<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) May 7, 1999
PSINet Inc.
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(Exact name of registrant as specified in its charter)
New York 0-25812 16-1353600
(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
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
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Exhibit 1.1 Underwriting Agreement dated April 28, 1999 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 Underwriting Agreement dated April 28, 1999 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 6 3/4% Series C
Cumulative Convertible Preferred Stock
Exhibit 3.1 Certificate of Amendment of Certificate of
Incorporation dated April 30, 1999 designating
the 6 3/4% Series C Cumulative Convertible
Preferred Stock
Exhibit 4.1 Form of 6 3/4% Series C Cumulative Convertible
Preferred Stock Certificate
Exhibit 4.2 Deposit Agreement dated as of May 4, 1999 between
PSINet and Wilmington Trust Company, as deposit
agent
Page 3
<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: May 7, 1999 PSINET INC.
By: /s/ David N. Kunkel
----------------------------
David N. Kunkel
Executive Vice President and
General Counsel
Page 4
<PAGE>
EXHIBIT INDEX
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<TABLE>
<CAPTION>
Exhibit
Number Exhibit Name Location
- ------ ------------ --------
<S> <C> <C>
Exhibit 1.1 Underwriting Agreement dated April 28, 1999 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 Underwriting Agreement dated April 28, 1999 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 6 3/4%
Series C Cumulative Convertible Preferred Stock
Exhibit 3.1 Certificate of Amendment of Certificate of Filed herewith
Incorporation dated April 30, 1999 designating
the 6 3/4% Series C Cumulative Convertible
Preferred Stock
Exhibit 4.1 Form of 6 3/4% Series C Cumulative Convertible Filed herewith
Preferred Stock Certificate
Exhibit 4.2 Deposit Agreement dated as of May 4, 1999 Filed herewith
between PSINet and Wilmington Trust Company,
as deposit agent
</TABLE>
Page 5
<PAGE>
EXHIBIT 1.1
PSINET INC.
8,000,000 SHARES OF COMMON STOCK
(1,200,000 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 8,000,000 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
Underwriters not more than an additional 1,200,000 shares of its common stock
(the "ADDITIONAL SHARES") if requested by the Underwriters as provided in
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 2
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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 3
at a price per Share of $48.10 (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 1,200,000 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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 4
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 a total of $300,000,000 of
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 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 6 3/4% 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,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 5
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 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 May 4, 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,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 6
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 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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 7
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.
(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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 8
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 May
31, 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 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,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 9
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.
(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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 10
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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 11
(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 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) Except as specified on Schedule A-2 or as otherwise disclosed in the
------------
Prospectus, there are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or 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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 12
(e) All outstanding shares of capital stock of the Company have been duly
authorized, validly issued and are fully paid and 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
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,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 13
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
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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 14
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 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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 15
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, PricewaterhouseCoopers 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
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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 16
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 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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 17
(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>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 18
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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 19
(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.
(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 in accordance with generally accepted accounting
principles 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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 20
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 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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 21
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 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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 22
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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 23
(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 the Preliminary Prospectus.
(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,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 24
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, 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,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 25
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 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,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 26
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:
(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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 27
(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 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 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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 28
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 9,200,000 shares of which have been
designated 6 3/4% 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.
(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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 29
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, fully paid
and non-assessable (subject to Section 630 of the BCL) and, to the
knowledge of such counsel, will not be subject to any preemptive rights
of any shareholder of the Company or any similar rights. 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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 30
(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 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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 31
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>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 32
(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,
notes 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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 33
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
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
(i) as of the date of the Registration Statement, the Registration Statement, as
amended or supplemented, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein not misleading, and (ii) the Prospectus, as amended or supplemented, as
of its date and 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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 34
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
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.
(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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 35
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 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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 36
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 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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 37
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
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).
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 38
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.
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.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
LEGG MASON WOOD WALKER INCORPORATED
April 28, 1999
Page 39
Very truly yours,
PSINET INC.
/s/ Edward D. Postal
By:____________________________
Name: Edward D. Postal
Title: Senior Vice President
and Chief Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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
/s/ Raymond Cleeman
By: ___________________________
Name: Raymond Cleeman
Title: Vice President
<PAGE>
ANNEX I
-------
Each of the executive officers and directors of the Company listed
under "Management" in the Prospectus.
