" equals the number of shares of Common Stock receiving the
distribution contemplated in Section 4.3(a)(vi) or subject to the tender
offer contemplated in Section 4.3(a)(v);
"TOff" equals the aggregate consideration that, together with (1)
any cash and other consideration payable in a tender or exchange offer by
the Corporation or any of its Subsidiaries for shares of Common Stock
expiring within the then-preceding 12-months in respect of which no
adjustment has been made and (2) the aggregate amount of any such all-cash
distributions referred to in section 4.3(a)(iv) to all holders of shares of
Common Stock within the then-preceding 12-months in respect of which no
adjustments have been made;
"TOff/S" equals the tender offer price per share;
"TPur" equals the number of shares purchased in the tender offer;
9
<PAGE>
"Value" equals the aggregate fair market value of the distribution
described in Section 4.3(a)(vi), as determined in good faith by the Board of
Directors of the Corporation;
"CP" equals the Conversion Price immediately prior to the
Conversion Price Adjustment Event;
"ACP" equals the Conversion Price immediately after the
Conversion Price Adjustment Event;
(i) In the case of a Conversion Price Adjustment Event described
in Sections 4.3(a)(i) or 4.3(a)(iii), the Conversion Price in effect
immediately before such event shall be adjusted pursuant to the following
formula: X/Y multiplied by CP=ACP.
(ii) In the case of a Conversion Price Event described in Section
4.3(a)(ii), the Conversion Price in effect immediately before such event
shall be adjusted pursuant to the following formula: X/(X+U((MV-ExP)/MV))
multiplied by CP=ACP. If any options, warrants or other rights of the
nature described in Section 4.3(a)(ii) ("Rights") expire without exercise
------
or conversion, the Conversion Price will be readjusted to the Conversion
Price which would otherwise be in effect had the adjustment made upon the
issuance of such Rights been made on the basis of delivery of only the
number of shares of Common Stock actually delivered upon the exercise or
conversion of such Rights.
(iii) In the case of a Conversion Price Adjustment Event described
in Section 4.3(a)(iv), the Conversion Price in effect immediately before
such event shall be adjusted pursuant to the following formula: CP-
((Cash-15%MC)/C)=ACP. There will be no adjustment to the Conversion Price
pursuant to Clause 4.3(a)(iv) if (Cash-15% MC) is less than or equal to
zero.
(iv) In the case of a Conversion Price Adjustment Event described
in Section 4.3(a)(v), and if the tender offer price or exchange offer price
per share is greater than Market Value, the Conversion Price in effect
immediately before such event shall be adjusted pursuant to the following
formula: CP-((TPur multiplied by (TOff/S-MV))/(#SH-TPur))=ACP. There will
be no adjustment to the Conversion Price pursuant to Clause 4.3(a)(v) if
TOff/S is less than or equal to Market Value or if TPur multiplied by
TOff/S is less than 15% MC.
(v) In the case of a Conversion Price Adjustment Event described
in Section 4.3(a)(vi), the Conversion Price in effect immediately before
such event shall be adjusted pursuant to the following formula: CP-
(Value/#SH)=ACP.
An adjustment made pursuant to this Section 4.3 shall become effective: (x) in
the case of a Conversion Price Adjustment Event described in Section 4.3(a)(i),
(ii), (iv) or (vi), immediately following the close of business on the record
date for the determination of holders of Common Stock entitled to participate in
such event; or (y) in the case of a Conversion Price Adjustment Event described
in Section 4.3(a)(iii), the close of business on the day upon which such
corporate action
10
<PAGE>
becomes effective; or (z) in the case of a Conversion Price Adjustment Event
described in Section 4.3(a)(v), the close of business on the day of the
completion of such tender offer or exchange offer.
(c) Notwithstanding anything herein to the contrary, no adjustment
under this Section 4.3 need be made to the Conversion Price unless such
adjustment would require an increase or decrease of at least 1% of the
Conversion Price then in effect. Any lesser adjustment shall be carried forward
and shall be made at the time, if ever, of and together with the next subsequent
adjustment required pursuant to this Section 4.3, which, together with any
adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least 1% of such Conversion Price.
(d) Notwithstanding anything to the contrary contained in this
Certificate of Amendment, no Conversion Price adjustment will be made as a
result of the issuance of Common Stock on conversion of or in payment of a
dividend on the Series C Preferred Stock or pursuant to the Deposit Agreement.
(e) Each event requiring adjustment to the Conversion Price shall
require only a single adjustment even though more than one of the adjustment
clauses set forth in Section 4.3(a), Section 4.4 or Section 4.5 may be
applicable to such event.
(f) If the Corporation shall take a record of the holders of any class
of its Capital Stock for the purpose of entitling them to receive a dividend or
other distribution or shall take any other action which would otherwise
constitute a Conversion Price Adjustment Event, and shall thereafter and before
the distribution to stockholders thereof legally abandon its plan to pay or
deliver such dividend or distribution or abandon such other action, then
thereafter no adjustment in the Conversion Price then in effect shall be
required by reason of the taking of such record or such other action.
(g) Upon any increase or decrease in the Conversion Price, then, and
in each such case, the Corporation promptly shall deliver to each registered
Holder of Series C Preferred Stock a certificate signed by an authorized officer
of the Corporation, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and specifying
the increased or decreased Conversion Price then in effect following such
adjustment.
(h) The Corporation reserves the right to make such reductions in the
Conversion Price in addition to those required in the foregoing provisions as it
considers to be advisable in order that any event treated for Federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
recipients. In the event the Corporation elects to make such a reduction in the
Conversion Price, the Corporation will comply with the requirements of Rule 14e-
1 under the Exchange Act, and any other securities laws and regulations
thereunder if and to the extent that such laws and regulations are applicable in
connection with the reduction of the Conversion Price.
4.4 In the event that, after the Issuance Date, the Corporation
distributes rights or warrants (other than those referred to in Section
4.3(a)(ii)) pro rata to all holders of shares of Common Stock, so long as any
such rights or warrants have not expired or been redeemed by the
11
<PAGE>
Corporation, the Holder of any Series C Preferred Stock surrendered for
conversion will, be entitled to receive upon such conversion, in addition to the
shares of Common Stock then issuable upon such conversion (the "Conversion
----------
Shares"), a number of rights or warrants to be determined as follows:
- ------
(a) if such conversion occurs on or prior to the date for the
distribution to the holders of rights or warrants of separate certificates
evidencing such rights or warrants (the "Distribution Date"), the same
-----------------
number of rights or warrants to which a holder of a number of shares of
Common Stock equal to the number of Conversion Shares is entitled at the
time of such conversion in accordance with the terms and provisions
applicable to the rights or warrants; and
(b) if such conversion occurs after such Distribution Date, the
same number of rights or warrants to which a holder of the number of shares
of Common Stock into which such Series C Preferred Stock was convertible
immediately prior to such Distribution Date would have been entitled on
such Distribution Date in accordance with the terms and provisions of and
applicable to the rights or warrants.
In the event the Holders of the Series C Preferred Stock are not entitled to
receive such rights or warrants pursuant to Section 4.4(a) or 4.4(b), the
Conversion Price will be subject to adjustment upon any declaration or
distribution of such rights or warrants pursuant to and subject to the terms of
Section 4.3(b)(ii), above.
4.5(a) In case of:
(i) any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par
value); or
(ii) any consolidation or merger of the Corporation with or into
another Person (other than a consolidation or merger in which the
Corporation is the resulting or surviving Person and which does not result
in any reclassification or change of outstanding Common Stock or in
connection with a merger effectuated solely to reflect a change in the
jurisdiction of incorporation of the Corporation; provided that any such
merger does not affect the rights and relationships of holders of Common
Stock in an adverse manner); or
(iii) any sale, transfer or other disposition to another Person of
all or substantially all of the assets of the Corporation (other than the
sale, transfer, assignment or distribution of shares of capital stock or
assets to a Subsidiary) contemplated on a consolidated basis (any of the
events described in Section 4.5(a) being referred to in this Section 4.5 as
a "Transaction"),
-----------
then the adjustment described in Section 4.5(b) will be made.
12
<PAGE>
(b) Each share of Series C Preferred Stock then outstanding shall,
without the consent of any Holder of Series C Preferred Stock (except as
expressly required by applicable law), become convertible only into the kind and
amount of shares of stock or other securities (of the Corporation or another
issuer), cash or other property receivable upon such Transaction by a holder of
the number of shares of Common Stock into which such share of Series C
Preferred Stock could have been converted immediately prior to such Transaction
after giving effect to any adjustment event.
(c) The provisions of this Section 4.5 and any equivalent thereof in
any such certificate similarly shall apply to successive Transactions. The
provisions of this Section 4.5 shall be the sole right of Holders of Series C
Preferred Stock in connection with any Transaction and, except as expressly
provided by applicable law, such Holders shall have no separate vote thereon.
4.6 In the case of any distribution by the Corporation to its
stockholders of substantially all of its assets, each Holder of Series C
Preferred Stock will participate pro rata in such distribution based on the
number of shares of Common Stock into which such Holders' shares of Series C
Preferred Stock would have been convertible immediately prior to such
distribution.
4.7 If, as a result of any Conversion Price Adjustment Event, a
Holder of the Series C Preferred Stock becomes entitled to receive upon
conversion shares of two or more classes of Capital Stock, the Corporation shall
determine the reasonable allocation of the adjusted Conversion Price between the
classes of Capital Stock. After such allocation, the Conversion Price of each
class of Capital Stock shall thereafter be subject to adjustment on terms
comparable to the Series C Preferred Stock in this Article 4.
4.8 The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Series C Preferred Stock, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series C
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common Stock to permit such reservation or to
permit the conversion of all outstanding shares of Series C Preferred Stock.
4.9 The issuance or delivery of certificates for Common Stock upon
the conversion of shares of Series C Preferred Stock shall be made without
charge to the converting Holder of shares of Series C Preferred Stock for such
certificates or for any documentary stamp or similar tax in respect of the
issuance or delivery of such certificates or the securities represented thereby,
and such certificates shall be issued or delivered in the respective names of,
or in such names as may be directed by, the Holders of the shares of Series C
Preferred Stock converted; provided, however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate in a name other than that
of the Holder of the shares of Series C Preferred Stock converted, and the
Corporation shall not be required to issue or deliver such certificate unless or
until the Person or Persons requesting
13
<PAGE>
the issuance or delivery thereof shall have paid to the Corporation the amount
of such tax or shall have established to the reasonable satisfaction of the
Corporation that such tax has been paid.
5. Optional Redemption.
-------------------
5.1(a) The Corporation may, at its option and to the extent
permitted by applicable law redeem the Series C Preferred Stock at a Redemption
Price equal to premium of [___]% of the Liquidation Preference (plus any
accumulated and unpaid dividends, if any) on or after [__________], 2001, if the
Trading Price of the Series C Preferred Stock equals or exceeds $[_____] per
share for 20 Trading Days within any 30 trading day period; provided that, any
such redemption may be effected, in whole or in part, at the option of the
Corporation, in cash, by delivery of fully paid and nonassessable shares of
Common Stock or a combination thereof, upon not less than 20 days' notice nor
more than 60 days' notice, during the twelve month period commencing on
[________] of the years indicated below, and at the Redemption Prices per share,
plus in each case all accumulated and unpaid dividends to the Redemption Date.
Except as provided in the immediately preceding sentence, the Corporation may
not redeem the Series C Preferred Stock prior to [_____], 2002.
(b) Beginning on [______], 2002, the Series C Preferred Stock may be
redeemed, in whole or in part, at the option of the Corporation, in cash, by
delivery of fully paid and nonassessable shares of Common Stock or a combination
thereof (subject, in each case, to applicable law), upon not less than 20 days'
notice nor more than 60 days' notice, during the twelve-month periods commencing
on [_________] of the years indicated below, at the following Redemption Prices
per share, plus in each case all accumulated and unpaid dividends to the
Redemption Date:
Redemption Premium
Year Per Share
- ---- ---------
2002...................... %
2003...................... %
2004...................... %
2005...................... %
2006 and thereafter....... 100%
(c) In the event that fewer than all the outstanding shares of the
Series C Preferred Stock are to be redeemed, the shares to be redeemed will be
determined pro rata or by lot, except that the Corporation may redeem such
shares held by any Holder of fewer than 100 shares (or shares held by Holders
who would hold fewer than 100 shares as a result of such redemption), as may be
determined by the Corporation.
14
<PAGE>
(d) If the Corporation elects to pay the Redemption Price in respect
of any shares of Series C Preferred Stock in shares of Common Stock, the number
of shares of Common Stock to be distributed in respect of such shares of Series
C Preferred Stock will be calculated by dividing the aggregate Redemption Price
in respect of such shares of Series C Preferred Stock payable to any Holder by
95% of the Market Value of the Common Stock as of the Redemption Notice Date.
(e) From and after the applicable Redemption Date (unless the
Corporation shall be in default of payment of the Redemption Price), dividends
on the shares of the Series C Preferred Stock to be redeemed on such Redemption
Date shall cease to accumulate, such shares shall no longer be deemed to be
outstanding, and all rights of the Holders thereof as stockholders of the
Corporation (except the right to receive the Redemption Price) will cease.
5.2 If any dividends on the Series C Preferred Stock are in arrears,
no shares of the Series C Preferred Stock will be redeemed unless all
outstanding shares of the Series C Preferred Stock are simultaneously redeemed.
5.3 In the event the Corporation shall elect to redeem shares of the
Series C Preferred Stock pursuant to Section 5.1 hereof, the Corporation must
provide the Holders with the Redemption Notice as described in Section 5.1(a) or
5.1(b), as applicable, and:
(a) (i) On or before any Redemption Date, each Holder of shares of
Series C Preferred Stock to be redeemed shall surrender the certificate or
certificates representing such shares of Series C Preferred Stock (properly
endorsed or assigned for transfer, if the Corporation shall so require and
the Redemption Notice shall so state), to the Corporation or the Redemption
Agent (if appointed) in the manner and at the place designated in the
Redemption Notice.
(ii) On the first Business Day following the Redemption Date, the
Corporation or the Redemption Agent, as applicable, shall pay or deliver to
the Holder, whose name appears on such certificate or certificates as the
registered owner thereof, the full Redemption Price due such Holder in
cash, in fully paid and nonassessable shares of Common Stock or in a
combination thereof (subject, in each case, to applicable law).
(iii) The shares represented by each certificate to be surrendered
shall be automatically (and without any further action of the Corporation
or the Holder) canceled as of the Redemption Date whether or not
certificates for such shares are returned to the Corporation and returned
to the status of authorized but unissued shares of preferred stock of no
series.
(iv) If fewer than all the shares represented by any such
certificate are to be redeemed, a new certificate shall be issued
representing the unredeemed shares, without costs to the Holder, together
with the amount of cash, if any, in lieu of fractional shares to the extent
the Corporation is legally and contractually entitled to pay cash for said
fractional shares. If the Corporation is not entitled to pay cash for
fractional shares, it shall pay cash
15
<PAGE>
to the Holder for the fractional shares when it becomes legally and
contractually able to pay such cash.
(b) If a Redemption Notice shall have been given as provided in
Section 5.1, dividends on the shares of Series C Preferred Stock so called for
redemption shall cease to accrue, such shares shall no longer be deemed to be
outstanding, and all rights of the Holders thereof as stockholders of the
Corporation with respect to shares so called for redemption (except for the
right to receive from the Corporation the Redemption Price (plus accumulated and
unpaid dividends, (whether or not declared) if any, to the Redemption Date))
shall cease (excluding any right to receive the dividend payment on shares
called for redemption where the Redemption Date falls between the Dividend
Payment Record Date and the Dividend Payment Date) either (i) from and after the
Redemption Date (unless the Corporation shall default in the payment of the
Redemption Price, in which case such rights shall not terminate at such time and
date) or (ii) if the Corporation shall so elect and state in the Redemption
Notice, from and after the time and date (which date shall be the Redemption
Date or an earlier date not less than 20 days after the date of mailing of the
Redemption Notice) on which the Corporation shall irrevocably deposit in trust
for the Holders of the shares to be redeemed with a designated Redemption Agent
as paying agent sufficient to pay at the office of such paying agent, on the
Redemption Date, the Redemption Price (plus accumulated and unpaid dividends, if
any, to the Redemption Date). Any money or shares of Common Stock so deposited
with such Redemption Agent which shall not be required for such redemption shall
be returned to the Corporation forthwith. Subject to applicable escheat laws,
any moneys or shares of Common Stock so set aside by the Corporation and
unclaimed at the end of one year from the Redemption Date shall revert to the
general funds of the Corporation, after which reversion the Holders of such
shares so called for redemption shall look only to the general funds of the
Corporation for the payment of the Redemption Price (plus accumulated and unpaid
dividends, if any, to the Redemption Date) without interest. Any interest
accrued on funds held by the Redemption Agent shall be paid to the Corporation
from time to time.
(c) If any Holder whose shares of Series C Preferred Stock are called
for redemption pursuant to this Article 5 fails to surrender the certificate
representing such shares (or fails to arrange for the appropriate book-entry
transfer if a global certificate has been issued), such Holder shall not be
entitled to receive payment of the redemption price until the certificate has
been surrendered for cancellation or the appropriate book-entry transfer is
made. Such Holder will not be entitled to receive any interest on the
Redemption Price.
6. Change of Control.
-----------------
6.1(a) Notwithstanding Section 4, in the event of a Change of
Control, Holders shall, if the Market Value at such time is less than the
Conversion Price, have a one time option, upon not less than 30 days' notice nor
more than 60 days' notice, to convert all of their outstanding shares of Series
C Preferred Stock into shares of Common Stock at an adjusted Conversion Price
equal to the greater of:
(i) the Market Value as of the Change of Control date; and
16
<PAGE>
(ii) $[__________].
(b) In lieu of issuing the shares of Common Stock issuable upon
conversion in the event of a Change of Control, the Corporation may, at its
option, make a cash payment equal to the Market Value of such Common Stock
otherwise issuable.
6.2 The foregoing provision is not waivable by the Corporation.
7. Liquidation Preference.
----------------------
7.1 Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, Holders of the Series C Preferred Stock will be
entitled to be paid, out of assets of the Corporation available for
distribution, the Liquidation Preference per share plus 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), before any distribution is made on
any Junior Securities, including, without limitation, the Common Stock.
7.2 If, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the amounts payable with respect to the Series C
Preferred Stock and all other Parity Securities are not paid in full, the
Holders of the Series C Preferred Stock and the Parity Securities will share
equally and ratably in any distribution of assets of the Corporation in
proportion to the full distributable amounts to which they are entitled.
7.3 After payment of the full amount of the Liquidation Preference
and accumulated and unpaid dividends to which they are entitled, the Holders of
shares of the Series C Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Corporation or have any right
or claim to any of the Corporation's remaining assets.
7.4 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 business of the Corporation (other than in connection with
the dissolution, liquidation or winding up of its business) nor the merger or
consolidation of the Corporation with or into any other corporation will be
deemed to be a dissolution, liquidation, or winding-up, voluntary or
involuntary, of the Corporation.
8. Voting Rights.
-------------
8.1 Holders of the Series C Preferred Stock have no voting rights
except as provided by law or as set forth herein.
8.2 If dividends on the Series C Preferred Stock are in arrears and
unpaid for six quarterly periods, the Holders of the Series C Preferred Stock
voting separately as a class with the shares of any other preferred stock or
preference securities having similar voting rights will be
17
<PAGE>
entitled at the next regular or special meeting of stockholders of the
Corporation to elect two directors of the Corporation. Such voting rights will
continue only until such time as the dividend arrearage on the Series C
Preferred Stock has been paid in full.
8.3 The affirmative vote or consent of the Holders of at least 66-
2/3% of the outstanding Series C Preferred Stock will be required for:
(a) the issuance of any class of Senior Securities or security
convertible into Senior Securities or evidencing a right to purchase any
shares or any class or series of Senior Securities, and
(b) amendments to the Corporation's Certificate of Incorporation
that would affect adversely the rights of Holders of the Series C Preferred
Stock.
In all such cases each share of Series C Preferred Stock shall be entitled to
one vote.
8.4 Notwithstanding any provision hereof to the contrary (including,
without limitation, Section 8.3),
(a) the creation, authorization or issuance of any shares of
Junior Securities, Parity Securities or Senior Securities; or
(b) an increase or decrease in the amount of authorized capital
stock of any class, including any preferred stock (other than, with respect
to an increase, Series C Preferred Stock), shall not require the consent of
the Holders of the Series C Preferred Stock unless otherwise required by
applicable law and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of Holders of shares of the Series
C Preferred Stock.
9. No Personal Liability of Directors, Officers, Employees,
--------------------------------------------------------
Incorporators and Stockholders.
------------------------------
9.1 Subject to applicable law, no director, officer, employee,
incorporator or stockholder of the Corporation or any of its Affiliates, as
such, shall have any liability for any obligations of the Corporation and any of
its Affiliates under the Series C Preferred Stock or this Certificate of
Incorporation or for any claim based on, in respect of, or by reason of, such
obligations or their creation. To the extent permitted by applicable law, each
Holder of the Series C Preferred Stock waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Series
C Preferred Stock.
18
<PAGE>
10. Amendment, Supplement and Waiver.
--------------------------------
10.1. Unless otherwise expressly required by applicable law, without
the consent of any Holder of the Series C Preferred Stock, the Corporation may
amend or supplement this Certificate of Amendment to cure any ambiguity, defect
or inconsistency, to provide for uncertificated Series C Preferred Stock in
addition to or in place of certificated Series C Preferred Stock, to provide for
the assumption of the Corporation's obligations to Holders of the Series C
Preferred Stock in the case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the
Series C Preferred Stock or that does not adversely affect the legal rights of
any such Holder under this Certificate of Incorporation.
11. Certain Definitions.
-------------------
Set forth below are certain defined terms used in this Certificate of
Amendment.