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Underwriters Number of
Firm
Shares to be
Purchased
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation..... 2,464,000
Merrill Lynch, Pierce, Fenner & Smith.................... 1,760,000
Incorporated.
Bear, Stearns & Co. Inc.................................. 1,760,000
BancBoston Robertson Stephens Inc........................ 528,000
Legg Mason Wood Walker Incorporated...................... 528,000
A.G. Edwards & Sons, Inc................................. 120,000
Wasserstein Perella Securities, Inc...................... 120,000
Friedman, Billings, Ramsey............................... 120,000
ING Baring Furman Selz LLC............................... 120,000
Kaufman Bros., L.P....................................... 120,000
Gruntal & Co., L.L.C..................................... 120,000
First Union Capital Markets Corp......................... 120,000
Jefferies & Company...................................... 120,000
---------
Total.................................................... 8,000,000
=========
</TABLE>
<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 Eight Million (8,000,000) shares of common stock, par 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) enter into any swap or
other arrangement that transfers all or a portion
<PAGE>
[___________], 1999
Page 2
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>
[___________], 1999
Page 3
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:______________
<PAGE>
EXHIBIT 1.2
PSINET INC.
8,000,000 SHARES OF 6 3/4%SERIES C CUMULATIVE
CONVERTIBLE PREFERRED STOCK
1,200,000 ADDITIONAL SHARES)
UNDERWRITING AGREEMENT
----------------------
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 8,000,000 shares of its 6 3/4% 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 and
sell to the several Underwriters not more than an additional 1,200,000 shares
<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
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) and 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 of Shares are hereinafter collectively referred to as the
"PROSPECTUS." If 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 3
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 $48.37 (the "PURCHASE PRICE") (inclusive of the Deposit
Amount, as defined below) the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule I hereto. In connection with the purchase of
the Shares from the Company, each Underwriter agrees, severally but not jointly,
to deposit, at the request of the purchasers of the Shares and on their behalf,
an amount equal to 19.34% of the Purchase Price, plus a ratable amount to be
deposited in respect of any Additional Shares purchased by the Underwriters
sufficient to pay, together with the earnings thereon, any quarterly cash
payment from the deposit account required to be made under the Deposit Agreement
(as defined below) through the Deposit Expiration Date (as defined in the
Deposit Agreement) (the "DEPOSIT AMOUNT"), into the account established pursuant
to the Deposit Agreement between the Company and the deposit agent set forth
therein (the "DEPOSIT AGREEMENT").
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 1,200,000 Additional Shares from the
Company at the Purchase Price and upon delivery of the Deposit Amount relating
to such Additional Shares into the deposit account pursuant to the Deposit
Agreement. 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
<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
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 and delivery of the related Deposit Amount, 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 and, in
connection therewith, deliver the related Deposit Amount for 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 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 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 a total of $300,000,000 of 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 in consideration for 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 5
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 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.
<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
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 and delivery by the several Underwriters
of the related Deposit Amount 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 and the related Deposit Amount shall be 9:00 a.m., New York
City time, on May 4, 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 and
the related Deposit Amount 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 and the delivery of the related Deposit Amount
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 and the related Deposit Amount 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
<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
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 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
<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
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.
(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.
<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
(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 May
31, 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
<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
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 and
delivery of the related Deposit Amount, (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) 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
<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
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 shall use its reasonable commercial efforts prior to July
1, 2000 to (i) seek approval from the holders of a majority of the outstanding
shares of Common Stock, (ii) seek to amend its Certificate of Incorporation, or
(iii) take such other action in each case as required to permit payment of
dividends on the Preferred Stock in the form of Common Stock and the Board of
Directors shall recommend such approval or amendment to the Company's
stockholders.
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
<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
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 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").
<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
(d) Except as specified on Schedule A-2 or as otherwise disclosed in the
------------
Prospectus, there are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or 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.
(e) All outstanding shares of capital stock of the Company have been duly
authorized, validly issued and are fully paid and 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
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, 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
<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
its terms, except as the enforceability hereof and thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to or affecting the enforcement of creditors' rights
generally and by equitable principles of general applicability (whether
considered in a proceeding in equity or at law).
(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 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
<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
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.
<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
(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
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
<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
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, PricewaterhouseCoopers 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
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.
<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
(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 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
<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
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.