11.1 "Affiliate" of any specified Person means any other Person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that no individual, other than a director of the Corporation or an
officer of the Corporation with a policy making function, shall be deemed an
Affiliate of the Corporation or any of its Subsidiaries, solely by reason of
such individual's employment, position or responsibilities by or with respect to
the Corporation or any of its Subsidiaries.
11.2. "Business Day" means any day other than a Legal Holiday.
------------
11.3. "Capital Stock" means any and all shares, of corporate stock
-------------
whether common or preferred.
11.4. "Change of Control" means: (a) the first day any "person or
-----------------
group" as such terms are used in Sections 13(d) and 14(d) of the Exchange Act,
is or becomes a "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person will be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time) directly or
indirectly, of more than 50% of the Corporation's outstanding Common Stock; (b)
the first day, during any period of two consecutive years, on which a majority
of the members of the Board of Directors of the Company are not Continuing
Directors; (c) any transaction or series of transactions, pursuant to which the
Corporation consolidates with or merges with or into any person, or conveys,
transfers or leases all or substantially all, computed on a consolidated basis
of its assets to any Person, or any corporation consolidates with or merges into
or with the Corporation, in any such event pursuant to a transaction in which
the Corporation's outstanding Common Stock is changed into or exchanged for
cash, securities or other property, other than any such transaction where the
Corporation's Common Stock
19
<PAGE>
is not changed or exchanged at all, except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Corporation or where no
"person" or "group" owns, immediately after such transaction, directly or
indirectly, more than 50% of the total outstanding voting stock of the surviving
corporation; or (d) the Corporation is liquidated or dissolved or adopts a plan
of liquidation or dissolution. The good faith determination of the Corporation's
Board of Directors or a duly authorized committee thereof, based upon the advice
of outside counsel, of the beneficial ownership of securities of the Corporation
within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act will be
conclusive, absent contrary controlling precedent or contrary written
interpretation published by the SEC.
11.5. "Common Stock" means the common stock, $.01 par value per share
------------
of the Corporation.
11.6. "Corporation" means PSINet Inc., a New York corporation, and any
-----------
successor thereof.
11.7. "Continuing Director" means, as of any date of determination,
-------------------
any member of the Board of Directors of the Corporation: (a) who was a member of
such Board of Directors two years prior to such date; or (b) whose nomination
for election or election to such Board of Directors was approved by an
affirmative vote of a majority of the directors then still in office who were
members of such Board two years prior to such date or whose nomination for
election or election was previously so approved.
11.8. The "Conversion Date" shall be the date the Transfer Agent
---------------
receives the Conversion Notice.
11.9. The "Conversion Notice" is written notice from the Holder to the
-----------------
Corporation stating that the Holder elects to convert all or a portion of the
shares of Series C Preferred Stock represented by certificates delivered to the
Transfer Agent contemporaneously, which notice shall be substantially in the
form of Exhibit A attached hereto.
---------
11.10. The "Conversion Price" shall initially be $[________], subject
----------------
to adjustment as set forth in Section 4.3.
11.11. "Conversion Price Adjustment Events" are any of those events
----------------------------------
specified in Section 4.3(a).
11.12. "Deposit Account" means that certain deposit account
---------------
established pursuant to the Deposit Agreement.
11.13. "Deposit Agreement" means the Deposit Agreement between the
-----------------
Corporation and Wilmington Trust Corporation.
11.14. "Dividend Payment Date" is as defined in Section 2.1, above.
---------------------
20
<PAGE>
11.15. "Dividend Payment Record Date" is as defined in Section 2.1,
----------------------------
above.
11.16. "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
11.17. "Holder" means a Person in whose name shares of Capital Stock
is registered.
11.18. "Issuance Date" means the date on which the Series C Preferred
-------------
Stock is originally issued under this Certificate of Amendment.
11.19. "Junior Security" is as defined in Section 3.1.
---------------
11.20. "Legal Holiday" means a Saturday, a Sunday or a day on which
-------------
banking institutions in the City of New York or at a place payment is to be
received are authorized by law, regulation or executive order to remain closed.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
11.21. "Liquidation Preference" means $50.00 per share of Series C
----------------------
Preferred Stock.
11.22. "Market Capitalization" means the product of the then-current
---------------------
Market Value times the total number of shares of Common Stock then outstanding.
11.23. "Market Value" means, as of any date, the average of the daily
------------
closing price for the five consecutive trading days ending on such date. The
closing price for each day shall be the last sales price or in case no such
reported sales take place on such day, the average of the last reported bid and
asked price, in either case, on the principal national securities exchange on
which the shares of Common Stock are admitted to trading or listed, or if not
listed or admitted to trading on such exchange, the representative closing bid
price as reported by the Nasdaq National Market, or other similar organization
if the Nasdaq National Market is no longer reporting such information, or if not
so available, the fair market price as determined, in good faith, by the Board
of Directors of the Corporation.
11.24. "Officer" means, with respect to any Person, the Chairman of
-------
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
Controller, Secretary or any Vice-President of such Person.
11.25. "Parity Security" is as defined in Section 3.1.
---------------
11.26. "Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock corporation, trust, limited liability company
or unincorporated organization.
11.27. "Redemption Agent" means that Person, if any, appointed by the
----------------
Corporation to hold funds deposited by the Corporation in trust to pay to the
Holders of shares to be redeemed.
21
<PAGE>
11.28. "Redemption Date" means that certain date set forth in the
---------------
Redemption Notice on which date the redemption of the Series C Preferred Stock
is completed.
11.29. "Redemption Notice" means that notice to be given by the
-----------------
Corporation to the Holders notifying the Holders as to the redemption, in whole
or in part, of the Series C Preferred Stock pursuant to Section 4 hereof. The
Redemption Notice shall include the following information: (i) the Redemption
Date and the time of day on such date; (ii) the total number of shares of Series
C Preferred Stock to be redeemed and, if fewer than all the shares held by such
Holder are to be redeemed, the number of such shares to be redeemed from such
Holder; (iii) the Redemption Price (whether to be paid in cash or shares of
Common Stock); (iv) the place or places where certificates for such shares are
to be surrendered for payment of the Redemption Price and delivery of
certificates representing shares of Common Stock (if the Corporation so
chooses); (v) that dividends on the shares to be redeemed will cease to accrue
on such Redemption Date unless the Corporation defaults in the payment of the
Redemption Price; and (vi) the name of any bank or trust Corporation, if any,
performing the duties of Redemption Agent.
11.30. "Redemption Notice Date" means the date the Redemption Notice
----------------------
is first mailed or delivered to any Holder.
11.31. "Redemption Price" means that price established for redemption
----------------
of the Series C Preferred Stock established in Section 5.1 hereof.
11.32. "SEC" means the Securities and Exchange Commission.
---
11.33. "Securities Act" means the Securities Act of 1933, as amended.
--------------
11.34. "Self Funding Event" is as defined in Section 2.2.
------------------
11.35. "Series A Preferred Stock" means the Corporation's authorized
------------------------
Series A Cumulative Preferred Stock.
11.36. "Series C Preferred Stock" means the Series C Preferred Stock
------------------------
authorized in this Article Fourth.
11.37. "Senior Securities" is as defined in Section 3.1.
-----------------
11.38. "Subsidiary" means, with respect to any Person, any
----------
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such person or one or more of the other Subsidiaries of such Person or a
combination thereof.
22
<PAGE>
11.39. "Trading Day" means any day on which Preferred Stock is traded
-----------
on the Nasdaq National Market.
11.40. "Trading Price" means the last reported sales price of the
-------------
Preferred Stock on the Nasdaq National Market on any specified Trading Day.
11.41. The "Transfer Agent" shall be as established pursuant to
--------------
Article 12 hereof.
12. Transfer Agent and Registrar.
----------------------------
The duly appointed Transfer Agent and registrar for the Series C
Preferred Stock shall be First Chicago Trust Company of New York. The
Corporation may, in its sole discretion, remove the Transfer Agent in accordance
with the agreement between the Corporation and the Transfer Agent; provided that
the Corporation shall appoint a successor transfer agent who shall accept such
appointment prior to the effectiveness of such removal.
13. Other Provisions.
----------------
13.1. With respect to any notice to a Holder of shares of the Series
C Preferred Stock required to be provided hereunder, neither failure to mail
such notice, nor any defect therein or in the mailing thereof, to any particular
Holder shall affect the sufficiency of the notice or the validity of the
proceedings referred to in such notice with respect to the other Holders or
affect the legality or validity of any distribution, rights, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or, except as otherwise expressly provided by
applicable law, the vote upon any such action. Any notice which was mailed in
the manner herein provided shall be conclusively presumed to have been duly
given whether or not the Holder receives the notice.
13.2. Shares of Series C Preferred Stock issued and reacquired will
be retired and canceled promptly after reacquisition thereof and, upon
compliance with the applicable law, will have the status of authorized but
unissued shares of preferred stock of the Corporation undesignated as to series
and may with any and all other authorized but unissued shares of preferred stock
of the Corporation be designated or redesignated and issued or reissued, as the
case may be, as part of any series of preferred stock of the Corporation.
13.3. In the Corporation's discretion, no fractional shares of Common
Stock or securities representing fractional shares of Common Stock will be
issued upon conversion, redemption, or as dividends payable on the Series C
Preferred Stock. Any fractional interest in a share of Common Stock resulting
from conversion, redemption, or dividend payment will be paid in cash based on
the last reported sale price of the Common Stock on the Nasdaq National
Market (or any national securities exchange or authorized quotation system on
which the Common Stock is then listed) at the close of business on the trading
day next preceding the date of conversion redemption or Dividend Payment Date,
as applicable or such later time as the Corporation is legally and
contractually able to pay for such fractional shares.
23
<PAGE>
13.4. All notices periods referred to herein shall commence on the
date of the mailing of the applicable notice.
13.5. Notwithstanding any provision of this Article FOURTH to the
contrary, the nonassessability of each share of Series C Preferred Stock and
each share of Common Stock issuable in respect thereof shall be subject to
Section 630 of the Business Corporation Law.
FIFTH: No shares of the Corporation's [_____%] Series C Cumulative
Convertible Preferred Stock have been issued as of the date hereof. The
foregoing amendments to the Certificate of Incorporation were authorized by the
affirmative vote of a majority of the members of the Board of Directors of the
Corporation or a duly authorized committee thereof at a meeting duly called and
held on [___________], 1999.
24
<PAGE>
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Amendment on this _____ day of April ___, 1999.
----------------------------------------
Edward D. Postal, Senior Vice President
and Chief Financial Officer
25
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be executed by the registered Holder
in order to convert shares of Series C Preferred Stock)
The undersigned hereby elects to convert the number of [__]% Series C Cumulative
Convertible Preferred Stock of PSINet Inc. (the "Corporation") indicated
below, into the number of shares of the Corporation's common stock, par value
$.01 per share (the "Common Stock"), indicated below, as of the date written
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Corporation in connection therewith. No fee will be charged to
the Holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
____________________________________________________________________________
Date to Effect Conversion
____________________________________________________________________________
Number of shares of Series C Preferred Stock to be Converted
____________________________________________________________________________
Number of shares of Common Stock to be Issued
____________________________________________________________________________
Applicable Conversion Price
____________________________________________________________________________
Signature
____________________________________________________________________________
Name
____________________________________________________________________________
By:
____________________________________________________________________________
Address
26
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
PSINET INC.
Under Section 805 of the Business Corporation Law
FILED BY:
Nixon, Hargrave, Devans & Doyle llp
437 Madison Avenue
New York, New York 10022
<PAGE>
EXHIBIT 4.1
PP
<TABLE>
<S> <C>
PSINet Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK CUSIP 74437C 30 9
SEE REVERSE SIDE FOR CERTAIN DEFINITIONS
</TABLE>
This Certifies that
is the owner of
SHARES OF THE _% SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01
PER SHARE, OF
PSINet Inc., transferable on the books of the Corporation by the holder hereof
in person or by duly authorized attorney upon surrender of this certificate
properly endorsed. The shares represented hereby are issued and shall be held
subject to the provisions of the Certificate of Incorporation and By-laws of the
Corporation and all amendments thereto, and any restrictions on the reverse side
hereof, to all of which the holder by acceptance hereof assents. This
certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
Corporate Secretary Chairman and Chief Executive Officer
Countersigned and Registered:
First Chicago Trust Company of New York
Transfer Agent and Registrar
By
Authorized Signature
<PAGE>
PSINet Inc.
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT
CHARGE A FULL STATEMENT OF THE DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF THE SHARES OF EACH CLASS AUTHORIZED TO BE ISSUED AND THE
DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF EACH SERIES OF ANY
CLASS OF PREFERRED STOCK WHICH THE CORPORATION IS AUTHORIZED TO ISSUE SO FAR AS
THE SAME HAVE BEEN FIXED AND THE AUTHORITY OF THE BOARD TO DESIGNATE AND FIX THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF OTHER SERIES. SUCH REQUEST
SHOULD BE ADDRESSED TO THE SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT
NAMED ON THE FACE HEREOF.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT _ . . . . . . . . . . Custodian . . . . . . . . .
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right Act . . . . . . . . . . . . .
of survivorship and not as (State)
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------
| |
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE.
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________________
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.
Dated, _________________________ SIGNATURE(S) GUARANTEED
BY__________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings
and Loan Associations and Credit Unions) WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM PURSUANT TO S.E.C. RULE 17ad.-15ER.
<PAGE>
EXHIBIT 4.2
PSINET INC.
DEPOSIT AGREEMENT
DEPOSIT AGREEMENT, dated as of April [___], 1999, by and between PSINet
Inc., a New York corporation (the "Company"), and Wilmington Trust Company (the
"Deposit Agent"), for the benefit of the registered holders (the "Holders") of
the [___]% Series C Cumulative Convertible Preferred Stock (the "Preferred
Stock").
This Agreement is made to induce all present and future Holders to purchase
the Preferred Stock by providing a deposit account (the "Deposit Account") to
secure the obligation of the Holders to acquire from the Company common stock,
par value $0.01 per share of the Company (the "Common Stock") on each Deposit
Payment Date (as defined below) as provided herein and, in lieu thereof, to
provide for a quarterly cash payment to the Holders in an amount equal to
$[_____] per share of Preferred Stock (the "Quarterly Return Amount") in the
manner hereinafter provided.
NOW, THEREFORE, the parties hereto agrees as follows:
1. Establishment of Deposit Account.
--------------------------------
(a) The Company hereby agrees that the Deposit Account shall be
established in connection with the offering of [__________] shares of Preferred
Stock (the "Offering") and shall be held subject to the terms and conditions of
this Agreement.
(b) Simultaneously with the closing of the Offering, the Initial Holders
shall deliver $[_________] in cash (the "Deposit Fund") to the Deposit Agent
against the Deposit Agent's written acknowledgment and receipt of the Deposit
Fund, in the form attached hereto as Exhibit A, which amount the Deposit Agent
will deposit into the Deposit Account and hold pursuant to the terms of this
Agreement. Funds placed in the Deposit Account will be the property of the
Holders, and not of the Company. The Deposit Account will secure the obligation
of the Holders to acquire from the Company shares of its Common Stock at the
election of the Company on each Deposit Payment Date, as set forth herein. The
Deposit Fund shall be invested as provided on Exhibit B to be attached at the
closing of the Offering and which will provide sufficient funds without any
further investment by the Company to equal the aggregate Quarterly Return Amount
due on the outstanding Preferred Stock, as such Quarterly Return Amount becomes
due, for each Deposit Payment Date (as defined below). The Deposit Agent shall
have no responsibility for determining whether funds held in the Deposit Account
shall have been invested in a such a manner so as to comply with the
requirements of this Section 1(b).
<PAGE>
2. Distribution, Reduction and Termination of Deposit Account.
----------------------------------------------------------
(a) Unless on or prior to the Notice Date (as defined below), the Company
shall have delivered to the Deposit Agent a Direction Notice (as defined below),
the Deposit Agent shall deliver to each Holder the Quarterly Return Amount on
[________], [________], [________], and [________] of each year (each such date
being a "Deposit Payment Date"), commencing [_______], 1999 and continuing until
[_____________________], 2002 (the "Deposit Expiration Date"). If the Company
shall have delivered a Direction Notice, substantially in the form attached
hereto as Exhibit C, to the Deposit Agent on or prior to the Notice Date, the
Deposit Agent shall, as instructed by the Company in such Direction Notice,
purchase from the Company, for transfer to each holder of Preferred Stock on the
next Deposit Payment Date, that number of whole shares of Common Stock,
determined by dividing the Quarterly Return Amount, (which has not been
previously paid in cash or shares of Common Stock) as the Company may direct the
Deposit Agent to utilize to purchase Common Stock, by 95% of the Market Value
(as defined below) of the Common Stock as of the Notice Date. At the written
request of the Deposit Agent, the Company shall deliver, for and on behalf of
the Deposit Agent, the Common Stock acquired by the Deposit Agent directly to
Holders of Preferred Stock. The Deposit Agent's obligation hereunder to purchase
shares of Common Stock from the Company shall be secured by the funds in the
Deposit Account.
(b) In the event of any conversion of the Preferred Stock on or prior to
the Deposit Expiration Date, the Company shall deliver a Direction Notice to the
Deposit Agent requiring the Deposit Agent to pay to the Company any funds
remaining in the Deposit Account allocable to the shares of Preferred Stock so
converted. Such allocation shall be made pro rata based upon the number of
shares of Preferred Stock so converted.
(c) In the event of any redemption of Preferred Stock prior to [________],
2002, any funds remaining in the Deposit Account allocable to those shares of
Preferred Stock so redeemed will be paid to those Holders whose shares have been
redeemed (to the extent the Deposit Account has not otherwise been terminated as
described in clause (e) below).
(d) On the Deposit Expiration Date, the Deposit Agent shall deliver to the
Holders, on a pro rata basis, any cash remaining in the Deposit Account on such
date unless, prior thereto, the Company delivers a Direction Notice to the
Deposit Agent requiring the Deposit Agent to purchase from the Company for
transfer to Holders that number of whole shares of the Common Stock determined
by dividing the Quarterly Return Amount by 95% of the Market Value of the Common
Stock as of the conversion date.
(e) Notwithstanding any other provision herein to the contrary, if (A) the
Company obtains any required amendments to the covenants under its various debt
obligations that would permit the Company to pay cash dividends on the Preferred
Stock prior to the Deposit Expiration Date, and (B) at the time the Company
receives such amendments or at any time thereafter (so long as the amendments
remain effective), the trading price, on any date, for the Preferred Stock
equals or exceeds the liquidation preference, then, in such event, the Company
may thereafter, upon notice to the Holders, to exchange the Deposit Account for
an obligation to accrue
-2-
<PAGE>
dividends on the Preferred Stock from the Deposit Payment Date immediately
preceding the date of such election by instructing the Deposit Agent in writing
to distribute the remaining balance of the Deposit Account to the Company. If
the Company elects early termination of the Deposit Account, the Preferred Stock
will begin to accrue dividends from the last Deposit Payment Date preceding such
election.
(f) In the event of any voluntary or involuntary dissolution, liquidation
or winding up of the Company, the Deposit Agent shall return to the Holders any
funds at the time remaining in the Deposit Account.
(g) For purposes of this Agreement: (i) the term "Notice Date" means the
tenth day prior to the applicable Deposit Payment Date or Deposit Expiration
Date, as the case may be; ;(ii) the term "Market Value" means, as of any date,
the average of the daily closing price for the five consecutive trading days
ending on such date; the closing price for each day shall be the last sales
price or, in case no such reported sales take place on such day, the average of
the last reported bid and asked price, in either case on the principal national
securities exchange on which the shares of the Common Stock are admitted to
trading or listed, or if not listed or admitted to trading on such exchange, the
representative closing bid price as reported by the Nasdaq National Market, or
other similar organization if the Nasdaq National Market is no longer reporting
such information, or if not so available, the fair market price as determined,
in good faith, by the Board of Directors of the Company and (iii) the term
"Direction Notice" means a notice from the Company delivered to the Deposit
Agent directing the Deposit Agent to purchase Common Stock from the Company to
distribute to holders of Preferred Stock.
(h) This Agreement shall remain in full force and effect until all amounts
held hereunder by the Deposit Agent have been finally distributed in accordance
herewith.
3. Record Date. The Quarterly Return Amount or, if a Direction Notice
-----------
has been delivered by the Company, Common Stock, shall be returned or delivered
to the Holders of record of the Preferred Stock, as they appear on the Company's
stock register 10 business days prior to each Deposit Payment Date.
4. Expenses. The Deposit Agent shall be entitled to customary fees and
--------
expenses for performing its duties hereunder, as may be agreed from time to time
by the Company and the Deposit Agent. The Deposit Agent shall be entitled to
prompt reimbursement of all reasonable expenses incurred by the Deposit Agent in
carrying out its duties hereunder, including, without limitation, reasonable
travel and other out-of-pocket expenses provided they are pre-approved in
writing by the Company, which approval shall not be unreasonable withheld, and
fees and expenses of its legal counsel arising in connection with the
interpretation or enforcement of any provision hereof or any arbitration or
other proceeding hereunder which approval shall not be unreasonably withheld.
The fees and expenses of the Deposit Agent in carrying out its duties hereunder
shall be paid or reimbursed by the Company.
5. Notices. All notices, requests, demands and other communications
-------
hereunder
-3-
<PAGE>
shall be deemed to have been duly given if delivered by hand or mailed,
certified or registered mail, return receipt requested, with postage prepaid:
(a) if to the Holders, to their address as set forth in the stock transfer
records of the Company;
(b) if to the Company, to PSINet Inc., 510 Huntmar Park Drive, Herndon,
Virginia 20170, Attention: Treasurer, or to such other person or address as the
Company shall designate in writing, with a copy to PSINet Inc., 510 Huntmar Park
Drive, Herndon, Virginia 20170, Attention: General Counsel, and to Nixon,
Hargrave, Devans & Doyle, LLP, 437 Madison Avenue, New York, New York 10022,
Attention: Richard F. Langan, Jr., Esq. and Bruce E. Rosenthal, Esq.; and
(c) if to Deposit Agent, to Wilmington Trust Company,
[____________________________].