(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
<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
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,
which is required by the Act to be described in the Registration Statement and
Prospectus which is not described as required.
<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
(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 in accordance with generally accepted accounting
principles 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.
<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
(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
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
<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
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 10,000,000 duly and validly
authorized shares of Common Stock 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") and shall take such action as
may be required to increase the number of Dividend Shares so reserved in the
event that the number of Dividend Shares reserved as of the date hereof is
insufficient. 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 in all material respects to the description thereof contained in the
Prospectus.
(mm) The Company has reserved for issuance a sufficient amount of duly and
validly authorized shares of Common Stock to issue 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
<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
Option Closing Date, the 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 5,000,000 duly and validly
authorized shares of Common Stock to issue and sell pursuant to the Deposit
Agreement (the "DEPOSIT SHARES") and shall take such action as may be required
to increase the number of Deposit Shares so reserved in the event that the
number of Deposit Shares reserved as of the date hereof is insufficient. 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. 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 will be filed prior to the Closing Date
with the Secretary of State of the State of New York and will have become
effective on or prior to the Closing Date, in accordance with the provisions of
the BCL.
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.
<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
(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 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.
<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
(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 the Preliminary Prospectus.
(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
<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
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, 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.
<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
(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 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
<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
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 and deliver the related Deposit
Amount 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
<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
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 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 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
<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
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 9,200,000 shares of which have been
designated 6 3/4% 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>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April 28, 1999
Page 32
(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
<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
issued, fully paid and non-assessable (subject to Section 630 of the BCL)
and, to the knowledge of such counsel, will not be subject to any
preemptive rights of any shareholder of the Company or any similar
rights. 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 "Certain Federal Income Tax Consequences,"
subject to the qualifications and limitations contained thereunder;
(vii) 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
<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
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 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;
<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
(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;
(xv) the statements under the captions "Description of
Preferred Stock" and "Underwriting" in the Prospectus, except for the
matters set forth in the third, fifth, eleventh and twelfth 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
<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
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 10,000,000 Dividend
Shares. The Dividend Shares, when authorized and issued in accordance
with the Certificate of Amendment, will have been duly authorized and,
when executed, countersigned and delivered in accordance with the
Certificate of Amendment, will be validly issued, fully paid and non-
assessable (subject to Section 630 of the BCL); 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 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
Dividend Shares will conform as to legal matters in all material respects
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
<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
Certificate of Amendment at a conversion price not less than the par
value per share of the Common Stock, will have been duly 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 validly issued, fully paid and non-assessable (subject
to Section 630 of the BCL). On the Closing Date or any Option Closing
Date, the Conversion Shares will conform as to legal matters in all
material respects to the description thereof contained in the Prospectus.
(xx) the Company has reserved for issuance 5,000,000 Deposit
Shares. The Deposit Shares, when authorized and issued in accordance with
the Deposit Agreement, will have been duly authorized and, when executed,
countersigned and delivered against payment therefor in accordance with
the Deposit Agreement, will be validly issued, fully paid and non-
assessable (subject to Section 630 of the BCL); 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 as 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
<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
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 (i) as of the date of the
Registration Statement, the Registration Statement, as amended or supplemented,
contained an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein not misleading, and (ii)
the Prospectus, as amended or supplemented, as of its date and 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.
<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
(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.
(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 and deliver the related Deposit Amount 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
<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
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 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 and deliver
the related Deposit Amount for 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,
<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
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 and deliver the related Deposit Amount for 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 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 and deliver the related Deposit Amount for 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 and
deliver the related Deposit Amount or (ii) purchase not less than the number of
Additional Shares and deliver the related Deposit Amount 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.
<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
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, and
delivery of the related Deposit Amount, 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 and
the related Deposit Amount 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
<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
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.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
April 28, 1999
Page 44
Very truly yours,
PSINET INC.
/s/ Edward D. Postal
By:__________________________
Name: Edward D. Postal
Title: Senior Vice President
and Chief of Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
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
/s/ Raymond Cleeman
By:____________________________
Name: Raymond Cleeman
Title: Vice President
<PAGE>
ANNEX I
-------
Each of the executive officers and directors of the Company listed
under "Management" in the Prospectus.
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Underwriters Number of
Firm
Shares to be
Purchased
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation........... 4,800,000
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................. 1,600,000
Bear, Stearns & Co. Inc....................................... 800,000
BancBoston Robertson Stephens Inc............................. 400,000
Chase Securities Inc.......................................... 400,000
---------
Total......................................................... 8,000,000
=========
</TABLE>
<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
Eight Million (8,000,000) shares of 6 3/4% Series C Cumulative Convertible
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
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BEAR, STEARNS & CO., INC.
BANCBOSTON ROBERTSON STEPHENS INC.
CHASE SECURITIES INC.
[__________], 1999
Page 2
Stock, Common Stock or any securities convertible into or exercisable or
exchangeable for Preferred Stock or 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 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, 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 Preferred Stock or
Common Stock or any securities convertible into or exercisable or exchangeable
for Preferred Stock or 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:___________
<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"), in order to amend the Corporation's
Certificate of Incorporation, does 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 6 3/4% 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:
6 3/4% 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 6 3/4% Series C Cumulative Convertible
Preferred Stock (the "Series C Preferred Stock"), and the number of shares so
------------------------
designated shall be 9,200,000 (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.
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 6 3/4% 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
August 15, November 15, February 15, and May 15 of each year, commencing August
15, 2002 (each such date being referred to herein as a "Dividend Payment Date").
---------------------
Dividends on the Series C Preferred Stock will accrue from May 15, 2002 (or
earlier if the Deposit Account is terminated, in which event dividends will
accrue from the last 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
3
<PAGE>
securities (any transaction in which the Corporation obtains the right
to make cash 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.
(c) (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 into shares of Common 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.
6
<PAGE>
(c) If the Conversion Date shall not be a Business Day, then such
conversion right shall be deemed exercised on the next Business Day.
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 may,
at the Corporation's option, be paid,
(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 each of
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 Issuance 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 (A) the issuance of shares
of Common Stock in connection with the payment in redemption for, of
dividends on, or the conversion of the Series C Preferred Stock or the
issuance of shares of Common Stock pursuant to the Deposit Agreement or (B)
to all holders of Series C Preferred Stock based upon the number of shares
of Common Stock into which Series C Preferred Stock is then convertible);
(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;
7
<PAGE>
(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 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 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;
8
<PAGE>
"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;
"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
9
<PAGE>
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;
"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.
10
<PAGE>
(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 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
11
<PAGE>
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 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 similar
change (to which Section 4.3(a) does not apply) 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
reincorporation merger does not also result in a reclassification or change
of Common Stock such that the Common Stock that holders of Series C
Preferred Stock would have received had they converted prior to such merger
is different from shares of Common Stock received by the holders of Common
Stock in such reincorporation merger); or
12
<PAGE>
(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) computed 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.
(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 and Section 8.3, 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.
13
<PAGE>
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 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 101.929% of the Liquidation Preference (plus any
accumulated and unpaid dividends, if any, whether or not declared, to the
Redemption Date (the "Provisional Redemption Date")) on or after November 15,
---------------------------
2000 but prior to May 15, 2002 (the "Provisional Redemption"), if the Trading
----------------------
Price of the Series C Preferred Stock equals or exceeds $124.74 per share for 20
Trading Days within any 30 Trading Day period. In addition to the payments
required by the preceding sentence, if the Deposit Account has not previously
been terminated, in the event of any Provisional Redemption, holders of Series C
Preferred Stock will also receive any funds remaining in the Deposit Account
allocable to those shares of Series C Preferred Stock which are redeemed in such
circumstances (but not the Additional Payment described in the next sentence).
If the Deposit Account has been terminated, and the Corporation then undertakes
a Provisional Redemption, holders of Series C Preferred Stock that the
Corporation calls for redemption, will, in addition to the payments required by
the second preceding sentence, also receive a payment (the "Additional Payment")
------------------
in an amount equal to the present value of the aggregate value of the dividends
that would thereafter have been payable on the Series C Preferred Stock (whether
or not declared) from the Provisional Redemption Date to May 15, 2002 (the
"Additional Period"). The present value will be calculated using the bond
-----------------
equivalent yield on U.S. Treasury notes or bills having a term nearest in length
to that of the Additional Period as the day immediately preceding the date on
which a notice of Provisional Redemption is mailed. If the Deposit Account has
been terminated, the Corporation will be obligated to make the Additional
Payment on all Series C Preferred Stock that it has called for Provisional
Redemption, whether or not those shares of Series C Preferred Stock are
converted into shares of Common Stock prior to the Provisional Redemption Date.