Any party may change the address (or the person to whose attention such notice
is directed) by notice given to the other parties hereto as aforesaid.
6. Concerning the Deposit Agent. In order to induce the Deposit Agent
----------------------------
to act as deposit agent hereunder, the Company hereby covenants and agrees with
the Deposit Agent as follows:
(a) The Deposit Agent shall not in any way be bound or affected by any
amendment, modification or cancellation of this Deposit Agreement, unless the
same shall have been agreed to in writing by the Deposit Agent.
(b) The Deposit Agent shall be entitled to rely, and shall be protected in
acting in reliance upon, any Direction Notice or other instructions or
directions furnished to the Deposit Agent in writing by the proper party under
this Deposit Agreement and shall be entitled to treat as genuine, and as the
document it purports to be, any letter, instruction or other document or
instrument delivered to the Deposit Agent hereunder and believed by the Deposit
Agent to be genuine and to have been presented by the proper party or parties,
without being required to determine the authenticity or correctness of any fact
stated therein, the propriety or validity thereof, or the authority or
authorization of the party or parties making and/or delivering the same to do
so.
(c) This Agreement sets forth exclusively the duties and obligations of
the Deposit Agent with respect to any and all matters pertinent to its acting as
deposit agent hereunder.
(d) The Deposit Agent undertakes to perform only such duties as are
expressly set forth in this Deposit Agreement, and neither the Deposit Agent nor
any of its directors, officers, employees or agents shall be in any manner
liable or responsible to the Company or any
-4-
<PAGE>
Holder or any other person or entity for or in respect of any loss, claim,
damage or liability (collectively, "Loss") resulting from, or arising out of,
any action or failure or omission to act hereunder or for any mistake of fact or
error of judgment, including, but not limited to, any Loss that may occur by
reason of the exercise of the Deposit Agent's discretion in any particular
matter or for any other reason, except for any Loss which is the result of
negligence or willful misconduct on the part of the Deposit Agent or such
director, officer, employee or agent.
(e) The Company covenants and agrees to indemnify and hold the Deposit
Agent and each of its directors, officers, employees and agents (the Deposit
Agent and any such person or entity seeking indemnification hereunder being
hereinafter referred to as an "Indemnified Party") harmless from and against,
and upon demand reimburse each Indemnified Party for, any and all losses,
claims, damages, liabilities, costs and expenses (including expenses of its
legal counsel) (collectively, "Indemnified Losses") which may be paid, incurred
or suffered by such Indemnified Party or to which such Indemnified Party may
become subject by reason of or in connection with the administration of the
Deposit Agent's duties as deposit agent hereunder (including, but not limited
to, any action taken or omitted by the Deposit Agent in connection with this
Agreement or any action allegedly so taken or omitted) or by reason of, or as a
result of, the Deposit Agent's compliance with the instructions set forth herein
or with any instructions delivered to the Deposit Agent pursuant hereto, except
with respect to Indemnified Losses which shall be the result of negligence or
willful misconduct on the part of such Indemnified Party.
(f) In the event of any controversy or dispute hereunder, or with respect
to any question as to the construction of this Agreement or any action to be
taken by it hereunder, the Deposit Agent may, in its discretion, obtain the
advice of counsel reasonably satisfactory to it provided such consultation is
approved in writing in advance by the Company, which approval shall not be
unreasonably withheld and shall incur no liability for any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(g) If any part of the Deposit Fund is at any time attached, garnished or
levied upon or under any court order, or in case the payment, assignment,
transfer, conveyance or delivery of any of the Deposit Fund shall be stayed or
enjoined by any court order, or in case any order, writ, judgment or decree
shall be made or entered by any court affecting the Deposit Fund or any part
thereof, then and in any of such events, the Deposit Agent is authorized, in its
sole discretion, to rely upon and comply with any such order, writ, judgment or
decree. The Deposit Agent shall not be liable to any of the parties hereto, to
any Holder or to any other person, firm or corporation by reason of such
compliance even though such order, writ, judgment or decree may be subsequently
reversed, modified, annulled, set aside, vacated, found to have been entered
without jurisdiction, or found to be in violation of or beyond the scope of a
constitution or a law.
(h) Notwithstanding anything to the contrary contained herein, if the
Deposit Agent shall be uncertain as to its duties or rights hereunder, shall
receive any notice, advice, direction, or other document from the Company with
respect to the Deposit Fund which, in its
-5-
<PAGE>
opinion, is in conflict with any of the provisions of this Agreement, or should
be advised that a dispute has arisen with respect to the payment, ownership, or
right of possession of the Deposit Fund or any part thereof (or as to the
delivery, non-delivery, or content of any notice, advice, direction, or other
document), the Deposit Agent shall be entitled (but not obligated), without
liability to anyone, to refrain from taking any action other than to use its
best efforts to keep safely the Deposit Fund until the Deposit Agent shall be
directed otherwise in writing by Company and a majority of the Holders or by an
order, decree or judgment of a court of competent jurisdiction which has been
finally affirmed on appeal or which by lapse of time or otherwise is no longer
subject to appeal, but the Deposit Agent shall be under no duty to institute or
to defend any proceeding, although it may institute or defend such proceedings.
(i) The Company shall have the right to cause the Deposit Agent to be
relieved of its duties hereunder and to select a substitute deposit agent, upon
the expiration of five days following delivery of written notice of substitution
to the Deposit Agent. Upon selection of such substitute deposit agent, such
substitute deposit agent and the Company shall enter into an agreement
substantially identical to this Agreement and, thereafter, the replaced deposit
agent shall be relieved of its duties and obligations to perform hereunder,
except that the replaced deposit agent shall transfer to the substitute deposit
agent upon request therefor the Deposit Funds and copies of all books, records,
plans and other documents in the replaced deposit agent's possession relating to
such funds or this Agreement.
(j) Upon not less than 30 days' written notice to the Company and the
Holders of its intention to resign under this Agreement, the Deposit Agent may
resign as deposit agent hereunder by selecting, as a successor deposit agent,
any other Deposit Agent as directed or approved by the Company (which approval
shall not be unreasonably withheld). Such resignation shall take effect upon
delivery by the resigning Deposit Agent of the Deposit Fund to such successor
deposit agent; the resigning Deposit Agent shall thereupon be discharged of all
its duties and obligations hereunder. In addition, the Deposit Agent shall be
discharged of all of its duties and obligations hereunder upon its deposit of
the Deposit Fund with a court of competent jurisdiction. The Company and the
Holders each hereby irrevocably consents and submits to the jurisdiction of such
court in any such action and waives all rights to contest the jurisdiction of
such court.
(k) The Company hereby authorizes the Deposit Agent, if the Deposit Agent
is threatened with litigation or is sued, to interplead all interested parties
in any court of competent jurisdiction and to deposit the Deposit Account with
the clerk of that court.
(l) The Deposit Agent's duties, obligations and liabilities hereunder,
except as a result of the Deposit Agent's negligence or willful misconduct, will
terminate upon its delivery of all of the Deposit Fund under any provision of
this Agreement. The provisions of Paragraphs 6(e) and of this Paragraph 6(l)
shall survive any such termination.
-6-
<PAGE>
7. Specific Performance. In the event of the failure by a party hereto
--------------------
to give any notice required under the terms of this Agreement, the other parties
hereto shall be entitled to specific performance by such non-performing party.
8. Miscellaneous.
-------------
(a) Continuance of Agreement. This Agreement shall be binding upon the
------------------------
parties hereto and their respective heirs, personal representatives, successors
and assigns.
(b) Counterparts. This Agreement may be executed in any number of
------------
counterparts all of which, taken together shall constitute the same agreement.
(c) No Amendments. This Agreement may not be modified or amended, nor
-------------
may any provision hereof be waived, except by a writing duly executed by the
Deposit Agent, the Company and by a majority of the Holders.
(d) Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of New York without reference to its
principles of conflicts of law.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and the year first above written.
PSINET INC.
By:
----------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY
By:
-----------------------------------
Name:
Title:
<PAGE>
Exhibit A
Deposit Agent's Cross-Receipt
THE UNDERSIGNED hereby acknowledges receipt from PSINet Inc., a New York
corporation (the "Company") of [__] Dollars ($[__]) representing a portion of
the proceeds from that certain public offering of [___]% Series C Cumulative
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"),
of the Company.
The undersigned, as deposit agent for the Company (the "Deposit Agent")
has, in accordance with that certain Deposit Agreement, dated April ___, 1999
among the Company and the Deposit Agent, as deposit agent and trustee (the
"Deposit Agreement"), deposited the Initial Deposit Amount in the Deposit
Account (as such term is defined in the Deposit Agreement).
WILMINGTON TRUST COMPANY
By:
-----------------------------------
Name:
Title:
Date: [ ], 1999
<PAGE>
Exhibit B
Investments
<PAGE>
Exhibit C
Form of Direction Notice
[Letterhead of the Company]
[Date]
[Deposit Agent]
Re: Direction Notice No. [___]
Ladies and Gentlemen:
We refer to the Deposit Agreement (the "Deposit Agreement") dated as
of the [__]th day of [ ], 1999 between you, as Deposit Agent, and PSINet Inc.,
a New York corporation (the "Company"). Unless otherwise specified, capitalized
terms used herein shall have the meaning given in the Deposit Agreement. This
letter constitutes a Direction Notice under the Deposit Agreement.
[The undersigned hereby notifies you that you are directed, pursuant
to Section 2(a) of the Deposit Agreement, to purchase from the Company, for
delivery to each holder of Preferred Stock in lieu of the Quarterly Return
Amount on the next Deposit Payment Date, ___ shares of Common Stock for $____ of
Quarterly Return Amount.]
[The undersigned hereby notifies you of the conversion of [_________]
shares of Preferred Stock by certain holders, and that you are directed,
pursuant to Section 2(b) of the Deposit Agreement, to pay to the Company any
funds remaining in the Deposit Account allocable to the shares of Preferred
Stock so converted.]
[The undersigned hereby notifies you that you are directed, pursuant
to Section 2(d) of the Deposit Agreement, to purchase from the Company for
delivery to holders who are entitled to the proceeds from the Deposit Account,
___ shares of Common Stock for $____ of Quarterly Return Amount.]
In connection with the requested disbursement, the undersigned hereby
notifies you that: (i) you may elect to have the Company deliver, for and on
your behalf, the shares of Common Stock acquired by you directly to the holders
of the Preferred Stock and (ii) your obligation to purchase shares of Common
Stock is secured by the funds in the Deposit Account. The Deposit Agent is
entitled to rely on the foregoing in disbursing funds relating to this Deposit
Notice.
PSINET INC.
By:
---------------------------------
<PAGE>
Name:
Title:
<PAGE>
Exhibit 5.1
NIXON, HARGRAVE, DEVANS & DOYLE LLP
437 Madison Avenue
New York, New York 10022
April 27, 1999
PSINet Inc.
510 Huntmar Park Drive
Herndon, Virginia 20170
Ladies and Gentlemen:
We have acted as counsel to PSINet Inc., a New York corporation (the
"Company"), in connection with the Registration Statement on Form S-3, File No.
333-75579, as amended by Amendment No. 1 and Amendment No. 2 (the "Registration
Statement"), filed by the Company with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Act"),
relating to the offering, from time to time, by the Company of an indeterminate
amount of shares of common stock of the Company, par value $.01 per share, and
shares of preferred stock of the Company, par value $.01 per share, with an
aggregate public offering price of up to $1,000,000,000 (such securities being
referred to collectively herein as the "Securities"). The Registration
Statement provides that the Securities may be offered separately or together, in
one or more series or classes, at prices and on terms to be set forth in one or
more prospectus supplements (each a "Prospectus Supplement") to the prospectus
contained in the Registration Statement (the "Prospectus").
This opinion is being delivered to you in connection with the Registration
Statement.
In connection with the foregoing, we have examined the Registration
Statement and the Prospectus. We also have examined originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, certificates and other documents and have made such investigations of
law as we have deemed necessary or appropriate as a basis for the opinions
expressed below.
As to questions of fact material to our opinions expressed herein, we have,
when relevant facts were not independently established, relied upon certificates
of, and information received from, the Company and/or representatives of the
Company. We have made no independent investigation of the facts stated in such
certificates or as to any information received from the Company and/or
representatives of the Company and do not opine as to the accuracy of such
factual matters. We also have relied, without investigation, upon certificates
and other documents from, and conversations with, public officials.
<PAGE>
PSINet Inc.
April 27, 1999
Page 2
In rendering the following opinions, we have assumed, without
investigation, the authenticity of any document or other instrument submitted to
us as an original, the conformity to the originals of any document or other
instrument submitted to us as a copy, the genuineness of all signatures on such
originals or copies, and the legal capacity of natural persons who executed any
such document or instrument at the time of execution thereof.
We have also assumed that, prior to the issuance of any shares of common
stock of the Company pursuant to the conversion of shares of any series of the
Company's convertible preferred stock or in lieu of the payment of any cash
dividend on, or in consideration of any cash payment from a deposit account
established in respect of, any series of the Company's preferred stock, there
will exist under the Certificate of Incorporation of the Company the requisite
number of authorized but unissued shares of common stock of the Company, and
that all actions necessary for the authorization, designation and issuance of
any series of preferred stock of the Company, including the filing of an
amendment to the Certificate of Incorporation of the Company, will have been
taken.
We have further assumed that the issuance, amount and terms of the
Securities to be offered and sold from time to time under the Registration
Statement will be authorized and determined by proper action of the Board of
Directors of the Company, or a duly designated committee of such Board of
Directors, in accordance with the parameters described in the Registration
Statement (each, a "Board Action") and in accordance with the Company's
Certificate of Incorporation and Amended and Restated By-laws and applicable
law.
In addition, we have assumed that, at or prior to the time of the issuance
and sale of any of the Securities, (i) no stop order shall have been issued in
respect of the Registration Statement, (ii) a Prospectus Supplement shall have
been filed by the Company with the Commission in a form reviewed by us, which
sets forth the particular terms of each class or series of the Securities
proposed to be issued, (iii) any underwriting agreement entered into by the
Company with respect to the Securities shall be in a form reviewed by us, (iv)
there shall not have occurred, since the date of this opinion, any change in law
affecting the validity of the Securities or the ability or capacity of the
Company to issue any of the Securities, and (v) the Company shall not have
effected any material change to its Certificate of Incorporation or Amended and
Restated By-laws, except as contemplated by our opinion expressed in paragraph 2
below. We have also assumed that none of the terms of any of the Securities to
be established subsequent to the date hereof nor the issuance and delivery of
any of the Securities nor the compliance by the Company with the terms of any of
the Securities will violate any applicable law, rule or regulation or will
result in a violation of any provision of any instrument or agreement then
binding upon the Company or any order or restriction imposed by any court or
governmental body having jurisdiction over the Company.
<PAGE>
PSINet Inc.
April 27, 1999
Page 3
Members of our firm involved in the preparation of this opinion are
licensed to practice law in the State of New York and we do not purport to be
experts on, or to express any opinion herein concerning, the laws of any other
jurisdiction other than the laws of the State of New York.
Based upon and subject to the foregoing, and the other qualifications and
limitations contained herein, we are of the opinion that:
1. When a series of preferred stock of the Company has been duly
authorized and designated in accordance with the applicable Board Action and the
terms of the Company's Certificate of Incorporation, and upon issuance and
delivery of the shares of such series of preferred stock against payment
therefor in accordance with such Board Action, the Registration Statement, the
Prospectus and the applicable Prospectus Supplement, such shares of preferred
stock will be duly authorized and validly issued and will be fully paid and non-
assessable subject to Section 630 of the Business Corporation Law of the State
of New York.
2. Upon issuance and delivery of shares of the common stock of the
Company:
(a) against payment therefor in accordance with the applicable Board
Action, the Registration Statement, the Prospectus and the applicable
Prospectus Supplement;
(b) pursuant to the conversion of shares of any series of the
Company's convertible preferred stock at a conversion price not less than
the par value per share of the Company's common stock in accordance with
the applicable Board Action, the Registration Statement, the Prospectus,
the applicable Prospectus Supplement and the terms of such convertible
preferred stock; or
(c) in lieu of the payment of any cash dividend on, or in
consideration of any cash payment from a deposit account established in
respect of, any series of the Company's preferred stock in accordance with
the applicable Board Action, the Registration Statement, the Prospectus,
the applicable Prospectus Supplement and the terms of such preferred stock,
provided that prior to any such distribution of shares of the Company's
common stock, the Company's Certificate of Incorporation shall have been
amended to permit such distribution to the holders of such preferred stock
or the Company shall have obtained the approval for such distribution by
the affirmative vote or the written consent of the holders of a majority of
the outstanding shares of its common stock;
then, in the case of clause (a), (b) or (c), such shares of common stock will be
duly authorized and validly issued and will be fully paid and non-assessable
subject to Section 630 of the Business Corporation Law of the State of New York.
<PAGE>
PSINet Inc.
April 27, 1999
Page 4
3. The opinions referred to as the opinions of counsel to the Company in
any Prospectus Supplement under the caption "Certain Federal Income Tax
Consequences" or "Important U.S. Tax Consequences to Non-U.S. Holders" are our
opinions, insofar as they are statements of federal income tax law. Our
opinions are based upon existing federal income tax law and present
interpretations thereof. We can give no assurance that such opinions will
continue to be our opinions if existing federal income tax laws, or the
interpretations thereof, are changed or modified hereafter.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name as it appears under the
caption "Legal Matters" in the Prospectus and in any Prospectus Supplement. In
giving such consent, we do not thereby admit we come within the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission thereunder.
We further consent to the filing of this opinion as an exhibit to
applications to the securities commissioners of the various states of the United
States, to the extent so required, in connection with the registration of the
shares of common stock and preferred stock of the Company.
This opinion is limited to the matters stated herein, and no opinion or
belief is implied or may be inferred beyond the matters expressly stated herein.
We wish to advise you that Nixon, Hargrave, Devans & Doyle LLP and certain
attorneys with Nixon, Hargrave, Devans & Doyle LLP own certain shares of the
Company's common stock.
Very truly yours,
/s/ Nixon, Hargrave, Devans & Doyle LLP
<PAGE>
Exhibit 10.1
March 19, 1999
Mr. Nadir Desai
83 Oakhurst Drive
Thornhill, Ontario L4J 8H2
CANADA
Dear Mr. Desai:
This agreement confirms your employment by PSINet Inc. (the "Company"), and sets
forth the terms and conditions which shall govern such employment as outlined
below. This agreement amends the terms of your employment agreement dated
January 17, 1996.
1. EMPLOYMENT:
a) The Company hereby employs you as Senior Vice President of the Company
and President, Canada and Latin America reporting to the President and
Chief Operating Officer of the Company. This is a corporate position
and as an officer of the Company you must stand for election by the
Board of Directors each year. You accept the employment and agree to
remain in the employ of the Company, and, except during vacation
periods and sickness, to provide during standard business hours a
minimum of forty hours per week of management services to the Company,
as determined by and under the direction of the President and Chief
Operating Officer of the Company or his designee.
b) During your employment you will, except during vacations, periods of
illness, and other absences beyond your reasonable control, devote your
best efforts, skill and attention to the performance of your duties on
behalf of the Company.
2. TERM OF EMPLOYMENT: The term of the employment shall continue for a period
of one (1) year from the date hereof.
3. COMPENSATION: BASE SALARY. The Company shall pay you a base salary at
the rate of $225,000 (US) per annum for 1999. You will also be eligible
for an annual bonus of up to fifty percent (50%) of your base salary. The
amount of
<PAGE>
Nadir Desai
March 19, 1999
annual bonus payable to you will be subject to the successful completion of
objectives established for your performance, which shall be determined by
the President of the Company. Your base salary shall be payable in such
installments as the Company regularly pays its other salaried employees,
subject to such deductions and withholdings as may be required by law or by
further agreement with you.
4. EMPLOYEE BENEFITS:
a) You shall be provided employee benefits, including (without limitation)
retirement savings, revenue bonus plan participation, four (4) weeks'
paid vacation, and life, health, accident and disability insurance
under the Company's plans, policies and programs available to employees
in accordance with the provisions of such plans, policies, and
programs.
b) The Company plans to implement a company car policy for which you would
be eligible. Until such a policy is implemented, the Company will cover
the rental or short term leasing cost (through normal expense
reimbursement) of a suitable executive vehicle up to the value of Seven
Hundred Fifty Dollars ($750.00) per month.
c) In the event you are required to move, the Company will provide to you
relocation benefits in accordance with applicable Company policy.
d) The Company has paid your tuition costs in connection with your
completion of the MBA program at Duke University. In the event that you
terminate your employment with the Company prior to the expiration of
three (3) years from the completion of such program, you agree to
reimburse the Company for all such tuition and related costs paid by it
with interest at the rate of ten percent (10%) per annum within twelve
months of your termination.
5. TERMINATION:
a) Your employment with the Company may be terminated by the Company at
any time for "Cause" as defined in Section 5(c) hereof. Upon such
termination, the Company will provide written notice whether it has
elected to use the non-Competition restrictions set forth in Section
6(a) hereof. Your employment may also be terminated by the Company at
any time without Cause provided the Company shall have given you thirty
(30) days' prior written notice of such termination. That written
notice must state whether the Company has elected to use the non-
competition restriction (which decision
2
<PAGE>
Nadir Desai
March 19, 1999
may not be rescinded). If you are terminated without cause, you will be
paid twenty-six (26) weeks of severance, plus a pro-rata bonus and
benefits will continue for the same period. In addition, your
employment may be terminated by you at any time for any reason,
provided you shall have given the Company at least thirty (30) days'
prior written notice of such termination. By the 30th day the Company
must notify you in writing whether it has elected to use the non-
Competition restriction. Such decision may not be rescinded. Failure of
the Company to so notify you shall result in the non-Competition
restriction not being in place.
b) Subject to your compliance with your obligations under Section 6
hereof, in the event that your employment terminates or is terminated
by you or the Company for any reason other than for cause, and the
Company has elected to use the non-Competition restriction, you shall
be entitled, for a period of twenty-four (24) months after termination
of employment, to the following (collectively, the "Termination
Payments"): (i) your then-current rate of base salary as provided in
Section 3; and (ii) all life insurance and health benefits, disability
insurance and benefits and reimbursement theretofore being provided to
you.
c) The Company shall have "Cause" for your termination of your employment
by reason of any breach of your agreement not to compete pursuant to
Section 6 hereof, your committing an act materially adversely affecting
the Company which constitutes wanton or willful misconduct, your
conviction of a felony, your voluntary resignation, or any material
breach by you of this agreement.
6. AGREEMENT NOT TO COMPETE:
a) In consideration of your employment pursuant to this agreement and for
other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, you covenant to and agree with the
Company that, so long as you are employed by the Company under this
agreement and for a period of twenty-four (24) months following the
termination of such employment (but only if the Company has elected to
enforce the restriction, you shall not, without the prior written
consent of the Company, either for yourself or for any other person,
firm or corporation, manage, operate, control, participate in the
management, operation or control of or be employed by any other person
or entity which is engaged in providing Internet-related network or
communications services competitive with the Internet-related network
or communication services offered to customers by the Company, as of
the date of termination or within six (6) months
3
<PAGE>
Nadir Desai
March 19, 1999
thereafter. The foregoing shall in no event restrict you from: (i)
writing or teaching, whether on behalf of for-profit, or not-for-profit
institution(s); (ii) investing (without participating in management or
operation) in the securities of any private or publicly traded
corporation or entity; or (iii) after termination of employment,
becoming employed by a hardware, software or other vendor to the
Company, provided that such vendor does not offer network or
communication services that are competitive with the Internet-related
network or communications services offered by the Company as of the
date of termination of employment or within six (6) months thereafter.
b) You may request permission from the Company's Board of Directors to
engage in activities which would otherwise be prohibited by Section
6(a). The Company shall respond to such request within thirty (30) days
after receipt. The Company will notify you in writing if it becomes
aware of any breach or threatened breach of any of the provisions in
Section 6(a), and you shall have thirty (30) days after receipt of such
notice in which to cure or prevent the breach, to the extent that you
are able to do so. You and the Company acknowledge that any breach or
threatened breach by you of any of the provisions in Section 6(a) above
cannot be remedied by the recovery of damages, and agree that in the
event of any such breach or threatened breach which is not cured with
such thirty (30) day period, the Company may pursue injunctive relief
for any such breach or threatened breach. If a court of competent
jurisdiction determines that you breached any of such provisions, you
shall not be entitled to any Termination Payments from and after date
of the breach. In such event, you shall promptly repay any Termination
Payments previously made plus interest thereon from the date of such
payment(s) at twelve percent (12%) per annum. If, however, the Company
has suspended making such Termination Payments and a court of competent
jurisdiction finally determines that you did not breach such provision
or determines such provision to be unenforceable as applied to your
conduct, you shall be entitled to receive any suspended Termination
Payment, plus interest thereon from the date when due at twelve percent
(12%) per annum. The Company may elect (once) to continue paying the
Termination Payments before a final decision has been made by the
court.
7. INTELLECTUAL PROPERTY; Ownership of Work Product. All copyrights,
patents, trade secrets, or other intellectual property rights associated
with any ideas, concepts, techniques, inventions, processes, or works of
authorship developed or created by you during the course of performing the
Company's work (collectively the "Work Product") shall belong exclusively
to the Company and shall, to the extent possible, be considered a work made
for hire for the Company within the meaning of Title 17 of the United
States Code.
4
<PAGE>
Nadir Desai
March 19, 1999
You automatically assign, and shall assign at the time of creation of the
Work Product, without any requirement of further consideration, any right,
title, or interest you may have in such Work Product, including any
copyrights or other intellectual property rights pertaining thereto. Upon
request of the Company, you shall take such further actions, including
execution and delivery of instruments of conveyance, as may be appropriate
to give full and proper effect to such assignment.
8. TRANSFERABILITY:
a) As used in this agreement, the term "Company" shall include any
successor to all or part of the business or assets of the Company who
shall assume and agree to perform this agreement.
This agreement shall inure to the benefit of and be enforceable by you
and your personal or legal representatives, executors, administrators,
heirs, distributees, devisees and legatees.
b) Except as provided under paragraph (a) of this Section 8, neither this
agreement nor any of the rights or obligations hereunder shall be
assigned or delegated by any party hereto without the prior written
consent of the other party.
9. SEVERABILITY: The invalidity or unenforceability of any particular
provision of this agreement shall not affect the other provisions hereof,
and this agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted. If a court of competent jurisdiction
determines that any particular provision of this agreement is invalid or
unenforceable, the court shall restrict the provision so as to be
enforceable. However, if the provisions of Section 6 shall be restricted, a
proportional reduction shall be made in the payments under Section 5b.
10. ENTIRE AGREEMENT; WAIVERS: This agreement contains the entire agreement
of the parties concerning the subject matter hereof and supersedes and
cancels all prior agreements, negotiations, correspondence, undertakings
and communications of the parties, oral or written. No waiver or
modification of any provision of this agreement shall be effective unless
in writing and signed by both parties.
11. NOTICES: Any notices, requests, instruction or other document to be
given hereunder shall be in writing and shall be sent certified mail,
return receipt requested, addressed to the party intended to be notified at
the address of such
5
<PAGE>
Nadir Desai
March 19, 1999
party as set for at the head of this agreement or such other address as
such party may designate in writing to the other.
12. GOVERNING LAW: THIS AGREEMENT SHALL BE SUBJECT TO, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. INSOFAR AS
MAY BE EFFECTED UNDER SUCH LAWS, REFERENCE TO GUIDING PRINCIPLES AND
BINDING RULES SHALL BE MADE TO THE LAW OF THE STATE OF NEW YORK, UNITED
STATES, WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW.
13. COUNTERPARTS: This agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
shall be one and the same instrument.
6
<PAGE>
Nadir Desai
March 19, 1999
DESAI EMPLOYMENT AGREEMENT SIGNATURE PAGE
Please confirm your agreement with the forgoing by signing and returning
one copy of this agreement to the undersigned, whereupon this agreement shall
become a binding agreement between you and the Company.
Sincerely,
PSINet Inc.
By: /s/ Harold S. Wills
------------------------------------------------------
Harold S. Wills, President and Chief Operating Officer
Accepted and Agreed to as of the day first above written:
By: /s/ Nadir Desai
---------------
Nadir Desai
7
<PAGE>
Exhibit 10.2
THIS AGREEMENT made the 8th day of July 1998
BETWEEN
(1) BALLYMORE PROPERTIES LIMITED of St John's House 5 South Parade Oxford OX2
7JL (Company Number 2260505) (hereinafter called "the Landlord") of the one
part and
(2) CORDOBA HOLDINGS LIMITED of EBC House 1-3 Seale Street St Helier Jersey JE4
OTF (hereinafter called "the Tenant") of the second part and
(3) THOMAS CHARLES COMBRINCK of Flat 15 Dudley House Westmoreland Street London
W1 (hereinafter called "the Surety") of the third part
WHEREBY IT IS AGREED as follows :
1. FOR the purpose of this Agreement the following definitions shall apply:
(a) "the Property" means the property described in the First
Schedule hereto
(b) "the Lease" means a lease in the form of the draft
("The Draft") annexed as hereto as annexure
1 and (where appropriate) the Deed of
Variation
(c) "the Landlord's Works" means the works set out in the
specification annexed hereto as annexure
(d) "Certificate of Practical means the certificate referred to in
Completion" clause 1(e) hereof being a certificate
issued by the Landlord stating that the
Landlord's Works have been completed (save
for items of a minor or snagging nature) to
such extent that the Tenant can obtain
reasonable access to and egress from the
Property and any items or work outstanding
to the Property itself would not materially
interfere with or affect
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<PAGE>
the Tenants access to and occupation of the
Property
(e) "the Completion Date" means the date 15 working days after the
issue of the Certificate of Practical
Completion
(f) "the Block" means Paragon Building City Reach London
E14 as is more particularly described in
the Lease
(g) "the Remaining Floors" means the 4th, 5th, 6th or 7th floors of
the Block or any part or parts thereof
(h) "the Deed of Variation" means a deed of variation in the form of
the draft annexed hereto as annexure 3
(i) "the Heads of Terms" means heads of terms signed by the Landlord
and the prospective lessee incorporating
details of the following:
(i) The lessee's name and address
(ii) The Demise
(iii) The term
(iv) The rent
(v) Any rent free period or other
incentive
(vi) The permitted User
(vii) Repairing obligations
(viii) Service Charge payable
(ix) Insurance provisions
(x) Alienation restrictions
(xi) Rights to be granted to the lessee
(xii) Rights to be reserved to the
Landlord
(xiii) Costs
(xiv) Restrictions on alterations
(xv) Rent review provisions (if any)
(j) "Tenants Works" means the works set out in the
specification annexed hereto at annexure 4
or such further works
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<PAGE>
as may be agreed between the Landlord and
the Tenant (acting reasonably)
(k) "Rent Commencement means the date being 10 working days after
Date" the date of issue of the Certificate of
Practical Completion
(l) "Agreed Square means the area for each floor as set out in
Footage" the Second Schedule hereto
(m) "Landlord's Solicitor" means Howard Kennedy of 19 Cavendish Square
London WIA 2AW or such other firm whose
name and address is notified to the Tenant
in writing
(n) "Tenant's Solicitor" means Messrs Turner Parkinson of Alberton
House St Mary's Parsonage Manchester M3 2WJ
or such other firm whose name and address
is notified to the Vendor in writing
(o) "Arbitrator" means an independent surveyor to be
appointed by the parties hereto or (failing
agreement) by the President for the time
being of the Institute of Chartered
Surveyors
(o) "Licence for Alterations" means a Licence in the form of the draft
annexed hereto as annexure 5
2. (a) On the Completion Date the Landlord will grant the Lease and the Deed
of Variation and the Tenant shall take the Lease and Deed of Variation
(b) THE Lease shall be granted for the term and at the rent and subject to
the covenants conditions exceptions reservations and other matters more
particularly set out in the Draft
(c) All rents interest service charges and other monies due under the
Lease and any licence fees payable hereunder shall commence to be
payable on the
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<PAGE>
earlier of the Rent Commencement Date and (as to any given floor) in
accordance with clause 6(b) hereof
3. THE Property is sold subject to the Standard Conditions of Sale (Third
Edition) so far as the same are consistent with this contract and with a
sale by private treaty
4. Title shall be deduced and shall consist of office copy entries of
leasehold title EGL 283159 and a certified copy of the transfer to the
Landlord The Tenant having been supplied with a copy of the transfer shall
be deemed to purchase with full knowledge thereof and shall raise no
enquiries or requisitions thereon or objections thereto
5. The Tenant shall be entitled to have access to the Property as from the
date hereof until the Completion Date to occupy the Property and commence
the Tenant's Works in the capacity of a licensee (and not as a tenant) on a
licence on the following terms and conditions :-
(a) The licence shall grant to the Tenant the rights granted by the Lease
(so far as they are consistent with the grant of a non exclusive
licence)
(b) The licence shall reserve to the Landlord the rights reserved by the
Lease (so far as they are consistent with the grant of a non exclusive
licence)
(c) The Landlord and the Tenant shall be bound to comply with and observe
all of the covenants conditions obligations and restrictions contained
or referred to in the Lease (so far as they are consistent with the
grant of a non exclusive licence)
(d) The licence shall be subject to the other matters and provisos
referred to or contained in the Lease (so far as they are consistent
with the grant of a non exclusive licence)
(e) Notwithstanding anything herein before contained or implied the Tenant
shall not be entitled to share occupation of the Property or any part
of it or grant any sub licences of the Property or any part of it save
that the Tenant shall be entitled (with prior notice in writing to the
Landlord) to grant a non exclusive sub licence to a third party of the
whole or any part of the Property such sub licence to be in a form of
the draft annexed to the Lease or such other form to
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<PAGE>
be approved by the Landlord (such approval not to be unreasonably
withheld or delayed)
(f) In the event of the Tenant granting a sub licence of the Property or
any part of it (in accordance with sub clause 5(e) hereof) prior to
the issue of the Certificate of Practical Completion then the Tenant
shall pay to the Landlord a licence fee ("the Licence Fee") as from
the date of the occupation and operation from such sublet premises by
such sub-licensee (and for the avoidance of doubt the sub-licensee
cannot operate from such sub-let premises until all necessary services
have been provided by the Landlord) calculated in accordance with the
provisions herein after contained
(g) In respect of any given floor where a sub licence has been granted the
Licence Fee be a sum equivalent to (Pounds)13.50 times by the number of
square feet of the entire floor on which the sub licence was granted
(whether or not the sub licence relates to the whole of the said floor or
part only thereof) and the square footage for any given floor for such
purposes shall be as per the second Schedule hereto
(h) The Tenant's Works shall be carried out in all respects and the
covenants terms and provisions contained in the Licence for
Alterations shall be complied with as if the Licence for Alterations
had been signed and entered into by the parties thereto as at the date
hereof
6. (a) The Landlord will carry out and complete the Landlord's Works to
the reasonable satisfaction of the Tenant in a good and workmanlike
manner as soon as reasonably practicable after the date hereof and in
any event within 20 weeks of the date hereof and in particular will
use its reasonable endeavours to connect an adequate electricity
supply as soon as reasonably practicable from the date hereof
(b) In the event that the Landlords Works have not been completed within
the aforesaid 20 week period all rents and licence fees and other
monies payable hereunder shall be suspended and cease to be payable
until the Date of Issue of the Certificate of Practical Completion and
for the avoidance of doubt the Landlord shall not be entitled to
receive any of the monies which were so suspended
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<PAGE>
7. (a) After service of the Certificate of Practical Completion the
Tenant and/or his surveyor may inspect the Property and in the event
that the validity of Certificate of Practical Completion is disputed
by the Tenant and/or his surveyor the Tenant or its surveyor may serve
a notice ("the Dispute Notice") on the Landlord to that effect setting
out the matters in dispute (provided that such notice is served prior
to the Completion Date time being of the essence)
(b) If the Tenant serves a valid Dispute Notice and the Landlord concurs
with the Tenants comments therein the Certificate of Practical
Completion shall automatically be withdrawn (but not in respect of
outstanding works and defects of a minor or snagging and verifying
nature which works and defects the Landlord shall use its best
endeavours to remedy to the reasonable satisfaction of the Tenant as
soon as possible after receipt of the Dispute Notice) and a new
Certificate of Practical Completion shall be served as and when the
matters set out in the Dispute Notice have been rectified to the
reasonable satisfaction of the Tenant whereupon this clause will apply
as though the new Certificate of Practical Completion were the
original Certificate of Practical Completion
(c) If the Tenant serves a valid Dispute Notice and the Landlord disagrees
with any or all of the Tenants comments therein the dispute as to
whether or not the Certificate of Practical Completion is a valid and
effective Certificate of Practical Completion shall be referred at the
instigation of either party to the Arbitrator and in the event that
the Arbitrator finds in favour of the Landlord completion shall take
place two working days after the Arbitrator's determination has been
served on both parties and in the event that the Arbitrator finds in
favour of the Tenant sub-clause (b) above shall apply and the Landlord
shall (if the Arbitrator so decides and the 20 week period referred to
in clause 6(b) above has been exceeded) forthwith on receipt of the
notification of the Arbitrator's determination repay all licence fees
and other monies with interest at base rate of Midland Bank Plc to the
Tenant or such proportion of such monies as the Arbitrator shall
determine
(d) If the Tenant becomes aware of any latent or other defect in the
Landlord's Works or the Block or the Common Areas (as defined in the Lease)
within three
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<PAGE>
months of the Completion Date the Landlord shall as soon as reasonably
possible rectify all such matters at the entire expense of the Landlord to
the reasonable satisfaction of the Tenant and in any event within one
calendar month of being so notified by the Tenant.
8. On the Completion Date the Landlord and the Tenant will enter into a
licence to alter the Property in the form of the Licence for Alterations
9. THE Landlord shall grant the Lease with full title guarantee
10. (Save as herein set out) the Property is let with vacant possession on
completion
11. In relation to the Remaining Floors:
(a) The Landlord will in its marketing of the Block use best endeavours to
let the seventh floor prior to the sixth floor and the sixth floor
prior to the fifth floor and the fifth floor prior to the fourth floor
(b) For a period of 8 weeks from Completion Date (time being of the
essence) :-
(i) the Landlord will not demise let or agree or contract to demise
or let any of the Remaining Floors to any person firm or company
other than the Tenant
(ii) The Tenant hereby is given by the Landlord the exclusive option
to have granted to it by the Landlord a lease a deed of
variation and a licence to carry out works as per the Tenant's
Works of any and/or all of the Remaining Floors such option to be
exercisable by 5 working days written notice on the Landlord's
Solicitors to that effect (hereinafter referred to as the
"Exercise Notice") and upon expiration of the said 5 working day
period (time being of the essence) the Landlord shall grant and
the Tenant shall take a lease ("the New Lease") and deed of
variation ("the New Deed of Variation") and new licence to carry
out Tenant's Works ("the New Licence") of the floors referred to
in the Exercise Notice on identical terms to the Lease and Deed
of Variation and Licence for Alterations (respectively) save for
the description of the Premises and the amount of Initial Rent
as each are defined in the Lease the Deed of Variation and the
Licence for Alterations (respectively) . At the same time the
Landlord and the
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<PAGE>
Tenant shall enter into a further deed of rent deposit charge in
identical terms to that entered into on the date hereof save that
the "Deposit" (as defined in that deed) shall be calculated in
the same proportion that (Pounds)1m bears to the square footage
of the Property calculated in accordance with the Second
Schedule. The Landlord shall procure that the Landlord's
solicitors shall deliver to the Tenant's solicitors ( or to such
other party as the Tenant's solicitors shall direct) counterparts
of the New Lease and New Deed of Variation within two working
days of receipt of the Exercise Notice and for the avoidance of
doubt the definition of the Premises in the New Lease and Deed of
Variation shall be the same as the floors referred to in the
Exercise Notice and the definition of Initial Rent in the New
Lease and the New Deed of Variation shall be:
- Lease: Initial Rent to be an amount equivalent to the
Agreed Square Footage for the relevant floor(s) multiplied
by (Pounds)15
- Deed of Variation: Initial rent to be an amount equivalent
to the Agreed Square Footage for the relevant floor(s)
multiplied by (Pounds)13.50
(iii) In the event that the Tenant fails to serve the Exercise Notice
within the aforesaid eight week period (time being of the
essence) the Tenant shall be prohibited from serving the Exercise
Notice
(iv) Nothing herein contained or implied shall prevent prohibit or
restrict the Landlord from marketing the Remaining Floors during
the aforesaid eight week period
(v) Each party shall be responsible for their own legal and surveyors
costs incurred and arising out of this Clause II
(c) (i) Prior to the first letting (or entering into of an agreement to
let) of the Remaining Floors with any third party lessee the
Landlord shall first serve on the Tenant a copy of the Heads of
Terms relating thereto ("the Heads of Terms Notice") and offer to
grant to the Tenant a lease
-8-
<PAGE>
of that part of the Block on the same terms as those contained
in the Heads of Terms on a lease similar in all material
respects to the Lease (save for the matters set out or referred
to in the Heads of Terms) ("the Heads of Terms Offer")
(ii) The Landlord will at all times keep the Tenant informed of the
course of negotiations for the letting of any of the Remaining
Floors
(iii) The Tenant shall have 10 working days (time being of the
essence) from the date of service of the Heads of Terms Notice
in which to accept or decline the Heads of Terms Offer by notice
in writing to that effect on the Landlord's Solicitors ("the
Heads of Terms Acceptance Notice") to the intent that if the
Tenant fails to serve a proper and valid Heads of Terms
Acceptance Notice within the aforesaid 10 working day period
(time being of the essence) the Tenant shall be deemed to have
declined the Heads of Terms Offer
(iv) In the event that the Tenant declines (or is deemed to have
declined) the Heads of Terms Offer the Landlord shall thereafter
be at liberty to let (or agree to let) the premises referred to
in the Heads of Terms Offer on the terms therein set out but for
the avoidance of doubt the right of first refusal contained in
this Clause 11 (c) shall not lapse unless the remaining floor or
floors referred to in such Heads of Terms are let to the
prospective lessee and in accordance with the Heads of Terms
(v) In the event that the Tenant accepts the Heads of Terms Offer
then the Landlord shall grant a lease (and the Tenant shall take
the lease) of the premises referred to in the Heads of Terms
Offer 20 working days after the date of service of the Heads of
Terms Acceptance Notice such lease to be in the form of the
Lease incorporating such reasonable and proper amendments as are
required by the Landlord's Solicitors and approved by the
Tenants Solicitors (such approval not to be unreasonably
withheld or delayed) necessary to incorporate the Heads of Terms
therein
-9-
<PAGE>
(vi) Any dispute concerning the terms of the lease to be granted
pursuant to sub clause (v) of this clause shall be referred to
the Arbitrator whose decision shall be final and binding and in
the event of a reference to the Arbitrator under this sub clause
the completion of the grant of the said lease shall take place
five working days after the Arbitrators determination
(d) On the grant of a lease of any of the Remaining Floors the Landlord's
Obligations hereunder relating to the Landlord's Works at the Property
shall be read and construed and continue to apply to the Remaining
Floors and this Agreement shall be read and construed as though it
relates to the relevant Remaining Floors and all obligations on the
parties hereto inclusive relating to the timing of such works, the
date of occupation of the Property and the Rent Commencement Date and
arbitration shall be construed accordingly.