Except as provided in the immediately preceding paragraph, the
Corporation may not redeem the Series C Preferred Stock prior to May 15, 2002.
(b) Beginning on May 15, 2002, the Series C Preferred Stock may be
redeemed, during the twelve-month periods commencing on May 15 of the years
indicated below, at the
14
<PAGE>
following Redemption Prices per share, plus in each case all accumulated and
unpaid dividends (whether or not declared) to the Redemption Date:
<TABLE>
<CAPTION>
Redemption Premium
Year Per Share
---- ---------
<S> <C>
2002............................ 103.857%
2003............................ 102.893%
2004............................ 101.929%
2005............................ 100.964%
2006 and thereafter............. 100%
</TABLE>
(c) The Corporation may effect any redemption (whether pursuant to
Section 5.1(a) or 5.1(b) 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 delivered to holders of
Series C Preferred Stock
(d) 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.
(e) 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.
(f) 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.
15
<PAGE>
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 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 or
the right, if any, to receive payments from the Deposit Account)) 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
16
<PAGE>
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 (whether
or not declared), 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
(ii) $38.73.
(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.
17
<PAGE>
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 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:
18
<PAGE>
(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; provided, however, that any issuance of shares of Parity Securities,
including the issuance of additional shares of Series C Preferred Stock,
will not, by itself, be deemed to adversely affect 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 in either case, 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.
19
<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 is not changed or exchanged at all, except to the
extent necessary to reflect a change in the
20
<PAGE>
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 $62.3675, 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, with respect
-----------------
to the Series C Preferred Stock, between the Corporation and Wilmington Trust
Corporation.
11.14. "Dividend Payment Date" is as defined in Section 2.1, above.
---------------------
21
<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.
22
<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 C Preferred Stock" means the Series C Preferred Stock
------------------------
authorized in this Article FOURTH.
11.36. "Senior Securities" is as defined in Section 3.1.
-----------------
11.37. "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.
11.38. "Trading Day" means any day on which the Series C Preferred
-----------
Stock is traded on the Nasdaq National Market or any other exchange on which the
Series C Preferred Stock is, at the time, principally traded or quoted.
23
<PAGE>
11.39. "Trading Price" means, on any specified Trading Day, the last
-------------
reported sales price of the Series C Preferred Stock on the Nasdaq National
Market or any other exchange on which the Series C Preferred Stock is, at the
time, principally traded or quoted.
11.40. 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.
24
<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 6 3/4% 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 April 28, 1999.
25
<PAGE>
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Amendment on this _____ day of April 1999.
/s/ Edward D. Postal
_______________________________________
Edward D. Postal, Senior Vice President
and Chief Financial Officer
<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 6 3/4% 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
<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 6 3/4% 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 May 4, 1999, by and between PSINet
Inc., a New York corporation (the "COMPANY"), and Wilmington Trust Company (the
"DEPOSIT AGENT"), as deposit agent for the benefit of the registered holders
(the "HOLDERS") of the 6 3/4% 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 non-interest bearing trust 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 $0.84375 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 Deposit Account shall be established in connection with the
offering of 8,000,000 shares of Preferred Stock (the "OFFERING"), and 1,200,000
additional shares of Preferred Stock (the "OVER-ALLOTMENT SHARES") subject to
acquisition in connection therewith, and shall be held subject to the terms and
conditions of this Agreement.
(b) Simultaneously with each closing in respect of the Offering, the
underwriters of the Offering shall deliver, at the request of the purchasers of
the Preferred Stock and on their behalf, an amount in cash equal to
approximately 19.34% of the purchase price of the Preferred Stock (or
approximately $9.36 of the $48.37 purchase price per share) payable by the
underwriters pursuant to that certain Underwriting Agreement, dated April 28,
1999 in respect of the Offering (the "UNDERWRITING AGREEMENT"), plus a ratable
amount to be deposited in respect of any Additional Shares (as defined in the
Underwriting Agreement) purchased by the Underwriters, sufficient to pay,
together with the earnings thereon, any Quarterly Return Amount from the Deposit
Account required to be made hereunder prior to the Deposit Expiration Date, as
defined below (such amount together with any earnings, interest and other
proceeds of investments are referred to as the "DEPOSIT FUND"), to the Deposit
Agent against the Deposit Agent's written acknowledgment and receipt of such
amount, 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
<PAGE>
shall be invested as provided on EXHIBIT B to be attached at the closing of the
Offering (and which may be amended by delivery by the Company of a revised
Exhibit B in the event of the issuance of the Over-Allotment Shares), which
investment will provide sufficient funds, without any further investment, to
equal the aggregate Quarterly Return Amount due on the outstanding Preferred
Stock, as such Quarterly Return Amount becomes due, on each Deposit Payment
Date. 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).