13. In consideration of the Landlord entering into this agreement at the
request of the Surety the Surety agrees to join in the Lease and any other
lease granted pursuant to the terms hereof to give the covenant on the part
of the Surety therein contained
14 In the event of any dispute in relation to any matter arising in respect of
this Agreement then either party may refer the dispute to the determination
of the Arbitrator whose decision shall be final and binding and whose
costs shall be in his award
15. The provisions of this Agreement shall continue in full force and effect
notwithstanding completion of the Lease in so far as they remain to be
performed
AS WITNESS the hands of the parties hereto
/s/ Ray Hardy
SIGNED for and on behalf of the Landlord
-10-
<PAGE>
/s/ Thomas Combrinck
..............................
SIGNED for and on behalf of the Surety
in the presence of.........................................
Being a Solicitor of the Supreme Court
who explained the nature of the Surety's
obligations hereunder to the Surety
-11-
<PAGE>
/s/ Vijay Khakhria
................................................................
SIGNED by an authorised signatory of
CORDOBA HOLDINGS LIMITED
-12-
<PAGE>
THE FIRST SCHEDULE
-------------------
hereinbefore referred to
------------------------
The Ground First Second and Third Floors of the Block
THE SECOND SCHEDULE
--------------------
hereinbefore referred to
------------------------
Floor sq.m sq.ft
7 1,072.1 11,540
6 1,072.1 11,540
5 1,072.1 11,540
4 1,072.1 11,540
3 1,072.1 11,540
2 1,471.1 15,835
1 1,471.1 15,835
-13-
<PAGE>
DATED 199
-------------------------------
BALLYMORE PROPERTIES LIMITED (1)
and
CORDOBA HOLDINGS LIMITED(2)
and
THOMAS CHARLES COMBRINCK (3)
L E A S E
of Premises at
The Paragon Building
City
Howard Kennedy
Harcourt House
19 Cavendish Square
London W1A 2AW
0171 636 1616
Ref: 36
<PAGE>
Particulars and Definitions
---------------------------
THE following expressions shall have where the context so admits the following
meanings:-
1. "THE ACCOUNTING PERIOD" means the period from the First of January in any
year to 31st December in the same year
2. "THE BLOCK" : the premises known as and situate at and known as The Paragon
Building Site F1 and F2 City Reach Greenwich View London E14 and shall
include all additions amendments and alterations made thereto during the
Term
3. "THE COMMENCEMENT DATE" : day of 199
4. "THE COMMON PARTS" : The entrances (other than the entrance included in the
demise) staircases passages landings toilet accommodation (other than as
included in the demise) and all other parts of the Block and/or the Estate
whether or not enjoyed or used by the Tenant in common with others and
which are not specifically demised to any other tenant in the Block and/or
the Estate and which are not included in the definitions of "Premises"
herein contained
5. "FIRST SERVICE CHARGE PAYMENT": (Pounds) 5000
6. "HEADLEASEHOLD TITLE": Title Number EGL 283159
7. "SUPERIOR LEASEHOLD TITLE": Title Number EGL 283164
8. "SERVICE CHARGE ITEM" : an item of expenditure which relates to the Block
and/or the Estate and/or is incurred for the general benefit of some or all
of the occupiers of the Block as referred to in Part I of the First
Schedule hereto
9. "THE SERVICE CHARGE PROPORTION" : a fair and reasonable proportion
calculated on the proportion which the Premises bears to the Block of the
costs charges and expenses incurred in providing or procuring the provision
of the Service Charge Items
10. "THE PARKING SERVICE CHARGE PROPORTION": means the fraction of the costs
charges and expenses referred to in clause (B) of Part II of the First
Schedule hereof of which the numerator is the number of parking spaces to
be allocated to the Tenant and the denominator is the total number of
parking spaces in the Parking Area
11. "PERMITTED USER": Such use as may be permitted under the terms of the
Headlease but provided always that uses of Telecommunications & Information
Technology Switching & Services Facility (or similar) shall not be
construed as being a breach of the use permitted by this Lease
12. "THE INITIAL RENT" : Eight hundred and forty six thousand and nine
hundred POUNDS ((Pounds)846,900) per annum
<PAGE>
13. "LESSOR" : Ballymore Properties Limited of St John's House 5 South Parade
Oxford
14. "MANAGEMENT COMPANY": A reputable management company nominated by the
Lessor in accordance with the provisions of clause 6.15 hereof
15. "PIPES" : means all pipes sewers drains mains ducts conduits gutters
watercourses wires cables channels flues and all other conducting media
16. "THE PLAN" : The Plan annexed to this Lease ?
17. "PREMISES" : All those premises on the Ground First Second and Third floor
of the Block which are shown for identification purposes only edged red on
the Plan
18. "RENT" : means the Initial Rent subject to review in accordance with the
provisions set out In the Second Schedule hereto
19. "RENT COMMENCEMENT DATE" day of
199[insert date agreed under the terms of the contract]
20 "THE TENANT" CORDOBA HOLDINGS LIMITED of EBC House 1-3 Seale Street St
Helier Jersey JE4 0TF
21. "THE TERM" : 25 years from the Commencement Date
22. "VALUE ADDED TAX" : value added tax payable by virtue of the Value Added
Tax Act 1994 (or previous legislation relating to VAT) or other imposition
or levy of a like nature and "VAT" shall be construed accordingly;
23. "THE SURETY" : means THOMAS CHARLES COMBRINCK of 15 Dudley House
Westmoreland Road London W1
24. "The Superior Lease": means the lease dated 5 April 1991 made between (1)
London Docklands Development Corporation and (2) Robert Ogden - Indescon
Developments Limited
25. "The Superior Lessor": means the person or persons for the time being
entitled to the freehold interest in the Premises
26. "the Head Lessor" means the person or persons entitled to the head
leasehold interest in the Premises
27. "The Headlease": means the lease dated 5 April 1991 between (1) Robert
Ogden - Indescon Developments Limited and (2) Derek Horatio Love Waiter and
the lease dated 5 April 1991 between (1) Derek Horatio Love Waiter and
(2) Indestates Limited
28. "The Atrium": means the atrium building adjoining and in part over the
Premises
<PAGE>
29. "The Atrium Lease": means the lease of the Atrium dated the 5th April 1991
made between (1) Robert Ogden - Indescon Developments Limited and (2)
Robert Ogden and Derek Horatio Love Waiter
30. "The Tenant of the Atrium": means the Tenant for the time being of the
Atrium Lease
31. "The Lessor of the Atrium": means the Lessor for the time being of the
Atrium Lease
32. "THE PARKING AREA": means the area within the Estate designated by the
Lessor for the parking of motor vehicles
332. "THE PARKING SPACES": means the parking spaces within the Parking Area
from time to time to be allocated by the Lessor to the Tenant for parking
motor vehicles the number of spaces to be allocated being calculated on a
ratio approximately of 1:1200 square feet (to be determined conclusively by
the Lessor acting reasonably)
34. "THE ESTATE": means the remainder of the premises comprised in sites F1
and F2 as defined in the Headlease
<PAGE>
THIS LEASE made the day of 199
BETWEEN
(1) The Lessor (which expression shall where the context so admits include the
person entitled to the reversion for the time being immediately expectant
on the term hereby created)
(2) The Tenant (which expression where the context so admits include its
successors in title) and
(3) The Surety (which expression where the context so admits include its
successors)
WITNESSETH as follows:-
1. Demise
In consideration of the rents and the Tenant's and the Surety's covenants
hereinafter reserved and contained THE LESSOR hereby DEMISES unto the Tenant
the Premises and there is included in the demise the following:-
1.1.1 the paint paper and other decorative finishes applied to the interior of
the external walls of the Block but not any other part of the external
walls
1.1.2 the floor finishes so that the lower limit of the Premises includes such
finishes but does not extend to anything below them
1.1.3 the entirety of any non-load bearing internal walls wholly within the
Premises but not any load bearing internal walls
1.1.4 the inner half severed medially of the internal non-load bearing walls
dividing the Premises from other parts of the Block
1.1.5 the ceiling finishes so that the upper limit of the Premises includes
such finishes but does not extend to anything above them
1.1.6 the internal doors and door frames
1.1.7 all additions and improvements to the Premises
1.1.8 all the Lessor's fixtures and fittings of every kind whether originally
affixed or fastened to the Premises or not
1.1.10 any Pipes in or upon the Premises that exclusively serve the Premises
TOGETHER WITH:-
1.2.1 the right of free passage and running of water and soil and all other
services in and through the Pipes made or to be made during the Term upon
through or under adjacent premises in the Block and to the free and
uninterrupted use of Pipes upon through or under such adjacent premises
all such rights to be so far as necessary for the enjoyment of the
Premises and in common with
<PAGE>
the Lessor and all others so authorised by the Lessor and all other
persons entitled
1.2.2 The right of support and protection from all other parts of the Block
1.2.3 All rights easements and privileges granted by the Headlease
1.2.4 the exclusive right to park one private motor vehicle in each Parking
Space BUT nothing in this Lease shall imply the right to use such parking
spaces unless and until the Lessor shall give notice to the Tenant that
it is or they are ready for use by the Tenant and the Lessor covenants
with the Tenant to serve the notice referred to in this clause as soon as
the Parking Space is ready for use and to use reasonable endeavours to
ensure that the parking space is ready as soon as reasonably practicable
1.2.5 the right of 24 hours access to the Premises
1.2.6 Such rights of access to and entry upon other parts of the Block as are
necessary for the due performance of the Tenant's obligations under this
lease or for the purposes of carrying out works to the Premises Provided
That such works shall be carried out with the minimum of damage and
inconvenience to the Lessor and other occupiers in the Block and any
damage caused shall be made good to the reasonable satisfaction of the
Lessor
1.2.8 the right to install such plant and machinery on the Block to serve the
Premises as are reasonably necessary for the full enjoyment of the
Premises the precise location of such plant and machinery to be
determined by the Lessor acting reasonably
1.2.9 Subject to the Tenant obtaining and serving all necessary consents in
accordance with its obligations in this Lease the right to place aerials
and microwave dishes and related equipment on the roof of the Block the
main location of such aerials and related equipment to be determined by
the Lessor acting reasonably
1.3 EXCEPTING AND RESERVING to the Lessor and the tenants and occupiers of
other portions of the Block of which the Premises form part and all other
persons entitled thereto
1.3.3 the right of free passage and running of water and soil in and through
the sewers drains and channels (if any) made or to be made during the
Term upon through or under the Premises and the free and uninterrupted
use of all Pipes upon through or under the Premises
<PAGE>
1.3.4 full right and liberty for the Lessor and their surveyors agents workmen
and others at all times and from time to time upon reasonable written
notice (save in case of emergency) to enter (and in cases of emergency to
break and enter) into and upon all parts of the Premises provided always
that the minimum possible interference shall be caused to the Tenant and
any lawful occupiers of the Premises for the purpose of viewing
inspecting repairing maintaining altering renewing the Block cleansing
examining or testing all parts of the Block and the Pipes serving it and
to make all connections disconnections and removals which may be
necessary and for the purpose of carrying out any work or doing anything
whatsoever comprised within the Lessor's obligations contained in this
Lease or (whether or not comprised within this Lease) for which the
Tenant is liable to make a contribution or for taking schedules or
inventories of fixtures to be yielded up at the expiry of the Term
PROVIDED that the Lessor shall forthwith make good any damage caused to
the Premises or to the Tenants or any occupiers fixtures and fittings or
stock in trade but shall not be liable to the Tenant for any reasonable
inconvenience or otherwise in relation to any such works carried out or
thing done as aforesaid
1.3.5 all rights of light air and other easements and rights now or hereafter
belonging to or enjoyed by the Premises from or over any adjacent or
neighbouring land or Block
1.3.6 the right for the Superior Lessor and the Headlessor and all persons
authorised by it or them without obtaining consent from or making any
compensation to the Tenant to deal as it or they may think fit with any
adjacent or neighbouring land or Block in any manner whatsoever and to
let the same for any purpose or otherwise deal therewith and to erect or
suffer to be erected thereon or on any part thereof any buildings
whatsoever and to make any alterations erections or additions and to
carry out any demolition building or rebuilding whatsoever which it or
they may think fit or desire to do to such land or buildings or any part
thereof in such manner as the Superior Lessor the Headlessor or the
Lessor think fit notwithstanding the light or air to the Premises is in
any such case thereby diminished or any other liberty easement right or
advantage belonging to the Tenant is thereby diminished or prejudicially
affected and the Tenant shall not at any time during the Term or
thereafter raise or make any complaint or institute or take any
proceedings whatsoever whether by way of injunction or for damage or
otherwise against the Superior Lessor the Headlessor or the Lessor or any
neighbouring owner
<PAGE>
or occupier by reason or in consequence of any noise disturbance
annoyance or inconvenience occasioned by any such erection rebuilding
alteration or user as aforesaid but the Superior Lessor the Headlessor
and/or the Lessor as the case may be shall cause as little inconvenience
to the Tenant as is reasonably practicable and shall make good forthwith
any damage caused to the Premises or damage to the Tenant's and any
occupier's fixtures and fittings or stock in trade as a result of any of
the matters set out in this clause
1.3.7 the right of support and shelter and all other easements and rights now
or hereafter belonging to or enjoyed by all adjacent or neighbouring land
or Blocks an interest wherein in possession or reversion is at any time
during the term hereby granted vested in the Lessor the Headlessor or the
Superior Lessor
1.3.8 the right to erect scaffolding for the purpose of inspecting repairing or
cleaning the Block notwithstanding such scaffolding may temporarily
restrict the access to or use of the Premises provided always that the
minimum possible interference shall be caused to the Tenant and any
lawful occupiers of the Premises
1.3.9 the right upon reasonable written notice (save in case of emergency) to
enter the Premises provided always that the minimum possible interference
shall be caused to the Tenant and any lawful occupiers of the Premises if
necessary to repair maintain alter or replace any machinery apparatus or
equipment serving any air conditioning apparatus or lifts in any lift
shafts abutting (but not comprising part of) the Premises the Lessor
causing as little interference with the Tenant's business provided always
that the minimum possible interference shall be caused to the Tenant and
any lawful occupiers of the Premises as possible and rectifying forthwith
any damage or damage to the Tenant's and any occupier's fixtures and
fittings or stock in trade caused in exercise of such right
1.3.10 All rights easements and privileges now belonging to or enjoyed by any
adjoining or neighbouring land
1.3.11 All rights easements and privileges excepted and/or reserved under the
Headlease
2. Habendum
<PAGE>
TO HOLD the Premises unto the Tenant (subject to all matters referred to in the
Headleasehold and Superior Title) for a term from and including the Commencement
Date for the Term subject nevertheless to clause 7 hereof and the proviso for
re-entry hereinafter contained
3. Reddendum
YIELDING AND PAYING during the Term yearly and proportionately for any fraction
of a year the rents set out below:
3.1 From and including the Rent Commencement Date the Rent together with (if
demanded) Value Added Tax thereon (upon the Tenant receiving a valid VAT
invoice address to the Tenant) at the rate applicable from time to time the
Rent shall be paid by equal quarterly payments in advance on the usual
quarter days in every year without any deduction or set-off whatsoever the
first payment apportioned in respect of the period from the Rent
Commencement Date to the quarter day next thereafter to be paid on the date
hereof
3.2 By way of further rent the Service Charge
3.3 Throughout the Term by way of further rent forthwith on demand following
the expenditure thereof by the Lessor
3.3.1 the proper and reasonable cost (with the Landlord retaining all
commission) to the Lessor of insuring or procuring the insurance of
not less than three years loss of the Rent
3.3.2 such sum or sums of money (if any) as may be demanded by the
insurance company with whom the Block shall from time to time be
insured in respect of increased premiums occasioned by the nature of
the occupation or business of the Tenant (which amount the Lessor
may at its reasonable discretion decide shall be wholly borne and
paid by the Tenant) together with any reasonable excess imposed by
the Lessor's insurance company as shall be then current in the
insurance market place
4. Tenant's Covenants
THE TENANT hereby COVENANTS with the Lessor as follows:-
Rents
- -----
<PAGE>
4.1 To pay during the Term the Rent at the times and in manner herein provided
without any deduction (and if so requested by the Lessor to pay the same by
Bankers standing order)
Service Charge
- --------------
4.2 To at all times comply with Part III of the First Schedule hereto
Outgoings
- ---------
4.3 To pay and indemnify the Lessor against (or in the absence of direct
assessment on the Tenant to repay to the Lessor a fair proportion of) all
existing and future rates taxes duties assessments impositions charges and
outgoings of every kind and description (whether parliamentary parochial or
of any other description) payable by law in respect of the Premises or any
part thereof by the owner Lessor lessee or occupier thereof (other than
those levied on the freehold reversion) and if the Lessor shall suffer any
loss of rating relief which may be applicable to empty premises after the
end of the Term by reason of such relief being allowed to the Tenant in
respect of any period before the end of the Term to make good such loss to
the Lessor
Electricity and other services consumed
- ---------------------------------------
4.4. To pay to the suppliers thereof all charges for electricity gas water and
all other supplies and services consumed in the Premises (including meter
rents) (or in the absence of direct assessment on the Tenant to repay to
the Lessor a fair proportion of such charges) during the Term
Interest
- --------
4.5 To pay to the Lessor interest ("Interest") at four per centum per annum
above the current Barclays Bank plc (or its successors in title) Base Rate
or if there shall be no such rate at such other reasonable rate of interest
as the Lessor may from time to time specify ("the Interest Rate") from the
date when any sums whether rent or otherwise shall become payable hereunder
(whether or not demanded) until the date of payment such interest to be
calculated on a day to day basis PROVIDED that such liability to pay
interest shall not arise if such sums are paid by the Tenant within
fourteen days of the date for due payment thereof
Repair
- ------
4.6 At all times to cleanse maintain keep and renew and well and properly
maintain the Premises and each and every part thereof in good substantial
and decorative repair
<PAGE>
and condition throughout the Term (damage by fire and such other risk
against which the Lessor shall have insured save where the insurance monies
shall be irrecoverable (whether in whole or in part) on consequence of any
act or default of the Tenant only excepted) and to replace from time to
time all Lessor's fixtures fittings and appurtenances in the Premises which
may be or become beyond repair at any time during or at the expiration or
sooner determination of the Term provided always that the Tenant shall not
be liable to carry out any works for the remedy of any damage caused by any
defect in the original design or construction of the Block or the Premises
Decoration
- ----------
4.7 In every fifth year and in the last year of the Term (howsoever determined)
to paint in a proper and workmanlike manner and to a high standard of
decorative finish to the reasonable satisfaction of the surveyor for the
time being of the Lessor and all the inside wood iron and other parts
heretofore or usually painted of the Premises with two good coats of good
quality paint and so that such painting in the last year of the Term shall
be of a tint or colour approved in writing by the Lessor (such approval not
to be unreasonably withheld or delayed) and also with every such internal
painting to oil wash stop gild polish whiten distemper grain varnish colour
paper and otherwise treat and decorate in a proper and workmanlike manner
all such internal parts of the Premises that have been or ought properly to
be so treated and decorated
Alterations and waste
- ---------------------
4.8.1 Not at any time during the Term to make or permit or suffer to be made
any structural alteration or addition whatsoever without the prior
written consent of the Lessor (such consent not to be unreasonably
withheld) nor to cut maim injure or remove or permit or suffer to be cut
maimed injured or removed any of the walls floors timbers beams columns
or other structural parts thereof nor to make any addition to or
alterations to the internal structural arrangements of the Premises or
any part thereof as the same exists at the date hereof
4.8.2 Not to commit or permit or suffer any waste spoil or destruction in or
upon the Premises nor to cut maim or injure or suffer to be cut maimed
or injured any of the roofs walls timbers wires pipes drains
appurtenances fixtures or fittings thereof
4.8.3 Not to carry out any alterations which are not prohibited pursuant to
sub-paragraph 4.8.1 and 4.8.2. without first obtaining the consent of the
Lessor thereto (such consent not to be unreasonably withheld or delayed)
and if such
<PAGE>
consent be granted to carry out such works in accordance with the
provisions of this Lease in all other respects provided that no consent
shall be required for the erection of non-structural alterations but
provided that the Tenant shall supply full drawings and specifications
for such alterations to the Lessor
4.8.4 Not to suspend or to permit or suffer to be suspended any excessive
weight from the main structure of the Premises
4.8.5 Not to overload or permit or suffer to be overloaded the Premises or the
Block or any part thereof or any services thereto or permit or suffer the
same to be used in any manner which will cause undue strain or interfere
therewith and not to cause vibrations nor to use or permit or suffer to
be used the Premises or any part thereof in such manner as to subject the
same or the Block to any strain beyond that which it is designed to bear
4.8.6 To erect any necessary chimney or other ventilator in connection with any
such machinery apparatus and equipment to the reasonable satisfaction in
all respects of the Lessor and to obtain such consents as may be
requisite from the local or any other appropriate authority for the use
of any machinery apparatus and equipment in the Premises and to comply
with all conditions to such consents
4.8.7 To report in writing to the Lessor any wants of reparation of the
Premises
Acts of Parliament
- ------------------
4.9 At all times during the Term to observe and comply with and to do and
execute or cause to be done and executed all such works and to do all such
things and provide and maintain all arrangements as under or by virtue of
any Act or Acts of Parliament whatsoever now or hereafter to be passed and
any orders bylaws rules and regulations whatsoever thereunder are or shall
be directed or necessary to be done executed upon or maintained in respect
of the Premises or any part thereof or in respect of the user thereof
whether by the Lessors tenants owners or occupiers of the Premises and at
all times to save harmless and to keep indemnified the Lessor and the
Lessor's estate and effects against all claims demands costs expenses and
liability in respect thereof and without prejudice to the generality of the
foregoing to pay all costs charges and expenses incurred by the Lessor in
abating a nuisance and executing all such works as may be necessary for
abating a nuisance or for remedying any other matter in connection with the
Premises in obedience to a notice served by a local authority
Proportion of expenses
- ----------------------
<PAGE>
4.10 To pay a fair proportion (to be conclusively determined by the Surveyor
for the time being of the Lessor acting reasonably) of the expenses
incurred in respect of constructing repairing and cleansing all party
walls fences sewers drains channels sanitary apparatus pipes wires
passageways stairways entrance ways roads pavements and other things the
use of which is common to the Block (or any part thereof) and to other
premises including in particular (but without prejudice a generality of
the foregoing) the cost of maintaining renewing replacing lighting and
insuring the Parking Area
Notice to repair
- ----------------
4.11.1 No more than once in any calendar year (except in an emergency) to
permit the Lessor and their agents surveyors and others authorised by
them respectively at all reasonable times upon previous notice (except
in emergency) to enter upon and view (and to open up floors and other
parts of the Premises provided always that the minimum possible
interference shall be caused to the Tenant and any lawful occupiers of
the Premises where the opening up is required to view) the state and
condition of the Premises or to check that the Tenant has observed the
covenants and conditions of this Lease and within two months after the
Lessor their agents or surveyors shall have given to the Tenant or left
on the Premises a notice ("the Notice") in writing of any defects decays
or wants of reparation found thereupon in accordance with the covenants
hereinbefore contained well and substantially to repair and make good
the same PROVIDED THAT if the Tenant shall not within one month after
service of the Notice (or sooner if so stated in the Notice) commence
and proceed diligently with the execution of the works or shall have
failed to complete the works specified in the notice within a reasonable
time after service of the Notice (or such other period as may be
specified in the Notice) then without prejudice to all other the
Lessor's rights and remedies it shall be lawful for the Lessor and its
agents surveyors and workmen to enter upon the Premises with or without
tools appliances equipment and materials and execute such repairs and
works and the cost thereof (which expression shall include but not be
limited to all legal costs and Surveyors' fees and other expenditure
whatsoever attendant thereon) shall be a debt immediately payable by the
Tenant to the Lessor and be forthwith recoverable by action as if the
same were in arrears and shall carry Interest at the rate aforesaid And
if and whenever any defect in the state of the Premises has come to the
notice of the Lessor then any such Lessor shall
<PAGE>
thereupon be entitled to enter upon the Premises and to erect thereon
such warning notices or lighting or ropes or barriers or such other
items the Lessor may think fit in its reasonable discretion for the
purpose of seeing that persons are reasonably safe from personal injury
or damage to their property from the defect in question but any such
action by such Lessor shall be entirely without prejudice to the
obligation of the Tenant to remedy the defect in question pursuant to
the covenants herein contained and to the Tenant's own obligation to see
that persons are reasonably safe as aforesaid provided always that the
minimum possible interference shall be caused to the Tenant and any
lawful occupiers of the Premises
Combustible articles
- --------------------
4.12 Not to store or bring upon the Premises any articles or goods of a
specially combustible inflammable or dangerous nature and not do to or
permit or suffer anything by reason whereof any insurance effected on
the Block and/or the Atrium may be rendered void or voidable or whereby
the rate of premium thereon may be increased and to comply with all
requirements of the insurers and fire authorities as to fire precautions
relating to the Premises and to keep the Premises supplied with such
fire fighting equipment as the London Civil Defence and Fire Authority
may require
Nuisance
- --------
4.13 Not to do or suffer on the Premises or any part thereof any act matter
or thing whatsoever which may interfere with the mechanism or the
operation of any equipment or hinder or interfere with any services
provided by the Lessor or which may be or tend to the annoyance
inconvenience nuisance damage or disturbance of the Lessor or the owners
tenants lessees or occupiers of any adjoining or neighbouring property
or which may or shall detract from the respectability of the Premises
the Atrium the Block or the neighbourhood
Illegal purpose
- ---------------
4.14 Not to use or permit or suffer the Premises or any part thereof to be
used for any illegal or immoral purpose or for any noisome noxious or
offensive trade or business
Occupation
- ----------
4.15 Not without the consent in writing of the Lessor (which shall not be
unreasonably withheld or delayed in the case of a proposed user which
shall not be in competition
<PAGE>
to any use or intended use of any other part of the Block) to use or
permit to be used the Premises except for the Permitted User
No residence
- ------------
4.16 Not to use the Premises as sleeping accommodation or for residential
purposes or as a music hall or casino or hotel or boarding house nor
keep any animal fish reptile or bird anywhere on the Premises
Signs
- -----
4.17 Not without the Lessors consent to affix erect attach or exhibit or
permit or suffer so to be upon any part of the exterior of the Premises
or on any part of the interior of the Premises such that the same is
visible from the outside of the Premises any placard signboard poster
notice advertisement name or sign lights or television telephonic
telegraphic or wireless mast or aerial whatsoever and at the end of the
Term to remove or efface any such permitted sign or signs and make good
to the satisfaction of the Lessors any and all damage caused in the
affixing and removal thereof
Auctions
- --------
4.18 Not to hold or permit or suffer to be held any sale by auction on the
Premises without the previous written consent of the Lessor
Part assignment
- ---------------
4.19 Not at any time during the Term
(a) to assign charge or mortgage a part only of the Premises
(b) nor to charge or mortgage the whole of the Premises without the
Lessor's written licence first had and obtained which shall not be
unreasonably withheld
Whole assignment
- ----------------
4.20 Not at any time during the Term to assign the whole of the Premises
without the Lessor's written licence first had and obtained which shall
not be unreasonably withheld in the case of a respectable and
responsible person firm or company PROVIDED that every such licence
shall be by deed to be prepared by the Lessor but at the expense of the
Tenant to which the intended assignee ("the Assignee") shall be a party
in order to covenant (and if a firm then jointly and severally by at
least two of its partners and/or directors as appropriate) directly with
the Lessor (and
<PAGE>
(if applicable) the Management Company) to pay the rents hereby reserved
and to perform and observe the covenants and conditions herein contained
during the residue of the Term (including this present covenant) in the
same manner as if such covenants and conditions were therein repeated in
extenso in such deed with the substitution of the name of the
Assignee(and partners or directors as aforesaid) for the name of the
Tenant and if the Lessor shall reasonably so require to procure that at
least two (or more if the Lessor so reasonably requires) of the
Assignee's partners or directors (if a partnership or a company
respectively) and/or such other guarantors acceptable to the Lessor
shall enter into direct covenants with the Lessor in a form reasonably
approved by the Lessor from time to time (the costs of such approval
being paid by the Tenant) wherein the partners or directors and/or other
guarantors guarantee the Assignee's covenants and obligations under the
Lease for the remainder of the Term and further provided if the Lessor
(acting reasonably) thinks it appropriate then to provide a rental
deposit equivalent to 6 months Rent and Additional Rent payable
hereunder to be held by the Lessor as security for the performance of
the Assignee's obligations during such period as the Assignee shall be
the Tenant hereunder and further that if such intended assignee shall be
an individual not normally resident in the United Kingdom then upon the
Lessor's demand in that behalf one or more acceptable United Kingdom
resident or company shall join in such deed as aforesaid as surety for
such individual as aforesaid and FURTHER PROVIDED that if requested to
do so by the Lessor the Tenant shall enter into guarantor obligations
direct with the Lessor in the form of Clause 7 hereof with such
variations as the Lessor may require to suit the circumstances of each
case
Premium for underletting and restricted parting with possession
- ---------------------------------------------------------------
4.21 Not at any time during the Term to demise underlet or otherwise part
with or share possession or occupation of the Premises or any part
thereof or hold them on trust for another for all or any part of the
Term at a fine or premium (the same being hereby expressly prohibited)
and not to part with or share possession or occupation of the Premises
or any part thereof or to hold them on trust for another save by way of
a permitted assignment of the whole or underletting of the whole or part
of the Premises with the consent of the Lessor in accordance with the
provisions in that behalf herein contained Provided That
<PAGE>
4.21.1 in the case of an underletting of part there shall be no more than two
sub-lettings per floor and all such sub-leases shall be excluded from
the provisions of Part II of the Landlord and Tenant Act 1954 and
4.21.2. the Lessor's consent shall not be required in relation to any licence
substantially in the form of the licence attached hereto as Annexure 2
and which licence shall grant no security of tenure or create any
relationship of landlord and tenant and
4.21.3. no consent shall be required for the sharing of occupation of the whole
or any part of the Premises with any group company of the Tenant within
the meaning of s42 of the Landlord and Tenant Act 1954 for so long as
such group relationship shall continues
Authorised underletting
- -----------------------
4.22 Not at any time during the Term to demise or underlet the whole or part
of the Premises for all or any part of the Term without the Lessor's
written licence first had and obtained which shall not be unreasonably
withheld PROVIDED that the Underlease shall (in addition to the proviso
in Clause 4.21.1)
4.22.1 provide that the rent to be reserved by an underlease of whole
shall not be less than the Rent payable hereunder or open
market rent at the date of such underletting (whichever shall
be the greater)
4.22.2 provide that the rent to be reserved by an underlease of part
shall not be less than the open market rent at the date of
such underletting in respect of that part of the Premises so
underlet
4.22.3 prohibit the undertenant from doing or allowing any act or
thing in relation to the underlet premises inconsistent with
or in breach of the provisions of this Lease
4.22.4 provide for re-entry by the under Lessor on breach of any
covenant by the undertenant
4.22.5 prohibit any assignment of the whole without the prior consent
of the Lessor under this Lease (such consent not to be
unreasonably withheld or delayed)
4.22.6 prohibit any further underletting of the Premises or the part
thereby underlet (the same being expressly prohibited)
4.22.7 impose in relation to any permitted assignment the same
obligations for registration with the Lessor as are contained
in this Lease in relation to dispositions by the Tenant
4.22.8 provide for the enforcement the performance and observance by
every such undertenant of the provisions of this Lease and the
underlease and not at any
<PAGE>
time either expressly or by implication to waive any breach of
the covenants or conditions on the part of any undertenant or
assignee of any underlease nor vary the terms or accept a
surrender of any permitted underlease
4.22.9 impose in relation to any permitted underletting the same
obligations as are contained in 4.22.5 4.22.6 4.22.7 and
4.22.8
4.22.10 impose obligations:-
4.22.10.1 to ensure that the underlease contains provisions for rent
review at the same time and on similar forms to those
contained in this Lease
4.22.10.2 to ensure that the rent is reviewed in accordance with the
terms of the underlease
4.22.10.3 not to agree the reviewed rent with the undertenant without
the approval of the Lessor (such consent not to be
unreasonably withheld or delayed)
4.22.10.4 where the underlease provides an option not to agree that
the third party determining the rent in default of agreement
shall act as an arbitrator or as an expert without the
approval of the Lessor (such consent not to be unreasonably
withheld or delayed
4.22.10.5 not to agree upon the appointment of the person to act as the
third party determining the rent in default of agreement
without the approval of the Lessor (such consent not to be
unreasonably withheld or delayed
4.22.10.6 to incorporate as part of its submissions or representations
to that third party such submissions or representations as the
Lessor shall promptly and reasonably require
4.22.10.7 to give notice to the Lessor of the details of the
determination of every rent review notice within 28 days
4.22.11 prior to the Tenant underletting the Premises it shall before
doing so and before giving possession to the intended
underlessee execute and deliver a deed to be prepared by the
Lessors solicitors at the cost of the Tenant containing if
required by the Lessor a covenant by the intended underlessee
directly with the Lessor to perform and observe during the
term granted to the underlessee the covenants on the part of
the Tenant and the conditions herein contained in the same
manner as if such covenants and conditions were set out in
extenso in such deed with the substitution of the name of the
intended underlessee for the name of the Tenant
<PAGE>
Notices specifying breach
- -------------------------
4.23 To pay on an indemnity basis all proper expenses (including where
appropriate solicitors' and architects costs and surveyors fees) costs fees
charges and disbursements (including Value Added Tax) incurred by the
Lessor:-
4.23.1 incidental to the preparation and service of a notice under section
146 of the Law of Property Act 1925 (whether by the Lessor) or
incurred in proceedings under Section 146 or 147 of that Act
notwithstanding in any such case forfeiture is avoided otherwise
than by relief granted by the Court
4.23.2 in or in contemplation of any legal or other proceedings or other
enforcement action in respect of any breach of any leasehold
covenant
4.23.3 and/or their respective solicitors and/or any managing agents
appointed to manage the Block in respect of any requests for
information and/or enquiries made to such persons
4.23.4 of and incidental to the contemplation of and service of all
notices and schedules relating to wants of repair the non payment
of rent or the performance and observance of the covenants
contained in this Underlease and whether served during or after the
expiration or sooner determination of the Term
Planning Acts
- -------------
4.24.1 At all times during the Term (in so far as such obligations
properly fall on the occupier of Premises as opposed to the Lessor)
to comply in all respects with the provisions and requirements of
the Town and Country Planning Act 1990 the Planning (Listed
Building and Conservation Areas) Act 1990 the Planning (Hazardous
Substances) Act 1990 the Planning (Consequential Provisions) Act
1990 and the Planning and Compensation Act 1991 or any statutory
modification or re-enactment thereof for the time being in force
("the Planning Acts") and any regulations orders consents or
conditions made thereunder and all licences consents permission and
conditions (if any) granted or imposed thereunder whether as to the
permitted user hereunder or otherwise and to indemnify (as well
after the expiration of the Term by effluxion of time or otherwise
as during its continuance) and keep the Lessor indemnified against
all liability whatsoever including costs and expenses in respect of
any contravention thereof and forthwith to produce to the Lessor on
receipt of notice thereof any notice order or proposal therefor
made given or issued to the Tenant by a planning authority under or
by virtue of the said Act affecting
<PAGE>
or relating to the Premises and at the request and cost of the
Lessor to make or join with the Lessor in making every such
objection or representation in respect of the same that the Lessor
shall (acting reasonably) deem expedient
4.24.2 Not without the previous consent in writing of the Lessor (such
consent not to be unreasonably withheld or delayed) to apply for
any planning permission relating to the Premises or any part
thereof
4.24.3 Subject only to any statutory direction to the contrary to pay and
satisfy any charge or levy that may subsequently be imposed under
the Planning Acts in respect of the carrying out or maintenance by
the Tenant on the Premises of any such operations or the
commencement or continuance of any such
4.24.4 Notwithstanding any consent which may be granted under this Lease
not to carry out or make any alteration or addition to the Premises
or any change of use until:-
4.24.4.1 all necessary notices under the Planning Acts have been
served and copies produced to the Lessor
4.24.4.2 all necessary permissions under the Planning Acts have
been obtained and produced to the Lessor
4.24.4.3 the Lessor has acknowledged that every necessary planning
permission is acceptable to it the Lessor being entitled
to refuse the acknowledgement of its acceptance of a
planning permission on the grounds that any condition
contained in it or omitted from it may be prejudicial to
the Lessors interest in the Premises or in the remainder
of the Block whether during or following the expiration
of the Term
4.24.4.4 where permission is granted subject to conditions if the
Lessor so requires to provide security for the compliance
with such conditions and not to implement the planning
permission until security has been provided
4.24.4.5 if required by the Lessor but at the cost of the Tenant
to appeal against any refusal of planning permission or
the imposition of any conditions in a permission
Damage indemnity
- ----------------
4.25 To be responsible for and to indemnify the Lessor against all damage
occasioned to the Premises whether by reason of the keeping of dangerous
combustible or inflammable goods or materials or otherwise or any other
part of the Block or any adjacent or neighbouring premises or to any
person caused by any act default or
<PAGE>
negligence of the Tenant or the servants agents licensees or invitees of
the Tenant and to effect adequate insurance against all third parties and
public liability risks
Obstruction
- -----------
4.26 Not to place or permit or suffer to be placed any goods or things
whatsoever upon nor to cause or permit any obstruction to the entrances
passages and other common portions of the Block or the Atrium or upon any
adjoining roads or ways
Regulations
- -----------
4.27 To observe and conform to all reasonable regulations and restrictions made
by the Lessor for the proper management of the Block and the Atrium and
notified in writing by the Lessor to the Tenant from time to time and all
regulations contained in or made pursuant to the Superior Lease and/ or
the Headlease and/or the Atrium Lease
Re-letting boards
- -----------------
4.28 To permit the Lessor during the six months immediately preceding the
determination of the Term and at any time thereafter to affix and retain
without interference upon any part of the Premises a notice for re-letting
the same and during such period to permit persons with written authority
of the Lessor or the Lessor's agents at reasonable times of the day to
view the Premises
Registration
- ------------
4.29 Within fourteen days after any permitted assignment underlease mortgage
charge transfer vesting declaration or order declaration of trust probate
letters of administration disposition devolution or other instruments of
the Premises or any part thereof whether the same be effected orally or in
writing to give notice thereof in duplicate to the Lessor's solicitor and
to produce to him the original or a certified copy of the instrument or
instruments (including any relevant probate letter of administration or
assent) or if the same be made orally a memorandum of the terms of such
transaction as aforesaid and also to deliver to the same solicitor for
retention by the Lessor a copy thereof and to pay to the same solicitor a
reasonable fee of not less than TWENTY FIVE POUNDS ((Pounds)25.00) plus
VAT thereon for registration of such transaction in the Lessor's books or
records and within three weeks of every determination of a revised rent
under the provisions of any underlease or underleases to give full details
to the solicitors of the Lessor with evidence of that determination
<PAGE>
Yield up
- --------
4.30.1 To yield up the Premises with all additions and improvements and
the fixtures and fittings and additions thereto at the expiration
or sooner determination of the Term in good and substantial repair
condition (the Lessor's fixtures fittings and appurtenances being
duly replaced) in accordance with the several covenants on the part
of the Tenant hereinbefore contained
4.30.2 To execute all works of repair painting gilding polishing graining
varnishing distempering colouring decorating papering and
repointing of the Premises necessary or required to be so executed
to the reasonable satisfaction of the Surveyor for the time being
of the Lessors
General indemnity
- -----------------
4.31 To pay and make good to the Lessor all and every loss and damage
whatsoever incurred or sustained by the Lessor as a consequence of every
breach or non-observance by the Tenants its servants agents and invitees
of the Tenant's covenants herein contained and to indemnify the Lessor and
the Lessor's estate and effects from and against all actions claims
liability costs and expenses thereby arising
Licence fees
- ------------
4.32 To pay all proper and reasonable costs and professionals' fees incurred by
the Lessor attendant upon or incidental to every application made by the
Tenant for a consent or licence hereinbefore required or made necessary
whether the same be granted or refused (but not unreasonably withheld) or
proffered subject to any lawful qualification or condition or whether the
application be withdrawn
Value Added Tax
- ---------------
4.33 Upon receipt of a valid VAT invoice addressed to the Tenant:-
4.33.1 To pay to the Lessor any VAT chargeable upon any supply made by the
Lessor to the Tenant by or pursuant to or in connection with this Lease
so that all consideration for any such supply is exclusive of VAT.
4.33.2 To pay and indemnify the Lessor against any VAT chargeable upon any
supply (whether made to the Lessor or to a third person) where pursuant
to this Lease the Tenant is required to pay to the Lessor any sum in
respect of any costs fees expenses or other expenditure or liability (of
what ever nature) in connection with that
<PAGE>
supply except to the extent that any such VAT may be recoverable by the
Lessor from HM Customs and Excise.
4.33.3 To pay all such VAT at the same time that the relevant sum of money or
consideration is payable to or receivable by the Lessor or (if earlier
and in relation to supplies made by the Lessor to the Tenant) at the
time that the supply is treated as taking place for the purposes of the
charge to VAT.