2. Distribution, Reduction and Termination of Deposit Account.
----------------------------------------------------------
(a) Unless on or prior to the Notice Date (as defined in Section
2(h)), the Company shall have delivered to the Deposit Agent a Direction Notice
(as defined in Section 2(h)) in respect of a Deposit Payment Date or the Deposit
Expiration Date), the Deposit Agent shall deliver to each Holder of Record (as
defined in Section 3) appearing on the list provided to the Deposit Agent in
accordance with Section 3, the Quarterly Return Amount on August 15, November
15, February 15 and May 15 of each year (each such date being a "DEPOSIT PAYMENT
DATE"), commencing August 15, 1999 and continuing until the earlier of (i) May
15, 2002 (the "DEPOSIT EXPIRATION DATE") and (ii) such earlier time as the
Deposit Account is terminated in accordance with Section 2(f) below. The sole
source of funds for each Quarterly Return Amount delivered to Holders of Record
by the Deposit Agent in accordance herewith shall be the Deposit Account and the
Deposit Agent shall have no liability in respect of any deficiency thereof
(subject to Section 6(d)).
(b) If the Company shall have delivered a Direction Notice to the
Deposit Agent on or prior to the Notice Date relating to a Deposit Payment Date
or the Deposit Expiration Date, the Deposit Agent shall, as instructed by the
Company in such Direction Notice, purchase, on behalf of the Holders of Record,
from the Company, with funds from the Deposit Account, that number of whole
shares of Common Stock as is determined by the Company (as set forth in the
Direction Notice) by dividing all or such portion of the Quarterly Return Amount
as set forth in the Direction Notice (the "SHARE CONSIDERATION") as the Company
shall direct by 95% of the Market Value (as defined in Section 2(h)) of the
Common Stock as of the Notice Date. The Deposit Agent shall pay the Share
Consideration from the Deposit Account to the Company in consideration for such
purchase of shares and the Deposit Agent, or the Company upon the written
request of the Deposit Agent, shall transfer such shares of Common Stock on such
Deposit Payment Date or Deposit Expiration Date to Holders of Record appearing
on the list provided to the Deposit Agent in accordance with Section 3, each
such Holder of Record to receive the number of such shares of Common Stock as is
directed by the Company in writing. The Deposit Agent shall transfer to Holders
of Record on the next Deposit Payment Date or Deposit Expiration Date any
portion of such Quarterly Return Amount as is not utilized to purchase Common
Stock from the Company. The Deposit Agent's obligation hereunder to cause shares
of Common Stock to be purchased by the Deposit Account from the Company shall be
secured by, and limited to, the funds in the Deposit Account, and the Deposit
Agent shall have no liability to the Company, the Holders or any other person to
the extent that there are not sufficient funds in the Deposit Account to make
any purchase, payment or transfer required under this Agreement.
(c) In the event of any conversion of the Preferred Stock into shares
of Common
-2-
<PAGE>
Stock prior to the Deposit Expiration Date, and assuming that, at the time of
such conversion, the Company has not delivered a redemption notice, then, in
those circumstances, the Company will be paid any funds remaining in the Deposit
Account allocable to those shares of Preferred Stock so converted (and as a
result, holders of Preferred Stock will not receive any partial payment from the
Deposit Account if they convert their shares prior to receipt of a full
Quarterly Return Amount). If, however, the Company has delivered a redemption
notice, and a holder converts its Preferred Stock into shares of Common Stock
between the date of the redemption notice and the second day preceding the
redemption date (and, in any case, prior to the Deposit Expiration Date or the
termination of the Deposit Account), then, in those circumstances, any funds
remaining in the Deposit Account allocable to those shares of Preferred Stock
converted in the circumstances described in this sentence will be paid to those
holders whose shares have been converted. The Company will deliver a statement
and written directions to the Deposit Agent setting forth the allocation of
funds pro rata based upon the number of shares of Preferred Stock so converted
and directions regarding the payment of such funds.