Access to repair
- ----------------
4.34 To permit the duly authorised agents and servants of the Lessor (and if
authorised by the Lessor the lessees tenants and occupiers of any
adjoining premises belonging to the Lessor) with all necessary workmen
and appliances at all reasonable times to enter upon the Premises
provided always that the minimum possible interference shall be caused
to the Tenant and any lawful occupiers of the Premises to repair cleanse
or maintain any Pipes in on over or under the Premises for the
accommodation of any adjoining premises now or hereafter belonging to
the Lessor all damage thereby occasioned to the Premises being made good
forthwith by the person or persons exercising such rights provided
always that the minimum possible interference shall be caused to the
Tenant and any lawful occupiers of the Premises
Precautions against escape of dangerous or noxious substances
- -------------------------------------------------------------
4.35 To take all necessary precautions (whether by the installation of
devices for consuming or absorbing smoke or fumes or for catching
intercepting or precipitating soot dust or ashes or by some other means)
to prevent the amount of smoke fumes gas soot dust or ashes escaping
from the Premises into the surrounding atmosphere PROVIDED ALWAYS that
nothing in this sub-clause contained shall be deemed to be an
authorisation by the Lessor of or of the commission of a nuisance
Not to Block Conduits
- ---------------------
4.36.1 Not to stop up or obstruct in any way whatsoever or permit oil
grease or other deleterious matter or substance to enter the
drains and sewers of the Block and the Atrium and to employ such
plant for treating any deleterious effluent before permitting the
same to enter such drains and sewers as may be required by the
Lessor from time to time in accordance with best modern practice
and at such intervals as may be reasonable to take steps to rod
the drains and conduits serving the Premises so as to ensure that
no blockage of them shall occur
<PAGE>
4.36.2 Not to stop up darken or obstruct any windows or lights belonging
to the Premises or any adjoining adjacent or neighbouring property
owned by the Lessor or their lessees or tenants
Encroachments
- -------------
4.37 To use its reasonable endeavours to prevent any encroachment upon the
Premises or the acquisition of any new right to light passage drainage or
other encroachment or easement over upon or under the Premises and to give
notice to the Lessor of any threatened encroachment or attempt to acquire
any such easement and at the request and cost of the Lessor will do all
such things as may be proper for preventing any new encroachment or
easements being acquired
Keys
- ----
4.38 To ensure that the Lessor has at all times written notice of the name home
address and home telephone number of at least 2 keyholders of the Premises
Notice of Defects
- -----------------
4.39 To give notice to the Lessor immediately upon becoming aware of any defect
in the Premises which might give rise to an obligation on the Lessor to do
or refrain from doing any act or thing in order to comply with the
provisions of this lease or the duty of care imposed on the Lessor
pursuant to the Defective Premises Act 1972 or otherwise
Compliance with Headlessor's and Superior Lessor's Obligation
- -------------------------------------------------------------
4.40 To observe the obligations and comply with the covenants and matters
referred to in the Headleasehold Title and Superior Leasehold Title and
the Atrium Lease (save as to payment of rent) and to indemnify the Lessor
in respect thereof Provided that in the event of any inconsistency between
the obligations contained in the Headlease the Superior Lease and the
Atrium Lease and those contained herein which would cause the Lessor to be
in breach of the Headlease or Superior Lease or the Atrium Lease then the
terms of the Headlease Atrium Lease and the Superior Lease will prevail
Goods left on the Property
- --------------------------
4.41 If at the termination date this tenancy has not been renewed by the Tenant
and any goods furniture or effects belonging to the Tenant are left in the
Premises for more
<PAGE>
than fourteen days the Lessor shall have power to sell them as agent for
the Tenant and the Lessor shall pay or account to the Tenant within ten
days after a written demand for the proceeds of sale (without interest)
less the reasonable costs of removal storage and sale
Distress
- --------
4.42 All sums due and payable under this Lease shall be recoverable if the
Lessor so wishes as if the same formed part of the rents reserved under
this Lease
4.43 Fire Fighting Equipment
-----------------------
At all times during the Term at the Tenant's expense to keep the Premises
supplied and equipped with such fire-fighting apparatus and appliances as
the relevant Fire Prevention Officers shall from time to time in writing
specify or in the absence of such specifications approve and to maintain
such apparatus and appliances to the relevant Fire Prevention Officers'
satisfaction and to permit them to be inspected on reasonable notice save
in an emergency by the Lessor and the relevant Fire Prevention Officers and
also not to obstruct the access to or means of working such apparatus and
appliances by the Tenant's occupations of or connected with the Premises
4.44 Entry To Inspect
----------------
To permit the Lessor and its agents at any reasonable time or times in the
daytime upon reasonable prior written notice (except in emergency) to enter
and examine the Premises provided always that the minimum possible
interference shall be caused to the Tenant and any lawful occupiers of the
Premises to ensure that nothing has been done therein which constitutes or
may in the reasonable opinion of the Lessor tend to constitute a breach of
any of the covenants in These Presents and to examine the state and
condition of the Premises the person or persons so entering causing as
little interference inconvenience and disturbance as reasonably possible
and the Lessor shall forthwith make good any damage caused to the Premises
or the Tenant's or its lawful occupiers' fixtures and fittings or stock in
trade as a result of such entry
4.45 Entry To Take Schedules
-----------------------
To permit the Lessor (no more often than once in any calendar year) at any
reasonable time or times in the day time upon reasonable prior written
notice (except in emergency) to enter the Premises provided always that the
minimum possible interference shall be caused to the Tenant and any lawful
occupiers of the Premises and to take schedules or inventories of the
fixtures and things to be yielded up at the expiration or
<PAGE>
sooner determination of the Term the person or persons so entering causing
as little interference inconvenience and disturbance forthwith and the
Lessor shall make good any damage caused as a result of such entry or
damage to the Tenant's and any occupier's fixtures and fittings or stock in
trade
4.46 Entry For Adjoining Premises Repair
-----------------------------------
To permit the Lessor and its workmen and the tenants and occupiers of any
adjoining or neighbouring premises or their respective agents and workmen
at any reasonable time or times in the day to enter upon the Premises
provided always that the minimum possible interference shall be caused to
the Tenant and any lawful occupiers of the Premises on at least five days
prior written notice (except in emergency) for the purpose of executing
repairs additions and alterations to or upon any adjoining or neighbouring
premises or for making repairing maintaining renewing connecting or
cleansing any Services belonging to or leading to or from the same the
persons entering causing as little damage inconvenience interference and
disturbance as possible and making good forthwith all damage thereby
occasioned to the Premises as a result of such entry or damage to the
Tenant's and any occupier's fixtures and fittings or stock in trade
4.47 Entry For Insurance Valuation
-----------------------------
To permit the Lessor and any valuer authorised by it to enter on to the
Premises provided always that the minimum possible interference shall be
caused to the Tenant and any lawful occupiers of the Premises at any
reasonable time upon reasonable prior notice to inspect and value the
Common Parts and the Premises for the purpose of assessing the sum for
which they should be insured the person or persons so entering causing as
little interference inconvenience and disturbance as reasonably and the
Lessor shall make good any damage caused as a result of such entry or
damage to the Tenant's and any occupier's fixtures and fittings or stock in
trade
4.48 Entry for other purposes
------------------------
To permit the Lessor at any reasonable time or times in the day time upon
reasonable prior notice (except in emergency) to enter the Premises
provided always that the minimum possible interference shall be caused to
the Tenant and any lawful occupiers of the Premises for any other proper
purpose the person or persons so entering causing as little interference
inconvenience and disturbance as reasonably and
<PAGE>
the Lessor shall make good any damage caused as a result of such entry or
damage to the Tenant's and any occupier's fixtures and fittings or stock in
trade
5. Lessor's Covenants
THE LESSOR hereby COVENANTS with the Tenant as follows:-
Repairs Insurance and Services
- ------------------------------
5.1 To comply with the provisions on its part contained in the First Schedule
hereto and in so doing the Lessor shall act reasonably and fairly when
allocating an item of expenditure as a Service Charge Item or a Parking
Service Charge Item
Quiet enjoyment
- ---------------
5.2 That the Tenant paying the rents hereby reserved and observing and
performing the several covenants conditions and stipulations herein on the
part of the Tenant contained shall peaceably hold and enjoy the Premises
throughout the Term without any interruption by the Lessor or any person
rightfully claiming under or in trust for the Lessor
5.3 Superior Lease Covenants
to use all reasonable endeavours to procure the observance and performance
of the obligations on the part of the Superior Lessor under the Superior
Lease and of the Head Lessor under the Headlease
5.4 Service Charge Voids
The Lessor shall be responsible for the discharge all Service Charge
liabilities in respect of unlet parts of the Block other than the Premises
6. PROVIDED ALWAYS AND IT IS HEREBY AGREED as follows:-
Re-entry
- --------
6.1 These presents are upon the express condition that if the rents from time
to time payable hereunder or any part thereof shall be unpaid for 28 days
after any of the days hereinbefore appointed for payment thereof (whether
the same shall have been
<PAGE>
legally demanded or not) or if the Tenant shall not duly perform or observe
all the covenants conditions and provisions hereby on the part of the
Tenant to be performed or observed or if the Tenant shall allow any
distress or execution to be levied on its assets at the Premises or if the
Tenant (being an individual) shall become bankrupt or if the Tenant (being
a company) shall enter into liquidation whether compulsory or voluntary
(save for the purpose of amalgamation or reconstruction of a solvent
company) or shall be struck off the Register of Companies under the
Companies Act 1948 or any statutory modification thereof or if the Tenant
(being an individual or a company) becomes insolvent which for these
purposes shall mean any of the following circumstances:-
6.1.1 in the case of an company :-
6.1.1.1 it is deemed unable to pay its debts as defined in Section
123 of the Insolvency Act 1986 (referred to as "the Act" in
the remainder of this paragraph)
6.1.1.2 a proposal is made for a voluntary arrangement for it under
Part I of the Act
6.1.1.3 a receiver or manager is appointed for it whether under
Part III of the Act (including an administrative receiver)
or otherwise
6.1.1.4 it goes into liquidation as defined in Section 247(2) of
the Act (other than a voluntary winding up solely for the
purpose of amalgamation or reconstruction while solvent)
6.1.1.5 a provisional liquidator is appointed for it under Section
135 of the Act
6.1.1.6 it makes any assignment for the benefit of creditors or
enters into any agreement or makes any arrangement with
creditors for liquidation of the Tenants debts by
composition or otherwise
6.1.1.7 a proposal is made for a scheme of arrangement for it under
Section 425 of the Companies Act 1985
6.1.2 in the case of an individual:-
6.1.2.1 an application is made for an interim order or a proposal
is made for a voluntary arrangement concerning him under
Part VIII of the Insolvency Act 1986
6.1.2.2 a petition is presented to the Court for him to be declared
bankrupt or his circumstances are such that a petition for
such declaration could be presented under Part IX of the
said Act
<PAGE>
Then and in any of the said cases and thenceforth it shall be lawful for
the Lessor or any person or persons duly authorised by the Lessor in that
behalf into or upon the Premises or any part thereof in the name of the
whole to re-enter and the same to re-possess and enjoy as if these presents
had not been made without prejudice to any right of action or remedy of the
Lessor in respect of any antecedent breach of any of the covenants by the
Tenant herein contained
Determination in case of extensive damage
- -----------------------------------------
6.2 If the Block shall suffer damage howsoever caused of such a substantial
nature as to render its reinstatement or rebuilding impracticable then the
Lessor or Tenant may give to the Tenant not less than three months notice
in writing to determine this present demise and on the expiration of such
notice this demise shall cease and be void but without prejudice to the
rights and remedies which may then have accrued to either party against the
other in respect of any antecedent claim or breach of covenant provided
that any dispute between the parties as to whether or not such
reinstatement or rebuilding is impracticable shall be determined by an
independent surveyor appointed (in default of agreement) by the President
for the time being of The Royal Institution of Chartered Surveyors
Rent suspension
- ---------------
6.3 In case the Block or any part thereof shall at any time during the Term be
so damaged or destroyed by fire or other risk against which the Lessor or
the Superior Lessor shall have insured as to render the Premises unfit for
occupation and use then (unless the insurance money shall be irrecoverable
solely or in part because of any act or default of the Tenant or any
subtenants or the Tenant's servants agents visitors or licensees) the rents
hereby reserved or a fair proportion thereof according to the nature and
extent of the damage sustained shall be suspended until the Premises shall
again be rendered fit for occupation and use or for a period of three years
(whichever shall be the shorter) and any dispute with reference to this
proviso shall be referred to arbitration in accordance with the Arbitration
Act 1996 or any statutory modification or re-enactment thereof for the time
being in force
Accidents
- ---------
6.4 The Lessor shall not be responsible to the Tenant or the Tenant's licensees
servants agents or other persons in the Premises or calling upon the Tenant
for any accident happening or injury suffered or damage to or loss of any
chattel or property sustained on the Premises or in the Block or in the
Atrium
<PAGE>
Effect of waiver in respect of other premises of the Lessor
- -----------------------------------------------------------
6.5 It is hereby declared that each of the Tenant's covenants herein contained
shall remain in full force both at law and in equity notwithstanding that
the Lessor shall have waived or released temporarily or permanently
revocably or irrevocably or otherwise howsoever a similar covenant or
similar covenants affecting other adjoining or neighbouring premises for
the time being belonging to the Lessor
Interruption of services
- ------------------------
6.6 Notwithstanding anything herein contained the Lessor shall not be liable to
the Tenant nor shall the Tenant have any claim against the Lessor in
respect of:-
6.6.1 any interruption in any of the services herein mentioned by reason
of necessary repair or maintenance of any installations or apparatus
or damage thereto or destruction thereof by fire water Act of God or
other cause beyond the Lessor's control or by reason of mechanical
or other defect or breakdown or frost or other inclement conditions
or unavoidable shortage of fuel materials water or labour or
6.6.2 any act omission negligence default or misconduct of any person
employed or engaged by or on behalf of the Lessor in or about the
performance or purported performance of any duty relating to the
provision of the said services or any of them or otherwise in
connection with the management of the Block or the Atrium or any
respective part thereof
Negative letting schemes and effect of s.62 Law of Property Act 1925
- --------------------------------------------------------------------
6.7 Nothing herein contained shall confer on the Tenant any right to the
benefit of or to enforce any covenant or agreement contained in any lease
or other instrument relating to any other part or parts of the Block or to
the Atrium or to any other premises belonging to the Lessor or limit or
affect the right of the Lessor to deal with the same now or at any time
hereafter in any manner which may be thought fit not shall anything herein
contained confer on the Tenant any liberty privilege easement right or
advantage whatsoever mentioned or referred to in section 62 of the Law of
Property Act 1925 save those expressly set out herein
Interpretation
- --------------
6.8 In this Underlease where the context so admits:
<PAGE>
6.8.1 The words importing the singular number only include the plural number
and vice versa
6.8.2 Where there are two or more persons included in the expression the Tenant
covenants expressed to be made by the Tenant respectively shall be
deemed to be made by such persons jointly and severally
Party walls
- -----------
6.9 Such of the internal division walls as divide the Premises from other
premises of the Lessor shall be deemed to be party walls and so subject to
section 38 of the Law of Property Act 1925
Service of notices
- ------------------
6.10 For the purpose of service of all notices hereby or by statute authorised
to be served the regulations as to service of notices contained in section
196 of the Law of Property Act 1925 as amended by the Recorded Delivery
Service Act 1962 shall be deemed to be incorporated herein
Compensation under Part II of the Landlord and Tenant Act 1954
- --------------------------------------------------------------
6.11 Subject to the provisions of sub-section (2) of Section 38 of the Landlord
and Tenant Act 1954 neither the Tenant nor any assignee or underlessee of
the term hereby granted or of the Premises shall be entitled on quitting
the Premises to any compensation under Section 37 of the same Act under any
corresponding provision in any act amending or replacing the same
Disputes
- --------
6.12 If at any time after the date of this Lease any dispute doubt or question
shall arise between the Lessor and the Tenant touching the construction
meaning or effect of these presents or of any clause or thing herein
contained or their respective rights or liabilities under these presents or
otherwise in relation to the Premises then every such dispute doubt or
question shall be referred to and be determined by arbitration in
accordance with the Arbitration Act 1996 or any statutory modification or
re-enactment thereof for the time being in force
No Restriction on Block
- -----------------------
6.13 Nothing contained in this Underlease shall by implication of law or
otherwise howsoever operate to confer on the Tenant any easements right or
privileges whatsoever over or against any adjoining neighbouring or other
property belonging to
<PAGE>
the Lessor which would or might restrict or prejudicially affect the use or
future use or the future rebuilding alteration or development of such
adjoining neighbouring or other property nor shall the Tenant be entitled
to object to any such use rebuilding alteration or development nor shall
the Tenant be entitled to compensation for any damage or disturbance caused
by or suffered through any such use rebuilding alteration or development
Tenant to pay irrecoverable proportion of Insurance Monies
- ----------------------------------------------------------
6.14 In the event of damage or destruction of the Premises by an Insured Risk
but where all or part of the Insurance monies shall be irrecoverable as a
result of any act omission neglect or default of the Tenant then the Tenant
shall pay to the Lessor all or such part of the Insurance monies as shall
have been irrecoverable as a result of the act omission neglect or default
of the Tenant as aforesaid and any dispute in this respect shall be
referred to arbitration in accordance with clause 6(12)
Management Company
- ------------------
6.15 At any time during the Term the Lessor may nominate a Management Company
which company shall be responsible for carrying out all or (at the option
of the Lessor) some only of the obligations of the Lessor relating to the
provisions of services contained herein and in that event the carrying out
of such obligations by the Management Company shall be deemed to be a
discharge by the Lessor of the obligations on the part of the Lessor
contained herein in relation to such matters and in the event of the Lessor
so nominating the obligations on the part of the Tenant contained in part
III of the First Schedule hereto shall be deemed to be obligations on the
part of the Tenant both to the Lessor and the Management Company
User
- ----
6.16 No representation is made or shall be deemed to be made by the Lessor that
the Permitted User is an authorised user under the Planning Acts (as
defined in clause 4.24.1 hereof)
Management of the Block
- -----------------------
6.17 In the management of the Block and the Atrium and the performance of the
obligations of the Lessor herein set out the Lessor shall be entitled to
employ or retain the services of any employee agent consultant service
company contractor engineer or other advisers of whatever nature as the
Lessor may require and the expenses incurred by the Lessor in connection
therewith shall be deemed to be an
<PAGE>
expense incurred by the Lessor in respect of which the Tenant shall be
liable to make an appropriate contribution under the provisions set out in
the First Schedule hereto
Rent Review
- -----------
6.18 The Parties hereto agree that the rent review provisions set out in the
Second Schedule hereto shall apply
Break Clause
- ------------
6.19 The Tenant may terminate this lease by giving at least 6 months notice in
writing to the Lessor such notice to expire at the end of the 15th year of
the Term
Rights and Consent
6.20 Where under the terms hereof rights are granted to and/or excepted and
reserved for the benefit of the Lessor such rights shall in addition be
deemed to be granted to and/or (as the case may be) excepted and reserved
for the benefit of the Superior Lessor and the Headlessor and all those
authorised by them and when under the terms hereof consent or approval
shall be required from the Lessor for any act or thing there shall be
deemed to be a separate requirement for the Tenant to obtain consent or
approval from the Superior Lessor (when the same shall be required under
the Superior Lease) and from the Headlessor (when the same shall be
required under the Headlease)
<PAGE>
Authorised Guarantee Agreement
<TABLE>
<S> <C> <C>
7 Date AGREEMENT dated....
Parties BETWEEN....("Lessor") (1)..... ("Assignor")
(2)........ ("the Surety") (3)
Agreement conditional on completion The Assignor has agreed to assign the
of proposed assignment lease..[particulars] ("the Lease") to... ("the
Assignee") and this agreement takes effect when the
Lease is assigned to the Assignee
Indemnity against loss from failure THE Assignor and the Surety jointly and severally
to comply with any lease term agree to Indemnify the Lessor against all losses
incurred as a result of any failure by the Assignee
to comply with any of the terms of the Lease
Assignor is principal debtor THE Assignor and the Surety are ,jointly and
severally liable to the Lessor under their agreement
as principal debtor, and his/its obligation remain
fully effective even if the Lessor gives the Assignee
extra time to comply with any obligation in the
Lease, or does not insist on its strict terms
Assignor to accept a new tenancy if THE Assignor and the Surety each agree, in the event
lease declaimed that the Lease is disclaimed and on being so required
by the Lessor, to accept from the Lessor the grant of
a new tenancy and to execute and deliver a
counterpart of it to the Lessor. The new tenancy is
to be on the same terms and conditions as the Lease
at the date of the disclaimer and to be for a term
expiring on the term date of the Lease
Agreement ends when Assignor released THIS Agreement ceases to have effect when the
</TABLE>
<PAGE>
<TABLE>
<S> <C>
by assignment (which is not excluded) Assignor is released from the tenant covenants of the
or by agreement Lease by virtue of Section 5 of the Lessor and Tenant
(Covenants) Act 1995 or with the consent of the Lessor
</TABLE>
Surety Provisions
8 THE SURETY in consideration of the demise hereinbefore contained having been
made at his request hereby COVENANTS with the Lessor as a primary obligation
that the Tenant shall pay the rents hereby reserved on the days and in manner
aforesaid and shall duly perform and observe all the covenants hereinbefore
on the Tenant's part contained and that in case of default in such payment of
rent or performance or observance of any of the covenants as aforesaid during
the currency of the Term and also thereafter during such period as the Tenant
remains in occupation of the Premises the Surety will pay and make good to
the Lessor on demand all loss damages costs and expenses thereby arising or
incurred by the Lessor PROVIDED ALWAYS AND IT IS HEREBY AGREED that any
neglect or forbearance of the Lessor in endeavouring to obtain payment of the
said several rents when the same becomes payable or to enforce performance or
observance of the several stipulations herein on the Tenant's part contained
and any time which may be given by the Lessor to the Tenant shall not release
or exonerate or in any way affect the liability of the Surety under this
covenant AND PROVIDED FURTHER AND IT IS HEREBY FURTHER AGREED that:-
8.1 in the event of this Lease being disclaimed by the Tenant or on behalf
of the Tenant under any statutory or other power the Surety will if
requested by the Lessor to do so take from the Lessor within three
months after such disclaimer a grant of another Lease of the Premises
for the residue of the Term unexpired hereinbefore reserved and subject
to the like covenants and provisions as are herein contained and at the
expense of the Surety and on the execution of such further Lease the
Surety shall execute and deliver to the Lessor a counterpart thereof
8.2 The Surety hereby further covenants with the Lessor that:-
8.2.1 if there shall be disclaimer or surrender of this Lease whether
by a liquidator trustee in bankruptcy the Crown or otherwise
howsoever or
8.2.2 if this Lease shall be forfeited or
<PAGE>
8.2.3 if the Tenant being a sole or the last surviving Tenant shall
in the case of an individual die or in the case of a company be
dissolved or if otherwise the Tenant shall cease to exist
THEN the Surety shall if the Lessor by notice in writing given to the
Surety within three months after such disclaimer or other event or
occurrence referred to in sub-paragraphs 8.2.1 8.2.2 and 8.2.3 so
requires accept from and execute and deliver to the Lessor a
counterpart of a new lease of the Premises for a term commencing on
the date of the disclaimer or other event and continuing for the
residue then remaining unexpired of the Term such new lease to be at
the cost of the Surety and to be at the same rent and subject to the
same covenants conditions and provisions as are contained in this
Lease
8.3 if the Lessor shall not require the Surety to take a new lease the
Surety shall nevertheless upon demand pay to the Lessor a sum equal to
the rent that would have been payable under this Lease but for the
disclaimer or other event in respect of the period from and including
the date of such disclaimer or other event until the Lessor shall have
granted a lease of the Premises to a third party
8.4 This guarantee shall ensure for the benefit of the successors and
assigns of the Lessor under this Lease without the necessity for any
assignment thereof
8.5 In the event that under the provisions of this Lease the Lessor shall
be entitled to require that the Tenant enters into an Agreement as
provided for in Clause 7 hereof the Surety will also enter into such
Agreement
8.6 The Surety may in its discretion enter into and require the Landlord
to enter into a deed of rent deposit in the form attached hereto as
Annexure 3 within 14 days of the Surety notifying the Landlord and Tenant
in writing of such requirement and upon formal completion of such deed the
Surety shall be released from the covenants contained in this Clause 8 and
all obligations contained or referred to in the agreement for lease to
which this lease gives effect, and any deeds ancillary hereto and the
Landlord shall execute a formal Deed of Release in a form reasonably
acceptable to the Tenant and Surety within 14 days of such notification and
this Lease shall be construed as if reference to "the Surety" were deleted
throughout provided that the deed of rent deposit shall be in addition to
that entered into by the Landlord and Tenant dated 8 July 1998 or any other
deed entered into by reason of the grant of any other lease of the Block by
the Landlord to the Tenant
<PAGE>
Headings
9 THE headings hereto are inserted for convenience of reference only and shall
not in any manner affect the construction meaning or effect of anything
herein contained or govern the rights and liabilities of the parties hereto
IN WITNESS whereof the parties hereto have executed these presents the day and
year first above written
<PAGE>
THE FIRST SCHEDULE
------------------
Part I
-------
Service Charge Items
--------------------
1. To pay to the appropriate authorities respectively responsible for
collecting the same all rates taxes and outgoings in respect of any part or
parts of the Block used in common by the owners or occupiers of more than
one unit in the Block including any imposed or becoming payable after the
date hereof and whether or not of a novel nature
2. To maintain any common service conduits in under or over the Block in a
good state of repair and condition but nothing herein contained shall
render the Lessor liable for maintenance of the said conduits which shall
have been adopted by or become vested in any national local or public
authority or body or statutory undertaking
3. (a) To keep the Common Parts and all fixtures and fittings in such of
the Common Parts as aforesaid and additions thereto in good and
tenantable repair and decorative condition (including any renewal and
replacement of all worn or damaged parts) (damage by any of the
insured risks excepted) but without prejudice to the rights of the
Lessor or the Lessor to recover from the Tenant or any other person
the amount or value of any loss or damage caused by the negligent or
other wrongful act or default of the Tenant or such other person
(b) Without prejudice to the generality of the foregoing to maintain any
equipment and/or facilities which may from time to time be available
for communal use by occupiers within the Block and insofar as may be
applicable to pay and discharge all or any rental or other payments
(including maintenance payments) which may from time to time be
payable in relation to any entry phone system installed in the Block
and also to any other such facilities in respect of which such
payments shall from time to time become due whether such facilities
are situated wholly or partly within the Common Parts of the Block or
elsewhere within the Block
4. If and whenever the Lessor or the Lessor shall reasonably consider it
necessary so to do install such equipment and facilities as it may
reasonably deem appropriate for
<PAGE>
the better running management use and security of the Block or any part
thereof upon such terms as the Lessor or the Lessor shall reasonably
consider appropriate
5. To keep or cause to be kept proper books of account of all costs charges
and expenses incurred by the Lessor in carrying out its obligations under
this schedule or in otherwise managing and administering the Block and in
each year during the Term to prepare a certificate of
(a) the total amount of such costs charges and expenses for the period to
which the certificate relates and
(b) the proportionate amount due from the Tenant to the Lessor under the
provisions set out in clause 1 of Part III of this Schedule after
taking into account payments made in advance under the provisions set
out clause 2 of the same part of this Schedule
and to send a copy of the same to the Tenant
6. (a) To insure and keep insured in the names of the Lessor (with the
interests of the Tenant and their respective mortgagees being noted if
the Lessor shall be so requested (either specifically or by way of a
general noting)) in some office of repute the Block against loss or
damage by fire or aircraft or things dropped from aircraft and storm
and tempest and all other risks normally covered for standard premium
by a comprehensive policy (including terrorism cover) in the aggregate
amount of:
(i) the full reinstatement value of the Block and
(ii) the amount of three years' rent thereof to the Lessor and
(iii) all architects' surveyors' and other professional fees and also
to insure against liability for personal injury occurring to any
person and such other risks as the Lessor the Superior Lessor or
the Headlessor may reasonably require and to make all payments
necessary for effecting and keeping on foot such insurances
(b) As often as any part of the Block is destroyed or damaged by fire or
aircraft or things dropped from aircraft storm or tempest or any other
peril covered by the aforementioned insurance to apply the proceeds of
the insurance in that behalf in or towards the rebuilding or
reinstatement of the Block and to make up any shortfall from the
Landlord's own monies
7. (a) To keep the structure and the exterior of the Block and the
remainder of the Common Parts as the Lessor shall reasonably designate
as being for the benefit of the occupiers of the Block (or some of
them) and all fixtures and fittings (including the lifts) in such of
the Common Parts as aforesaid and
<PAGE>
additions thereto in good and tenantable repair and decorative
condition (including any renewal and replacement of all worn or
damaged parts) (damage by any of the insured risks excepted) but
without prejudice to the rights of the Lessor to recover from the
Tenant or any other person the amount or value of any loss or damage
caused by the negligent or other wrongful act or default of the Tenant
or such other person and (insofar as may be appropriate) to provide
lighting therefor provided that for the sake of clarity
(b) Without prejudice to the generality of the foregoing to use all
reasonable endeavours to maintain any equipment and/or facilities
which may from time to time be available for communal use by occupiers
within the Block and insofar as may be applicable to pay and discharge
all or any rental or other payments (including maintenance payments)
which may from time to time be payable in relation to any entry phone
system installed in the Block and also to any other such facilities
in respect of which such payments shall from time to time become due
whether such facilities are situated wholly or partly within the
Common Parts of the Block or elsewhere within the Block)
8. To use all reasonable efforts to enforce the covenants contained in such
other Leases of units in the Block as may be granted
9. If and whenever the Lessor or the Lessor shall consider it necessary so to
install such equipment and facilities as it may deem appropriate for the
better running management use and security of the Block (taken together) or
any part thereof upon such terms as the Lessor shall reasonably consider
appropriate
10. To employ such staff as the Lessor shall reasonably consider appropriate to
provide any of the services referred to in any part of this Schedule or
otherwise to provide services in relation to the management of the Block or
any part thereof
11. To pay the interest and other financing costs (if any) incurred by the
Lessor in respect of the payment of any Service Charge Item
12. To make any payment due from the Lessor (directly or indirectly) under the
Headlease and the Atrium Lease
13. To comply with the principles of good estate management in the provision
of the Service Charge Items
14. To provide within three months of the end of each accounting period and
deliver to the Tenant a statement and accounts audited by a reputable firm
of chartered accountants and certified statement of the costs of such
Service Charge Items and the Lessor or Tenant as appropriate shall pay to
the either with fourteen days of delivery of such statement a sum equal to
the amount by which the actual service
<PAGE>
charge payment either exceeded or was less than the actual cost of
provisions of the Service Charge Items as appropriate
15. To provide adequate refuse disposal facilities
<PAGE>
PART II
-------
Parking Service Charge Items
----------------------------
1. To keep the car parking spaces forming part of the Parking Area and all
gates shutters ramps and accessways leading thereto and the security
facilities thereof in good and tenantable repair and cleaned (including the
replacement of damaged and worn parts)
2. To pay to the appropriate authorities respectively responsible for
collecting the same all rates taxes and outgoings in respect of any part or
parts of the Parking Area including any becoming payable after the date
hereof and whether or not of a novel nature
3. If and whenever the Lessor shall reasonably (acting within the principles
of good estate management) consider it necessary so to do install such
equipment and facilities as it may deem appropriate for the better running
management use and security of the Parking Area
4. To use all reasonable efforts to maintain the painted lines (if any)
separating one parking space from another
PART III
--------
1. (a) To pay to and keep the Lessor indemnified against the Service
Charge Proportion of all costs charges and expenses which the
Lessor shall incur in complying with the obligations set out in
Part I of the First Schedule hereto in respect of any expenditure
incurred by the Lessor which shall be treated as a Service Charge
Item but if in the reasonable opinion of the Lessor it shall be
undesirable or unreasonable to calculate or apportion the whole
or any part of any such costs charges and expenses on the basis
of the Service Charge Proportion then the proportion shall be
such part of the whole or any part of such costs charges and
expenses determined at the reasonable discretion of the Lessor
<PAGE>
(b) To pay to and keep the Lessor indemnified against the Parking
Service Charge Proportion of all costs charges and expenses which
the Lessor shall incur in complying with the obligations set out
in Part II of the First Schedule hereto and/or in respect of any
expenditure incurred by the Lessor which shall be treated as a
Parking Service Charge Item but if in the reasonable opinion of
the Lessor it shall be undesirable or unreasonable to calculate
or apportion the whole or any part of any such costs charges and
expenses on the basis of the Parking Service Charge Proportion
then the proportion shall be such part of the whole or any part
of such costs charges and expenses determined at the reasonable
discretion of the Lessor
(c) Notwithstanding anything herein contained the parties agree that
if the Lessor shall (acting reasonably) consider that any part or
parts of the costs charges and expenses which the Lessor shall
incur as aforesaid shall be the subject of contributions from
persons other than the lessees for the time being of the Block
then the Lessor shall reduce the amount of the costs charges and
expenses in question to which the Tenant is obliged to contribute
by such sum or sums as the Lessor shall in its absolute
discretion consider reasonable rather than allocating the total
amount of those costs charges and expenses and in this connection
the Tenant acknowledges that the discretion conferred upon the
Lessor under the provisions of this clause is an absolute
discretion which shall be exercisable by the Lessor in such
manner and upon such terms and at such times as the Lessor shall
consider appropriate
(d) Any sums due from the Tenant to the Lessor pursuant to this
clause (and under clauses 2 and 3 of Part III of this Schedule)
shall be due as additional rent and shall be recoverable as such
2. (a) To pay to the Lessor on the usual quarter days in each year such
reasonable sum as the Lessor shall (acting reasonably) estimate
to be one quarter of the amount prospectively payable by the
Tenant under clause 1 of this Schedule (such sum being taken into
account and credited against the amount eventually determined to
be so payable) the first payment to be made on the execution
hereof and to be the amount of the First Service Charge Payment
being a fixed amount to cover the period from the date hereof
until the next Quarter Day and until such time as the said
expenses shall be calculated or estimated each of the said
quarterly contributions shall be in the amount of the First
Service Charge Payment provided that:-
(i) any sum received by the Lessor on the execution hereof or
from time to time on account of any service charge
proportions payable for a
<PAGE>
period after the date upon which such payment or payments
is or are to be made shall be deemed to be held by the
Lessor as bare trustee for the Tenant upon trust to utilise
such sum towards the expenses to be incurred by the Lessor
as aforesaid
(ii) in this Schedule the expression "all costs charges and
expenses which the Lessor shall incur" shall include not
only those costs charges and expenses which the Lessor
shall have actually incurred or made or which shall have
been charged to the Lessor during the year in question but
also a reasonable sum on account of those items of
expenditure which are of a periodically recurring nature
(whether recurring by regular or irregular periods)
whenever disbursed incurred or made and whether prior to
the commencement of the Term or otherwise including a sum
or sums of money by way of reasonable provision for
anticipated expenditure in respect thereof as the Lessor
may in its reasonable discretion allocate to the year in
question as being fair and reasonable in all the
circumstances
(b) if in order to comply with any of the obligations of the
Lessor contained in this Schedule hereto or if to carry out
any other works or things to or for the reasonable
improvement of the Block the Lessor has properly and
reasonably spent money in excess of those sums the Lessor
shall then have collected from the Tenant and the other
tenants of the Block towards the cost of carrying out such
obligations or works or things then the Tenant shall pay
within 28 days of demand being received by the Tenant such
sums as shall represent a proportionate part (calculated in
the manner aforesaid) of the money that will be required to
be expended by the Lessor over and above the sums already
received by the Lessor and such further amount shall be
taken into account in calculating the amount of the service
charge proportions pursuant to the provisions hereinbefore
contained
3. Within twenty-eight days after receipt of a copy of the certification
provided for in this Schedule to pay to the Lessor the net amount (if any)
appearing by such notice to be due to the Lessor from the Tenant
<PAGE>
THE SECOND SCHEDULE
-------------------
Rent Review
-----------
1. Definitions
-----------
1.1 The terms defined in this paragraph shall for all purposes of this
Schedule have the meanings specified
1.2 "Review Period" means the period between any Review Date and the day
prior to the next Review Date (inclusive) or between the last Review
Date and the expiry of the Term (inclusive)
1.3 "The Assumptions" means the following assumptions at the relevant
Review Date
1.3.1 That no work has been carried out on the Premises by the Tenant
or its sub-Tenants during the Term which has diminished the
rental value of the Premises
1.3.2 That if the Premises have been destroyed or damaged that they
have been fully restored
1.3.3 That the covenants contained in this Lease on the part of the
Tenant and the Lessor have been fully observed and performed
1.3.4 That the Premises are available to let by a willing Lessor to a
willing tenant ("Willing Tenant") by one lease without a fine
or premium being paid by either party and with vacant
possession
1.3.5 That the Premises are ready and fitted out for possession in
accordance with the Category A works listed in Annexure 1
attached hereto awaiting tenants fixtures fittings and
equipment to render them ready for use for the purpose or
purposes required by the Willing Tenant
1.3.6 That the Premises have been fitted with a full VAV air
conditioning system and that the same is in good working order
1.3.7 That the Lease referred to in paragraph 1.3.4 contains the same
terms as this Lease except the amount of the Initial Rent and
any rent free period allowed to the Tenant but including the
provision for rent review on the Review Dates and except as set
out in paragraph 1.3.8
1.3.8 That the term of the Lease referred to in paragraph 1.3.4 is
equal in length to the Term beginning on the relevant Review
Date and that the rent shall commence to be payable from that
date and that the years during which the Tenant covenants to
decorate the Premises shall be
<PAGE>
at similar intervals after the beginning of the term of such
lease as those referred to in this Lease
1.3.9 That any rent free period or concessionary rent period or
contribution or any other inducement whether of a capital or
revenue nature which would or might be made by the willing
Lessor to the Willing Tenant to reflect the time and capital
cost necessary to fit out the Premises for operational use upon
the grant of the lease referred to in paragraph 1.3.4 shall
have expired or been given immediately before the relevant
Review Date
1.4 The Disregarded Matters means:-
1.4.1 Any effect on rent of the fact that the Tenant has been in
occupation of the Premises
1.4.2 Any goodwill attached to the Premises by reason of the carrying
on at the Premises of the business of the Tenant
1.4.3 Any increase in rental value of the Premises attributable to
the existence at the relevant Review Date of any improvement to
the Premises (other than any improvement referred to in
Paragraph 1.3.5 and 1.3.6) carried out with consent where
required otherwise than in pursuance of an obligation (whether
or not that obligation was imposed before or after the date
hereof) to the Lessor or its predecessors in title either
1.4.3.1 by the Tenant its sub-tenants or their predecessors in
title or by any lawful occupiers during the Term or
during any period of occupation prior to the Term or
during any period of occupation prior to the Term
arising out of an agreement to grant or
1.4.3.2 by any tenant or sub-tenant of the Premises or by any
lawful occupiers before the commencement of the Term
so long as the Lessor or its predecessors in title
have not since the improvement was carried out had
vacant possession of the relevant part of the Premises
1.5 "The President" means the President for the time being of the Royal
Institution of Chartered Surveyors the duly appointed deputy of the
President or any person authorised by the President to make
appointments on his behalf
<PAGE>
1.6 "The Arbitrator" means a person appointed by agreement between the
parties or in the absence of agreement within 14 days of one party
giving notice to the other of its nomination or nominations nominated
by the President on the application of either party made not earlier
than six months before the relevant Review Date or at any time
afterwards
1.7 "Review Dates" mean the [ ] day of [ ] in the years 2003 2008
2013 2018 and 2023
1.8 "Initial Rent" means the annual rent of (Pounds)846,900
1.9 "Rent" means the rent first reserved by this Lease
2. Ascertaining the Rent
---------------------
2.1 The Rent shall be:-
2.1.1 Until the first Review Date the Initial Rent and
2.1.2 During each successive Review Period a rent equal to the
greatest of:-
2.1.2.1 the Rent payable immediately prior to the ]% per
annum (compounded quarterly) from relevant Review
Date or if payment of Rent has the Term Commencement
Date or (if been suspended pursuant to the proviso to
that applicable) the previous Review Date and effect
contained in this Lease the Rent which would have
been payable had there been no such suspension
increased at the rate of [
2.1.2.2 such Rent as may be ascertained in accordance
with this Schedule and
2.1.2.3 (Pounds)846,900
2.2 Such revised Rent for any Review Period may be agreed in writing at
any time between the parties or (in the absence of agreement) will be
determined not earlier than the Review Date by the Arbitrator
2.3 The revised Rent to be determined by the Arbitrator shall be in
respect of each Review Date such as he shall decide to be the market
rent at which the Premises might reasonably be expected to be let on
the open market at the relevant Review Date making the Assumptions
but disregarding the Disregarded Matters
2.4 The Arbitration shall be conducted in accordance with the Arbitration
Acts 1950-1979 except that if the Arbitrator nominated pursuant to
paragraph 1.6 shall die or decline to act the President may on the
application of either party discharge the Arbitrator and appoint
another in his place
<PAGE>
2.5 Whenever the Rent shall have been ascertained in accordance with this
Schedule Memorandum to this effect shall be signed by or on behalf of
the parties and annexed to this Lease and its counterpart and the
parties shall bear their own costs in this respect
3. Arrangements Pending Ascertainment of Revised Rent
--------------------------------------------------
If the revised Rent payable during any Review Period has not been
ascertained by the relevant Review Date Rent shall continue to be payable
at the rate previously payable such payments being on account of the Rent
for that Review Period
4. Payment of Revised Rent
-----------------------
If the revised Rent payable during any Review Period has not been
ascertained by the relevant Review Date then immediately after the date
when the same has been agreed between the parties or the date upon which
the Arbitrators award shall be received by one party the Tenant shall pay
to the Lessor:-
4.1 Any shortfall between the Rent which would have been paid on the
Review Date and on any subsequent quarter days had the revised rent
been ascertained on or before the relevant Review Date and the
payments made by the Tenant on account
4.2 Interest at Base Rate of Barclays Bank for the period commencing on
the relevant Review Date until the quarter day following the date on
which the revised Rent shall be ascertained
5. Rental Restriction
------------------
5.1 If at any of the Review Dates there shall be in force a statute which
shall prevent restrict or modify the Lessor's right to review the Rent
in accordance with this Lease and/or to recover any increase in the
Rent the Lessor shall when such restriction or modification is removed
relaxed or modified be entitled (but without prejudice to its rights
(if any) to recover any Rent the payment of which has only been
deferred by Law) on giving not less than one month's nor less than
three months' notice in writing to the Tenant to invoke the provisions
of paragraph 5.2
5.2 Upon the service of a notice pursuant to paragraph 5.1 the Lessor
shall be entitled:-
5.2.1 to proceed with any review of the Rent which may have been
prevented or further to review the Rent in respect of any
review where the Lessor's right was restricted or modified and
the date of expiry of
<PAGE>
such notice shall be deemed for the purposes of this Lease to
be a Review Date (provided that without prejudice to the
operation of this paragraph nothing in this paragraph shall be
construed as varying any subsequent Review Dates)
5.2.2 to recover any increase in Rent with effect from the earliest
date permitted by law
5.3 Time shall not be of the essence with regard to the provisions of this
Schedule
EXECUTED as a DEED by
the TENANT acting by two of
it's directors :-
EXECUTED as a DEED by
the LESSOR acting by two of
it's directors :-
EXECUTED as a DEED by
the SURETY acting by two
of it's directors :-
<PAGE>
Annexures to Agreement
----------------------
The following is a list of the Annexures to the Agreement. Annexures
marked with an asterisk are omitted from this filing. The registrant agrees to
furnish supplementally a copy of any omitted annexure to the Commission upon
request.
1. Lease of Premises
2. Rent Deposit Charge*
3. Deed of Variation*
4. Licence for Alterations*
5. Landlord's Works*
<PAGE>
Material Differences Schedule
Pursuant to Instruction 2 to Item 601(a) of Regulation S-K, the registrant
has omitted the following documents:
1. Agreement dated October 15, 1998 between Ballymore Properties Limited
and Cordoba Holdings Limited and Thomas Charles Combrinck ("October
1998 Agreement").
2. Agreement dated January 29, 1999 between Ballymore Properties Limited
and Cordoba Holdings Limited and Thomas Charles Combrinck ("January
1999 Agreement").
The omitted documents are substantially identical to this exhibit except
that they differ with respect to the following material details:
1. With respect to the October 1998 Agreement, that document differs from
this exhibit in the following manner:
a. Date: October 15, 1998
b. Demised Premises: The Fourth, Fifth, Sixth and Seventh Floors
of the Block
c. Initial Rent: (Pounds)692,400 per annum
d. Facilities Management Form of Facilities Management Agreement
Agreement: annexed to the October 1998 Agreement
2. With respect to the January 1999 Agreement, that document differs from
this exhibit in the following manner:
a. Date: January 29, 1999
b. Demised Premises: The Eighth and Ninth Floors and the Block
c. Initial Rent: (Pounds)230,800 per annum
d. Deed of Variations: No Deed of Variations annexed to the January
1999 Agreement