(d) In the event of any redemption of Preferred Stock (written notice
of which shall be provided to the Deposit Agent by the Company) prior to the
earlier of (i) the Deposit Expiration Date and (ii) such earlier time as the
Deposit Account is terminated in accordance with Section 2(f) below, the Deposit
Agent shall, at the written direction of the Company, make a payment to the
Holders whose shares of Preferred Stock have been redeemed of any funds
remaining in the Deposit Account allocable to such Holders' shares so redeemed
(to the extent that the Deposit Account has not been terminated as described in
clause (g) hereof). The Company shall give such notice promptly after any such
redemption and shall include in its written direction (i) the Holders whose
shares have been so redeemed, (ii) the number of shares of each such Holder that
have been so redeemed, and (iii) the amount of the payment per share redeemed to
be made to each such Holder.
(e) On the Deposit Expiration Date, the Deposit Agent shall deliver
to the Holders of Record appearing on the list provided in accordance with
Section 3, 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 with funds from the
Deposit Account from the Company for transfer to Holders of Record that number
of whole shares of Common Stock determined by dividing the Share Consideration
by 95% of the Market Value of the Common Stock as of the conversion date. In any
such event, the Company shall deliver a Direction Notice as contemplated by
Exhibit C hereto.
(f) 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 obtains 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 in respect thereof, then, in
such event, the Company may thereafter, upon notice to the Holders, elect to
exchange the Deposit Account for an obligation to accrue 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
-3-
<PAGE>
of the Deposit Account to the Company in accordance with this clause (f). If the
Company elects to so terminate the Deposit Account, the Preferred Stock will
begin to accrue dividends from the last Deposit Payment Date preceding such
election.
(g) Upon the final resolution (including the final resolution of all
appeals or rights to appeal in any court) of any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Deposit Agent shall,
upon the written direction of the Company, return to the Holders any funds at
the time remaining in the Deposit Account.
(h) 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, in the form attached as
Exhibit C, delivered to the Deposit Agent directing the Deposit Agent use funds
from the Deposit Account to purchase Common Stock from the Company to distribute
to holders of Preferred Stock.
(i) 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
stock register of the Company or its transfer agent or registrar 10 business
days prior to each Deposit Payment Date (such Holders, the "HOLDERS OF RECORD").
A list of the Holders of Record, including the number of shares of Preferred
Stock held by each such Holder, shall be delivered to the Deposit Agent by the
Company or its transfer agent or registrar at least 5 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 and reasonable fees and expenses of its
legal counsel arising in connection with the entering into this Agreement or the
negotiation, interpretation or enforcement of any provision hereof or any
arbitration or other proceeding hereunder. The fees and expenses of the Deposit
Agent in carrying out its duties hereunder shall be paid or reimbursed by the
Company. In the event the Deposit Agent renders any extraordinary services in
connection with the Deposit Account or otherwise under this Agreement at the
request of the Company or the Holders, the Deposit Agent shall be entitled to
reasonable
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<PAGE>
additional compensation therefor. The terms of this Section 4 shall survive
termination of this Deposit Agreement.
5. Notices. All notices, requests, demands and other communications
-------
hereunder shall be deemed to have been duly given on the next business day after
being sent if by hand or if by overnight courier service for next business day
delivery, or five days after being sent if 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, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Bruce L.
Bisson.
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 conclusively to rely, and
shall be protected in acting in reliance upon, any Direction Notice or other
notice, letter, statement, list, instruction or direction or any signature
furnished to the Deposit Agent pursuant to this Deposit Agreement and shall be
entitled to treat as genuine, and as the document it purports to be, any letter,
notice, statement, list, instruction, direction or other document or instrument
and any signature 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 (and the Deposit Agent shall be
permitted to so assume) the authenticity or correctness thereof and 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.
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<PAGE>
(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 under this Agreement.
(d) The Deposit Agent undertakes to perform only such duties as are
expressly set forth in this Deposit Agreement, and no implied duties or implied
obligations shall be read into this Deposit Agreement against the Deposit Agent.
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 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 connection with to the Deposit
Agreement or Deposit Account in any particular matter or for any other reason,
except for any Loss which is the result of gross 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, actions, suits or
proceedings at law or in equity, and any other expenses, fees or charges of any
character or nature (including reasonable costs of investigation and fees and
disbursements 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 its
acting as deposit agent hereunder or arising out of the Deposit Account
(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 gross negligence or willful misconduct on the part of such
Indemnified Party. The terms of this Section 6(e) shall survive the termination
of this Deposit Agreement.
(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 and shall incur no liability
for, and shall be fully protected in, acting 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
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<PAGE>
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 opinion, is in conflict with any of
the provisions of this Agreement, 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) or if any obligation of the
Deposit Agent under this Agreement shall, in the opinion of the Deposit Agent,
expose the Deposit Agent to liability due to actual or potential conflicting
claims to the Deposit Account, the Deposit Agent shall be entitled (but not
obligated), without liability to anyone, to refrain from taking any action other
than to hold the Deposit Fund in accordance with this Agreement until such
uncertainty, conflict, dispute or obligation is resolved to the reasonable
satisfaction of the Deposit Agent, including by (and, notwithstanding anything
to the contrary, it shall be reasonable for the Deposit Agent not to act until
it has received) 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 30 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.
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<PAGE>
(k) The Company hereby authorizes the Deposit Agent, (i) to institute
a bill of interpleader in any court of competent jurisdiction to determine the
rights of any person (including the Initial Holders, the Holders, the Company
and any other person) to the Deposit Account and the Company shall pay all
reasonable costs, expenses and disbursements of the Deposit Agent in connection
therewith, including reasonable attorney's fees and (ii) 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 gross negligence or willful
misconduct, will terminate upon its delivery of all of the Deposit Fund under
any provision of this Agreement. The provisions of this Section 6(l) shall
survive any such termination.
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 (i) by a writing duly executed by the
Deposit Agent, the Company and by a majority of the Holders or (ii) as provided
in Section 1(b).
(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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and the year first above written.
PSINET INC.
/s/ Edward D. Postal
By:__________________________________________
Name: Edward D. Postal
Title: Senior vice President and Chief
Financial Officer
WILMINGTON TRUST COMPANY
/s/ Bruce L. Bisson
By:__________________________________________
Name: Bruce L. Bisson
Title: Vice President
<PAGE>
EXHIBIT A
DEPOSIT AGENT'S CROSS-RECEIPT
THE UNDERSIGNED hereby acknowledges receipt of [_________________]
Dollars [($_________)] (the "INITIAL DEPOSIT").
The undersigned, as deposit agent (the "DEPOSIT AGENT") pursuant to
that certain Deposit Agreement, dated May 4, 1999 among the Company and the
Deposit Agent, as deposit agent (the "DEPOSIT AGREEMENT"), has deposited the
Initial Deposit in the Deposit Account (as such term is defined in the Deposit
Agreement).
WILMINGTON TRUST COMPANY
By: _____________________________
Name:
Title:
Date: May __, 1999
<PAGE>
EXHIBIT B
INVESTMENTS
The funds that the purchasers of the 6 3/4% Series C Cumulative
Convertible Preferred Stock deposit in the Deposit Account will be invested in
U.S. government obligations or U.S. government guaranteed obligations as
provided on the attachment hereto.
This Exhibit B shall be amended in the event of any issuance of the
Over-Allotment Shares.
In the event that investments made pursuant to this Exhibit B shall
mature or otherwise require reinvestment, the Deposit Agent shall make overnight
(or, if requested in writing by the Company, other) investment of available
funds in U.S. government obligations or U.S. government guaranteed obligations
which shall mature as required to make payments required under the Deposit
Agreement.
<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(B) of the Deposit Agreement, to purchase from the Company, for
delivery to each Holder of Record of Preferred Stock in lieu of the Quarterly
Return Amount on the next Deposit Payment Date or the Deposit Expiration Date,
as applicable, ___ 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(C) 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 of the redemption of [____]
shares of Preferred Stock by certain holders, and that you are directed,
pursuant to SECTION 2(D) of the Deposit Agreement, to pay $[_____] to the
Company, representing funds remaining in the Deposit Account allocable to the
shares of Preferred Stock so redeemed.]
[The undersigned hereby notifies you that you are directed, pursuant
to SECTION 2(E) 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.
<PAGE>
PSINET INC.
By:__________________________________________
Name:
Title:
