B Y E - L A W S
OF
GLOBAL TELESYSTEMS HOLDINGS LTD.
I HEREBY CERTIFY that the within written Bye-Laws are a true copy of the Bye-
Laws of
GLOBAL TELESYSEMS HOLDINGS LTD.
as subscribed by the subscribers to the Memorandum of Association and approved
at the Statutory meeting of the above Company on the 25/th/ March, 1997.
Secretary
Prepared by
Messrs Appleby Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton, Bermuda
I N D E X
BYE-LAW SUBJECT
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1 Interpretation
2 Registered Office
3-4 Share Rights
5-6 Modification of Rights
7-9 Shares
10-12 Certificates
13-15 Lien
16-21 Calls on Shares
22-28 Forfeiture of Shares
29 Register of Shareholders
30 Register of Directors and Officers
31-34 Transfer of Shares
35-38 Transmission of Shares
39-41 Increase of Capital
42-43 Alteration of Capital
44-45 Reduction of Capital
46 General Meetings and Written Resolutions
47-48 Notice of General Meetings
49-55 Proceedings at General Meetings
56-67 Voting
68-73 Proxies and Corporate Representatives
74-76 Appointment and Removal of Directors
77 Resignation and Disqualification of Directors
78-80 Alternate Directors
81 Directors' Fees and Additional
Remuneration and Expenses
82 Directors' Interests
83-87 Powers and Duties of the Board
88-90 Delegation of the Board's Powers
91-99 Proceedings of the Board
100 Officers
101 Minutes
102-103 Secretary and Resident Representative
104 The Seal
105-111 Dividends and Other Payments
112 Reserves
113-114 Capitalization of Profits
115 Record Dates
116-118 Accounting Records
119 Audit
120-122 Service of Notices and Other Documents
123 Winding Up
124-126 Indemnity
127 Amalgamation
128 Alteration of Bye-Laws
B Y E - L A W S
OF
GLOBAL TELESYSTEMS HOLDINGS LTD
INTERPRETATION
--------------
1. In these Bye-Laws unless the context otherwise requires -
"Bermuda" means the Islands of Bermuda;
"Board" means the Board of Directors of the Company or the Directors
present at a meeting of Directors at which there is a quorum;
"the Companies Acts" means every Bermuda statute from time to time in force
concerning companies insofar as the same applies to the Company;
"Company" means the company incorporated in Bermuda under the name of
Global Telesystems Holdings Ltd on the 25th day of March, 1997;
"paid up" means paid up or credited as paid up;
"Parent" means the company incorporated in the Cayman Islands under the
name of GT Parent Holdings LDC;
"Register" means the Register of Shareholders of the Company;
"Registered Office" means the registered office for the time being of the
Company;
"Resident Representative" means the person (or, if permitted in accordance
with the Companies Acts, the company) appointed to perform the duties of
resident representative set out in the Companies Acts and includes any assistant
or deputy Resident Representative appointed by the Board to perform any of the
duties of the Resident Representative;
"Resolution" means a resolution of the Shareholders or, where required, of
a separate class or separate classes of Shareholders, adopted either in general
meeting or by written resolution, in accordance with the provisions of these
Bye-Laws;
"Seal" means the common seal of the Company and includes any duplicate
thereof;
"Secretary" includes a temporary or assistant or deputy Secretary and any
person appointed by the Board to perform any of the duties of the Secretary;
"Shareholder" means a shareholder or member of the Company;
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"Stockholders Agreement" means the agreement dated 24th March, 1997, and
made between Parent and its shareholders relating, inter alia, to the
management and operation of the Parent;
"these Bye-Laws" means these Bye-Laws in their present form or as from time
to time amended;
for the purposes of these Bye-Laws a corporation shall be deemed to be
present in person if its representative duly authorised pursuant to the
Companies Acts is present;
words importing only the singular number include the plural number and vice
versa;
words importing only the masculine gender include the feminine and neuter
genders respectively;
words importing persons include companies or associations or bodies of
persons, whether corporate or un-incorporate;
reference to writing shall include typewriting, printing, lithography,
photography and other modes of representing or reproducing words in a legible
and non-transitory form;
any words or expressions defined in the Companies Acts in force at the date
when these Bye-Laws or any part thereof are adopted shall bear the same meaning
in these Bye-Laws or such part (as the case may be).
REGISTERED OFFICE
-----------------
2. The Registered Office shall be at such place in Bermuda as the Board
shall from time to time appoint.
SHARE RIGHTS
------------
3. Subject to any special rights conferred on the holders of any share or
class of shares, any share in the Company may be issued with or have attached
thereto such preferred, deferred, qualified or other special rights or such
restrictions, whether in regard to dividend, voting, return of capital or
otherwise, as the Company may by Resolution determine or, if there has not been
any such determination or so far as the same shall not make specific provision,
as the Board may determine.
4. Subject to the Companies Acts, any preference shares may, with the
sanction of a Resolution, be issued on terms:
(a) that they are to be redeemed on the happening of a specified event
or on a given date; and/or,
(b) that they are liable to be redeemed at the option of the Company;
and/or,
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(c) if authorised by the memorandum/Incorporating Act of the Company,
that they are liable to be redeemed at the option of the holder.
The terms and manner of redemption shall be provided for by way of such
Resolution, or if the shareholders so direct by Resolution, as the Board may
determine, provided that such rights, when so determined, shall be attached to
these Bye-Laws.
MODIFICATION OF RIGHTS
----------------------
5. Subject to the Companies Acts, all or any of the special rights for
the time being attached to any class of shares for the time being issued may
from time to time (whether or not the Company is being wound up) be altered or
abrogated with the consent in writing of the holders of not less than seventy
five percent of the issued shares of that class or with the sanction of a
resolution passed at a separate general meeting of the holders of such shares
voting in person or by proxy. To any such separate general meeting, all the
provisions of these Bye-Laws as to general meetings of the Company shall mutatis
mutandis apply, but so that the necessary quorum shall be two or more persons
holding or representing by proxy any of the shares of the relevant class, that
every holder of shares of the relevant class shall be entitled on a poll to one
vote for every such share held by him and that any holder of shares of the
relevant class present in person or by proxy may demand a poll; provided,
however, that if the Company or a class of Shareholders shall have only one
Shareholder, one Shareholder present in person or by proxy shall constitute the
necessary quorum.
6. The special rights conferred upon the holders of any shares or class
of shares shall not, unless otherwise expressly provided in the rights attaching
to or the terms of issue of such shares, be deemed to be altered by the creation
or issue of further shares ranking pari passu therewith.
SHARES
------
7. (a) Subject to the provisions of these Bye-Laws and to sub-paragraph
(b) below, the unissued shares of the Company (whether forming part of the
original capital or any increased capital) shall be at the disposal of the
Board, which may offer, allot, grant options over or otherwise dispose of them
to such persons, at such times and for such consideration and upon such terms
and conditions as the Board may determine.
(b) Notwithstanding the foregoing, no shares in the capital of the
Company may be issued to the Parent except in accordance with the terms of
the Stockholders Agreement.
8. The Board may in connection with the issue of any shares exercise all
powers of paying commission and brokerage conferred or permitted by law.
4
9. Except as ordered by a court of competent jurisdiction or as required
by law, no person shall be recognised by the Company as holding any share upon
trust and the Company shall not be bound by or required in any way to recognise
(even when having notice thereof) any equitable, contingent, future or partial
interest in any share or any interest in any fractional part of a share or
(except only as otherwise provided in these Bye-Laws, or by law) any other right
in respect of any share except an absolute right to the entirety thereof in the
registered holder.
CERTIFICATES
-------------
10. The preparation, issue and delivery of certificates shall be governed
by the Companies Acts. In the case of a share held jointly by several persons,
delivery of a certificate to one of several joint holders shall be sufficient
delivery to all.
11. If a share certificate is defaced, lost or destroyed it may be
replaced without fee but on such terms (if any) as to evidence and indemnity and
to payment of the costs and out of pocket expenses of the Company in
investigating such evidence and preparing such indemnity as the Board may think
fit and, in case of defacement, on delivery of the old certificate to the
Company.
12. All certificates for share or loan capital or other securities of the
Company (other than letters of allotment, scrip certificates and other like
documents) shall, except to the extent that the terms and conditions for the
time being relating thereto otherwise provide, be issued under the Seal. The
Board may by resolution determine, either generally or in any particular case,
that any signatures on any such certificates need not be autographic but may be
affixed to such certificates by some mechanical means or may be printed thereon
or that such certificates need not be signed by any persons.
LIEN
----
13. The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys, whether presently payable or not,
called or payable, at a date fixed by or in accordance with the terms of issue
of such share in respect of such share, and the Company shall also have a first
and paramount lien on every share (other than a fully paid share) standing
registered in the name of a Shareholder, whether singly or jointly with any
other person, for all the debts and liabilities of such Shareholder or his
estate to the Company, whether the same shall have been incurred before or after
notice to the Company of any interest of any person other than such Shareholder,
and whether the time for the payment or discharge of the same shall have
actually arrived or not, and notwithstanding that the same are joint debts or
liabilities of such Shareholder or his estate and any other person, whether a
Shareholder or not. The Company's lien on a share shall extend to all dividends
payable thereon. The Board may at any time, either generally or in any
particular case, waive any lien that has arisen or declare any share to be
wholly or in part exempt from the provisions of this Bye-Law.
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14. The Company may sell, in such manner as the Board may think fit, any
share on which the Company has a lien but no sale shall be made unless some sum
in respect of which the lien exists is presently payable nor until the
expiration of fourteen days after a notice in writing, stating and demanding
payment of the sum presently payable and giving notice of the intention to sell
in default of such payment, has been served on the holder for the time being of
the share.
15. The net proceeds of sale by the Company of any shares on which it has
a lien shall be applied in or towards payment or discharge of the debt or
liability in respect of which the lien exists so far as the same is presently
payable, and any residue shall (subject to a like lien for debts or liabilities
not presently payable as existed upon the share prior to the sale) be paid to
the holder of the share immediately before such sale. For giving effect to any
such sale the Board may authorise some person to transfer the share sold to the
purchaser thereof. The purchaser shall be registered as the holder of the share
and he shall not be bound to see to the application of the purchase money, nor
shall his title to the share be affected by any irregularity or invalidity in
the proceedings relating to the sale.
CALLS ON SHARES
---------------
16. The Board may from time to time make calls upon the Shareholders in
respect of any moneys unpaid on their shares (whether on account of the par
value of the shares or by way of premium) and not by the terms of issue thereof
made payable at a date fixed by or in accordance with such terms of issue, and
each Shareholder shall (subject to the Company serving upon him at least
fourteen days notice specifying the time or times and place of payment) pay to
the Company at the time or times and place so specified the amount called on his
shares. A call may be revoked or postponed as the Board may determine.
17. A call may be made payable by installments and shall be deemed to have
been made at the time when the resolution of the Board authorizing the call was
passed.
18. The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
19. If a sum called in respect of the share shall not be paid before or on
the day appointed for payment thereof the person from whom the sum is due shall
pay interest on the sum from the day appointed for the payment thereof to the
time of actual payment at such rate as the Board may determine, but the Board
shall be at liberty to waive payment of such interest wholly or in part.
20. Any sum which, by the terms of issue of a share, becomes payable on
allotment or at any date fixed by or in accordance with such terms of issue,
whether on account of the nominal amount of the share or by way of premium,
shall for all the purposes of these Bye-Laws be deemed to be a call duly made,
notified and payable on the date on which, by the terms of issue, the same
becomes payable and, in case of non-payment, all the relevant provisions of
these Bye-Laws as to payment of interest, forfeiture or otherwise shall apply as
if such sum had become payable by virtue of a call duly made and notified.
6
21. The Board may on the issue of shares differentiate between the
allottees or holders as to the amount of calls to be paid and the times of
payment.
FORFEITURE OF SHARES
--------------------
22. If a Shareholder fails to pay any call or installment of a call on the
day appointed for payment thereof, the Board may at any time thereafter during
such time as any part of such call or installment remains unpaid serve a notice
on him requiring payment of so much of the call or installment as is unpaid,
together with any interest which may have accrued.
23. The notice shall name a further day (not being less than 14 days from
the date of the notice) on or before which, and the place where, the payment
required by the notice is to be made and shall state that, in the event of non-
payment on or before the day and at the place appointed, the shares in respect
of which such call is made or installment is payable will be liable to be
forfeited. The Board may accept the surrender of any share liable to be
forfeited hereunder and, in such case, references in these Bye-Laws to
forfeiture shall include surrender.
24. If the requirements of any such notice as aforesaid are not complied
with, any share in respect of which such notice has been given may at any time
thereafter, before payment of all calls or installments and interest due in
respect thereof has been made, be forfeited by a resolution of the Board to that
effect. Such forfeiture shall include all dividends declared in respect of the
forfeited shares and not actually paid before the forfeiture.
25. When any share has been forfeited, notice of the forfeiture shall be
served upon the person who was before forfeiture the holder of the share; but no
forfeiture shall be in any manner invalidated by any omission or neglect to give
such notice as aforesaid.
26. A forfeited share shall be deemed to be the property of the Company
and may be sold, re-offered or otherwise disposed of either to the person who
was, before forfeiture, the holder thereof or entitled thereto or to any other
person upon such terms and in such manner as the Board shall think fit, and at
any time before a sale, re-allotment or disposition the forfeiture may be
cancelled on such terms as the Board may think fit.
27. A person whose shares have been forfeited shall thereupon cease to be
a Shareholder in respect of the forfeited shares but shall, notwithstanding the
forfeiture, remain liable to pay to the Company all moneys which at the date of
forfeiture were presently payable by him to the Company in respect of the shares
with interest thereon at such rate as the Board may determine from the date of
forfeiture until payment, and the Company may enforce payment without being
under any obligation to make any allowance for the value of the shares
forfeited.
7
28. An affidavit in writing that the deponent is a Director or the
Secretary and that a share has been duly forfeited on the date stated in the
affidavit shall be conclusive evidence of the facts therein stated as against
all persons claiming to be entitled to the share. The Company may receive the
consideration (if any) given for the share on the sale, re-allotment or
disposition thereof and the Board may authorise some person to transfer the
share to the person to whom the same is sold, re-allotted or disposed of, and he
shall thereupon be registered as the holder of the share and shall not be bound
to see to the application of the purchase money (if any) nor shall his title to
the share be affected by any irregularity or invalidity in the proceedings
relating to the forfeiture, sale, re-allotment or disposal of the share.
REGISTER OF SHAREHOLDERS
------------------------
29. The Secretary shall establish and maintain the Register of
Shareholders at the Registered Office in the manner prescribed by the Companies
Acts. Unless the Board otherwise determines, the Register of Shareholders shall
be open to inspection in the manner prescribed by the Companies Acts between
10.00 a.m. and 12.00 noon on every working day. Unless the Board so determines,
no Shareholder or intending Shareholder shall be entitled to have entered in the
Register any indication of any trust or any equitable, contingent, future or
partial interest in any share or any interest in any fractional part of a share
and if any such entry exists or is permitted by the Board it shall not be deemed
to abrogate any of the provisions of Bye-Law 9.
REGISTER OF DIRECTORS AND OFFICERS
----------------------------------
30. The Secretary shall establish and maintain a register of the Directors
and Officers of the Company as required by the Companies Acts. The register of
Directors and Officers shall be open to inspection in the manner prescribed by
the Companies Acts between 10:00 a.m. and 12:00 noon on every working day.
TRANSFER OF SHARES
------------------
31. Subject to the Companies Acts and to such of the restrictions
contained in these Bye-Laws as may be applicable, any Shareholder may transfer
all or any of his shares by an instrument of transfer in the usual common form
or in any other form which the Board may approve.
32. The instrument of transfer of a share shall be signed by or on behalf
of the transferor and where any share is not fully-paid, the transferee and the
transferor shall be deemed to remain the holder of the share until the name of
the transferee is entered in the Register in respect thereof. All instruments
of transfer when registered may be retained by the Company. The Board may, in
its absolute discretion and without assigning any reason therefor, decline to
register any transfer of any share which is not a fully-paid share. The Board
may also decline to register any transfer unless:-
8
(a) the instrument of transfer is duly stamped and lodged with the
Company, accompanied by the certificate for the shares to which it relates,
and such other evidence as the Board may reasonably require to show the
right of the transferor to make the transfer,
(b) the instrument of transfer is in respect of only one class of
share,
(c) where applicable, the permission of the Bermuda Monetary Authority
with respect thereto has been obtained.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under this Bye-
Law and Bye-Laws 31 and 33.
33. If the Board declines to register a transfer it shall, within three
months after the date on which the instrument of transfer was lodged, send to
the transferee notice of such refusal.
34. No fee shall be charged by the Company for registering any transfer,
probate, letters of administration, certificate of death or marriage, power of
attorney, distringas or stop notice, order of court or other instrument relating
to or affecting the title to any share, or otherwise making an entry in the
Register relating to any share.
TRANSMISSION OF SHARES
----------------------
35. In the case of the death of a Shareholder, the survivor or survivors,
where the deceased was a joint holder, and the estate representative, where he
was sole holder, shall be the only person recognised by the Company as having
any title to his shares; but nothing herein contained shall release the estate
of a deceased holder (whether the sole or joint) from any liability in respect
of any share held by him solely or jointly with other persons. For the purpose
of this Bye-Law, estate representative means the person to whom probate or
letters of administration has or have been granted in Bermuda or, failing any
such person, such other person as the Board may in its absolute discretion
determine to be the person recognised by the Company for the purpose of this
Bye-Law.
36. Any person becoming entitled to a share in consequence of the death of
a Shareholder or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from time to
time be required by the Board as to his entitlement, either be registered
himself as the holder of the share or elect to have some person nominated by him
registered as the transferee thereof. If the person so becoming entitled elects
to be registered himself, he shall deliver or send to the Company a notice in
writing signed by him stating that he so elects. If he shall elect to have his
nominee registered, he shall signify his election by signing an instrument of
transfer of such share in favour of his nominee. All the limitations,
restrictions and provisions of these Bye-Laws relating to the right to transfer
and the registration of transfer of shares shall be applicable to any such
notice or instrument of transfer as aforesaid as if the death of the Shareholder
or
9
other event giving rise to the transmission had not occurred and the notice or
instrument of transfer was an instrument of transfer signed by such Shareholder.
37. A person becoming entitled to a share in consequence of the death of a
Shareholder or otherwise by operation of applicable law shall (upon such
evidence being produced as may from time to time be required by the Board as to
his entitlement) be entitled to receive and may give a discharge for any
dividends or other moneys payable in respect of the share, but he shall not be
entitled in respect of the share to receive notices of or to attend or vote at
general meetings of the Company or, save as aforesaid, to exercise in respect of
the share any of the rights or privileges of a Shareholder until he shall have
become registered as the holder thereof. The Board may at any time give notice
requiring such person to elect either to be registered himself or to transfer
the share and, if the notice is not complied with within sixty days, the Board
may thereafter withhold payment of all dividends and other moneys payable in
respect of the shares until the requirements of the notice have been complied
with.
38. Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under Bye-Laws
35, 36 and 37.
INCREASE OF CAPITAL
-------------------
39. The Company may from time to time increase its capital by such sum to
be divided into shares of such par value as the Company by Resolution shall
prescribe.
40. The Company may, by the Resolution increasing the capital, direct that
the new shares or any of them shall be offered in the first instance either at
par or at a premium or (subject to the provisions of the Companies Acts) at a
discount to all the holders for the time being of shares of any class or classes
in proportion to the number of such shares held by them respectively or make any
other provision as to the issue of the new shares.
41. The new shares shall be subject to all the provisions of these Bye-
Laws with reference to lien, the payment of calls, forfeiture, transfer,
transmission and otherwise.
ALTERATION OF CAPITAL
---------------------
42. The Company may from time to time by Resolution:-
(a) divide its shares into several classes and attach thereto
respectively any preferential, deferred, qualified or special rights,
privileges or conditions;
(b) consolidate and divide all or any of its share capital into shares
of larger par value than its existing shares;
10
(c) sub-divide its shares or any of them into shares of smaller par
value than is fixed by its memorandum, so, however, that in the sub-
division the proportion between the amount paid and the amount, if any,
unpaid on each reduced share shall be the same as it was in the case of the
share from which the reduced share is derived;
(d) make provision for the issue and allotment of shares which do not
carry any voting rights;
(e) cancel shares which, at the date of the passing of the resolution
in that behalf, have not been taken or agreed to be taken by any person,
and diminish the amount of its share capital by the amount of the shares so
cancelled; and
(f) change the currency denomination of its share capital. Where any
difficulty arises in regard to any division, consolidation, or sub-division
under this Bye-Law, the Board may settle the same as it thinks expedient
and, in particular, may arrange for the sale of the shares representing
fractions and the distribution of the net proceeds of sale in due
proportion amongst the Shareholders who would have been entitled to the
fractions, and for this purpose the Board may authorise some person to
transfer the shares representing fractions to the purchaser thereof, who
shall not be bound to see to the application of the purchase money nor
shall his title to the shares be affected by any irregularity or invalidity
in the proceedings relating to the sale.
43. Subject to the Companies Acts and to any confirmation or consent
required by law or these Bye-Laws, the Company may by Resolution from time to
time convert any preference shares into redeemable preference shares.
REDUCTION OF CAPITAL
--------------------
44. Subject to the Companies Acts, its memorandum and any confirmation or
consent required by law or these Bye-Laws, the Company may from time to time by
Resolution authorise the reduction of its issued share capital or any capital
redemption reserve fund or any share premium or contributed surplus account in
any manner.
45. In relation to any such reduction, the Company may by Resolution
determine the terms upon which such reduction is to be effected including in the
case of a reduction of part only of a class of shares, those shares to be
affected.
GENERAL MEETINGS AND WRITTEN RESOLUTIONS
----------------------------------------
46. (a) The Board shall convene and the Company shall hold general
meetings as Annual General Meetings in accordance with the requirements of the
Companies Acts at such times and places as the Board shall appoint. The Board
may, whenever it thinks fit, and shall, when required by the Companies Acts,
convene general meetings other than Annual General Meetings which shall be
called Special General Meetings.
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(b) Except in the case of the removal of auditors and Directors,
anything which may be done by resolution of the Company in general meeting
or by resolution of a meeting of any class of the Shareholders of the
Company may, without a meeting and without any previous notice being
required, be done by resolution in writing, signed by all of the
Shareholders or their proxies, or in the case of a Shareholder that is a
corporation (whether or not a company within the meaning of the Companies
Acts) on behalf of such Shareholder, being all of the Shareholders of the
Company who at the date of the resolution in writing would be entitled to
attend a meeting and vote on the resolution. Such resolution in writing
may be signed by, or in the case of a Shareholder that is a corporation
(whether or not a company within the meaning of the Companies Acts), on
behalf of, all the Shareholders of the Company, or any class thereof, in as
many counterparts as may be necessary.
(c) For the purposes of this Bye-Law, the date of the resolution in
writing is the date when the resolution is signed by, or in the case of a
Shareholder that is a corporation (whether or not a company within the
meaning of the Companies Acts), on behalf of, the last Shareholder to sign
and any reference in any enactment to the date of passing of a resolution
is, in relation to a resolution in writing made in accordance with this
section, a reference to such date.
(d) A resolution in writing made in accordance with this Bye-Law is as
valid as if it had been passed by the Company in general meeting or, if
applicable, by a meeting of the relevant class of Shareholders of the
Company, as the case may be. A resolution in writing made in accordance
with this section shall constitute minutes for the purposes of the
Companies Acts and these Bye-Laws.
NOTICE OF GENERAL MEETINGS
--------------------------
47. An Annual General Meeting shall be called by not less than 5 days
notice in writing and a Special General Meeting shall be called by not less than
5 days notice in writing. The notice shall be exclusive of the day on which it
is served or deemed to be served and of the day for which it is given, and shall
specify the place, day and time of the meeting, and, in the case of a Special
General Meeting, the general nature of the business to be considered. Notice of
every general meeting shall be given in any manner permitted by Bye-Laws 120 and
121 to all Shareholders other than such as, under the provisions of these Bye-
Laws or the terms of issue of the shares they hold, are not entitled to receive
such notice from the Company and to any Director or Resident Representative who
or which has delivered a written notice upon the Registered Office requiring
that such notice be sent to him or it.
Notwithstanding that a meeting of the Company is called by shorter notice
than that specified in this Bye-Law, it shall be deemed to have been duly called
if it is so agreed:-
(a) in the case of a meeting called as an Annual General Meeting, by
all the Shareholders entitled to attend and vote thereat;
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(b) in the case of any other meeting, by a majority in number of the
Shareholders having the right to attend and vote at the meeting, being a
majority together holding not less than 95 percent in nominal value of the
shares giving that right.
48. The accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental omission to
send such instrument of proxy to, or the non-receipt of notice of a meeting or
such instrument of proxy by, any person entitled to receive such notice shall
not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
-------------------------------
49. No business shall be transacted at any general meeting unless a quorum
is present when the meeting proceeds to business, but the absence of a quorum
shall not preclude the appointment, choice or election of a chairman which shall
not be treated as part of the business of the meeting. Save as otherwise
provided by these Bye-Laws, at least two Shareholders present in person or by
proxy and entitled to vote shall be a quorum for all purposes; provided,
however, that if the Company shall have only one Shareholder, one Shareholder
present in person or by proxy shall constitute the necessary quorum.
50. If within five minutes (or such longer time as the chairman of the
meeting may determine to wait) after the time appointed for the meeting, a
quorum is not present, the meeting, if convened on the requisition of
Shareholders, shall be dissolved. In any other case, it shall stand adjourned
to such other day and such other time and place as the chairman of the meeting
may determine and at such adjourned meeting two Shareholders present in person
or by proxy (whatever the number of shares held by them) shall be a quorum
provided that if the Company shall have only one Shareholder, one Shareholder
present in person or by proxy shall constitute the necessary quorum. The
Company shall give not less than 5 days notice of any meeting adjourned
through want of a quorum and such notice shall state that the sole Shareholder
or, if more than one, two Shareholders present in person or by proxy (whatever
the number of shares held by them) shall be a quorum.
51. A meeting of the Shareholders or any class thereof may be held by
means of such telephone, electronic or other communication facilities as permit
all persons participating in the meeting to communicate with each other
simultaneously and instantaneously and participation in such a meeting shall
constitute presence in person at such meeting.
52. Each Director upon giving the notice referred to in Bye-Law 47 above,
and the Resident Representative shall be entitled to attend and speak at any
general meeting of the Company.
53. The Chairman (if any) of the Board or, in his absence, the President
shall preside as chairman at every general meeting. If there is no such
Chairman or President, or if at any meeting neither the Chairman nor the
President is present within five minutes after the time appointed for holding
the meeting, or if neither of them is willing to act as chairman, the
13
Directors present shall choose one of their number to act or if one Director
only is present he shall preside as chairman if willing to act. If no Director
is present, or if each of the Directors present declines to take the chair, the
persons present and entitled to vote on a poll shall elect one of their number
to be chairman.
54. The chairman of the meeting may, with the consent of any meeting at
which a quorum is present (and shall if so directed by the meeting), adjourn the
meeting from time to time and from place to place but no business shall be
transacted at any adjourned meeting except business which might lawfully have
been transacted at the meeting from which the adjournment took place. When a
meeting is adjourned for three months or more, notice of the adjourned meeting
shall be given as in the case of an original meeting.
55. Save as expressly provided by these Bye-Laws, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
VOTING
------
56. Save where a greater majority is required by the Companies Acts or
these Bye-Laws, any question proposed for consideration at any general meeting
shall be decided on by a simple majority of votes cast.
57. At any general meeting, a resolution put to the vote of the meeting
shall be decided on a show of hands unless (before or on the declaration of the
result of the show of hands or on the withdrawal of any other demand for a poll)
a poll is demanded by:-
(a) the chairman of the meeting; or
(b) at least three Shareholders present in person or represented by
proxy; or
(c) any Shareholder or Shareholders present in person or represented
by proxy and holding between them not less than one tenth of the total
voting rights of all the Shareholders having the right to vote at such
meeting; or
(d) a Shareholder or Shareholders present in person or represented by
proxy holding shares conferring the right to vote at such meeting, being
shares on which an aggregate sum has been paid up equal to not less than
one tenth of the total sum paid up on all such shares conferring such
right.
Unless a poll is so demanded and the demand is not withdrawn, a declaration
by the chairman that a resolution has, on a show of hands, been carried or
carried unanimously or by a particular majority or not carried by a particular
majority or lost shall be final and conclusive, and an entry to that effect in
the minute book of the Company shall be conclusive evidence of the fact without
proof of the number of votes recorded for or against such resolution.
14
58. If a poll is duly demanded, the result of the poll shall be deemed to
be the resolution of the meeting at which the poll is demanded.
59. A poll demanded on the election of a chairman, or on a question of
adjournment, shall be taken forthwith. A poll demanded on any other question
shall be taken in such manner and either forthwith or at such time (being not
later than three months after the date of the demand) and place as the chairman
shall direct. It shall not be necessary (unless the chairman otherwise directs)
for notice to be given of a poll.
60. The demand for a poll shall not prevent the continuance of a meeting
for the transaction of any business other than the question on which the poll
has been demanded and it may be withdrawn at any time before the close of the
meeting or the taking of the poll, whichever is the earlier.
61. On a poll, votes may be cast either personally or by proxy.
62. A person entitled to more than one vote on a poll need not use all his
votes or cast all the votes he uses in the same way.
63. In the case of an equality of votes at a general meeting, whether on a
show of hands or on a poll, the chairman of such meeting shall not be entitled
to a second or casting vote.
64. In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
Register in respect of the joint holding.
65. A Shareholder who is a patient for any purpose of any statute or
applicable law relating to mental health or in respect of whom an order has been
made by any Court having jurisdiction for the protection or management of the
affairs of persons incapable of managing their own affairs may vote, whether on
a show of hands or on a poll, by his receiver, committee, curator bonis or other
person in the nature of a receiver, committee or curator bonis appointed by such
Court and such receiver, committee, curator bonis or other person may vote on a
poll by proxy, and may otherwise act and be treated as such Shareholder for the
purpose of general meetings.
66. No Shareholder shall, unless the Board otherwise determines, be
entitled to vote at any general meeting unless all calls or other sums presently
payable by him in respect of shares in the Company have been paid.
67. If (i) any objection shall be raised to the qualification of any voter
or (ii) any votes have been counted which ought not to have been counted or
which might have been rejected or (iii) any votes are not counted which ought to
have been counted, the objection or error shall not vitiate the decision of the
meeting or adjourned meeting on any resolution unless the same is raised or
pointed out at the meeting or, as the case may be, the adjourned
15
meeting at which the vote objected to is given or tendered or at which the error
occurs. Any objection or error shall be referred to the chairman of the meeting
and shall only vitiate the decision of the meeting on any resolution if the
chairman decides that the same may have affected the decision of the meeting.
The decision of the chairman on such matters shall be final and conclusive.
PROXIES AND CORPORATE REPRESENTATIVES
-------------------------------------
68. The instrument appointing a proxy shall be in writing under the hand
of the appointor or of his attorney authorised by him in writing or, if the
appointor is a corporation, either under its seal or under the hand of an
officer, attorney or other person authorised to sign the same.
69. Any Shareholder may appoint a standing proxy or (if a corporation)
representative by depositing at the Registered Office a proxy or (if a
corporation) an authorisation and such proxy or authorisation shall be valid for
all general meetings and adjournments thereof or, resolutions in writing, as the
case may be, until notice of revocation is received at the Registered Office.
Where a standing proxy or authorisation exists, its operation shall be deemed to
have been suspended at any general meeting or adjournment thereof at which the
Shareholder is present or in respect to which the Shareholder has specially
appointed a proxy or representative. The Board may from time to time require
such evidence as it shall deem necessary as to the due execution and continuing
validity of any such standing proxy or authorisation and the operation of any
such standing proxy or authorisation shall be deemed to be suspended until such
time as the Board determines that it has received the requested evidence or
other evidence satisfactory to it.
70. Subject to Bye-Law 69, the instrument appointing a proxy together with
such other evidence as to its due execution as the Board may from time to time
require, shall be delivered at the Registered Office (or at such place as may be
specified in the notice convening the meeting or in any notice of any
adjournment or, in either case or the case of a written resolution, in any
document sent therewith) prior to the holding of the relevant meeting or
adjourned meeting at which the person named in the instrument proposes to vote
or, in the case of a poll taken subsequently to the date of a meeting or
adjourned meeting, before the time appointed for the taking of the poll, or, in
the case of a written resolution, prior to the effective date of the written
resolution and in default the instrument of proxy shall not be treated as valid.
71. Instruments of proxy shall be in any common form or in such other form
as the Board may approve and the Board may, if it thinks fit, send out with the
notice of any meeting or any written resolution forms of instruments of proxy
for use at that meeting or in connection with that written resolution. The
instrument of proxy shall be deemed to confer authority to demand or join in
demanding a poll and to vote on any amendment of a written resolution or
amendment of a resolution put to the meeting for which it is given as the proxy
thinks fit. The instrument of proxy shall unless the contrary is stated therein
be valid as well for any adjournment of the meeting as for the meeting to which
it relates.
16
72. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the principal,
or revocation of the instrument of proxy or of the authority under which it was
executed, provided that no intimation in writing of such death, insanity or
revocation shall have been received by the Company at the Registered Office (or
such other place as may be specified for the delivery of instruments of proxy in
the notice convening the meeting or other documents sent therewith) one hour at
least before the commencement of the meeting or adjourned meeting, or the taking
of the poll, or the day before the effective date of any written resolution at
which the instrument of proxy is used.
73. Subject to the Companies Acts, the Board may at its discretion waive
any of the provisions of these Bye-Laws related to proxies or authorisations
and, in particular, may accept such verbal or other assurances as it thinks fit
as to the right of any person to attend and vote on behalf of any Shareholder at
general meetings or to sign written resolutions.
APPOINTMENT AND REMOVAL OF DIRECTORS
------------------------------------
74. The number of Directors shall be such number not less than two as the
Company by Resolution may from time to time determine and, subject to the
Companies Acts and these Bye-Laws, shall serve until re-elected or their
successors are appointed at the next Annual General Meeting.
75. The Company shall at the Annual General Meeting and may by Resolution
determine the minimum and the maximum number of Directors and may by Resolution
determine that one or more vacancies in the Board shall be deemed casual
vacancies for the purposes of these Bye-Laws. Without prejudice to the power of
the Company by Resolution in pursuance of any of the provisions of these Bye-
Laws to appoint any person to be a Director, the Board, so long as a quorum of
Directors remains in office, shall have power at any time and from time to time
to appoint any individual to be a Director so as to fill a casual vacancy.
76. The Company may in a Special General Meeting called for that purpose
remove a Director provided notice of any such meeting shall be served upon the
Director concerned not less than 14 days before the meeting and he shall be
entitled to be heard at that meeting. Any vacancy created by the removal of a
Director at a Special General Meeting may be filled at the Meeting by the
election of another Director in his place or, in the absence of any such
election, by the Board.
RESIGNATION AND DISQUALIFICATION OF DIRECTORS
---------------------------------------------
77. The office of a Director shall be vacated upon the happening of any of
the following events:
(a) if he resigns his office by notice in writing delivered to the
Registered Office or tendered at a meeting of the Board;
17
(b) if he becomes of unsound mind or a patient for any purpose of any
statute or applicable law relating to mental health and the Board resolves
that his office is vacated;
(c) if he becomes bankrupt or compounds with his creditors;
(d) if he is prohibited by law from being a Director;
(e) if he ceases to be a Director by virtue of the Companies Acts or
is removed from office pursuant to these Bye-Laws.
ALTERNATE DIRECTORS
-------------------
78. The Company may by Resolution elect any person or persons to act as
Directors in the alternative to any of the Directors or may authorise the Board
to appoint such Alternate Directors and a Director may appoint and remove his
own Alternate Director. Any appointment or removal of an Alternate Director by
a Director shall be effected by depositing a notice of appointment or removal
with the Secretary at the Registered Office, signed by such Director, and such
appointment or removal shall become effective on the date of receipt by the
Secretary. Any Alternate Director may be removed by Resolution of the Company
and, if appointed by the Board, may be removed by the Board. Subject as
aforesaid, the office of Alternate Director shall continue until the next annual
election of Directors or, if earlier, the date on which the relevant Director
ceases to be a Director. An Alternate Director may also be a Director in his
own right and may act as alternate to more than one Director.
79. An Alternate Director shall be entitled to receive notices of all
meetings of Directors, to attend, be counted in the quorum and vote at any such
meeting at which any Director to whom he is alternate is not personally present,
and generally to perform all the functions of any Director to whom he is
alternate in his absence.
80. Every person acting as an Alternate Director shall (except as regards
powers to appoint an alternate and remuneration) be subject in all respects to
the provisions of these Bye-Laws relating to Directors and shall alone be
responsible to the Company for his acts and defaults and shall not be deemed to
be the agent of or for any Director for whom he is alternate. An Alternate
Director may be paid expenses and shall be entitled to be indemnified by the
Company to the same extent mutatis mutandis as if he were a Director. Every
person acting as an Alternate Director shall have one vote for each Director for
whom he acts as alternate (in addition to his own vote if he is also a
Director). The signature of an Alternate Director to any resolution in writing
of the Board or a committee of the Board shall, unless the terms of his
appointment provides to the contrary, be as effective as the signature of the
Director or Directors to whom he is alternate.
18
DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES
--------------------------------------------------------
81. The amount, if any, of Directors' fees shall from time to time be
determined by the Company by Resolution and in the absence of a determination to
the contrary such fees shall be deemed to accrue from day to day. Each Director
may be paid his reasonable travel, hotel and incidental expenses in attending
and returning from meetings of the Board or committees constituted pursuant to
these Bye-Laws or general meetings and shall be paid all expenses properly and
reasonably incurred by him in the conduct of the Company's business or in the
discharge of his duties as a Director. Any Director who, by request, goes or
resides abroad for any purposes of the Company or who performs services which in
the opinion of the Board go beyond the ordinary duties of a Director may be paid
such extra remuneration (whether by way of salary, commission, participation in
profits or otherwise) as the Board may determine, and such extra remuneration
shall be in addition to any remuneration provided for by or pursuant to any
other Bye-Law.
DIRECTORS' INTERESTS
--------------------
82. (a) A Director may hold any other office or place of profit with the
Company (except that of auditor) in conjunction with his office of Director for
such period and upon such terms as the Board may determine, and may be paid such
extra remuneration therefor (whether by way of salary, commission, participation
in profits or otherwise) as the Board may determine, and such extra remuneration
shall be in addition to any remuneration provided for by or pursuant to any
other Bye-Law.
(b) A Director may act by himself or his firm in a professional
capacity for the Company (otherwise than as auditor) and he or his firm
shall be entitled to remuneration for professional services as if he were
not a Director.
(c) Subject to the provisions of the Companies Acts, a Director may
notwithstanding his office be a party to, or otherwise interested in, any
transaction or arrangement with the Company or in which the Company is
otherwise interested; and be a Director or other officer of, or employed
by, or a party to any transaction or arrangement with, or otherwise
interested in, any body corporate promoted by the Company or in which the
Company is interested. The Board may also cause the voting power conferred
by the shares in any other company held or owned by the Company to be
exercised in such manner in all respects as it thinks fit, including the
exercise thereof in favour of any resolution appointing the Directors or
any of them to be directors or officers of such other company, or voting or
providing for the payment of remuneration to the directors or officers of
such other company.
(d) So long as, where it is necessary, he declares the nature of his
interest at the first opportunity at a meeting of the Board or by writing
to the Directors as required by the Companies Acts, a Director shall not by
reason of his office be accountable to the Company for any benefit which he
derives from any office or employment to which these Bye-Laws allow him to
be appointed or from any transaction or arrangement in which these Bye-Laws
allow him to be interested, and
19
no such transaction or arrangement shall be liable to be avoided on the
ground of any interest or benefit.
(e) Subject to the Companies Acts and any further disclosure required
thereby, a general notice to the Directors by a Director or officer
declaring that he is a director or officer or has an interest in a person
and is to be regarded as interested in any transaction or arrangement made
with that person, shall be a sufficient declaration of interest in relation
to any transaction or arrangement so made.
POWERS AND DUTIES OF THE BOARD
------------------------------
83. Subject to the provisions of the Companies Acts and these Bye-Laws and
to any directions given by the Company by Resolution, the Board shall manage the
business of the Company and may pay all expenses incurred in promoting and
incorporating the Company and may exercise all the powers of the Company. No
alteration of these Bye-Laws and no such direction shall invalidate any prior
act of the Board which would have been valid if that alteration had not been
made or that direction had not been given. The powers given by this Bye-Law
shall not be limited by any special power given to the Board by these Bye-Laws
and a meeting of the Board at which a quorum is present shall be competent to
exercise all the powers, authorities and discretions for the time being vested
in or exercisable by the Board.
84. The Board may exercise all the powers of the Company to borrow money
and to mortgage or charge all or any part of the undertaking, property and
assets (present and future) and uncalled capital of the Company and to issue
debentures and other securities, whether outright or as collateral security for
any debt, liability or obligation of the Company or of any other persons.
85. All cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts for
money paid to the Company shall be signed, drawn, accepted, endorsed or
otherwise executed, as the case may be, in such manner as the Board shall from
time to time by resolution determine.
86. The Board on behalf of the Company may provide benefits, whether by
the payment of gratuities or pensions or otherwise, for any person including any
Director or former Director who has held any executive office or employment with
the Company or with any body corporate which is or has been a subsidiary or
affiliate of the Company or a predecessor in the business of the Company or of
any such subsidiary or affiliate, and to any member of his family or any person
who is or was dependent on him, and may contribute to any fund and pay premiums
for the purchase or provision of any such gratuity, pension or other benefit, or
for the insurance of any such person.
87. The Board may from time to time appoint one or more of its body to be
a managing director, joint managing director or an assistant managing director
or to hold any other employment or executive office with the Company for such
period and upon such terms as the Board may determine and may revoke or
terminate any such appointments. Any such
20
revocation or termination as aforesaid shall be without prejudice to any claim
for damages that such Director may have against the Company or the Company may
have against such Director for any breach of any contract of service between him
and the Company which may be involved in such revocation or termination. Any
person so appointed shall receive such remuneration (if any) (whether by way of
salary, commission, participation in profits or otherwise) as the Board may
determine, and either in addition to or in lieu of his remuneration as a
Director.
DELEGATION OF THE BOARD'S POWERS
--------------------------------
88. The Board may by power of attorney appoint any company, firm or person
or any fluctuating body of persons, whether nominated directly or indirectly by
the Board, to be the attorney or attorneys of the Company for such purposes and
with such powers, authorities and discretions (not exceeding those vested in or
exercisable by the Board under these Bye-Laws) and for such period and subject
to such conditions as it may think fit, and any such power of attorney may
contain such provisions for the protection and convenience of persons dealing
with any such attorney and of such attorney as the Board may think fit, and may
also authorise any such attorney to sub-delegate all or any of the powers,
authorities and discretions vested in him.
89. The Board may entrust to and confer upon any Director, officer or,
without prejudice to the provisions of Bye-Law 90, other individual any of the
powers exercisable by it upon such terms and conditions with such restrictions
as it thinks fit, and either collaterally with, or to the exclusion of, its own
powers, and may from time to time revoke or vary all or any of such powers but
no person dealing in good faith and without notice of such revocation or
variation shall be affected thereby.
90. The Board may delegate any of its powers, authorities and discretions
to committees, consisting of such person or persons (whether a member or members
of its body or not) as it thinks fit. Any committee so formed shall, in the
exercise of the powers, authorities and discretions so delegated, conform to any
regulations which may be imposed upon it by the Board.
PROCEEDINGS OF THE BOARD
------------------------
91. The Board may meet for the despatch of business, adjourn and otherwise
regulate its meetings as it thinks fit. Questions arising at any meeting shall
be determined by a majority of votes. In the case of an equality of votes the
motion shall be deemed to have been lost. A Director may, and the Secretary on
the requisition of a Director shall, at any time summon a meeting of the Board.
92. Notice of a meeting of the Board shall be deemed to be duly given to a
Director if it is given to him personally or by word of mouth or sent to him by
post, cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory form at his last known address or any
other address given by him to the Company
21
for this purpose. A Director may waive notice of any meeting either
prospectively or retrospectively.
93. (a) The quorum necessary for the transaction of the business of the
Board may be fixed by the Board and, unless so fixed at any other number, shall
be two individuals. Any Director who ceases to be a Director at a meeting of
the Board may continue to be present and to act as a Director and be counted in
the quorum until the termination of the meeting if no other Director objects and
if otherwise a quorum of Directors would not be present.
(b) A Director who to his knowledge is in any way, whether directly or
indirectly, interested in a contract or proposed contract, transaction or
arrangement with the Company and has complied with the provisions of the
Companies Acts and these Bye-Laws with regard to disclosure of his interest
shall be entitled to vote in respect of any contract, transaction or
arrangement in which he is so interested and if he shall do so his vote
shall be counted, and he shall be taken into account in ascertaining
whether a quorum is present.
(c) The Resident Representative shall, upon delivering written notice
of an address for the purposes of receipt of notice, to the Registered
Office, be entitled to receive notice of, attend and be heard at, and to
receive minutes of all meetings of the Board.
94. So long as a quorum of Directors remains in office, the continuing
Directors may act notwithstanding any vacancy in the Board but, if no such
quorum remains, the continuing Directors or a sole continuing Director may act
only for the purpose of calling a general meeting.
95. The Chairman (if any) of the Board or, in his absence, the President
shall preside as chairman at every meeting of the Board. If there is no such
Chairman or President, or if at any meeting the Chairman or the President is not
present within five minutes after the time appointed for holding the meeting, or
is not willing to act as chairman, the Directors present may choose one of their
number to be chairman of the meeting.
96. The meetings and proceedings of any committee consisting of two or
more members shall be governed by the provisions contained in these Bye-Laws for
regulating the meetings and proceedings of the Board so far as the same are
applicable and are not superseded by any regulations imposed by the Board.
97. A resolution in writing signed by all the Directors for the time being
entitled to receive notice of a meeting of the Board or by all the members of a
committee for the time being shall be as valid and effectual as a resolution
passed at a meeting of the Board or, as the case may be, of such committee duly
called and constituted. Such resolution may be contained in one document or in
several documents in the like form each signed by one or more of the Directors
or members of the committee concerned.
22
98. A meeting of the Board or a committee appointed by the Board may be
held by means of such telephone, electronic or other communication facilities as
permit all persons participating in the meeting to communicate with each other
simultaneously and instantaneously and participation in such a meeting shall
constitute presence in person at such meeting.
99. All acts done by the Board or by any committee or by any person acting
as a Director or member of a committee or any person duly authorised by the
Board or any committee, shall, notwithstanding that it is afterwards discovered
that there was some defect in the appointment of any member of the Board or such
committee or person acting as aforesaid or that they or any of them were
disqualified or had vacated their office, be as valid as if every such person
had been duly appointed and was qualified and had continued to be a Director,
member of such committee or person so authorised.
OFFICERS
--------
100. The officers of the Company shall include a President and a Vice-
President or a Chairman and a Deputy Chairman who shall be Directors and shall
be elected by the Board as soon as possible after the statutory meeting and each
Annual General Meeting. In addition, the Board may appoint any person whether
or not he is a Director to hold such office as the Board may from time to time
determine. Any person elected or appointed pursuant to this Bye-Law shall hold
office for such period and upon such terms as the Board may determine and the
Board may revoke or terminate any such election or appointment. Any such
revocation or termination shall be without prejudice to any claim for damages
that such officer may have against the Company or the Company may have against
such officer for any breach of any contract of service between him and the
Company which may be involved in such revocation or termination. Save as
provided in the Companies Acts or these Bye-Laws, the powers and duties of the
officers of the Company shall be such (if any) as are determined from time to
time by the Board.
MINUTES
-------
101. The Directors shall cause minutes to be made and books kept for the
purpose of recording -
(a) all appointments of officers made by the Directors;
(b) the names of the Directors and other persons (if any) present at
each meeting of Directors and of any committee;
(c) of all proceedings at meetings of the Company, of the holders of
any class of shares in the Company, and of committees;
(d) of all proceedings of its managers (if any).
23
SECRETARY AND RESIDENT REPRESENTATIVE
-------------------------------------
102. The Secretary and, if required, the Resident Representative, shall be
appointed by the Board at such remuneration (if any) and upon such terms as it
may think fit and any Secretary and Resident Representative so appointed may be
removed by the Board.
The duties of the Secretary and the duties of the Resident Representative shall
be those prescribed by the Companies Acts together with such other duties as
shall from time to time be prescribed by the Board.
103. A provision of the Companies Acts or these Bye-Laws requiring or
authorising a thing to be done by or to a Director and the Secretary shall not
be satisfied by its being done by or to the same person acting both as Director
and as, or in the place of, the Secretary.
THE SEAL
--------
104. (a) The Seal shall consist of a circular metal device with the name
of the Company around the outer margin thereof and the country and year of
incorporation across the centre thereof. Should the Seal not have been received
at the Registered Office in such form at the date of adoption of this Bye-Law
then, pending such receipt, any document requiring to be sealed with the Seal
shall be sealed by affixing a red wafer seal to the document with the name of
the Company, and the country and year of incorporation type written across the
centre thereof.
(b) The Board shall provide for the custody of every Seal. A Seal
shall only be used by authority of the Board or of a committee constituted
by the Board. Subject to these Bye-laws, any instrument to which a Seal is
affixed shall be signed by either two Directors, or by the Secretary and
one Director, or by the Secretary or by any one person whether or not a
Director or Officer, who has been authorised either generally or
specifically to attest to the use of a Seal.
DIVIDENDS AND OTHER PAYMENTS
----------------------------
105. The Board may from time to time declare cash dividends or
distributions out of contributed surplus to be paid to the Shareholders
according to their rights and interests including such interim dividends as
appear to the Board to be justified by the position of the Company. The Board
may also pay any fixed cash dividend which is payable on any shares of the
Company half yearly or on such other dates, whenever the position of the
Company, in the opinion of the Board, justifies such payment.
106. Except insofar as the rights attaching to, or the terms of issue of, any
share otherwise provide:-
(a) all dividends or distributions out of contributed surplus may be
declared and paid according to the amounts paid up on the shares in respect
of which the dividend or distribution is paid, and an amount paid up on a
share in advance of calls may be treated for the purpose of this Bye-Law as
paid-up on the share;
24
(b) dividends or distributions out of contributed surplus may be
apportioned and paid pro rata according to the amounts paid-up on the
shares during any portion or portions of the period in respect of which the
dividend or distribution is paid.
107. The Board may deduct from any dividend, distribution or other moneys
payable to a Shareholder by the Company on or in respect of any shares all sums
of money (if any) presently payable by him to the Company on account of calls or
otherwise in respect of shares of the Company.
108. No dividend, distribution or other moneys payable by the Company on or
in respect of any share shall bear interest against the Company.
109. Any dividend, distribution, interest or other sum payable in cash to
the holder of shares may be paid by cheque or warrant sent through the post
addressed to the holder at his address in the Register or, in the case of joint
holders, addressed to the holder whose name stands first in the Register in
respect of the shares at his registered address as appearing in the Register or
addressed to such person at such address as the holder or joint holders may in
writing direct. Every such cheque or warrant shall, unless the holder or joint
holders otherwise direct, be made payable to the order of the holder or, in the
case of joint holders, to the order of the holder whose name stands first in the
Register in respect of such shares, and shall be sent at his or their risk and
payment of the cheque or warrant by the bank on which it is drawn shall
constitute a good discharge to the Company. Any one of two or more joint
holders may give effectual receipts for any dividends, distributions or other
moneys payable or property distributable in respect of the shares held by such
joint holders.
110. Any dividend or distribution out of contributed surplus unclaimed for
a period of six years from the date of declaration of such dividend or
distribution shall be forfeited and shall revert to the Company and the payment
by the Board of any unclaimed dividend, distribution, interest or other sum
payable on or in respect of the share into a separate account shall not
constitute the Company a trustee in respect thereof.
111. The Board may direct payment or satisfaction of any dividend or
distribution out of contributed surplus wholly or in part by the distribution of
specific assets, and in particular of paid-up shares or debentures of any other
company, and where any difficulty arises in regard to such distribution or
dividend the Board may settle it as it thinks expedient, and in particular, may
authorise any person to sell and transfer any fractions or may ignore fractions
altogether, and may fix the value for distribution or dividend purposes of any
such specific assets and may determine that cash payments shall be made to any
Shareholders upon the footing of the values so fixed in order to secure equality
of distribution and may vest any such specific assets in trustees as may seem
expedient to the Board provided that such dividend or distribution may not be
satisfied by the distribution of any partly paid shares or debentures of any
company without the sanction of a Resolution.
25
RESERVES
--------
112. The Board may, before recommending or declaring any dividend or
distribution out of contributed surplus, set aside such sums as it thinks proper
as reserves which shall, at the discretion of the Board, be applicable for any
purpose of the Company and pending such application may, also at such
discretion, either be employed in the business of the Company or be invested in
such investments as the Board may from time to time think fit. The Board may
also without placing the same to reserve carry forward any sums which it may
think it prudent not to distribute.
CAPITALIZATION OF PROFITS
-------------------------
113. The Company may, upon the recommendation of the Board, at any time and
from time to time pass a Resolution to the effect that it is desirable to
capitalize all or any part of any amount for the time being standing to the
credit of any reserve or fund which is available for distribution or to the
credit of any share premium account or any capital redemption reserve fund and
accordingly that such amount be set free for distribution amongst the
Shareholders or any class of Shareholders who would be entitled thereto if
distributed by way of dividend and in the same proportions, on the footing that
the same be not paid in cash but be applied either in or towards paying up
amounts for the time being unpaid on any shares in the Company held by such
Shareholders respectively or in payment up in full of unissued shares,
debentures or other obligations of the Company, to be allotted and distributed
credited as fully paid amongst such Shareholders, or partly in one way and
partly in the other, and the Board shall give effect to such Resolution,
provided that for the purpose of this Bye-Law, a share premium account and a
capital redemption reserve fund may be applied only in paying up of unissued
shares to be issued to such Shareholders credited as fully paid and provided
further that any sum standing to the credit of a share premium account may only
be applied in crediting as fully paid shares of the same class as that from
which the relevant share premium was derived.
114. Where any difficulty arises in regard to any distribution under the
last preceding Bye-Law, the Board may settle the same as it thinks expedient
and, in particular, may authorise any person to sell and transfer any fractions
or may resolve that the distribution should be as nearly as may be practicable
in the correct proportion but not exactly so or may ignore fractions altogether,
and may determine that cash payments should be made to any Shareholders in order
to adjust the rights of all parties, as may seem expedient to the Board. The
Board may appoint any person to sign on behalf of the persons entitled to
participate in the distribution any contract necessary or desirable for giving
effect thereto and such appointment shall be effective and binding upon the
Shareholders.
RECORD DATES
------------
115. Notwithstanding any other provisions of these Bye-Laws, the Company
may by Resolution or the Board may fix any date as the record date for any
dividend, distribution, allotment or issue and for the purpose of identifying
the persons entitled to receive notices of general meetings. Any such record
date may be on or at any time before or after any date on
26
which such dividend, distribution, allotment or issue is declared, paid or made
or such notice is despatched.
ACCOUNTING RECORDS
------------------
116. The Board shall cause to be kept accounting records sufficient to give
a true and fair view of the state of the Company's affairs and to show and
explain its transactions, in accordance with the Companies Acts.
117. The records of account shall be kept at the Registered Office or at
such other place or places as the Board thinks fit, and shall at all times be
open to inspection by the Directors: PROVIDED that if the records of account are
kept at some place outside Bermuda, there shall be kept at an office of the
Company in Bermuda such records as will enable the Directors to ascertain with
reasonable accuracy the financial position of the Company at the end of each
three month period. No Shareholder (other than an officer of the Company) shall
have any right to inspect any accounting record or book or document of the
Company except as conferred by law or authorised by the Board or by Resolution.
118. A copy of every balance sheet and statement of income and expenditure,
including every document required by law to be annexed thereto, which is to be
laid before the Company in general meeting, together with a copy of the
auditors' report, shall be sent to each person entitled thereto in accordance
with the requirements of the Companies Acts.
AUDIT
-----
119. Save and to the extent that an audit is waived in the manner permitted
by the Companies Acts, auditors shall be appointed and their duties regulated in
accordance with the Companies Acts, any other applicable law and such
requirements not inconsistent with the Companies Acts as the Board may from time
to time determine.
SERVICE OF NOTICES AND OTHER DOCUMENTS
--------------------------------------
120. Any notice or other document (including a share certificate) may be
served on or delivered to any Shareholder by the Company either personally or by
sending it through the post (by airmail where applicable) in a pre-paid letter
addressed to such Shareholder at his address as appearing in the Register or by
delivering it to or leaving it at such registered address. In the case of joint
holders of a share, service or delivery of any notice or other document on or to
one of the joint holders shall for all purposes be deemed as sufficient service
on or delivery to all the joint holders. Any notice or other document if sent
by post shall be deemed to have been served or delivered seven days after it was
put in the post, and in proving such service or delivery, it shall be sufficient
to prove that the notice or document was properly addressed, stamped and put in
the post.
121. Any notice of a general meeting of the Company shall be deemed to be
duly given to a Shareholder, or other person entitled to it, if it is sent to
him by cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory
27
form at his address as appearing in the Register or any other address given by
him to the Company for this purpose. Any such notice shall be deemed to have
been served twenty-four hours after its despatch.
122. Any notice or other document delivered, sent or given to a Shareholder
in any manner permitted by these Bye-Laws shall, notwithstanding that such
Shareholder is then dead or bankrupt or that any other event has occurred, and
whether or not the Company has notice of the death or bankruptcy or other event,
be deemed to have been duly served or delivered in respect of any share
registered in the name of such Shareholder as sole or joint holder unless his
name shall, at the time of the service or delivery of the notice or document,
have been removed from the Register as the holder of the share, and such service
or delivery shall for all purposes be deemed as sufficient service or delivery
of such notice or document on all persons interested (whether jointly with or as
claiming through or under him) in the share.
WINDING UP
----------
123. If the Company shall be wound up, the liquidator may, with the
sanction of a Resolution of the Company and any other sanction required by the
Companies Acts, divide amongst the Shareholders in specie or kind the whole or
any part of the assets of the Company (whether they shall consist of property of
the same kind or not) and may for such purposes set such values as he deems fair
upon any property to be divided as aforesaid and may determine how such division
shall be carried out as between the Shareholders or different classes of
Shareholders. The liquidator may, with the like sanction, vest the whole or any
part of such assets in trustees upon such trust for the benefit of the
contributories as the liquidator, with the like sanction, shall think fit, but
so that no Shareholder shall be compelled to accept any shares or other assets
upon which there is any liability.
INDEMNITY
---------
124. Subject to the proviso below, every Director, officer of the Company
and member of a committee constituted under Bye-Law 90 and any Resident
Representative shall be indemnified out of the funds of the Company against all
liabilities, loss, damage or expense (including but not limited to liabilities
under contract, tort and statute or any applicable foreign law or regulation and
all reasonable legal and other costs and expenses properly payable) incurred or
suffered by him as such Director, officer, committee member or Resident
Representative and the indemnity contained in this Bye-Law shall extend to any
person acting as a Director, officer, committee member or Resident
Representative in the reasonable belief that he has been so appointed or elected
notwithstanding any defect in such appointment or election PROVIDED ALWAYS that
the indemnity contained in this Bye-Law shall not extend to any matter which
would render it void pursuant to the Companies Acts.
125. Every Director, officer, member of a committee duly constituted under
Bye-Law 90 or Resident Representative of the Company shall be indemnified out of
the funds of the Company against all liabilities incurred by him as such
Director, officer, committee member or Resident Representative in defending any
proceedings, whether civil or criminal,
28
in which judgment is given in his favour, or in which he is acquitted, or in
connection with any application under the Companies Acts in which relief from
liability is granted to him by the court.
126. To the extent that any Director, officer, member of a committee duly
constituted under Bye-Law 90 or Resident Representative is entitled to claim an
indemnity pursuant to these Bye-Laws in respect of amounts paid or discharged by
him, the relative indemnity shall take effect as an obligation of the Company to
reimburse the person making such payment or effecting such discharge.
AMALGAMATION
------------
127. Any resolution proposed for consideration at any general meeting to
approve the amalgamation of the Company with any other company, wherever
incorporated, shall require the approval of a simple majority of votes cast at
such meeting and the quorum for such meeting shall be that required in Bye-law
49.
ALTERATION OF BYE-LAWS
----------------------
128. These Bye-Laws may be amended from time to time in the manner provided
for in the Companies Acts.
(Revised June 13, 1997)
Form of Schedule I to the Bye-Laws
of Global Telesystems Holdings Ltd.
SCHEDULE I
Senior Increasing Rate Redeemable
Exchangeable Preference Shares
----------------------------------
The terms of the Company's authorized Senior Increasing Rate
Redeemable Exchangeable Preference Shares shall be as set forth below in this
Schedule I.
(a) Designation. There is hereby created out of the authorized and
-----------
unissued Preferred Shares of the Company a class of Preferred Shares designated
as the "Senior Increasing Rate Redeemable Exchangeable Preference Shares." The
number of shares constituting such class shall be 500,000 and are referred to as
the "Preference Shares." 100,000 Preference Shares shall be initially issued
with the remaining 400,000 shares reserved for issuance in accordance with
paragraph (d) hereof. The liquidation preference of the Preference Shares shall
be $1,000.00 per share.
(b) Currency. The Preference Shares shall be denominated in United
--------
States currency and all payments and distributions thereon or with respect
thereto shall be made in United States currency. All references to "$" or
"dollars" refer to United States currency.
(c) Rank. The Preference Shares shall, with respect to dividends and
----
distributions upon liquidation, winding-up and dissolution of the Company, rank
(i) senior to all classes of Common Stock of the Company and to each other class
of Capital Stock of the Company or series of Preference Shares of the Company
hereafter created the terms of which do not expressly provide that it ranks
senior to or on a parity with the Preference Shares as to dividends and
distributions upon liquidation, winding up and dissolution of the Company
(collectively referred to as "Junior Securities"); (ii) pari passu with each
---- -----
class of Capital Stock of the Company or series of Preferred Stock of the
Company hereafter created, the terms of which expressly provide that such class
or series will rank on a parity with the Preference Shares as to dividends and
distributions upon liquidation, winding-up and dissolution (collectively
referred to as "Parity Securities"); provided that any such Parity Securities
--------
not issued in accordance with the requirements of paragraph (g)(ii)(A) hereof
shall be deemed to be Junior Securities and not Parity Securities; and (iii)
junior to each class of Capital Stock of the Company or series of Preferred
Shares of the Company hereafter created the terms of which expressly provide
that such class or series will rank senior to the Preference Shares as to
dividends and distributions upon
2
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Senior Securities"); provided that any such Senior Securities that were not
--------
approved by the Holders in accordance with paragraph (g)(ii)(B) hereof shall be
deemed to be Junior Securities and not Senior Securities.
(d) Dividends.
---------
(i) Beginning on the Issue Date, the Holders of the outstanding
Preference Shares shall be entitled to receive, when, as and if declared by
the Board of Directors, out of funds legally available therefor,
distributions in the form of dividends on each Preference Share, at a rate
per annum equal to 14% of the liquidation preference per Preference Share,
--- -----
payable on each Dividend Payment Date. If the Preference Shares are not
redeemed prior to April 1, 2001 the dividend rate shall increase by 0.50%
per annum on April 1, 2001 and by an additional 0.50% per annum on each
--- ----- --- -----
subsequent April 1; provided that in no event shall the dividend rate borne
--------
by the Preference Shares exceed 20% per annum. All dividends shall be
--- -----
cumulative, whether or not earned or declared, on a daily basis from the
date of issuance of the Preference Shares and shall be payable in arrears,
on each Dividend Payment Date, commencing June 1, 1997. Dividends may be
paid, at the Company's option, on any applicable Dividend Payment Date
occurring on or prior to April 1, 2002 either in cash (and, if paid in
cash, payable only for such consecutive Dividend Periods immediately
preceding the applicable Dividend Payment Date for which dividends, whether
cash or in-kind, have not been declared and paid) or by the issuance of
additional Preference Shares (including fractional shares) having an
aggregate liquidation preference equal to the amount of such dividends.
Thereafter, dividends will be payable in cash only; provided that if the
--------
dividend rate exceeds 15% per annum, the Company may, at its option, cause
--- -----
any dividends in excess of 15% per annum to be paid in additional
--- -----
Preference Shares (including fractional Shares). In the event that
dividends are declared and paid through the issuance of additional
Preference Shares on or prior to April 1, 2002 or as provided in the
previous sentence, such dividends shall be deemed paid in full and shall
not accumulate. Each dividend shall be payable to the Holders of record as
they appear on the stock books of the Company on the Dividend Record Date
immediately preceding the related Dividend Payment Date. Dividends shall
cease to accumulate in respect of the Preference Shares on the Exchange
Date or on the date of their earlier redemption unless the Company shall
have failed to issue the appropriate aggregate principal amount of Exchange
Notes in respect of the Preference Shares on such Exchange Date or shall
have failed to pay the relevant redemption price on the date fixed for
redemption.
3
(ii) All dividends paid with respect to the Preference Shares
pursuant to paragraph (d)(i) shall be paid pro rata to the Holders entitled
--- ----
thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Company to pay or set apart for payment, any dividends on
Preference Shares at any time.
(iv) Dividends accruing after April 1, 2002 on the Preference Shares
for any past Dividend Period and dividends in connection with any optional
redemption pursuant to paragraph (f)(i) may be declared and paid at any
time, without reference to any regular Dividend Payment Date, to Holders of
record on such date, not more than forty-five (45) days prior to the
payment thereof, as may be fixed by the Board of Directors of the Company.
(v) Dividends payable on the Preference Shares for any period less
than a year shall be computed on the basis of a 360-day year of twelve 30-
day months and the actual number of days elapsed in the period for which
payable.
(e) Liquidation Preference.
----------------------
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, the Holders of
Preference Shares then outstanding shall be entitled to be paid out of the
assets of the Company available for distribution to its stockholders an
amount in cash equal to the liquidation preference for each share
outstanding, plus, without duplication, an amount in cash equal to
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 shall be
made or any assets distributed to the holders of any of the Junior
Securities including, without limitation, Common Stock of the Company.
Except as provided in the preceding sentence, Holders of Preference Shares
shall not be entitled to any distribution in the event of any liquidation,
dissolution or winding up of the affairs of the Company. If the assets of
the Company are not sufficient to pay in full the liquidation payments
payable to the Holders of outstanding Preference Shares, then the holders
of all such shares shall share equally and ratably in such distribution of
assets first in proportion to the full liquidation preference to which each
is entitled until such preferences are paid in full, and then in proportion
to their respective amounts of accumulated but unpaid dividends.
4
(ii) For the purposes of this paragraph (e), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets
of the Company nor the consolidation or merger of the Company with or into
one or more entities shall be deemed to be a liquidation, dissolution or
winding up of the affairs of the Company.
(f) Redemption.
----------
(i) Optional Redemption. (A) The Company may, at the option of the
-------------------
Board of Directors, redeem at any time on or after April 1, 1997, in whole
or in part, in the manner provided for in paragraph (f)(iii) hereof, any or
all of the Preference Shares, at the redemption prices (expressed as a
percentage of the liquidation preference) set forth below plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends per share (including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to
the Redemption Date to the Redemption Date) (the "Optional Redemption
Price"). The redemption prices shall be as follows if redeemed during the
12-month period beginning April 1 of each of the years set forth below:
1997............................ 114%
1998............................ 114%
1999............................ 114%
2000............................ 114%
2001............................ 114%
2002............................ 111%
2003............................ 108%
2004............................ 105%
2005............................ 102%
2006............................ 100%
; provided that no redemption pursuant to this paragraph (f)(i)(A) shall be
--------
authorized or made unless prior thereto full accumulated and unpaid
dividends are declared and paid in full, or declared and a sum in cash set
apart sufficient for such payment, on the Preference Shares for all
Dividend Periods terminating on or prior to the Redemption Date.
(B) In the event of a redemption pursuant to paragrap h (f)(i)(A)
hereof of only a portion of the then outstanding Preference Shares, the
Company shall effect such redemption on a pro rata basis according to the
--- ----
number of shares held by each Holder of the Preference Shares, except that
the Company may redeem such shares held by Holders of fewer than 10 shares
(or shares held by Holders who would hold less than 10 shares as a result
of such redemption), as may be determined by the Company.
5
(ii) Mandatory Redemption. (A) The Company will, on each June 1 and
--------------------
December 1 commencing on the first such date to occur more than 90 days
after the Commercial Operation Date, apply an amount equal to 100% of
Excess Cash Flow to mandatorily redeem the Preference Shares on a pro rata
basis, at the redemption prices (expressed as a percentage of the
liquidation preference) set forth below, plus, without duplication, an
amount in cash equal to all accumulated and unpaid dividends per share
(including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date); provided that any Excess Cash Flow shall be applied
--------
(i) first, to mandatorily redeem the Senior Notes pursuant to the
provisions thereof, (ii) second, if none of the Senior Notes are
outstanding, to pay accumulated but unpaid dividends in cash on the
Preference Shares and (iii) third, to redeem the Preference Shares in
accordance with the terms of this Section (f)(ii)(A). The redemption
prices shall be as follows if redeemed during the 12-month period beginning
April 1 of the years set forth below:
1997................. 114%
1998................. 114%
1999................. 112%
2000................. 112%
2001................. 107%
2002 and thereafter.. 100%
Notwithstanding the foregoing, at such time as at least $50 million in aggregate
liquidation preference of Preference Shares has been redeemed or repurchased,
Excess Cash Flow may be used for a Permitted System Upgrade in lieu of redeeming
any Preference Shares.
(B) On April 1, 2007, the Company shall redeem, to the extent of
funds legally available therefor, in the manner provided for in paragraph
(e)(iii) hereof, all of the Prefe rence Shares then outstanding at a
redemption price equal to 100% of the liquidation preference per share,
plus, without duplication, an amount in cash equal to all accumulated and
unpaid dividends per share (including an amount equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to
the Redemption Date to the Redemp tion Date) (the "Mandatory Redemption
Price").
(iii) Procedures for Redemption. (A) At least thirty (30) days and
-------------------------
not more than sixty (60) days prior to the date fixed for any redemption of
the Preference Shares, written notice (the "Redemption Notice") shall be
given by first class mail, postage prepaid, to each Holder of record on the
record date fixed for such redemption of the Preference Shares at such
Holder's address as it appears on the stock books of the Company, provided
--------
that no failure to
6
give such notice nor any deficiency therein shall affect the validity of
the procedure for the redemption of any Preference Shares to be redeemed
except as to the Holder or Holders to whom the Company has failed to give
said notice or to whom such notice was defective. The Redemption Notice
shall state:
(1) whether the redemption is pursuant to paragraph (f)(i) or
(f)(ii) hereof;
(2) the Optional Redemption Price or the Mandatory Redemption
Price, as the case may be;
(3) whether all or less than all the outstanding shares of the
Preference Shares are to be redeemed and the total number of
Preference Shares being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Company, in the
manner, at the place or places and at the price designated, his
certificate or certificates representing the Preference Shares to be
redeemed; and
(6) that dividends on the Preference Shares to be redeemed shall
cease to accumulate on such Redemption Date unless the Company
defaults in the payment of the Optional Redemption Price or the
Mandatory Redemption Price, as the case may be.
(B) Each Holder of Preference Shares shall surrender the certificate
or certificates representing such Preference Shares to the Company, duly
endorsed (or otherwise in proper form for transfer, as determined by the
Company), in the manner and at the place designated in the Redemption
Notice, and on the Redemption Date the full Optional Redemption Price or
Mandatory Redemption Price, as the case may be, for such shares shall be
payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall
be canceled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Company defaults in
the payment in full of the applicable redemption price, dividends on the
Preference Shares called for redemption shall cease to accumulate on the
Redemption Date, and all rights of the Holders of redeemed shares shall
terminate with respect thereto on the Redemption Date, other than the right
to receive the Optional Redemption Price or the Mandatory Redemption Price,
as the case may be, without interest; provided, however, that if a notice
-------- -------
of redemption
7
shall have been given as provided in paragraph (iii)(A) above and the funds
necessary for redemption (including an amount in respect of all dividends
that will accrue to the Redemption Date) shall have been irrevocably
deposited in trust for the equal and ratable benefit for the Holders of the
shares to be redeemed, then, at the close of business on the day on which
such funds are segregated and set aside, the Holders of the shares to be
redeemed shall cease to be stockholders of the Company and shall be
entitled only to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, without interest.
(g) Voting Rights.
-------------
(i) The Holders of Preference Shares, except as otherwise required
under Bermuda law or as set forth in paragraphs (ii), (iii) and (iv) below,
shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Company.
(ii) (A) So long as any shares of the Preference Shares are
outstanding, the Company shall not authorize any additional Preference
Shares or any class of Parity Securities without the affirmative vote or
consent of Holders of at least a majority of the then outstanding
Preference Shares, voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution adopted at
an annual or special meeting; provided, however, that no such vote or
-------- -------
consent shall be necessary in connection with the issuance of additional
Preference Shares pursuant to the provisions of paragraph (d) hereof.
(B) So long as any Preference Shares are outstanding, the Company
shall not authorize any class of Senior Securities without the affirmative
vote or consent of Holders of at least a majority of the outstanding
Preference Shares, voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution adopted at
an annual or special meeting.
(C) So long as any Preference Shares are outstanding, the Company
shall not amend this Certificate of Designation so as to affect materially
and adversely the specified rights, preferences, privileges or voting
rights of holders of Preference Shares without the affirmative vote or
consent of Holders of at least a majority of the issued and outstanding
Preference Shares, voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution adopted at
an annual or special meeting.
(D) While any of the Preference Shares are outstanding, the Company
shall not amend or modify the
8
Exchange Notes to be issued upon an exchange of Preference Shares in
accordance with paragraph (h) hereof in the form as executed on the Issue
Date without the affirmative vote or consent of Holders of at least a
majority of the Preference Shares then outstanding, voting or consenting,
as the case may be, as one class, and given in person or by proxy, either
in writing or by resolution adopted at an annual or special meeting.
(E) Except as set forth in paragraphs (g)(ii)(A), (g)(ii)(B) and
(g)(ii)(C) above, (x) the creation, authorization or issuance of any shares
of any Junior Securities, Parity Securities or Senior Securities or (y) the
increase or decrease in the amount of authorized Capital Stock of any
class, including Preference Shares, shall not require the consent of
Holders of Preference Shares and shall not be deemed to affect adversely
the rights, preferences, privileges or voting rights of Holders of
Preference Shares.
(iii) Without the affirmative vote or consent of Holders of a
majority of the issued and outstanding Preference Shares, voting or
consenting, as the case may be, as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special meeting,
the Company shall not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its
assets to, another Person or adopt a plan of liquidation unless: (A)
either (1) the Company is the surviving or continuing Person or (2) the
Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person that acquires by conveyance,
transfer or lease the properties and assets of the Company substantially as
an entirety or in the case of a plan of liquidation, the Person to which
assets of the Company have been transferred, shall be a corporation,
partnership or trust organized and existing under the laws of the United
States or any State thereof or the District of Columbia or under the laws
of Bermuda; (B) the Preference Shares shall be converted into or exchanged
for and shall become shares of such successor, transferee or resulting
Person, having in respect of such successor, transferee or resulting Person
the same powers, preferences and relative, participating, optional or other
special rights and the qualifications, limitations or restrictions thereon,
that the Preference Shares had immediately prior to such transaction; (C)
immediately after giving effect to such transactions, no Voting Rights
Triggering Event shall have occurred or be continuing; and (D) the Company
has delivered to the Holders of the Preference Shares prior to the
consummation of the proposed transaction an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or
9
transfer complies with the terms hereof and that all conditions precedent
herein relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties or assets of
one or more Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company shall be deemed to be the transfer of all or substantially all of
the properties and assets of the Company.
(iv) (A) If (1) the Company fails to pay dividends on the Preference
Shares in an amount equivalent to at least four quarterly dividends (a
"Dividend Default"); (2) the Company fails to redeem all of the then
outstanding Preference Shares on April 1, 2007 or otherwise fails to
discharge any redemption obligation with respect to the Preference Shares;
(3) the Company fails to make a Change of Control Offer (whether pursuant
to the terms of paragraph (i)(v) or otherwise) following a Change of
Control if such Change of Control Offer is required by paragraph (i) hereof
or fails to purchase Preference Shares from Holders who elect to have such
shares purchased pursuant to the Change of Control Offer; then in the case
of any of clauses (1)-(3) the number of directors constituting the Board of
Directors shall be adjusted by the number, if any, necessary to permit the
Holders of Preference Shares, voting separately and as one class, to elect
the lesser of two directors or that number of directors constituting 25% of
the members of the Board of Directors. Each such event described in
clauses (1), (2) and (3) is a "Voting Rights Triggering Event." Holders of
a majority of the issued and outstanding Preference Shares, voting
separately and as one class, shall have the exclusive right to elect the
lesser of two directors or that number of directors constituting 25% of the
members of the Board of Directors at a meeting therefor called upon
occurrence of such Voting Rights Triggering Event, and at every subsequent
meeting at which the terms of office of the directors so elected by the
Holders of Preference Shares expire (other than as described in (g)(iv)(B)
below). The voting rights provided herein shall be the exclusive remedy at
law or in equity of the holders of Preference Shares for any Voting Rights
Triggering Event.
(B) The right of the Holders of Preference Shares voting together as a
separate class to elect members of the Board of Directors as set forth in
subparagraph (g)(iv)(A) above shall continue until such time as (x) in the
event such right arises due to a Dividend Default, all accumulated
dividends that are in arrears on the Preference Shares are
10
paid in full in cash; and (y) in all other cases, the failure, breach or
default giving rise to such Voting Rights Triggering Event is remedied,
cured or waived by the holders of at least a majority of the Preference
Shares then outstanding and entitled to vote thereon, at which time (1) the
special right of the Holders of Preference Shares so to vote as a class for
the election of directors and (2) the term of office of the directors
elected by the Holders of Preference Shares shall each terminate and the
directors elected by the holders of Common Stock or Capital Stock (other
than the Preference Shares), if applicable, shall constitute the entire
Board of Directors. At any time after voting power to elect directors
shall have become vested and be continuing in the Holders of Preference
Shares pursuant to paragraph (g)(iv) hereof, or if vacancies shall exist in
the offices of directors elected by the Holders of Preference Shares, a
proper officer of the Company may, and upon the written request of the
Holders of record of at least twenty-five percent (25%) of the Preference
Shares then outstanding addressed to the secretary of the Company shall,
call a special meeting of the Holders of Preference Shares, for the purpose
of electing the directors which such Holders are entitled to elect. If
such meeting shall not be called by a proper officer of the Company within
twenty (20) days after personal service of said written request upon the
secretary of the Company, or within twenty (20) days after mailing the same
within the United States by certified mail, addressed to the secretary of
the Company at its principal executive offices, then the Holders of record
of at least twenty-five percent (25%) of the outstanding Preference Shares
may designate in writing one of their number to call such meeting at the
reasonable expense of the Company, and such meeting may be called by the
Person so designated upon the notice required for the annual meetings of
stockholders of the Company and shall be held at the place for holding the
annual meetings of stockholders. Any Holder of Preference Shares so
designated shall have, and the Company shall provide, access to the lists
of stockholders to be called pursuant to the provisions hereof.
(C) At any meeting held for the purpose of electing directors at which
the Holders of Preference Shares shall have the right, voting together as a
separate class, to elect directors as aforesaid, the presence in person or
by proxy of the Holders of at least a majority of the outstanding
Preference Shares shall be required to constitute a quorum of such
Preference Shares.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Preference Shares may be filled by the remaining directors
elected by the Holders of Preference Shares unless and until such vacancy
shall be filled by the Holders of Preference Shares.
11
(v) In any case in which the Holders of Preference Shares shall be
entitled to vote pursuant to this paragraph (g) or pursuant to Bermuda law,
each Holder of Preference Shares entitled to vote with respect to such
matter shall be entitled to one vote for each Preference Share held.
(h) Exchange.
--------
(i) Requirements. The outstanding Preference Shares are exchangeable,
------------
in whole but not in part, at the option of the Company, at any time for
Global's Exchange Notes due 2007 (the "Exchange Notes") to be substantially
in the form of Exhibit A hereto; provided, however, that any such exchange
-------- -------
may only be made if on or prior to the date of such exchange (i) the
Company has paid (or is deemed to have paid) all accumulated dividends on
the Preference Shares (including the dividends payable on the date of
exchange) and there shall be no contractual impediment to such exchange;
(ii) no default or event of default under any other material instrument
governing Indebtedness of Global outstanding at the time would be caused
thereby; and (iii) the Company shall have delivered a written opinion to
the effect that all conditions to be satisfied prior to such exchange have
been satisfied. The exchange rate shall be $1.00 principal amount of
Exchange Notes for each $1.00 of liquidation preference of Preference
Shares, including, to the extent necessary, Exchange Notes in principal
amounts less than $1,000, provided that the Company shall have the right,
--------
at its option, to pay cash in an amount equal to the principal amount of
that portion of any Exchange Note that is not an integral multiple of
$1,000 instead of delivering an Exchange Note in a denomination of less
than $1,000. Each holder of Preference Shares by so holding agrees to
accept Exchange Notes and, in lieu of fractional shares, cash, in
satisfaction of the amounts due to him on redemption or repurchase of the
Preference Shares that is deemed to occur upon the exchange and waives any
right to receive cash other than as aforesaid in respect of such redemption
or repurchase.
(ii) Procedure for Exchange. (A) At least thirty (30) days and not
----------------------
more than sixty (60) days prior to the date fixed for exchange, written
notice (the "Exchange Notice") shall be given by first-class mail, postage
prepaid, to each Holder of record on the record date fixed for such
exchange of Preference Shares at such Holder's address as the same appears
on the stock books of the Company; provided that no failure to give such
--------
notice nor any deficiency therein shall affect the validity of the
procedure for the exchange of any Preference Shares to be exchanged except
as to the Holder or Holders to whom the Company has failed to give said
notice or to whom such notice was defective. The Exchange Notice shall
state:
12
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Company, in the manner
and at the place or places designated, his certificate or certificates
representing the Preference Shares to be exchanged;
(3) that dividends on the Preference Shares to be exchanged shall
cease to accrue on such Exchange Date whether or not certificates for
Preference Shares are surrendered for exchange on such Exchange Date
unless the Company shall default in the delivery of Exchange Notes;
and
(4) that interest on the Exchange Notes shall accrue from the
Exchange Date whether or not certificates for Preference Shares are
surrendered for exchange on such Exchange Date.
(B) On or before the Exchange Date, each Holder of Preference
Shares shall surrender the certificate or certificates representing
such Preference Shares, in the manner and at the place designated in
the Exchange Notice. The Company shall cause the Exchange Notes to be
executed on the Exchange Date and, upon surrender in accordance with
the Exchange Notice of the certificates for any Preference Shares so
exchanged, duly endorsed (or otherwise in proper form for transfer, as
determined by the Company), such shares shall be exchanged by the
Company into Exchange Notes. The Company shall pay interest on the
Exchange Notes at the rate and on the dates specified therein from the
Exchange Date.
(C) If notice has been mailed as aforesaid and all Exchange Notes
necessary for such exchange shall have been duly executed by the
Company and delivered to the Holders of Preference Shares, then the
rights of the Holders of Preference Shares so exchanged as
stockholders of the Company shall cease (except the right to receive
Exchange Notes, an amount in cash equal to the amount of accrued and
unpaid dividends to the Exchange Date and, if the Company so elects,
cash in lieu of any Exchange Notes not in an integral multiple of
$1,000), and the Person or Persons entitled to receive the Exchange
Notes issuable upon exchange shall be treated for all purposes as the
registered Holder or Holders of such Exchange Notes as of the Exchange
Date.
(iii) No Exchange in Certain Cases. Notwithstanding the
foregoing provisions of this paragraph (h), the Company shall not be
entitled to exchange the Preference Shares for Exchange Notes
13
(i) if such exchange, or any term or provision of the Exchange Notes,
or the performance of the Company's obligations under the Exchange
Notes, shall materially violate any applicable law or if, at the time
of such exchange, the Company is insolvent or if it would be rendered
insolvent by such exchange or (ii) in the event Global or any of its
Subsidiaries, after the issuance of the Preference Shares, has
transferred, directly or indirectly, to any Subsidiary of the Company,
other than any Subsidiary of Global, assets or property of Global or
its Subsidiaries constituting in any individual transfer at least 10%,
or in the aggregate at least 20%, of the assets of Global and its
Subsidiaries, taken as a whole, unless each such transferee
simultaneously with the exchange of Preference Shares for Exchange
Notes executes and delivers in favor of the holders of the Exchange
Notes a guarantee of all of Global's obligations with respect to the
Exchange Notes, which guarantee shall be subordinated to Senior
Indebtedness (as defined in the Exchange Notes) of such transferee to
the same extent as the Exchange Notes are subordinated to Senior
Indebtedness of Global and which is otherwise in form and substance
reasonably satisfactory to the holders of a majority of the Preference
Shares.
(i) Change of Control.
-----------------
(i) In the event of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall
notify the Holders of the Preference Shares in writing of such
occurrence and shall make an offer to purchase (the "Change of Control
Offer") all then outstanding Preference Shares at a purchase price of
101% of the liquidation preference thereof plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends per
share (including an amount in cash equal to a prorated dividend for
the period from the Dividend Payment Date immediately prior to the
Change of Control Payment Date to the Change of Control Payment Date).
(ii) Within 30 days following the Change of Control Date, the
Company shall send, by first class mail, postage prepaid, a notice to
each Holder of Preference Shares at such Holder's address as it
appears on the stock books of the Company, which notice shall govern
the terms of the Change of Control Offer. The notice to the Holders
shall contain all instructions and materials necessary to enable such
Holders to tender Preference Shares pursuant to the Change of Control
Offer. Such notice shall state:
14
(A) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this paragraph (i) and that
all Preference Shares validly tendered and not withdrawn will be
accepted for payment;
(B) the purchase price (including the amount of accumulated and
unpaid dividends, if any) and the purchase date (which shall be no
earlier than 30 days nor later than 45 days from the date such notice
is mailed, other than as may be required by law) (the "Change of
Control Payment Date");
(C) that any Preference Shares not tendered will continue to
accrue dividends;
(D) that, unless the Company defaults in making payment therefor,
any Preference Shares accepted for payment pursuant to the Change of
Control Offer shall cease to accrue dividends after the Change of Control
Payment Date;
(E) that Holders electing to have any Preference Shares purchased
pursuant to a Change of Control Offer will be required to surrender the
certificate or certificates representing such shares, properly endorsed for
transfer together with such customary documents as the Company and the
transfer agent may reasonably require, in the manner and at the place
specified in the notice prior to the close of business on the Business Day
prior to the Change of Control Payment Date;
(F) that Holders will be entitled to withdraw their election if
the Company receives, not later than five Business Days prior to the Change
of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the number of Preference
Shares the Holder delivered for purchase and a statement that such Holder
is withdrawing his election to have such Preference Shares purchased;
(G) that Holders whose Preference Shares are purchased only in
part will be issued a new certificate representing the unpurchased
Preference Shares; and
(H) the circumstances and relevant facts regarding such Change of
Control.
(iii) The Company will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of Preference Shares in connection with a Change of Control
Offer.
(iv) On the Change of Control Payment Date the Company shall (A)
accept for payment the Preference Shares
15
validly tendered pursuant to the Change of Control Offer, (B) pay to the
Holders of shares so accepted the purchase price therefor in cash and (C)
cancel and retire each surrendered certificate. Unless the Company
defaults in the payment for the Preference Shares tendered pursuant to the
Change of Control Offer, dividends will cease to accumulate with respect to
the Preference Shares tendered and all rights of Holders of such tendered
shares will terminate, except for the right to receive payment therefor, on
the Change of Control Payment Date.
(v) If the purchase of the Preference Shares would violate or
constitute a default under the Senior Credit Facilities, the Senior Notes
or any other Indebtedness, then, notwithstanding anything to the contrary
contained above, prior to complying with the foregoing provisions, but in
any event within 30 days following the Change of Control Date, the Company
shall, to the extent needed to permit such purchase of the Preference
Shares, either (A) repay in full all such Indebtedness under the Senior
Credit Facilities, the Senior Notes and such other Indebtedness and, in the
case of the Senior Credit Facilities, the Senior Notes or other
Indebtedness, terminate all commitments outstanding thereunder or (B)
obtain the requisite consents, if any, under the Senior Credit Facilities,
the Senior Notes or the instruments governing such Indebtedness required to
permit the repurchase of Preference Shares required by this paragraph (i).
Until the requirements of the immediately preceding sentence are satisfied,
the Company shall not make, and shall not be obligated to make, any Change
of Control Offer; provided that the Company's failure to comply with the
--------
provisions of this paragraph (i)(v) shall constitute a Voting Rights
Triggering Event.
(j) Conversion or Exchange. The Holders of Preference Shares shall
----------------------
not have any rights hereunder to convert such shares into or exchange such
shares for shares of any other class or classes or of any other series of any
class or classes of Capital Stock of the Company or for Exchange Notes.
(k) Reissuance of Preference Shares. Preference Shares that have been
-------------------------------
issued and reacquired in any manner, including shares purchased or redeemed or
exchanged, shall (upon compliance with any applicable provisions of the laws of
Bermuda) have the status of authorized and unissued Preference Shares
undesignated as to series and may be redesignated and reissued as part of any
series of Preference Shares, provided that any issuance of such Preference
--------
Shares must be in compliance with the terms hereof.
(l) Business Day. If any payment, redemption or exchange shall be
------------
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or
16
exchange shall be made on the immediately succeeding Business Day.
(m) Definitions. As used in this Certificate of Designation, the
-----------
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Advisory Services Agreement" means the Advisory Services Agreement,
---------------------------
dated as of March 25, 1997, between Global and PCG Telecom Services LLC, a
Delaware limited liability company.
"Affiliate" as applied to any Person, means any other Person directly
---------
or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including the
correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as applied to any Person, means (i) the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of that Person, whether through the ownership
of voting securities or by contract or otherwise, or (ii) the ownership of
more than 10% of the voting securities of that Person; provided that
--------
Preference Shares shall not constitute voting securities.
"Board of Directors" means, with respect to any Person, the Board of
------------------
Directors of such Person or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified pursuant to
----------------
an Officers' Certificate to have been duly adopted by the Board of
Directors of the Company and to be in full force and effect, and delivered
to the Holders.
"Business Day" means any day excluding Saturday, Sunday and any day
------------
which is a legal holiday under the laws of New York, New York or of Canada
or Bermuda or is a day on which banking institutions therein located are
authorized or required by law or other governmental action to close.
"Cable System" means the submarine fiber optic cable system linking
------------
the United States to the United Kingdom, the United Kingdom to Germany
(and/or the Netherlands) and Germany (and/or the Netherlands) to the United
States.
"Capital Stock" means (i) with respect to any Person that is a
-------------
corporation, any and all shares, interests, membership units,
participations or other equivalents (however designated and whether or not
voting) of corporate stock, including, without limitation, each class of
Common Stock or Preferred Shares of such Person and (ii) with
17
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Change in Law" means any change in or amendment to any Law, or any
-------------
change in official position regarding the application or interpretation of
such Law.
"Change of Control" means the occurrence of one or more of the
-----------------
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of Parent or the Company to any Person or group of
related Persons for purposes of Section 13(d) of the Exchange Act (a
"Group"), together with any Affiliates thereof; (ii) the approval by the
holders of Capital Stock of Parent or the Company of any plan or proposal
for the liquidation or dissolution of Parent or the Company; (iii) any
Person or Group (other than the Permitted Holders or Parent) shall become
the owner, directly or indirectly, beneficially or of record, of Voting
Stock representing more than 35% of the total voting power of all Voting
Stock of Parent or the Company; (iv) the occurrence of any "Change of
Control" as defined in the Senior Credit Facilities or the Senior Notes; or
(v) the termination of PCG or its Affiliates under the Advisory Services
Agreement.
"Change of Control Date" shall have the meaning ascribed to it in
----------------------
paragraph (i)(i) hereof.
"Change of Control Offer" shall have the meaning ascribed to it in
-----------------------
paragraph (i)(i) hereof.
"Change of Control Payment Date" shall have the meaning ascribed to it
------------------------------
in paragraph (i)(ii) hereof.
"Commercial Operation Date" means the date of commercial service for
-------------------------
the entire Cable System as defined in the Supply Contract.
"Common Stock" of any Person means any and all shares, interests or
------------
other participations in, and other equivalents (however designated and
whether voting or non-voting) of, such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company Taxes" means, with respect to any semi-annual period, the
-------------
amount of any Tax imposed during, or with respect to, such period and to
which the Company becomes subject after the date hereof as a result of any
change in or amendment to any law or any change in official position
regarding the application or interpretation of such law which becomes
effective after the date hereof.
18
"Company" means Global Telesystems Holdings Ltd., a company organized
-------
under the laws of Bermuda.
"Disqualified Capital Stock" means any Capital Stock of the Company or
--------------------------
a Subsidiary thereof which, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable at the option
of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the option of the holder thereof, in whole or in part,
on or prior to the maturity date of the Preference Shares, for cash or
securities constituting Indebtedness. Without limitation of the foregoing,
Disqualified Capital Stock shall be deemed to include (i) any Preferred
Shares of a Subsidiary of the Company and (ii) any Preferred Shares of the
Company, with respect to either of which, under the terms of such Preferred
Shares, by agreement or otherwise, such Subsidiary of the Company is
obligated to pay current dividends or distributions in cash during the
period prior to the maturity date of the Preference Shares; provided,
--------
however, that Preferred Shares of the Company or any Subsidiary thereof
-------
that are issued with the benefit of provisions requiring a change of
control offer to be made for such Preferred Shares in the event of a change
of control of the Company or Subsidiary, which provisions have
substantially the same effect as the provisions hereof described under
"Change of Control," shall not be deemed to be Disqualified Capital Stock
solely by virtue of such provisions.
"Dividend Default" shall have the meaning ascribed to it in paragraph
----------------
(g)(ii) hereof.
"Dividend Payment Date" means March 1, June 1, September 1 and
---------------------
December 1 of each year; provided that the payment of cash dividends shall
--------
occur only on each June 1 and December 1.
"Dividend Period" means each semi-annual period ending on a Dividend
---------------
Payment Date.
"Dividend Record Date" means the February 15, May 15, August 15 and
--------------------
November 15 of each year preceding such Dividend Payment Date.
"Excess Cash Flow" means for each semi-annual period commencing after
----------------
the Commercial Operation Date, 100% of Operating Cash Flow minus (i) an
-----
amount of Company operating expenses not to exceed $2.5 million per annum
without the consent of the holders of a majority in aggregate liquidation
preference of the outstanding Preference Shares, minus (ii) an amount equal
-----
to all Permitted Tax Distributions, minus (iii) all Parent expenses not to
-----
exceed $1.5 million without the consent of the holders of a
19
majority in aggregate liquidation preference of the outstanding Preference
Shares, minus (iv) any Company Taxes and minus (v) an amount equal to the
----- -----
aggregate of all amounts required to be paid to the holders of Senior Notes
during such semi-annual period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, and any successor statute.
"Exchange Date" means the date of issuance of any Exchange Notes in
-------------
accordance with paragraph (h) hereof.
"Exchange Notes" shall have the meaning ascribed to it in paragraph
--------------
(h)(i) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph
---------------
(h)(ii) hereof.
"Global" means Global Telesystems Ltd., a company organized under the
------
laws of Bermuda, and which is a wholly-owned Subsidiary of the Company.
"Holder" means a holder of Preference Shares as reflected in the stock
------
books of the Company.
"Indebtedness" means, with respect to any Person, (i) all
------------
indebtedness, obligations and liabilities of such Person for borrowed
money, (ii) that portion of obligations with respect to capital leases that
is properly classified as a liability on a balance sheet of such Person in
conformity with generally accepted accounting principles, (iii) notes
payable and drafts accepted representing extensions of credit, whether or
not representing obligations for borrowed money, of such Person, (iv) any
indebtedness, obligation or liability of such Person owed for all or any
part of the deferred purchase price of property or services, which purchase
price is (a) due more than six months (or a longer period of up to one
year, if such terms are available from suppliers in the ordinary course of
business) from the date of incurrence of the obligation in respect thereof
or (b) evidenced by a note or similar written instrument, (v) all
indebtedness, obligations and liabilities secured by any lien on any
property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person except that "Indebtedness" shall
not include trade payables and accrued liabilities incurred in the ordinary
course of business for the purchase of goods or services which are not
secured by a lien, (vi) guarantees of such Person in respect of
Indebtedness of other Persons and (vii) all Disqualified Capital Stock
issued by such Person with the amount of Indebtedness represented by such
20
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed repurchase price,
but excluding accrued dividends, if any; provided that Indebtedness shall
--------
not include any obligations of Global under the Supply Contract. For
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Agreement,
and if such price is based upon, or measured by, the fair market value of
such Disqualified Capital Stock, such fair market value to be determined
reasonably and in good faith by the Board of Directors of the issuer of
such Disqualified Capital Stock.
"Issue Date" means the date of original issuance of the Preference
----------
Shares.
"Junior Securities" shall have the meaning ascribed to it in paragraph
-----------------
(d) hereof.
"Laws" means all applicable statutes, laws, ordinances, regulations,
----
rules, orders, judgments, writs, injunctions or decrees of any state,
commonwealth, nation, territory, possession, province, county, parish,
town, township, village municipality or Tribunal and "Law" means each of
the foregoing.
"Mandatory Redemption Price" shall have the meaning ascribed to it in
--------------------------
paragraph (f)(ii) hereof.
"Officer" means the Chairman of the Board, the Chief Executive
-------
Officer, the President, any Vice President, the Chief Financial Officer,
the Controller, the Treasurer or the Secretary of the Company, as the case
may be.
"Officers' Certificate" means, as applied to any corporation, a
---------------------
certificate executed on behalf of such corporation by two Officers.
"Operating Cash Flow" means, with respect to Global, for each semi-
-------------------
annual period commencing after the Commercial Operation Date, that portion
of Global's "Excess Cash Flow" (as defined in the Senior Credit Facilities
as in effect on June , 1997, which definition is incorporated by
reference herein and may be amended, supplemented or otherwise modified in
a manner that is not materially adverse to the Holders) available to the
Company pursuant to the terms of the Senior Credit Facilities as in effect
on June , 1997 (which terms are incorporated by reference herein and may
be amended, supplemented or otherwise modified in a manner that
21
is not materially adverse to the Holders) in respect of such period.
"Opinion of Counsel" means an opinion of counsel that, in such
------------------
counsel's opinion, all conditions precedent to be performed by the Company
prior to the taking of any proposed action have been taken.
"Optional Redemption Price" shall have the meaning ascribed to it in
-------------------------
paragraph (f)(i) hereof.
"Parent" means GT Parent Holdings LDC, a Cayman Islands limited
------
duration company, and the parent company of the Company.
"Parity Securities" shall have the meaning ascribed to it in paragraph
-----------------
(c) hereof.
"PCG" means Pacific Capital Group, Inc., or its Affiliates.
---
"Permitted Holders" means each of PCG, CIBC and PCG Telecom LDC and
-----------------
their respective Affiliates.
"Permitted System Upgrade" means upgrades to the Cable System
------------------------
contemplated by Article 6-A of the Supply Contract in an amount not to
exceed $75 million.
"Permitted Tax Distributions" means the payment of distributions to
---------------------------
Parent at such times and in such amounts that are sufficient to enable
Parent to satisfy timely, or to further distribute such amounts to its
members or their members, partners, or shareholders (collectively, "Upper
Tier Persons") in order that such Upper Tier Persons may satisfy timely,
any Tax liability resulting from a Change in Law that becomes effective
after the date hereof, which distributions shall take into account, and be
increased by, any further Taxes imposed upon Parent or an Upper Tier Entity
as a result of the receipt of such distributions.
"Person" means and includes natural persons, corporations, limited
------
liability companies, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"Preference Shares" shall have the meaning ascribed to it in the
-----------------
introductory paragraph hereof.
"Preferred Shares" of any Person means any Capital Stock of such
----------------
Person that has preferential rights (as
22
compared to any other Capital Stock of such Person) with respect to
dividends or redemptions or upon liquidation.
"Redemption Date", with respect to any Preference Shares, means the
---------------
date on which such Preference Shares are redeemed by the Company.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
-----------------
(f)(iii) hereof.
"Senior Credit Facilities" means the long form Senior Credit
------------------------
Facilities Commitment Letter and, upon execution thereof, instead means,
the Credit Agreement among Global, the lenders named therein and Canadian
Imperial Bank of Commerce, as agent, together with the documents related
thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
adding Subsidiaries of Global as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or
any successor or replacement agreement and whether by the same or any other
agent, lender or group of lenders.
"Senior Notes" means the Senior Notes due 2004 of the Company issued
------------
pursuant to the Senior Note Securities Purchase Agreement dated as of March
25, 1997 among the Company and the purchasers named therein as such
agreement may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time.
"Senior Securities" shall have the meaning ascribed to it in paragraph
-----------------
(c) hereof.
"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 stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereto is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Supply Contract" means the Project Development and Construction
---------------
Contract dated as of March 25, 1997 between AT&T-Submarine Services, Inc.
and Global, as amended from time to time.
23
"Taxes" means all taxes, assessments, fees, levies, impost, duties,
-----
penalties, deductions, liabilities, withholdings or other charges of any
nature whatsoever, including interest penalties, from time to time or at
any time imposed by any Law or any Tribunal.
"Tribunal" means any government, any arbitration panel, any court or
--------
any governmental department, commission, board, agency, authority or
instrumentality of the United States or any state, province, commonwealth,
nation, territory, possession, county, parish, town, township, village or
municipality, whether now or hereafter constituted and/or existing.
"Voting Rights Triggering Event" shall have the meaning ascribed to it
------------------------------
in paragraph (g)(iv) hereof.
24
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by , its , this day of
June, 1997.
GLOBAL TELESYSTEMS HOLDINGS LTD.
By:___________________________
Name:
Title:
(Revised June 13, 1997)
SENIOR SUBORDINATED EXCHANGE NOTE THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE DISPOSED OF OR
TRANSFERRED UNLESS REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. IN THE CASE OF A TRANSFER OTHER THAN (1) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (2) PURSUANT TO RULE 144A
UNDER THE ACT, FOR SO LONG AS IT IS AVAILABLE, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
ACT THAT PURCHASES FOR ITS ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, THE HOLDER SHALL, AT THE REQUEST OF THE COMPANY, PROVIDE
TO THE ISSUER HEREOF AN OPINION OF COUNSEL THAT THE TRANSFER DOES NOT REQUIRE
REGISTRATION UNDER THE ACT.
GLOBAL TELESYSTEMS LTD. (the "Company")
SENIOR SUBORDINATED EXCHANGE NOTE
DUE APRIL 1, 2007
$____________ [DATE]
GLOBAL TELESYSTEMS LTD., a Bermuda company ("Payor"), for value
received, promises to pay to the order of _________ ("Payee") the principal
amount of __________ DOLLARS ($____________), together with accrued interest
thereon, calculated and payable as set forth below in this Note (together with
any PIK Notes issued pursuant to Section 2.1 below, the "Notes"). The principal
and interest on the Notes is payable in lawful money of the United States of
America in immediately available funds at such place in the United States as
Payee may from time to time designate in writing to Payor.
This Note is made pursuant to that certain Preference Share Securities
Purchase Agreement (the "Purchase Agreement"), dated March 25, 1997, by and
between Global Telesystems Holdings Ltd. ("Holdings") and the Purchasers named
therein, and is one of the "Exchange Notes" referred to therein. All
capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Purchase Agreement.
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms
---------------------
The following terms used in this Note shall have the following
meanings:
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Subsidiary of the
2
Company or assumed in connection with the acquisition of assets from such
Person.
"Additional Amounts" has the meaning ascribed to such term in Section
7.10.
"Additional Shares" means the purchase by one or more Persons of
shares of the Class A Common Shares of Parent representing 8.5% of such
outstanding shares of voting Common Stock of Parent on the Closing Date for
gross proceeds to Parent of at least $7.5 million, which proceeds will be
contributed to Holdings on the Closing Date.
"Advisory Services Agreement" means the Advisory Services Agreement,
dated as of March 25, 1997, between Global and PCG Telecom Services LLC, a
Delaware limited liability company.
"Affiliate," as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means (i) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise, or (ii) the ownership of more than 10% of the voting
securities of that Person; provided that the Senior Preferred Stock shall not
constitute voting securities.
"Affiliate Transaction" has the meaning ascribed to such term in
Section 4.9.
"Agent" has the meaning ascribed to such term in Section 7.8.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
lease, assignment, transfer or other disposition for value (including, without
limitation, pursuant to any amalgamation, merger or consolidation or pursuant to
any sale-and-leaseback transaction) by the Company or by any of its Subsidiaries
to any Person other than the Company or any of its wholly-owned Subsidiaries
(any such transaction, a "disposition") of (i) any Capital Stock of any of the
Company's Subsidiaries, (ii) all or substantially all of the assets of any
division or line of business of the Company or of any of its Subsidiaries, or
(iii) any other assets (whether tangible or intangible) of the Company or of any
of its Subsidiaries; excluding (a) any disposition of inventory in the ordinary
---------
course of business or obsolete equipment in the ordinary course of business
consistent with past practices of the Company or the lease or sub-lease of any
real or personal property in the ordinary course of business, (b) any sale,
lease or transfer of Capacity and (c) any
3
disposition of stock or assets in any single transaction or related series of
transactions the aggregate value of which is equal to $1,000,000 or less.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Subsidiary from such Asset Sale (including cash
received as consideration for the assumption of liabilities incurred in
connection with or in anticipation of such Asset Sale), after (a) provision for
all income or other taxes measured by or resulting from such Asset Sale, (b)
payment of all brokerage commissions, underwriting and other fees and expenses
related to such Asset Sale, (c) provision for minority interest holders in any
Subsidiary as a result of such Asset Sale and (d) deduction of appropriate
amounts to be provided by the Company or a Subsidiary as a reserve, in
accordance with GAAP, against any liabilities associated with the assets sold or
disposed of in such Asset Sale and retained by the Company or a Subsidiary after
such Asset Sale, including, without limitation, pension and other post
employment benefit liabilities and liabilities related to environmental matters
or against any indemnification obligations associated with the assets sold or
disposed of in such Asset Sale, and (ii) promissory notes and other noncash
consideration received by the Company or any Subsidiary from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or noncash
consideration into cash.
"AT&T-SSI" means AT&T Submarine Systems, Inc.
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in
accordance with clause (III)(a) or (III)(b), and which have not yet been the
basis for an Excess Proceeds Offer in accordance with clause (III)(c), of
Section 2.2C(i).
"Bank Indebtedness" means any and all obligations of every nature of
the Company and its Subsidiaries under or in respect of the Senior Credit
Facilities whether for principal, reimbursements, interest, fees, expenses,
indemnities or otherwise, and whether primary, secondary, direct, indirect,
contingent, fixed or otherwise (including obligations of performance).
"Bankruptcy Law" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute or any
other United States federal, state or local law or the law of any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors, whether in effect on the date hereof or
hereafter.
"Bankruptcy Order" means any court order made in a proceeding pursuant
to or within the meaning of any Bankruptcy Law, containing an adjudication of
bankruptcy or insolvency, or
4
providing for liquidation, winding up, dissolution or reorganization, or
appointing a custodian of a debtor or of all or any substantial part of a
debtor's property, or providing for the staying, arrangement, adjustment or
composition of indebtedness or other relief of a debtor.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any duly authorized committee of that Board.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of New York, New York or of Canada or
Bermuda or is a day on which banking institutions therein located are authorized
or required by law or other governmental action to close.
"Cable System" means the submarine fiber optic cable system linking
the United States to the United Kingdom, the United Kingdom to Germany (and/or
the Netherlands) and Germany (and/or the Netherlands) to the United States.
"Capacity" means all capacity of the Cable System which is available
for sale, lease or other disposition, as more specifically defined in the
Capacity Sales Agreements.
"Capacity Sales Agreements" means any agreement between the Company or
any of its Subsidiaries and any other Person providing for the sale, lease or
other disposition of Capacity of the Cable System.
"Capital Lease," as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is required to be accounted for as a capital lease on the
balance sheet of that Person.
"Capitalized Lease Obligation" means obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, membership units, participations or
other equivalents (however designated and whether or not voting) of corporate
stock, including, without limitation, each class of Common Stock and Preferred
Stock of such Person and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United
5
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States, in each case maturing within one year from the
date of acquisition thereof; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having the highest
rating obtainable from either Standard & Poor's Rating Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having the highest rating obtainable from either S&P's or Moody's; and (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any commercial bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia that (a) is at least "adequately capitalized" (as defined in the
regulations of its primary Federal banking regulator) and (b) has Tier 1 capital
(as defined in such regulations) of not less than $100,000,000; (v) shares of
any money market mutual fund that (a) has at least 95% of its assets invested
continuously in the types of investments referred to in clauses (i) and (ii)
above, (b) has net assets of not less than $500,000,000, and (c) has the highest
rating obtainable from either S&P's or Moody's; and (vi) repurchase agreements
with respect to, and which are fully secured by a perfected security interest
in, obligations of a type described in clause (i) or clause (ii) above and are
with any commercial bank described in clause (iv) above.
"Certificate of Designation" means the Certificate of Designation duly
adopted by the Board of Directors of the Company setting forth the rights,
preferences and priorities of the Preference Shares.
"Change in Law" means any change in or amendment to any Law, or any
change in official position regarding the application or interpretation of such
Law.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of Parent, Holdings or the Company to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together
with any Affiliates thereof; (ii) the approval by the holders of Capital Stock
of Parent, Holdings or the Company of any plan or proposal for the liquidation
or dissolution of Parent, Holdings or the Company; (iii) any Person or Group
(other than the Permitted Holders or Parent or Holdings) shall become the owner,
directly or indirectly, beneficially or of record, of Voting Stock representing
more than 35% of the total voting power of all Voting Stock of Parent, Holdings
or the Company; (iv) the occurrence of any "Change of Control" as defined in the
Senior
6
Credit Facilities; or (v) the termination of PCG or its Affiliates under the
Advisory Services Agreement.
"Change of Control Date" has the meaning ascribed to such term in
Section 2.2C(ii).
"Change of Control Offer" has the meaning ascribed to such term in
Section 2.2C(ii).
"CIBC" means CIBC Wood Gundy Securities Corp. or its Affiliates.
"CIBC Capital Equity Investment" means the purchase by CIBC Wood Gundy
Capital (SFC) Inc. or one or more of its Affiliates of shares of Class C Common
Shares of Parent representing 38.25% of the outstanding shares of voting Common
Stock on the Closing Date for gross proceeds to Parent of at least $33.75
million, which proceeds will be contributed to the Company on the Closing Date.
"Closing Date" means the date of the consummation of the purchase of
the Preference Shares.
"Commercial Operation Date" means the date of commercial service for
the entire Cable System as defined in the Supply Contract.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of, such Person's common stock, whether outstanding on the
Closing Date or issued after the Closing Date, and includes, without limitation,
all series and classes of such common stock.
"Company" has the meaning ascribed to such term in the introduction to
this Note.
"Company Taxes" means with respect to any Taxable period of the
Company, the amount of Tax imposed during, or with respect to, such period as a
result of a Change in Law which change becomes effective after the Closing Date.
"Consolidated Interest Coverage Ratio" means of any Person, with
respect to any determination date, the ratio of (i) EBITDA for such Person's
prior four full Fiscal Quarters for which financial results are available, to
(ii) consolidated Interest Expense of such Person for such period. For purposes
of computing the Consolidated Interest Coverage Ratio, (A) if the Indebtedness
which is the subject of a determination under this provision is Acquired
Indebtedness, or Indebtedness incurred in connection with the simultaneous
acquisition (by way of merger, consolidation or otherwise) of any Person,
business, property or assets (an "Acquisition"), then such ratio shall be
determined by giving effect (on a pro forma basis, as if the transaction had
7
occurred at the beginning of the four-quarter period) to both the incurrence or
assumption of such Acquired Indebtedness or such other Indebtedness by the
Company and the inclusion in the Company's EBITDA of the EBITDA of the acquired
Person, business, property or assets, (B) if any Indebtedness outstanding or to
be incurred (x) bears a floating rate of interest, the interest expense on such
Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account on a pro forma basis any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term as at the date
of determination in excess of 12 months), (y) bears, at the option of the
Company or a Subsidiary, a fixed or floating rate of interest, the interest
expense on such Indebtedness shall be computed by applying, at the option of the
Company or such Subsidiary, either a fixed or floating rate and (z) was incurred
under a revolving credit facility, the interest expense on such Indebtedness
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period, (C) for any Fiscal Quarter prior to the date
hereof included in the calculation of such ratio, such calculation shall be made
on a pro forma basis, giving effect to the Transaction, the issuance of the
Notes, the incurrence of Indebtedness under the Senior Credit Facilities and the
use of the net proceeds therefrom as if the same had occurred at the beginning
of the four-quarter period used to make such calculation and (D) for any Fiscal
Quarter included in the calculation of such ratio prior to the date that any
Asset Sale was consummated, or that any Indebtedness was incurred, or that any
Acquisition was affected, by the Company or any of its Subsidiaries, such
calculation shall be made on a pro forma basis, giving effect to each Asset
Sale, incurrence of Indebtedness or Acquisition, as the case may be, and the use
of any proceeds therefrom, as if the same had occurred at the beginning of the
four-quarter period used to make such calculation.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the total interest expense of
such Person and its Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount (other than original issue discount attributable to the issuance of the
Senior Notes), non-cash interest payments and the interest component of
Capitalized Lease Obligations), whether paid or accrued, to the extent such
expense was deducted in computing the Consolidated Net Income of such Person,
and (ii) an amount equal to the product of (A) all redeemable cash dividends
paid during such period on any Disqualified Capital Stock of such Person and its
Subsidiaries times (B) a fraction, the numerator of which is one and the
-----
denominator of which is one minus the then effective consolidated Federal, state
and local tax rate of such Person expressed as a decimal.
8
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the net income (or loss) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (a) the net income of any other Person in which such
--------
Person or any of its Subsidiaries has an interest (which interest does not cause
the net income of such other Person to be consolidated with the net income of
such Person and its Subsidiaries in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions actually paid to such
Person or such Subsidiary by such other Person during such period; (b) the net
income of any Subsidiary of such Person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction would
prevent the payment of an amount that otherwise could have been paid to such
Person or to a Subsidiary of such Person not subject to any Payment Restriction;
and (c) there shall be excluded (i) the net income (or loss) of any other Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition, (ii) all gains and losses realized on any Asset Sale
(without regard to the $1,000,000 threshold set forth in the definition of Asset
Sale), (iii) all gains and losses realized on the purchase or other acquisition
by such Person or any of its Subsidiaries of any Securities of such Person or
any of its Subsidiaries, (iv) all other net extraordinary gains/losses, and
(v)(A) all non-cash charges (provided, however, that any cash payments actually
-------- -------
made with respect to the liabilities for which such charges were created shall
be deducted from Consolidated Net Income in the period when made) and (B) all
deferred financing costs written off in connection with the early extinguishment
of any Indebtedness, in each case, incurred by such Person or any of its
Subsidiaries in connection with the Transaction.
"Consolidated Tax Expense" means, for any Person, for any period, the
aggregate income tax expense of such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP, excluding, however, the income tax
expense of such Person attributable to a disposition of assets the gain from
which is excluded form the calculation of "Consolidated Net Income," but only to
the extent such income tax expense does not exceed the cash portion of the
consideration received by such Person in connection with the disposition of such
assets.
"Contingent Obligation," as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account
9
of that Person or as to which that Person is otherwise liable for reimbursement
of drawings, or (iii) under Interest Rate Agreements and Currency Agreements.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclause (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"Contractual Obligation", as applied to any Person, means any
provision of any security issued by that Person or of any indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.
"Controlled Group" means (i) a controlled group of corporations as
defined in Section 1563(a) of the Internal Revenue Code or (ii) a group of
trades or businesses under common control, as defined in Section 414(c) of the
Internal Revenue Code, of which the Company or any of its Subsidiaries is a part
or becomes a part.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designed to protect the Company or any of its
Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, interim receiver, receiver and
manager, trustee, assignee, liquidator, sequestrator or similar official charged
with maintaining possession or control over property for one or more creditors,
whether under any Bankruptcy Law or otherwise.
"Designated Senior Indebtedness," as to the Company, means any Senior
Indebtedness (a) under the Senior Credit Facilities, or (b) which at the time of
determination exceeds
10
$75,000,000 in aggregate principal amount (or accreted value in the case of
Indebtedness issued at a discount) outstanding or available under a committed
facility and (x) which is specifically designated in the instrument evidencing
such Senior Indebtedness as "Designated Senior Indebtedness" by such Person and
(y) as to which the Holders have been given written notice of such designation.
"Disqualified Capital Stock" means any Capital Stock of the Company or
a Subsidiary thereof which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Senior Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include (i) any Preferred Stock of a Subsidiary of the
Company and (ii) any Preferred Stock of the Company, with respect to either of
which, under the terms of such Preferred Stock, by agreement or otherwise, such
Subsidiary or the Company is obligated to pay current dividends or distributions
in cash during the period prior to the maturity date of the Senior Notes;
provided, however, that Preferred Stock of the Company or any Subsidiary thereof
-------- -------
that is issued with the benefit of provisions requiring a change of control
offer to be made for such Preferred Stock in the event of a change of control of
the Company or Subsidiary, which provisions have substantially the same effect
as the provisions of this Note described under "Change of Control," shall not be
deemed to be Disqualified Capital Stock solely by virtue of such provisions.
"Dollars" or the sign "$" means the lawful money of the United States
of America.
"EBITDA" means, for any Person, for any period, an amount equal to (a)
the sum of (i) Consolidated Net Income for such period, plus (ii) Consolidated
Tax Expense for such period, plus (iii) Consolidated Interest Expense (but only
to the extent included in the determination of Consolidated Net Income) for such
period, plus (iv) depreciation for such period on a consolidated basis, plus (v)
amortization of intangibles for such period on a consolidated basis, plus (vi)
any other non-cash items reducing Consolidated Net Income for such period, minus
(b) all non-cash items increasing Consolidated Net Income for such period, all
for such Person and its Subsidiaries determined in accordance with GAAP.
"Environmental Laws" means the common law and all statutes,
ordinances, orders, rules, regulations, plans, policies or decrees and the like
relating to (i) environmental matters, including, without limitation, those
relating to fines, injunctions, penalties, damages, contribution, cost recovery
11
compensation, losses or injuries resulting from the Release or threatened
Release of Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. (S) 9601 et
--
seq.), the Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.),
--- -- ---
the Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the
-- ---
Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the Clean Air
-- ---
Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
-- ---
(S) 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7
-- ---
U.S.C. (S) 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. (S)
-- ---
651 et seq.) and the Emergency Planning and Community Right-to-Know Act (42
-- ---
U.S.C. (S) 11001 et seq.), each as amended or supplemented, and any analogous
-- ---
future or present statutes and regulations promulgated pursuant thereto, each as
in effect as of the date of determination.
"Environmental Lien" means a Lien in favor of a Tribunal or other
Person (i) for any liability under an Environmental Law or (ii) for damages
arising from or costs incurred by such Tribunal or other Person in response to a
Release or threatened Release of hazardous or toxic waste, substance or
constituent into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"Escrow Agreement" means the Escrow Agreement dated as of March 25,
1997 between Parent and United States Trust Company of New York, as escrow
agent, relating to the Warrants.
"Event of Default" means each of the events set forth in Section 5.
"Excess Cash Flow" means for each semi-annual period commencing after
the Commercial Operation Date, 100% of Operating Cash Flow minus (i) an amount
of Holdings operating expenses not to exceed $2.5 million per annum without the
consent of the holders of a majority in aggregate principal amount of the
outstanding Notes, (ii) an amount equal to all Permitted Tax Distributions,
(iii) all Parent expenses not to exceed $1.5 million without the consent of the
holders of Senior Notes as provided for in the Senior Notes, (iv) any Company
Taxes and (v) an amount equal to the aggregate of all amounts required to be
paid to the holders of Senior Notes during such semi-annual period pursuant to
the Senior Note Purchase Agreement.
"Excess Proceeds Offer" has the meaning ascribed to such term in
Section 2.2C(i).
12
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Exchange Date" means the date on which Holdings exercises its right
pursuant to the terms of the Certificate of Designation to exchange all of its
then outstanding Preference Shares for Notes.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by any of Parent,
Holdings, the Company or any of their respective Subsidiaries or any of their
respective predecessors in interest.
"Fiscal Quarter" means each quarterly accounting period of each Fiscal
Year of the Company.
"Fiscal Year" means each annual accounting period of the Company,
ending on December 31 of each calendar year.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by The Financial Accounting Standards
Board and which are consistently applied for all periods after the date hereof
so as to properly reflect the financial conditions, and the results of
operations and changes in financial position, of the Company and its
Subsidiaries, except that any accounting principle or practice required to be
changed in order to continue as a generally accepted accounting principle or
practice may be so changed.
"Guaranteed Completion Date" means August 15, 1999.
"Guaranty" means the Guaranty of AT&T Corp. of certain of the
obligations of AT&T-SSI under the Supply Contract.
"Hazardous Materials" means (i) any chemical, material or substance at
any time defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," "infectious waste," "toxic substances" or any
other formulations intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto; (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) asbestos in any
form; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which
contains any oil or dielectric fluid containing
13
levels of polychlorinated biphenyls in excess of fifty parts per million; (ix)
pesticides; and (x) any other chemical, material or substance, exposure to which
is prohibited, limited or regulated by any governmental authority or which may
or could pose a hazard to human health or safety or the environment.
"Holder" shall mean the holder of this Note and "Holders" shall mean
-------
each of the holders of the Notes.
"Holdings" means Global Telesystems Holdings Ltd., a Bermuda company.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that any amendment,
-------- -------
modification or waiver of any document pursuant to which Indebtedness was
previously Incurred shall only be deemed to be an Incurrence of Indebtedness if
and to the extent such amendment, modification or waiver (i) increases the
principal thereof or interest rate or premium payable thereon or (ii) changes to
an earlier date the stated maturity thereof or the date of any scheduled or
required principal payment thereon or the time or circumstances under which such
Indebtedness shall be redeemed; provided, further, that any Indebtedness of a
-------- -------
Person existing at the time such Person becomes a Subsidiary of the Company
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Subsidiary at the time it becomes a Subsidiary of the
Company.
"Indebtedness" means, with respect to any Person, (i) all
indebtedness, obligations and liabilities of such Person for borrowed money,
(ii) that portion of obligations with respect to Capital Leases that is properly
classified as a liability on a balance sheet of such Person in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit,
whether or not representing obligations for borrowed money, of such Person, (iv)
any indebtedness, obligation or liability of such Person owed for all or any
part of the deferred purchase price of property or services (excluding any such
obligations incurred under ERISA), which purchase price is (a) due more than six
months (or a longer period of up to one year, if such terms are available from
suppliers in the ordinary course of business) from the date of incurrence of the
obligation in respect thereof or (b) evidenced by a note or similar written
instrument, (v) all indebtedness, obligations and liabilities secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person
14
except that "Indebtedness" shall not include trade payables and accrued
liabilities Incurred in the ordinary course of business for the purchase of
goods or services which are not secured by a Lien other than a Permitted
Encumbrance and obligations under Interest Rate Agreements, Currency Agreements
and obligations of Global under the Supply Contract (which constitute Contingent
Obligations, not Indebtedness), (vi) guarantees of such Person in respect of
Indebtedness of other Persons and (vii) all Disqualified Capital Stock issued by
such Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to this Note,
and if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value to be determined reasonably
and in good faith by the board of directors of the issuer of such Disqualified
Capital Stock.
"Independent Financial Advisor" means an accounting, appraisal,
investment banking or consulting firm of nationally recognized standing that is,
in the reasonable and good faith judgment of the Board of Directors of the
Company, qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company and its Affiliates.
"Initial Blockage Period" has the meaning ascribed to such term in
Section 6.2(b).
"Intercompany Indebtedness" means any Indebtedness of the Company or
any Subsidiary of the Company which, in the case of the Company, is owing to any
wholly-owned Subsidiary of the Company and which, in the case of any such
Subsidiary, is owing to the Company or any wholly-owned Subsidiary of the
Company; provided, however, that if as of any date any Person other than the
-------- -------
Company or a wholly-owned Subsidiary of the Company or any lender under the
Senior Credit Facilities owns or holds such Indebtedness, or holds any Lien in
respect thereof, such Indebtedness shall no longer be Intercompany Indebtedness
permitted to be Incurred pursuant to Section 4.1(v).
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect the Company or any of its
Subsidiaries against fluctuations in interest rates.
15
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor code or statute.
"Investment" means (i) any direct or indirect purchase or other
acquisition of, or of a beneficial interest in, any securities of any other
Person or (ii) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business), extension of credit or
capital contribution to any other Person, including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"Investor Shares" means shares of the Class A Common Shares of Parent
representing up to 15% of the outstanding shares of voting Common Stock on the
Closing Date issued by Parent to holders of the Senior Preferred Stock.
"Judgment Currency" has the meaning ascribed to such term in Section
7.8.
"Laws" means all applicable statutes, laws, ordinances, regulations,
rules, orders, judgments, writs, injunctions or decrees of any state,
commonwealth, nation, territory, possession, province, county, parish, town,
township, village, municipality or Tribunal, and "Law" means each of the
---
foregoing.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Margin Stock" has the meaning assigned to that term in Regulation U
and Regulation G of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect on (a)
the Cable System or (b) the business, assets, revenues (after the Commercial
Operation Date), results of operations (after the Commercial Operation Date) or
financial condition of the Company and its Subsidiaries, taken as a whole, or
(c) the ability of the Company and its Subsidiaries to achieve the Commercial
Operation Date by the Guaranteed Completion Date, (ii) a material adverse effect
on the ability of the Company or its Subsidiaries to perform, or the impairment
of the ability of the Holders to enforce, the obligations of the Company under
this
16
Note or (iii) a material adverse effect on the ability of Global, the Company or
its Subsidiaries to perform their obligations under the System Contracts,
provided that an adverse change in sales or prospective sales of Capacity on the
Cable System whether or not based on changes or perceived changes in external
market conditions (including as a result of increased competition or
introductions or applications of new technology) will not provide a basis that
an event described above has occurred.
"Maturity Date" has the meaning ascribed to such term in Section 2.1D.
"Maximum Cash Interest Rate" means an interest rate of 15% per annum;
provided that any interest payable on the Notes pursuant to Section 2.1E shall
--------
be included in the determination.
"Multiemployer Plan" means a Pension Plan which is a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
the Company, the aggregate net proceeds received by the Company, after payment
of expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the board of directors, at the time of
receipt) and (b) in the case of any exchange, exercise, conversion or surrender
of outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Capital Stock, the net book value of such
outstanding securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder to the
Company upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less all
expenses incurred by the Company in connection therewith).
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness.
"Obligations" means the Company's obligation to make timely payments
of principal and interest on the Notes.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Controller, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by two Officers; provided,
--------
however, that every Officers' Certificate with respect to the compliance with a
-------
condition precedent to the issuance of the Notes hereunder shall include
17
(i) a statement that the officer or officers making or giving such Officers'
Certificate have read such condition and any definitions or other provisions
contained in this Note relating thereto, (ii) a statement that, in the opinion
of the signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as
to whether or not such condition has been complied with, and (iii) a statement
as to whether, in the opinion of the signers, such condition has been complied
with.
"Operating Cash Flow" means, with respect to the Company, for each
semi-annual period commencing after the Commercial Operation Date, that portion
of the Company's "Excess Cash Flow" (as defined in the Senior Credit Facilities)
available to Holdings pursuant to the terms of the Senior Credit Facilities in
respect of such period.
"Operations Agreement" means the Operations, Administration and
Maintenance Agreement dated as of March 25, 1997 between AT&T-SSI and the
Company, as amended from time to time.
"Parent" means GT Parent Holdings LDC, a Cayman Islands limited
duration company and the parent company of Holdings and Company.
"Payment Blockage Period" has the meaning ascribed to such term in
Section 6.2(b).
"Payment Date" has the meaning ascribed to such term in Section
2.2(D).
"Payment Default" means any default, whether or not any requirement
for the giving of notice, the lapse of time or both, or any other condition to
such default becoming an event of default has occurred, in the payment of
principal of (or premium, if any) or interest on or any other amount payable in
connection with Designated Senior Indebtedness.
"Payment Restriction" has the meaning ascribed to such term in Section
4.8.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.
"PCG" means Pacific Capital Group, Inc. or its Affiliates.
"PCG Common Equity Investment" means the issuance of shares of the
Class B Common Shares of Parent representing 38.25% of the outstanding shares of
voting Common Stock on the Closing Date for gross proceeds to Parent of at least
$33.75 million,
18
which proceeds will be contributed to the Company on the Closing Date.
"Pension Plan" means an employee pension benefit plan as defined in
Section 3(2) of ERISA which is subject to the provisions of Title IV of ERISA
and which is maintained for employees of Parent, the Company, any of their
respective Subsidiaries or any member of the Controlled Group.
"Permitted Encumbrances" means (i) Liens granted to secure the Bank
Indebtedness and the obligations of the Company and the Guarantors under this
Note and the Guarantees; (ii) Liens existing on the Closing Date to the extent
and in the manner such Liens are in effect on the Closing Date; (iii) Liens for
Obligations under or otherwise contemplated by the Supply Contract; (iv) Liens
for taxes, assessments or governmental charges or claims the payment of which is
not, at the time, required by Section 4.3; (v) statutory Liens of landlords and
banks and rights of offset, and Liens of carriers, warehousemen, workmen,
repairmen, mechanics and materialmen and other Liens imposed by law incurred in
the ordinary course of business for sums not yet delinquent or being contested
in good faith, if such reserve or other appropriate provision, if any, as shall
be required by GAAP shall have been made therefor; (vi) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, trade contracts, utility payments,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money); (vii) any attachment or
judgment Lien not constituting an Event of Default; (viii) leases or subleases
granted to others not interfering in any material respect with the ordinary
conduct of the business of the Company and its Subsidiaries, taken as a whole;
(ix) easements, rights-of-way, restrictions, minor defects, encroachments or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the business of
the Company and its Subsidiaries, taken as a whole; (x) any (a) interest or
title of a lessor or sublessor (other than the Company or any of its
Subsidiaries) under any lease, (b) restriction or encumbrance that the interest
or title of such lessor or sublessor may be subject to (including without
limitation ground leases or other prior leases of the demised premises,
mortgages, mechanics' liens, tax liens, and easements), or (c) subordination of
the interest of the lessee or sublessee under such lease to any restrictions or
encumbrance referred to in the preceding clause (b); (x) Liens arising from
filing UCC financing statements for precautionary purposes relating solely to
true leases of personal property permitted by this Note under which the Company
or any of its Subsidiaries is a lessee; (xii) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods;
19
(xiii) any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any real
property; (xiv) Liens securing obligations (other than obligations representing
Indebtedness for borrowed money) under operating, reciprocal easement or similar
agreements entered into in the ordinary course of business of the Company and
its Subsidiaries; (xv) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods in the ordinary
course of business; (xv) Liens securing reimbursement obligations with respect
to letters of credit which encumber documents and other property relating to
such letters of credit and the products and proceeds thereof; (xvii) Liens
arising out of consignment or similar arrangements for the sale of goods entered
into by the Company or any Subsidiary in the ordinary course of business in
accordance with past practices; and (xix) Liens to secure Permitted Refinancing
Indebtedness to the extent the Indebtedness Refinanced was secured and such
Liens do not extend to any property other than the property which was subject to
the Lien under the Indebtedness being Refinanced.
"Permitted Holders" means each of PCG, CIBC and PCG Telecom LDC and
their respective Affiliates.
"Permitted Investments" means
(i) Investments by the Company, or by a Subsidiary thereof, in the
Company or a Subsidiary;
(ii) any Investment (including, without limitation, any promissory
note or other debt obligation) issued by a purchaser or lessee or other
user of any portion of the Cable System located within the jurisdiction of
a Landing Country to the Company or Global in connection with a transaction
permitted by the Senior Credit Facilities;
(iii) Investments in cash and Cash Equivalents;
(iv) Investments by the Company, or by a Subsidiary thereof, in a
Person, if as a result of such Investment (a) such Person becomes a
Subsidiary of the Company or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Subsidiary thereof;
(v) reasonable and customary loans made to employees in connection
with their relocation not to exceed $2 million in the aggregate at any one
time outstanding; and
(vi) an Investment that is made by the Company or a Subsidiary thereof
in the form of any stock, bonds, notes, debentures, partnership or joint
venture interests or other
20
securities that are issued by a third party to the Company or Subsidiary
solely as partial consideration for the consummation of an Asset Sale that
is otherwise permitted under the covenant described under Section 2.2C.
"Permitted Refinancing Indebtedness" means (A) any Refinancing by the
Company of Indebtedness of the Company or of its Subsidiaries and (B) any
Indebtedness incurred pursuant to a Refinancing by any Subsidiary of the Company
of Indebtedness Incurred by such Subsidiary, that does not (1) result in an
increase in the total of the aggregate principal amount of the Indebtedness of
such Person being Refinanced as of the date of such proposed Refinancing (if
such Indebtedness that is Refinancing the existing Indebtedness is issued at a
price less than 100% of the principal amount thereof, an increase shall not be
deemed to have occurred unless the gross proceeds of such Indebtedness that is
Refinancing the existing Indebtedness is in excess of the total of the aggregate
principal amount of the Indebtedness being Refinanced as of the date of such
proposed Refinancing) or (2) create Indebtedness with a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced; provided, however, that (x) if such Indebtedness
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being Refinanced is Indebtedness of the Company, then such Refinancing
Indebtedness shall be Indebtedness solely of the Company and (y) if such
Indebtedness being Refinanced is subordinate or junior in right of payment to
the Notes or if recourse in respect of the Indebtedness being Refinanced is
limited in any respect, then such Indebtedness proposed to be Incurred to
Refinance the existing Indebtedness shall be subordinate in right of payment to
the Notes and recourse with respect thereto, as the case may be, shall be
limited at least to the same extent and in the same manner as the Indebtedness
being Refinanced.
"Permitted System Upgrade" means upgrades to the Cable System
contemplated by Article 6-A of the Supply Contract in an amount not to exceed
$75 million.
"Permitted Tax Distributions" means the payment of distributions to
Holdings at such times and in such amounts that are sufficient to enable
Holdings and Parent to satisfy timely, or to further distribute such amounts to
its members or their members, partners, or shareholders (collectively, "Upper
Tier Persons") in order that such Upper Tier Persons may satisfy timely, any Tax
liability resulting from a Change in Law that becomes effective after the
Closing Date, which distributions shall take into account, and be increased by,
any further Taxes imposed upon Holdings, Parent or an Upper Tier Entity as a
result of the receipt of such distributions.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land
21
trusts, business trusts or other organizations, whether or not legal entities,
and governments and agencies and political subdivisions thereof.
"PIK Interest Amount" has the meaning ascribed to such term in Section
2.1B.
"Placement Agent" means CIBC Wood Gundy Securities Corp., as placement
agent for the Transaction.
"Placement Agreement" means the Placement Agreement dated as of March
25, 1997 among Parent, Holdings and the Placement Agent, relating to the
Transaction.
"Plan" means an employee benefit plan as defined in Section 3(3) of
ERISA maintained by the Company or any of its Subsidiaries for employees of the
Company or any of its Subsidiaries.
"Plan Assets" means the assets of (i) an "employee benefit plan" (as
defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (ii) a
"plan" (as defined in Section 4975(e)(1) of the Code), (iii) any other entity
deemed to hold "plan assets" within the meaning of 29 C.F.R. (S) 2510.3-101 or
otherwise under ERISA or (iv) any governmental plan subject to Federal, state or
local law substantially similar to the provisions of Section 406 of ERISA or
Section 4975 of the Code.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.
"Preference Share" means the Senior Increasing Rate Redeemable
Exchangeable Preference Shares of Holdings.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights (as compared to any other Capital Stock of such
Person) with respect to dividends or redemptions or upon liquidation.
"Projections" means the financial projection of the Company provided
to the Holders by the Company, its representatives, advisors or Affiliates in
connection with the Transaction.
"Purchase Agreement" has the meaning ascribed to such term in the
introductory paragraphs hereof.
"Real Property Assets" means interests in land, buildings,
improvements, and fixtures attached thereto or used in the operation thereof, in
each case owned or leased (as lessee) by the Company or its Subsidiaries.
22
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund or defease, or to issue a security or
Indebtedness in exchange or replacement for, such security or Indebtedness in
whole or in part.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Related Business Investment" means (i) any Investment by a Person in
any other Person a majority of whose revenues are derived from a spur to the
Cable System, (ii) any capital expenditure or Investment, in each case,
reasonably related to a spur to the Cable System and (iii) any investment or
capital expenditure in respect of any other submarine cable system.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
"Reinvestment Date" has the meaning ascribed to such term in Section
2.2C(i).
"Reportable Event" has the meaning set forth in Section 4043 of ERISA,
but excluding any event for which the 30-day notice requirement has been waived
by applicable regulations of the PBGC.
"Representative" has the meaning ascribed to such term in Section
6.3(b).
"Required Holders" means Holders holding in the aggregate more than
50% of the outstanding principal amount of Notes.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution or payment on Capital Stock
of the Company or any Subsidiary of the Company or any payment made to the
direct or indirect holders (in their capacities as such) of Capital Stock of the
Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Capital
Stock) or in options, warrants or other rights to purchase Capital Stock (other
than Disqualified Capital Stock), and (y) in the case of Subsidiaries of the
Company, dividends or distributions payable to the Company or to a wholly-owned
Subsidiary of the Company), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company or any of its
Subsidiaries (other
23
than Capital Stock owned by the Company or a wholly-owned Subsidiary of the
Company, excluding Disqualified Capital Stock), (iii) the purchase, defeasance,
repurchase, redemption or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund payment
of, or the making of any principal payment on, any Subordinated Indebtedness
other than Subordinated Indebtedness acquired in anticipation of satisfying a
scheduled sinking fund obligation, principal installment or final maturity (in
each case due within one year of the date of acquisition), (iv) the making of
any Investment or guarantee of any Investment in any Person other than a
Permitted Investment and (v) forgiveness of any Indebtedness of an Affiliate of
the Company to the Company or a Subsidiary. For purposes of determining the
amount expended for Restricted Payments, cash distributed or invested shall be
valued at the face amount thereof and property other than cash shall be valued
at its fair market value determined in good faith by the Board of Directors of
the Company.
"Sales Agency Agreement" means the Sales Agency Agreement dated as of
March 25, 1997 between AT&T-SSI and the Company, as amended.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Senior Credit Facilities" means the long form Senior Credit
Facilities Commitment Letter and upon execution the Credit Agreement among the
Company, the lenders named therein and Canadian Imperial Bank of Commerce, as
agent, together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"Senior Indebtedness" means for any Person the principal of, premium,
if any, and interest on and all other obligations with respect to any
Indebtedness of such Person, whether outstanding on the Closing Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Indebtedness" shall include (x) the principal of,
premium, if any, and interest on all obligations of every nature of the Company
from time to time owed to the lenders under the Senior
24
Credit Facilities, including, without limitation, all obligations in respect of
letters of credit and principal of and interest on and all fees, indemnities,
and expenses payable under the Senior Credit Facilities and (y) interest
accruing thereon subsequent to the occurrence of any Event of Default specified
in Sections 5.7 and 5.8 relating to the Company, whether or not the claim for
such interest is allowed under any applicable Bankruptcy Law. Notwithstanding
the foregoing, "Senior Indebtedness" of any Person shall not include (a)
Indebtedness evidenced by the Notes, (b) Indebtedness that is expressly
subordinate or junior in right of payment to any Indebtedness of such Person,
(c) Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to such
Person, (d) Indebtedness which is represented by Disqualified Capital Stock, (e)
obligations for goods, materials or services purchased in the ordinary course of
business or obligations consisting of trade payables, (f) Indebtedness of or
amounts owed by such Person for compensation to employees or for services
rendered such Person, (g) any liability for federal, state, local or other taxes
owed or owing by such Person, (h) Indebtedness of such Person to a Subsidiary of
such Person and (i) that portion of any Indebtedness which is incurred by such
Person in violation of this Note.
"Senior Note Purchase Agreement" means the Senior Note Securities
Purchase Agreement, dated March 25, 1997, among Holdings and the Purchasers
named therein.
"Senior Notes" are the Senior Notes of Holdings as described in the
Senior Note Purchase Agreement.
"Senior Officers" means each of the Chief Executive Officer, Senior
Vice President and Chief Financial Officer of the Company.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
"Subsequent Notes" has the meaning ascribed to such term in Section
2.1C.
"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 stock or other equity interest entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereto is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"Supply Contract" means the Project Development and Construction
Contract dated as of March 25, 1997 between AT&T-SSI and the Company.
25
"System Contracts" means, collectively, the Supply Contract,
Operations Agreement, Sales Agency Agreement and the Guaranty.
"Taxes" means all taxes, assessments, fees, levies, imposts, duties,
penalties, deductions, liabilities, withholdings or other charges of any nature
whatsoever, including interest penalties, from time to time or at any time
imposed by any Law or any Tribunal.
"Transaction" shall mean, collectively, (i) the entering into of the
System Contracts for the purpose of establishing the Cable System, (ii) the PCG
Common Equity Investment, (iii) the CIBC Capital Common Equity Investment, (iv)
the purchase of the Preference Shares, (v) the Senior Notes Purchase Commitment,
(vi) the issuance of the Investor Shares pursuant to the Escrow Agreement, if
applicable, and the Additional Shares and the commitment to issue the Warrants
pursuant to the Escrow Agreement, (vii) the execution of a commitment letter to
provide for the Senior Credit Facilities and (viii) the execution of the
Advisory Services Agreement.
"Transaction Documents" means the Preference Shares, the Purchase
Agreement, the Notes, the Senior Note Purchase Agreement, the Senior Notes, the
Senior Credit Facilities, the Advisory Services Agreement, the System Contracts,
the Escrow Agreement and each agreement or instrument entered into in accordance
with the foregoing and each other agreement or instrument entered into in
accordance with the PCG Common Equity Investment, the CIBC Capital Common Equity
Investment, the Investor Shares, the Additional Shares and the Warrants and each
other agreement entered into in connection with the Transaction.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency, authority or
instrumentality of the United States or any state, province, commonwealth,
nation, territory, possession, county, parish, town, township, village or
municipality, whether now or hereafter constituted and/or existing.
"Trigger Event" means the occurrence of any event or the existence of
any circumstances requiring or permitting the redemption of the Notes, or
requiring an offer to purchase the Notes, in each case pursuant to the
provisions of Section 2.2.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
to vote under ordinary
26
circumstances in the election of members of the board of directors or other
governing body of such Person.
"Warrants" means Warrants to purchase shares of Class A Common Stock
of Parent representing up to 5% of the fully diluted shares of Common Stock of
Parent issued on the Execution Date and held pursuant to the Escrow Agreement
pending delivery to holders of outstanding Preference Shares on April 1, 2001.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
"wholly owned Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which 100% of the total
voting power of shares of stock or other equity interest 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 that Person or one or more of the other wholly-owned
Subsidiaries of that Person or a combination thereof.
1.2 Accounting Terms
----------------
For the purposes of this Note, all accounting terms not otherwise
defined herein shall have the meanings assigned to them in conformity with GAAP.
1.3 Other Definitional Provisions
-----------------------------
Any of the terms defined in Section 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference.
SECTION 2 TERMS OF NOTE
2.1 Interest on the Notes
---------------------
A. Rate of Interest. The Notes shall bear cash interest on the
----------------
unpaid principal amount thereof from the date of issuance (the "Issue Date")
through maturity (whether by prepayment, acceleration or otherwise) initially at
a rate of 14.00% per annum, which rate shall increase by .50% per annum
commencing on April 1, 2001 and by an additional .50% per annum on each
subsequent April 1, provided that in no case will the interest rate exceed
--------
20.00% per annum.
27
B. Interest Payments. Interest shall be payable with respect to the
-----------------
Notes, semi-annually in arrears on each December 1 and June 1 commencing on the
first June 1 or December 1 after issuance thereof, and upon any prepayment of
the Notes (to the extent accrued on the amount being prepaid) and at maturity of
the Notes; provided, however, that if, on any interest payment date, the
-------- -------
interest rate borne by the Notes exceeds the Maximum Cash Interest Rate, the
Company may pay all or a portion of the interest payable in excess of the
Maximum Cash Interest Rate by issuance of Subsequent Notes in an aggregate
principal amount equal to the amount of such interest in excess of the Maximum
Cash Interest Rate being so paid (the "PIK Interest Amount").
C. PIK Notes. On each interest payment date on which the Company
---------
elects to pay a PIK Interest Amount pursuant to Section 2.1B, the Company shall
execute and deliver to each Holder on such interest payment date a Note dated
such interest payment date substantially in the form of this Note in a principal
amount equal to such Holder's pro rata portion of such PIK Interest Amount (each
a "Subsequent Note" and, together with all other Notes, the "Notes"). A
Subsequent Note shall bear interest from the date of its issuance at the same
rate borne by all Notes.
D. Maturity of Notes. The Notes shall mature and the Company shall
-----------------
pay in full the outstanding principal amount thereof and accrued interest
thereon on April 1, 2007 (the "Maturity Date").
E. Defaulted Interest. Any principal payments on the Notes not paid
------------------
when due and, to the extent permitted by applicable law, any interest payment on
the Notes not paid when due, in each case whether at stated maturity, by notice
of prepayment, by acceleration or otherwise, shall thereafter bear interest
payable upon demand at a rate which is 2.00% per annum in excess of the rate of
interest otherwise then payable on the Notes.
F. Computation of Interest. Interest on the Notes shall be computed
-----------------------
on the basis of a 360-day year of twelve 30-day months. In computing interest
on the Notes, the Exchange Date shall be included and the date of payment shall
be excluded; provided, however, that if a Note is repaid on the same day on
-------- -------
which it is issued, one day's interest shall be paid on that Note.
2.2 Optional and Mandatory Redemption
of Notes; Offers to Purchase Notes
----------------------------------
A. Optional Redemption. The Company may, upon not less than three
-------------------
Business Days' prior written notice confirmed in writing to each Holder, at any
time and from time to time, on a pro rata basis, repurchase the Notes in whole
--- ----
or in part at the redemption prices (expressed as a percentage of principal
amount)
28
set forth below, plus accrued and unpaid interest to the redemption date, if
redeemed during the 12-month period beginning on April 1 of each year indicated
below:
Year Percentage
---- -----------
1997................ 114%
1998................ 114
1999................ 114
2000................ 114
2001................ 114
2002................ 111
2003................ 108
2004................ 105
2005................ 102
2006................ 100
B. Excess Cash Flow Sweep. Subject to the terms and conditions of
----------------------
the Senior Credit Facilities and the Senior Notes the Company will, on each June
1 and December 1 commencing on the first such date to occur more than 90 days
after the Commercial Operation Date, apply an amount equal to 100% of Excess
Cash Flow to mandatorily redeem the Notes on a pro rata basis, at the redemption
--- ----
prices set forth below, plus, without duplication, an amount in cash equal to
all unpaid and accumulated interest (including an amount in cash equal to all
interest accrued since the interest payment date immediately prior to the
redemption date); provided that any Excess Cash Flow shall be applied (i) first,
--------
to mandatorily redeem the Senior Notes pursuant to the provisions thereof and
(ii) second, to redeem the Notes in accordance with the terms of this Section
2.2B. The redemption prices shall be as follows if redeemed during the 12-month
period beginning April 1 of the years set forth below:
Year Percentage
-------- -----------
1997......................... 114%
1998......................... 114
1999......................... 112
2000......................... 112
2001......................... 107
2002 and thereafter.......... 111
At such time as at least 50% of the outstanding principal amount of Notes has
been redeemed or repurchased pursuant to the terms of this Note, Excess Cash
Flow may be used for a Permitted System Upgrade in lieu of redeeming any Notes.
29
C. Offers to Purchase Notes.
------------------------
(i) Prepayments from Asset Sales. The Company will not, and will not
----------------------------
permit any of its Subsidiaries to, consummate an Asset Sale (other than
those permitted under or contemplated by the Senior Credit Facilities)
unless (I) the Company or such Subsidiary, as the case may be, receives
consideration at the time of such sale or other disposition at least equal
to the fair market value thereof (as determined in good faith by the
Company's Board of Directors); (II) not less than 85% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the
form of cash or Cash Equivalents; and (III) the Asset Sale Proceeds
received by the Company or such Subsidiary are applied (a) first, to the
extent the Company elects, or is required, to prepay, repay or purchase
debt under the Senior Credit Facilities within 180 days following the
receipt of the Asset Sale Proceeds from any Asset Sale; (b) second, to the
extent of the balance of Asset Sale Proceeds after application as described
above, to the extent the Company elects, to a Related Business Investment,
provided that such investment occurs or the Company or a Subsidiary enters
--------
into contractual commitments to make such investment, subject only to
customary conditions (other than the obtaining of financing), on or prior
to the 181st day following receipt of such Asset Sale Proceeds and Asset
Sale Proceeds contractually committed are so applied within 270 days
following the receipt of such Asset Sale Proceeds (the "Reinvestment
Date"); (d) third, to an offer by Holdings to repurchase Senior Notes
pursuant to the asset sale provisions thereof; and (d) fourth, if, on the
Reinvestment Date with respect to any Asset Sale, the Available Asset Sale
Proceeds exceed $5,000,000, the Company shall apply an amount equal to such
Available Asset Sale Proceeds to an offer to repurchase the Notes, at a
purchase price in cash equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase (an "Excess
Proceeds Offer").
(ii) Change of Control. Upon the occurrence of a Change of Control
-----------------
(the date of such occurrence, the "Change of Control Date"), the Holders
shall have the right to require the repurchase of all of the Notes pursuant
to an offer to purchase (the "Change of Control Offer") at a purchase price
equal to 101% of the aggregate principal amount thereof, plus accrued
interest thereon to the date of repurchase.
If the Senior Credit Facilities are in effect, or any amounts are
owing thereunder, at the time of the occurrence of a Change of Control, prior to
the mailing of the notice to Holders described in paragraph 2.2D below, but in
any event within 30 days following any Change of Control, the Company covenants
to (i) repay in full all obligations under the Senior Credit
30
Facilities or offer to repay in full all obligations under the Senior Credit
Facilities and repay the obligations under the Senior Credit Facilities of each
lender who has accepted such offer or (ii) obtain the requisite consent under
the Senior Credit Facilities to permit the repurchase of the Notes pursuant to
this Section 2.2C. The Company must first comply with the covenant described in
the preceding sentence before it shall be required to purchase Notes in the
event of a Change of Control; provided that the Company's failure to comply with
--------
the covenant described in the preceding sentence constitutes an Event of Default
described under Section 5.3 hereof if not cured within 30 days after the notice
required by such clause.
D. Procedure for Redemption or Purchase. Within 30 days following
------------------------------------
any Trigger Event the Company shall mail a notice to each Holder stating:
(1) that the offer is being made pursuant to this Section 2.2
and stating the relevant subsection thereof and that, in the case of
Section 2.2A, the principal amount of Notes to be redeemed and, in the case
of Section 2.2C, that all Notes validly tendered will be accepted for
payment (in the case of an Excess Proceeds Offer, to the extent of the
Available Asset Sale Proceeds);
(2) the purchase price and the purchase date which shall be no earlier
than 30 days nor later than 60 days from the date such notice is mailed
(the "Payment Date");
(3) that any Note not tendered or accepted for payment will continue
to accrue interest;
(4) that any Note accepted for payment shall cease to accrue interest
after the Payment Date unless the Company shall default in the payment of
the repurchase price of the Notes;
(5) that Holders electing to have Notes purchased pursuant to Section
2.4C will be required to surrender the Note, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Note completed, to the
Company on or prior to 5:00 p.m. New York time on the Payment Date;
(6) that Holders will be entitled to withdraw their election in the
case of an offer pursuant to Section 2.2C if the Company receives, not
later than 5:00 p.m. New York time on the Business Day preceding the
Payment Date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Notes the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to
have such Notes purchased;
31
(7) that, in the case of an Excess Proceeds Offer, the method of
calculating the Available Asset Sale Proceeds and that if the aggregate
principal amount of Notes surrendered by Holders exceeds the Available
Asset Sale Proceeds, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral
multiples thereof, shall be purchased);
(8) that Holders whose Notes were purchased or redeemed only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; and
(9) such other information or calculations reasonably necessary to the
consummation of any such offer in accordance with the provisions hereof.
On or before the Payment Date, the Company shall, to the extent lawful
and to the extent required by this Note, accept for payment Notes or portions
thereof tendered and shall mail or deliver to each tendering Holder an amount
equal to the purchase or redemption price of the Notes tendered by such Holder
and accepted by the Company for purchase, and the Company shall promptly issue
new Notes and mail or make available for delivery such new Notes to such Holder
equal in principal amount to any unpurchased portion of the Notes surrendered,
if applicable.
Rule 14e-1. The Company shall comply with the requirements of Rule
----------
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the purchase of Notes pursuant to an offer hereunder. To the extent the
provisions of any securities laws or regulations conflict with the provisions
under this Section, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 2.2 by virtue thereof.
E. Manner and Time of Payment. All payments of obligations under
--------------------------
the Notes by the Company shall be made without defense, set-off or counterclaim
and in same-day funds and delivered to each Holder, unless otherwise specified,
not later than 10:00 A.M. New York time on the date due to the account of such
Holder as indicated on the relevant signature page hereto; funds received by a
Holder after that time shall be deemed to have been paid by the Company on the
next succeeding Business Day.
F. Payments on Non-Business Days. Whenever any payment to be made
-----------------------------
under the Notes shall be stated to be due on a day which is not a Business Day,
the payment shall be made on the next succeeding Business Day and such extension
of time shall be
32
included in the computation of the payment of interest hereunder or under the
Notes.
SECTION 3 AFFIRMATIVE COVENANTS
The Company covenants and agrees that, until the Notes and all other
amounts due under this Note have been indefeasibly paid in full it shall perform
all covenants in this Section 3 required to be performed by it:
3.1 Financial Statements and Other Reports
--------------------------------------
The Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of consolidated financial
statements in conformity with GAAP. The Company will deliver to each Holder
following the Exchange Date:
(i) as soon as available and in any event within 45 days after the end
of each of the first three fiscal quarters of each fiscal year and within
90 days after the end of the fourth fiscal quarter of each fiscal year, (1)
the consolidated balance sheets of the Company and its Subsidiaries as at
the end of such fiscal quarter, (2) the related consolidated statements of
operations, stockholders' equity and cash flows for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan and
financial forecast for the current fiscal year delivered pursuant to
Section 3.1(viii), all in reasonable detail and certified by the chief
financial officer of the Company that they fairly present the financial
condition of each the Company and its Subsidiaries, as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal year-
end adjustments, and (3) a narrative report describing the operations of
the Company and its Subsidiaries (in the form of management's discussion
and analysis of such operations which would comply with the disclosure
requirements of the Exchange Act and rules and regulations promulgated
thereunder with respect to management's discussion and analysis set forth
in quarterly reports on Form 10-Q) prepared for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end of
such fiscal quarter;
(ii) as soon as available and in any event within 90 days after the
end of each fiscal year, (1) the consolidated balance sheets of the Company
and its Subsidiaries as at the end of such fiscal year, (2) the related
consolidated
33
statements of operations, stockholders' equity and cash flows for such
fiscal year, setting forth in each case in comparative form the
corresponding figures for the previous fiscal year and the corresponding
figures from the consolidated plan and financial forecast for the current
fiscal year delivered pursuant to Section 3.1(viii) for the fiscal year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer of the Company that they fairly
present the financial condition of the Company and its Subsidiaries as at
the dates and the results of their operations and their cash flows for the
periods indicated, (3) a narrative report describing the operations of the
Company and its Subsidiaries (in the form of management's discussion and
analysis of such operations which would comply with the disclosure
requirements of the Exchange Act and rules and regulations promulgated
thereunder with respect to management's discussion and analysis set forth
in quarterly reports on Form 10-K) prepared for such fiscal year, and (4) a
report thereon of independent certified public accountants of recognized
national standing, which report shall be unqualified as to scope of audit,
shall express no doubts about the ability of the Company and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present the consolidated financial
position of the Company and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years (except as otherwise disclosed in such financial statements) and that
the examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards;
(iii) together with each delivery of financial statements pursuant to
Sections (i) and (ii) above, (a) an Officers' Certificate of the Company
stating that the signers have reviewed the terms of the Notes and have
made, or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of the Company and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or
at the end of such accounting period, and that the signers do not have
knowledge of the existence as at the date of the Officers' Certificate, of
any condition or event which constitutes an Event of Default or Potential
Event of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action the
Company has taken, is taking and proposes to take with respect thereto; and
(b) a compliance certificate demonstrating in reasonable detail compliance
(as determined in accordance with GAAP) during and at the end of such
34
accounting periods with the restrictions contained in Sections 4.1 through
4.17 inclusive;
(iv) together with each delivery of consolidated financial statements
pursuant to Section (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating whether,
in connection with their audit examination, any condition or event that
constitutes an Event of Default or Potential Event of Default that relates
to accounting matters has come to their attention and, if any such
condition or event has come to their attention, specifying the nature and
period of existence thereof; provided that such accountants shall not be
--------
liable by reason of any failure to obtain knowledge of any such Event of
Default or Potential Event of Default that would not be disclosed in the
course of their audit examination, and (b) stating that based on their
audit examination nothing has come to their attention that causes them to
believe that the information contained in the certificates delivered
therewith is not correct;
(v) promptly upon the sending or filing thereof, copies of all
financial statements, reports, notices and proxy statements sent or made
available generally by the Company to its security holders or by any
Subsidiary of the Company to its security holders other than the Company or
another Subsidiary of the Company;
(vi) promptly after a responsible officer has knowledge thereof, the
Company will give written notice to the Holders of (a) the occurrence of an
Event of Default or Potential Event of Default, (b) any default under any
Contractual Obligation of the Company that could reasonably be expected to
have a Material Adverse Effect, and (c) any other development that has
resulted in, or could reasonably be expected to result in, a Material
Adverse Effect;
(vii) promptly upon any Senior Officer obtaining knowledge of (X) the
institution of, or non-frivolous threat of, any action, suit, proceeding
(whether administrative, judicial or otherwise), governmental investigation
or arbitration against or affecting the Company or any of its Subsidiaries
or any property of the Company or any of its Subsidiaries (collectively,
"Proceedings") not previously disclosed in writing by the Company to
Holders or (Y) any material development in any Proceeding that, in any
case:
(1) could reasonably be expected to have a Material Adverse
Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any material damages or obtain material relief as a result
of, the Transaction,
35
written notice thereof together with such other information as may be
reasonably available to the Company or any of its Subsidiaries to enable
the Holders and their counsel to evaluate such matters;
(viii) within 60 days of the Commercial Operation Date, the Company
will adopt an operating budget and an operating plan for the initial
operating year and within 60 days of each subsequent operating year, an
operating plan for such year;
(ix) in writing, promptly upon an Officer obtaining knowledge that the
Company or any of its Subsidiaries has received notice or otherwise learned
of any claim, demand, action, event, condition, report or investigation
indicating any potential or actual liability arising in connection with (x)
the non-compliance with or violation of the requirements of any
Environmental Law which could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, (y) the release or
threatened release of any toxic or hazardous waste, substance or
constituent into the environment which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, or (z)
the existence of any Environmental Lien on any properties or assets of the
Company or any of its Subsidiaries;
(x) promptly after the availability thereof, copies of all material
amendments to the certificate of incorporation or by-laws of the Company or
any of its Subsidiaries;
(xi) promptly upon any Person becoming a Subsidiary of the Company, a
written notice setting forth with respect to such Person the date on which
such Person became a Subsidiary of the Company; and
(xii) with reasonable promptness, such other information and data
with respect to the Company or any of its Subsidiaries or any of their
respective property, business or assets as from time to time may be
reasonably requested by any Holder of $25 million or more of Notes to
enable such purchaser to confirm compliance by the Company with the
covenants contained herein; provided that no information or data shall be
--------
required to be delivered hereunder or under any other provision of this
Note if it would violate any applicable attorney-client or accountant-
client privilege.
3.2 Corporate Existence, Etc.
------------------------
The Company will at all times preserve and keep in full force and
effect its corporate existence and rights and franchises to its business and
those of each of its Subsidiaries,
36
except where the failure to so preserve or keep could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
3.3 Payment of Taxes and Claims;
Tax Consolidation
----------------------------
A. The Company will, and will cause each of its Subsidiaries to, pay
all material Taxes, assessments and other governmental charges imposed upon it
or any of its material properties or assets or in respect of any of its
franchises, business, income or property before any material penalty accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable and
which by law have or may become a Lien upon any of its properties or assets
prior to the time when any material penalty or fine shall be incurred with
respect thereto, provided, however, that no such Tax assessment, charge or claim
-------- -------
need be paid if the validity or amount of such charge or claim is being
diligently contested in good faith and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor.
B. The Company will not, nor will it permit any of its Subsidiaries
to, file or consent to the filing of any consolidated income tax return with any
Person (other than the Company or any of its Subsidiaries so long as the filing
of such consolidated income tax return is permitted by applicable law).
3.4 Maintenance of Properties; Insurance
------------------------------------
From and after the Commercial Operation Date, the Company will cause
the Cable System to be operated in an efficient and businesslike manner in
accordance with the Supply Contract and the Operations Agreement. The Company
will maintain or cause to be maintained, with financially sound and reputable
insurers or with self insurance programs, in each case to the extent consistent
with prudent business practices and customary in its industries, insurance with
respect to its properties and business and the properties and businesses of its
Subsidiaries against loss or damage of the kinds (including, in any event,
business interruption insurance) and in the amounts customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses and owning similar properties in the same general
respective areas in which the Company and its Subsidiaries operate; provided,
--------
that in no event shall the Company maintain insurance at levels below those
required by the Senior Credit Facilities.
3.5 Inspection
----------
The Company shall permit one authorized representative designated by
the Holders to visit and inspect any of the properties of the Company or its
Subsidiaries, including, without
37
limitation, its and their financial and accounting records, and to make copies,
and to discuss its and their affairs, finances and accounts with its and their
officers and independent public accountants (provided that representatives of
the Company or any of its Subsidiaries may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be reasonably
requested.
3.6 Limitation on Loans
-------------------
The Company will not, and will not permit any of its Subsidiaries to,
create, incur or otherwise cause of suffer to exist or become effective any
Liens of any kind other than Liens permitted by Section 4.3 upon any property or
asset of the Company or and Subsidiary or any shares of stock or debt of any
Subsidiary which owns property or assets, now owned or hereafter acquired,
unless (i) if such Lien secures Indebtedness which is pari passu with the Notes,
---- -----
then the Notes are secured on an equal and ratable basis with the obligations so
secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness which is subordinated to the Notes, any
such Lien shall be subordinated to the Lien granted to the Holders of the Notes
to the same extent as such subordinated Indebtedness is subordinated to the
Notes.
3.7 Compliance with Laws, Etc.
-------------------------
The Company shall and shall cause each of its Subsidiaries to comply
with the requirements of all applicable Laws of any Tribunal, noncompliance with
which, singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
3.8 Maintenance of Accurate Records, Etc.
------------------------------------
The Company shall keep, and shall cause each of its Subsidiaries to
keep, true books and records and accounts in which full and correct entries will
be made of all its respective business transactions, and will reflect, and cause
each of its Subsidiaries to reflect, in its respective financial statements
adequate accruals and appropriations to reserves.
3.9 ERISA Compliance
----------------
Each of the Company and its Subsidiaries will (i) make prompt payment
of all contributions which it is obligated to make under all Pension Plans and
which are required to meet the minimum funding standard set forth in ERISA with
respect to each of the Pension Plans, except where the failure to make such
payment could not reasonably be expected to have a Material Adverse Effect, and
(ii) notify the Holders promptly upon becoming aware of any fact, including but
not limited to, any Reportable Event arising in connection with any of the
Pension
38
Plans that is not a Multiemployer Plan, which could be reasonably expected to
constitute grounds for termination thereof by the PBGC or for the appointment by
the appropriate United States District Court of a trustee to administer such
Pension Plan, together with a statement as to the action, if any, proposed to be
taken with respect thereto.
3.10 Payments in U.S. Dollars
------------------------
Other than with respect to PIK Interest Amounts, all payments of any
obligations to be made hereunder by the Company or any other obligor with
respect thereto shall be made solely in U.S. Dollars or such other currency as
is then legal tender for public and private debts in the United States of
America.
3.11 Form, Registration, Transfer and
Exchange of Notes; Lost Notes
--------------------------------
The Notes are issuable as registered Notes without coupons in
denominations of at least $1,000, except as may be necessary to reflect any
principal amount not evenly divisible by $1,000. The Company shall keep at its
principal office a register in which the Company shall provide for the
registration of Notes and of transfers of Notes. Upon surrender for
registration of transfer of any Note at the principal office of the Company, the
Company shall, at its expense, execute and deliver one or more new Notes of the
like tenor and of a like aggregate principal amount, registered in the name of
such transferee or transferees. At the option of the holder of any Note, such
Note may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes which the Holder making the exchange is entitled to receive.
Every Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed by
the holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried by
the Note so exchanged or transferred, so that neither gain nor loss of interest
shall result from any such transfer or exchange. Upon receipt of written notice
from the holder of any Note of the loss, theft, destruction or mutilation of
such Note and, in the case of any such loss, theft or destruction, upon receipt
of such holder's unsecured indemnity agreement, or in the case of any such
mutilation upon surrender and cancellation of such Note, the Company will make
and deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.
Prior to due presentment for registration of transfer, the Company may
treat the Person in whose name any Note is
39
registered as the owner and holder of such Note for the purpose of receiving
payment of principal of and interest on such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and the Company shall not
be affected by notice to the contrary.
3.12 Holders' Meeting
----------------
The Company will participate in a meeting with the Holders twice
during each fiscal year to be held at a location and a time selected by the
Holders and reasonably satisfactory to the Company.
SECTION 4 NEGATIVE COVENANTS
The Company covenants and agrees that until the repayment in full of
the Notes and all other obligations due under this Note it will fully and timely
perform all covenants in this Section 4.
4.1 Indebtedness
------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, Incur, or remain or become directly or
indirectly liable with respect to, any Indebtedness, except for the following
("Permitted Indebtedness"):
(i) the Company may Incur and remain liable with respect to the
obligations under the Notes;
(ii) the Company and its Subsidiaries may Incur and remain liable with
respect to the Bank Indebtedness; provided, however, that the aggregate
-------- -------
principal amount of Indebtedness under the Senior Credit Facilities shall
not exceed the sum of $425,000,000 less the sum of (a) the aggregate amount
of scheduled amortization payments of the principal amount thereof actually
made (other than with respect to the revolving loan commitments under the
Senior Credit Facilities), (b) the aggregate amount of mandatory
prepayments of the principal amount thereof actually made (other than with
respect to the revolving loan commitments under the Senior Credit
Facilities) and (c) each permanent reduction of commitments to extend
credit thereunder not otherwise caused pursuant to clause (a) or (b);
(iii) the Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations permitted by Section 4.6 and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iv) the Company and its Subsidiaries may remain liable with respect
to Indebtedness in respect of Capital Leases or
40
incurred to finance (a) the purchase price of equipment, fixtures and any
other similar property or the remodeling or other improvement costs of any
facility of the Company or any of its Subsidiaries or (b) the purchase
price of any Real Property Assets; provided that the aggregate amount of
--------
Indebtedness incurred under this Section 4.1(iv) from and after the Closing
Date shall not exceed $25 million at any time outstanding;
(v) the Company and its Subsidiaries may Incur and remain liable with
respect to Intercompany Indebtedness;
(vi) the Company and its Subsidiaries may Incur and remain liable with
respect to Permitted Refinancing Indebtedness;
(vii) Subsidiaries of the Company acquired after the Closing Date may
remain liable with respect to Indebtedness existing immediately prior to
the time any such entity became a Subsidiary of Company in an aggregate
amount for all such Subsidiaries not to exceed $10 million at any time
outstanding; provided that such Indebtedness is not incurred in
--------
contemplation of such acquisition;
(viii) the Company may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed at any time
outstanding $25 million;
(ix) to the extent permitted under the Senior Credit Facilities,
Indebtedness under, or constituting net exposure under, interest and
currency hedging arrangements entered into to hedge obligations under the
Senior Credit Facilities; and
(x) Indebtedness incurred in connection with Permitted Sale Leasebacks
(as defined in the Senior Credit Facilities) in an amount not to exceed at
any time outstanding $ 5.0 million.
In addition to the foregoing, at any time if no Event of Default or
Potential Event of Default with respect to the Notes shall have occurred and be
continuing at the time of or as a consequence of the incurrence of any such
Indebtedness, the Company may incur Indebtedness if the Consolidated Interest
Coverage Ratio immediately preceding the time at which such additional
Indebtedness is incurred would have been at least 2.0 to 1, determined on a pro
forma basis in accordance with GAAP.
4.2 Senior Subordinated Indebtedness
--------------------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, directly or indirectly, Incur any Indebtedness that is by its
terms (or by the terms of any agreement governing such Indebtedness)
subordinated in right of
41
payment to any other Indebtedness of the Company or of such Subsidiary
("Subordinated Indebtedness") unless such Subordinated Indebtedness is also by
its terms (or by the terms of any agreement governing such Subordinated
Indebtedness) made expressly subordinate to the Notes to the same extent and in
the same manner as such Notes are subordinated to Senior Indebtedness of the
Company.
4.3 Liens
-----
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset (including any
document or instrument in respect of goods or accounts receivable) of the
Company or of any of its Subsidiaries, whether now owned or hereafter acquired,
or assign or otherwise convey any right to receive any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
State or under any similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens on (a) Real Property Assets or (b) equipment, fixtures and
other similar property of Company and any of its Subsidiaries, in each case
securing Indebtedness described in Sections 4.1(iv) and 4.1(vii); provided
--------
that such Liens shall extend only to the equipment, fixtures, and other
similar property so financed (and improvements or attachments thereto) and
the proceeds thereof;
(iii) Liens securing Indebtedness permitted under Section 3.1(viii),
which Liens are existing prior to the time the entity which incurred such
Indebtedness became a Subsidiary of the Company; provided that such Liens
--------
were not incurred in connection with, or in contemplation of, the
acquisition of such Subsidiary of the Company and such Liens extend or
cover only the property and assets of such entity which were covered by
such Liens and which were owned by such entity, in each case at the time
such entity became a Subsidiary of the Company (and improvements or
attachments thereto); and
(iv) the replacement, extension or renewal of any Lien permitted by
this Section 4.3 upon or in the same property subject to such Lien and as
security for the same obligations or any refinancings thereof to the extent
such refinancings are permitted under Section 4.1; provided that such Lien
--------
does not extend to or cover any property other than the property covered by
such Lien immediately prior to
42
such replacement, extension or renewal of such Lien (and improvements or
attachments thereto) and the principal of the obligations secured thereby
is not increased.
4.4 Restricted Payments
-------------------
The Company shall not make, and shall not permit any of its
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Event of Default or Potential Event of Default shall have
occurred and be continuing at the time of or immediately after giving
effect to such Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
--- -----
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the last paragraph of Section 4.1; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Closing
Date does not exceed the sum of (1) 25% of the Company's Consolidated Net
Income (or in the event that such Consolidated Net Income shall be a
deficit, minus 100% of such deficit) after the Closing Date, plus (2) 100%
of the aggregate Net Proceeds from the issue or sale, after the Issue Date,
of Capital Stock (other than Disqualified Capital Stock or Capital Stock of
the Company issued to any Subsidiary of the Company) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted or exercised or
exchanged, as the case may be.
The provisions of this Section 4.4 shall not prohibit (i) the payment
of any distribution within 60 days after the date of declaration thereof, if at
such date of declaration such payment would comply with the provisions of this
Note, (ii) the retirement of any shares of Capital Stock of the Company or
Subordinated Indebtedness by conversion into, or by or in exchange for, shares
of Capital Stock (other than Disqualified Capital Stock), or out of, the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other than
Disqualified Capital Stock), (iii) the redemption, repayment or retirement of
Subordinated Indebtedness in exchange for, by conversion into, or out of the Net
Cash Proceeds of, a substantially concurrent sale or incurrence of Capital Stock
(other than Disqualified Capital Stock) or of Indebtedness (other than any
Indebtedness owed to a Subsidiary) of the Company that is contractually
subordinated in right of payment to the Notes to at least the same extent as the
Indebtedness being redeemed, repair or retired, (iv) the retirement of any
shares of
43
Disqualified Capital Stock by conversion into, or by exchange for, shares of
Disqualified Capital Stock, or out of the Net Proceeds of the substantially
concurrent issuance or sale (other than to a Subsidiary of the Company) of other
shares of Disqualified Capital Stock, (v) the payment of dividends to Holdings
in such amounts and at such time as is necessary for the payment of interest,
principal or premium on the Senior Notes in accordance with the terms thereof
and the Senior Note Purchase Agreement in effect on the Closing Date, (vi) the
payment of an amount not to exceed 1.5% of the gross revenues of Holdings for
management services provided by PCG under the Advisory Services Agreement, (vii)
the payment of dividends to Holdings, in an amount not to exceed $4.0 million
per year, to be used by Holdings and Parent for overhead and operating expenses
of Holdings and Parent or (viii) Permitted Tax Distributions.
4.5 Investments
-----------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with
Section 4.4.
4.6 Contingent Obligations
----------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, directly or indirectly, create or become or remain liable with
respect to any Contingent Obligation, except:
(i) the Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of letters of credit under the
Senior Credit Facilities;
(ii) the Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets; provided that the
--------
maximum assumable liability in respect of all such obligations shall at no
time exceed the gross proceeds actually received by the Company and its
Subsidiaries in connection with such Asset Sales and other sales;
(iii) the Company and its Subsidiaries, as applicable, may remain
liable with respect to existing Contingent Obligations existing on the
Closing Date;
(iv) the Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations under guarantees made under the
Senior Credit Facilities;
44
(v) the Company and its Subsidiaries may become and remain liable with
respect to guarantees of Indebtedness or Contingent Obligations of a
wholly-owned Subsidiary of the Company and a Subsidiary of the Company may
become and remain liable with respect to guarantees of Indebtedness or
Contingent Obligations of the Company or a wholly-owned Subsidiary of the
Company;
(vi) with respect to the Company and its Subsidiaries, Contingent
Obligations permitted in accordance with the terms of Senior Credit
Facilities; and
(vii) the Company and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided that the maximum
--------
aggregate liability, contingent or otherwise, of the Company and its
Subsidiaries in respect of all such Contingent Obligations shall at no time
exceed $5 million.
4.7 Restriction on Fundamental Changes
----------------------------------
Other than the sale of Capital Stock of a Subsidiary of the Company in
accordance with Section 2.4C(i) and Section 4.15, the Company shall not, nor
shall it cause or permit any of its Subsidiaries to, directly or indirectly,
enter into any transaction, or series of related transactions, of merger,
amalgamation, consolidation or combination, or consolidate, or liquidate, wind-
up or dissolve itself (or suffer any liquidation or dissolution), or convey,
sell, lease, sublease, transfer or otherwise dispose of, in one transaction or
in a series of transactions, all or substantially all of its business, property
or assets, whether now owned or hereafter acquired, except any Subsidiary of the
Company may be merged, amalgamated, consolidated or combined with or into the
Company or any wholly-owned Subsidiary of the Company or be liquidated, wound up
or dissolved, or all or substantially all of its business, property or assets
may be conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or in a series of transactions, to the Company or to any wholly-
owned Subsidiary of the Company; provided, however, that (A) no Potential Event
-------- -------
of Default or Event of Default shall have occurred and be continuing or would
result therefrom, (B) in the case of such a merger, amalgamation, consolidation
or combination of the Company and a Subsidiary of the Company, the Company shall
be the continuing or surviving corporation, and (C) where one of the predecessor
entities is the Company, the surviving entity (i) if it is the Company (I)
continues to be bound as such under this Note and (II) executes and delivers to
the Holders immediately upon consummation of such transaction a written
confirmation or acknowledgment to such effect, in form and substance
satisfactory to the Holders, together with evidence of appropriate corporate
power, authority and action and a written legal opinion in form and substance
satisfactory to the Holders to the effect that this Note continues to be a
legal, valid and binding obligation of
45
such entity, enforceable against such entity in accordance with its terms
(subject to customary exceptions in respect of bankruptcy, insolvency and other
equitable remedies) and with respect to such other matters as the Holders may
reasonably request, and (ii) if it is not the Company, executes and delivers to
the Holders immediately upon the consummation of such transaction an amendment
to this Note, in form and substance satisfactory to the Holders, whereby such
surviving entity assumes the due and punctual performance of all obligations and
liabilities of such predecessor, together with evidence of appropriate corporate
power, authority and action and a written legal opinion in form and substance
satisfactory to the Holders to the effect that such Note is the legal, valid and
binding obligation of such surviving entity, enforceable against such surviving
entity in accordance with its terms (subject to customary exceptions in respect
of bankruptcy, insolvency and other equitable remedies) and with respect to such
other matters as the Holders may reasonably request.
4.8 Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries
-----------------------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary of the Company to (a) pay dividends or make any other
distributions on its Capital Stock or any other interest or participation in, or
measured by, such Subsidiary's profits; (b) make loans or advances or pay any
Indebtedness or other obligation owed to the Company or to any Subsidiary of the
Company; or (c) transfer any of its property or assets to the Company or to any
Subsidiary of the Company (any such restriction or encumbrance a "Payment
Restriction"), except for such encumbrances or restrictions existing under or by
reason of: (1) any restrictions contained in (i) this Note; (ii) the Senior
Credit Facilities (or any of the documents contemplated therein) as in effect on
the Closing Date; (iii) the Indebtedness pertaining to a Subsidiary of the
Company that is not a Subsidiary of the Company on the Closing Date in existence
at the time such Subsidiary becomes a Subsidiary of the Company; provided,
--------
however, that any such Indebtedness was not incurred as a result of, in
-------
connection with or in anticipation of the transaction pursuant to which such
entity becomes a Subsidiary of the Company and it does not apply to any Person,
or the properties of assets of any Person, other than the Subsidiary acquired
and such Indebtedness is otherwise permitted to be incurred pursuant to Section
4.1; (iv) secured Indebtedness otherwise permitted to be incurred pursuant to
Sections 4.1 and 4.2 that limits the right of the debtor to dispose of the
assets securing such Indebtedness; (2) customary non-assignment provisions of
any lease governing a leasehold interest of any Subsidiary of the Company; (3)
customary net worth provisions contained in leases and other agreements entered
into by a
46
Subsidiary in the ordinary course of business; (4) customary restrictions with
respect to a Subsidiary pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital Stock or
assets of such Subsidiary; (5) applicable law; and (6) any instrument that
Refinances any Indebtedness effecting any such encumbrance or restriction
pursuant to clause (1) above; provided, however, that the provisions relating to
-------- -------
any such encumbrance or restriction in any such instrument are not materially
less favorable to the Company or its Subsidiaries or the Holders than those
contained in the agreements referred to in clause (1).
4.9 Transactions with Shareholders
and Affiliates
------------------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction") or
extend, renew, waive or otherwise modify the terms of any Affiliate Transaction
entered into prior to the Closing Date unless (i) such Affiliate Transaction is
between or among the Company and its wholly-owned Subsidiaries; or (ii) the
terms of such Affiliate Transaction are fair and reasonable to the Company or
such Subsidiary, as the case may be, and the terms of such Affiliate Transaction
are at least as favorable as the terms which could be obtained by the Company or
such Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties. In any Affiliate Transaction
involving an amount or having a value in excess of $3 million which is not
permitted under clause (i) above, the Company must obtain a resolution of the
Board of Directors certifying that such Affiliate Transaction complies with
clause (ii) above. In transactions with a value in excess of $5 million which
are not permitted under clause (i) above, the Company must obtain a written
opinion as to the fairness of such a transaction from an Independent Financial
Advisor.
The foregoing restrictions shall not apply to the following "Permitted
Affiliate Transactions": (i) any transaction exclusively between the Company
and any of its wholly-owned Subsidiaries or exclusively between any of the
Company's wholly-owned Subsidiaries, (ii) reasonable and customary fees paid to
members of the Board of Directors of the Company, (iii) reasonable and customary
fees and compensation paid to, and indemnity provided on behalf of, officers,
directors or employees of the Company or any of its Subsidiaries, as determined
by the Board of Directors of the Company or any such Subsidiary or the senior
management thereof in good faith, including, without limitation, issuances of
stock, payment of bonuses and other transactions pursuant to employment or
compensation agreements, stock option agreements, indemnification
47
agreements and other arrangements approved by the Board of Directors of the
applicable company, in good faith, and director and officer and other insurance
purchased by the Company and benefiting the officers and directors of Parent or
Holdings, (iv) transactions pursuant to or affecting the Advisory Services
Agreement, (v) transactions pursuant to or affecting the Placement Agreement and
(vi) any transactions with PCG or CIBC.
4.10 Subsidiary Stock
----------------
Except for any sale of 100% of the Capital Stock or other equity
securities of any of the Company's Subsidiaries in compliance with the
provisions of Section 4.7, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of Capital Stock or other equity securities of
any of its Subsidiaries, except (i) to qualify directors if required by
applicable law, (ii) in the case of the Company's Subsidiaries, to the Company
or to a wholly-owned Subsidiary of the Company, (iii) Asset Sales made in
compliance with this Note or (iv) Liens in favor of the lenders under the Senior
Credit Facilities.
4.11 Business Activities
-------------------
The Company shall not, nor shall the Company cause or permit any of
its Subsidiaries to, directly or indirectly, engage in or operate any business
other than the Cable System or a Related Business Investment.
4.12 Amendments or Waivers of Certain Documents
------------------------------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, except to the extent permitted in accordance with the terms of
the Senior Credit Facilities, directly or indirectly, enter into any amendment,
modification, supplement or waiver with respect to any of the Transaction
Documents as in effect on the Closing Date, that would modify any of the
provisions thereof or any of the definitions relating to the provisions thereof
in a manner materially adverse to the Holders and which would have a Material
Adverse Effect on the value of the Notes.
4.13 Amendments to Charter Documents
-------------------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, amend its certificate of incorporation or bylaws in any respect
which is materially adverse to the interests of the Holders.
4.14 Refinancing of the Notes in Part
--------------------------------
The Company shall not, nor shall the Company cause or permit any of
its Subsidiaries to, Incur any Indebtedness to
48
Refinance (other than any extension or amendment or other restructuring of the
Indebtedness under the Senior Credit Facilities) the Notes in part unless the
terms, conditions, covenants, events of default and other provisions in respect
of the instruments evidencing the Indebtedness Incurred to Refinance the Notes
in part shall be the same or better terms; and provided that no Refinancing in
--------
part shall result in the amount of the Notes outstanding being less than $50
million.
4.15 Asset Sales
-----------
The Company shall not, nor shall it cause or permit any of its Subsidiaries
to, except to the extent permitted in accordance with the terms of the Senior
Credit Facilities, directly or indirectly, consummate any Asset Sale unless all
of the Asset Sale Proceeds in respect thereof are applied by the Company or a
Subsidiary of the Company in accordance with Section 2.4C(i).
4.16 Transfer of Assets to Subsidiaries
----------------------------------
(a) The Company shall not, nor shall the Company cause or permit any
of its Subsidiaries to, except to the extent permitted in accordance with the
terms and conditions of the Senior Credit Facilities, directly or indirectly,
transfer (or in the ordinary course of business or pursuant to a Permitted
Investment) any assets or property to any Subsidiary of the Company unless such
Subsidiary pays fair market value therefor to the Company or to a wholly-owned
Subsidiary of the Company and except as provided in Sections 4.8 and 4.10.
(b) The Company shall not, nor shall the Company cause or permit any
of its Subsidiaries to, directly or indirectly, transfer to any Subsidiary of
Holdco, other than any Subsidiary of the Company, assets or property of the
Company or its Subsidiaries constituting in any individual transfer at least
10%, or in the aggregate at least 20%, of the assets and property of the Company
and its Subsidiaries, taken as a whole, unless each such transferee executes and
delivers in favor of the Holders a guarantee of all of the Company's obligations
with respect to the Notes, which guarantee shall be subordinated to Senior
Indebtedness of such transferee to the same extent as the Notes are subordinated
to Senior Indebtedness of the Company and which is otherwise in form and
substance reasonably satisfactory to the Required Holders. In the event any
such transfer occurs prior to the initial issuance of the Notes, the transferee
shall execute and deliver such guarantee simultaneous with the issuance of the
Notes.
SECTION 5 EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
shall occur and be continuing:
49
5.1 Failure To Make Payments When Due
---------------------------------
Failure to pay any installment of principal of the Notes when due,
whether at stated maturity, by acceleration, by notice of prepayment or
otherwise; or failure to pay any interest on the Notes or any other amount due
under this Note within five days or more after the date due; or
5.2 Default in Other Agreements
---------------------------
Failure of the Company or any of its Subsidiaries to pay at final
maturity any principal on one or more issues of Indebtedness or Contingent
Obligations of the Company or of any of its Subsidiaries (other than
Indebtedness referred to in Section 5.1) or breach or default by the Company or
any of its Subsidiaries with respect to any other term of any one or more issues
of Indebtedness or Contingent Obligations of the Company or of any of its
Subsidiaries or any agreement or instrument evidencing or securing such
Indebtedness or Contingent Obligations and such default or breach results in the
acceleration of that Indebtedness or Contingent Obligation prior to its stated
maturity and, in either case, the principal amount of such Indebtedness or
Contingent Obligation and all other such Indebtedness or Contingent Obligations
of the Company and its Subsidiaries in respect of which there is a failure to
pay principal or interest or which has been so accelerated equals $5,000,000 or
more; or
5.3 Breach of Certain Covenants
---------------------------
Failure of the Company to perform or comply with any covenant, term or
condition contained in Section 2.2C(ii) or 3.2; or
5.4 Breach of Warranty
------------------
Any representation, warranty or certification made by Global in the
Purchase Agreement or in any statement or certificate at any time given by
Global in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false or incorrect in any material respect on the date as of
which made or deemed made and shall not have been cured within 30 days;
provided, however, if (A) such failure cannot be cured within such 30-day period
-------- -------
despite the Company's best efforts to do so, (B) such failure is susceptible of
cure, (C) the Company is continuously proceeding with diligence and in good
faith to cure such failure and (D) the existence of such failure has not had and
could not reasonably be expected to have a Material Adverse Effect, then such
30-day cure period shall be extended to such date, not to exceed a total 90-day
cure period; or
50
5.5 Other Defaults Under Note
-------------------------
The Company shall default in the performance of or compliance with any
covenant, term or condition contained in this Note and such default shall not
have been remedied or waived in accordance with this Note within 30 days after
the date of written notice from the holder or holders of not less than 25% in
aggregate principal amount of the Notes then outstanding of such default;
provided, however, if (A) such failure cannot be cured within such 30-day period
-------- -------
despite the Company's best efforts to do so, (B) such failure is susceptible of
cure, (C) the Company is continuously proceeding with diligence and in good
faith to cure such failure and (D) the existence of such failure has not had and
could not reasonably be expected to have a Material Adverse Effect, then such
30-day cure period shall be extended to such date, not to exceed a total 90-day
cure period; or
5.6 Defaults Under Other Agreements
-------------------------------
Prior to the Commercial Operation Date, an "event of default" (as
defined therein) shall have occurred under the Supply Contract, and could
reasonably be expected to have a Material Adverse Effect unless AT&T Corp. is
performing under its Guaranty or the Supply Contract has been replaced following
such termination or default; or
5.7 Involuntary Bankruptcy;
Appointment of Custodian, Etc.
------------------------------
A court of competent jurisdiction enters a Bankruptcy Order under any
Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary in an
involuntary case or proceeding, or
(B) appoints a Custodian of the Company or any Subsidiary for all
or substantially all of its properties, or
(C) orders the liquidation of the Company or any Subsidiary,
and in each case the order or decree remains unstayed and in effect for 60 days;
or
5.8 Voluntary Bankruptcy;
Appointment of Custodian, Etc.
------------------------------
The Company or any Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case or proceeding, or
51
(B) consents to the entry of a Bankruptcy Order for relief
against it in an involuntary case or proceeding, or
(C) consents to the appointment of a Custodian; or
5.9 Judgments and Attachments
-------------------------
Any money judgment, writ or warrant of attachment, or similar process
involving in any individual case or in the aggregate at any time an amount in
excess of $5,000,000 (to the extent not covered by third-party insurance as to
which the insurance company has acknowledged coverage) shall be entered or filed
against the Company or any of its Subsidiaries or any of their respective
properties or assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of 60 days or in any event later than five days prior to
the date of any proposed sale thereunder; or
5.10 Dissolution
-----------
Any order, judgment or decree shall be entered against the Company or
any Subsidiary decreeing the dissolution or split-up of the Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 60 days; or
5.11 Foreclosure
-----------
The agent under the Senior Credit Facilities or any other party
entitled to act thereunder commences judicial proceedings to foreclose on the
collateral securing the Bank Indebtedness or exercises any right under
applicable law or any instrument evidencing a security interest or other
encumbrance in respect of such collateral to take ownership or effect the
transfer of such collateral in lieu of foreclosure;
THEN (i) upon the occurrence of any Event of Default described in the
foregoing Sections 5.7 or 5.8, all of the unpaid principal amount of and accrued
interest on the Notes and all other outstanding obligations shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by the
Company, and (ii) upon written notice of the holder or holders of 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Company, declare all of the unpaid principal amount of and accrued interest
on the Notes and all other outstanding obligations to be, and the same shall
forthwith become, due and payable, and the obligations of the Holders hereunder
shall thereupon terminate or if there are any amounts outstanding under the
Senior Credit Facilities, such amounts shall become due and payable upon the
first to occur of an acceleration under the Senior Credit Facilities or five
52
Business Days after receipt by the Company of notice of the acceleration of the
Notes; provided, however, that if any declaration of acceleration under the
Notes occurs solely because an Event of Default set forth in Section 5.2 has
occurred and is continuing, such declaration of acceleration shall be
automatically annulled if the holders of the Indebtedness or Contingent
Obligations which are the subject of such Event of Default have rescinded their
declaration of acceleration in respect of such Indebtedness or Contingent
Obligations within thirty days of such acceleration of such Indebtedness or
Contingent Obligations and the Holders have received written notice thereof
within such time and if no other Event of Default has occurred during such
thirty-day period which has not been cured or waived in accordance with this
Note. Nevertheless, if at any time after acceleration of the maturity of the
Notes, the Company shall pay all arrears of interest and all payments on account
of the principal thereof which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Note) and all Events of Default
and Potential Events of Default (other than non-payment of principal of and
accrued interest on the Notes due and payable solely by virtue of acceleration)
shall be remedied or waived, then the holders of a majority in aggregate
principal amount of the Notes then outstanding, by written notice to the Company
may rescind and annul the acceleration and its consequences; but such action
shall not affect any subsequent Event of Default or Potential Event of Default
or impair any right consequent thereon.
SECTION 6 SUBORDINATION
6.1 Notes Subordinated to Senior
Indebtedness of the Company
---------------------------
Payments of principal and interest due on the Notes by the Company
shall be subordinated in accordance with the provisions of this Section 6 to the
prior payment in full, in cash or Cash Equivalents, of all amounts payable in
respect of Senior Indebtedness of the Company, whether now outstanding or
hereafter created (including any interest accruing subsequent to an event
specified in Section 5.7 or 5.8 whether or not such interest is an allowed claim
against the Company), that the subordination is for the benefit of the holders
of Senior Indebtedness of the Company, and that each holder of Senior
Indebtedness of the Company whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Senior
Indebtedness of the Company in reliance upon the covenants and provisions
contained in this Note.
6.2 Priority and Payment Over
of Proceeds in Certain Events
-----------------------------
(a) Subordination on Dissolution, Liquidation or Reorganization of
--------------------------------------------------------------
the Company. Upon any payment or distribution
-----------
53
of assets or securities of the Company of any kind or character, whether in
cash, property or securities, upon any dissolution or winding up or total or
partial liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
Senior Indebtedness of the Company (including any interest accruing subsequent
to an event specified in Section 5.7 or 5.8 whether or not such interest is an
allowed claim enforceable against the Company) shall first be paid in full in
cash or Cash Equivalents, before the Holders shall be entitled to receive any
payment by the Company of any principal or interest on the Notes and upon any
such dissolution or winding up or liquidation or reorganization, any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, to which the Holders would be entitled
except for the provisions of this Section 6 shall be made by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, directly to the holders of the Senior
Indebtedness of the Company or their representatives to the extent necessary to
pay all of the Senior Indebtedness of the Company to the holders of such Senior
Indebtedness of the Company.
(b) Subordination on Default on Designated Senior Indebtedness. (i)
Unless Section 6.3(a) hereof shall be applicable, after the occurrence of a
Payment Default no payment or distribution of any assets or securities of the
Company or any Subsidiary of any kind or character (including, without
limitation, cash, property and any payment or distribution which may be payable
or deliverable by reason of the payment of any other Indebtedness of the Company
being subordinated to the payment of the Notes by the Company) may be made by or
on behalf of the Company or any Subsidiary, including, without limitation, by
way of set-off or otherwise, for or on account of principal of, premium, if any,
or interest on the Notes, or for or on account of the purchase, redemption or
other acquisition of the Notes, and no holder or owner of any Notes shall take
or receive from the Company or any Subsidiary, directly or indirectly in any
manner, payment in respect of all or any portion of Notes following the delivery
by the representative of the holders of Designated Senior Indebtedness (the
"Representative") to the Holders of written notice of the occurrence of a
Payment Default, and in any such event, such prohibition shall continue until
such Payment Default is cured, waived in writing or ceases to exist. At such
time as the prohibition set forth in the preceding sentence shall no longer be
in effect, subject to the provisions of the following paragraph (ii), the
Company the Notes, including any missed payments.
(ii) Unless Section 6.3(a) hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness,
no payment or distribution of any assets of the Company of any kind or character
shall be made by the Company, including, without limitation, by way of set-off
or
54
otherwise, on account of any principal of, premium, if any, or interest on the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of Notes for a period ("Payment Blockage Period") commencing on the date of
receipt by the Holders of written notice from the Representative of such Non-
Payment Event of Default unless and until (subject to any blockage of payments
that may then be in effect under the preceding paragraph (a)) the earliest to
occur of the following events; (w) more than 179 days shall have elapsed since
the date of receipt of such written notice by the Holders, (x) such Non-Payment
Event of Default shall have been cured or waived in writing or shall have ceased
to exist, (y) such Designated Senior Indebtedness shall have been discharged or
paid in full in cash or Cash Equivalents or (z) such Payment Blockage Period
shall have been terminated by written notice to the Company or the Holders from
the Representative initiating such Payment Blockage Period, or the holders of at
least a majority in principal amount of such issue of Designated Senior
Indebtedness, after which, in the case of clause (w), (x), (y) or (z), the
Company shall resume making any and all required payments in respect of the
Notes, including any missed payments. Notwithstanding any other provisions of
this Note, no Non-Payment Event of Default with respect to Designated Senior
Indebtedness which existed or was continuing on the date of the commencement of
any Payment Blockage Period initiated by the Representative shall be, or be
made, the basis for the commencement of a second Payment Blockage Period
initiated by the Representative unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days. In no event
shall a Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Holders of the notice referred to in this Section 6.3(b)(ii) (the
"Initial Blockage Period"). Any number of additional Payment Blockage Periods
may be commenced during the Initial Blockage Period; provided, however, that no
such additional Payment Blockage period shall extend beyond the Initial Blockage
Period. After the expiration of the Initial Blockage period, no Payment
Blockage Period may be commenced under this Section 6.3(b)(ii) and no Guarantee
Payment Blockage Period may be commenced under Section 8.2(b) hereof until at
least 180 consecutive days have elapsed from the last day of the Initial
Blockage Period.
(c) Rights and Obligations of the Holders. In the event that,
notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Holders shall have received any payment on account of any
Obligation (other than as permitted by Sections (a) and (b) of this Section 6.2)
at a time when such payment is prohibited by this Section 6.2, then and in such
event such payment or distribution shall be received and held in trust for the
holders of the Senior Indebtedness of the Company and shall be paid over or
delivered to the holders of the Senior Indebtedness of the Company remaining
unpaid to the extent necessary to pay in full in cash or Cash Equivalents all
Senior Indebtedness of the Company in accordance with their terms after
55
giving effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness of the Company.
If payment of the Obligations is accelerated because of an Event of
Default, the Company shall promptly notify the agent or other representatives
for Senior Indebtedness of the Company of the acceleration.
Upon any payment or distribution of assets or securities referred to
in this Section 6, the Holders (notwithstanding any other provision of this
Note) shall be entitled to rely upon any order or decree of a court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, and upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making any
such payment or distribution, delivered to the Holders for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of Senior Indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 6.
The Company shall give written notice to each of the Holders of any
default or event of default under any Senior Indebtedness of the Company or
under any agreement pursuant to which Senior Indebtedness of the Company may
have been issued, and, in the event of any such event of default, shall provide
to the Holders the names and address of the trustees or other representatives of
holders of such Senior Indebtedness of the Company.
With respect to the holders and owners of Senior Indebtedness of the
Company, by acceptance of this Note, each Holder undertakes to perform only such
obligations on the part of such Holder as are specifically set forth in this
Section 6, and no implied covenants or obligations with respect to the holders
or owners of Senior Indebtedness of the Company shall be read into this Note
against the Holders. The Holders shall not be deemed to owe any fiduciary duty
to the holders or owners of Senior Indebtedness of the Company or to the agent
under the Senior Credit Facilities or any other representative of the holders of
the Senior Indebtedness of the Company.
6.3 Payments May Be Paid Prior to Dissolution
-----------------------------------------
Nothing contained in this Section 6 or elsewhere in this Note shall
prevent or delay the Company, except under the conditions described in Section
6.2, from making payments at any time for the purpose of paying Obligations.
56
6.4 Rights of Holders of Senior Indebtedness
of the Company Not To Be Impaired
----------------------------------------
No right of any present or future holder of any Senior Indebtedness of
the Company to enforce subordination as provided in this Section 6 shall at any
time in any way be prejudiced or impaired by any act or failure to act by any
such holder, or by any noncompliance by the Company with the terms and
provisions and covenants herein, regardless of any knowledge thereof any such
holder may have or otherwise be charged with. Without in any way limiting the
generality of the foregoing Section, such holders of Senior Indebtedness of the
Company may, at any time and from time to time without impairing or releasing
the subordination provided in this Section 6 or the obligations of the Holders
hereunder to the holders of Senior Indebtedness of the Company, do any one or
more of the following: (i) change the manner, place, terms or time of payment
of, or renew or alter, Senior Indebtedness of the Company or otherwise amend or
supplement in any manner Senior Indebtedness of the Company or any instrument
evidencing the same or any agreement under which any Senior Indebtedness of the
Company is outstanding; (ii) sell, exchange, release, or otherwise deal with any
property pledged, mortgaged, or otherwise securing Senior Indebtedness of the
Company or fail to perfect or delay in the perfection of the security interest
in such property; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness of the Company; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person. Each
Holder by purchasing or accepting a Note waives any and all notice of the
creation, modification, renewal, extension or accrual of any Senior Indebtedness
of the Company and notice of or proof of reliance by any holder or owner of
Senior Indebtedness of the Company upon this Section 6 and the Senior
Indebtedness of the Company shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Section 6, and all dealings between
the Company and the holders and owners of the Senior Indebtedness of the Company
shall be deemed to have been consummated in reliance upon this Section 6.
The provisions of this Section 6 are intended to be for the benefit
of, and shall be enforceable directly by, the holders of the Senior Indebtedness
of the Company.
6.5 Subrogation
-----------
Upon the payment in full in accordance with the terms of Section 6.2
of all amounts payable under or in respect of the Senior Indebtedness of the
Company, the Holders shall be subrogated to the rights of the holders of such
Senior Indebtedness of the Company to receive payments or distributions of
assets of Company made on such Senior Indebtedness of the Company until the
Obligations shall be paid in full in cash or Cash Equivalents; and for purposes
of such subrogation no payments or distributions to holders of such Senior
Indebtedness
57
of the Company of any cash, property or securities to which the Holders would be
entitled except for the provisions of this Section 6, and no payment over
pursuant to the provisions of this Section 6 to holders of such Senior
Indebtedness of the Company by the Holders, shall, as between the Company, its
creditors other than holders of such Senior Indebtedness of the Company and the
Holders, be deemed to be a payment by the Company to or on account of such
Senior Indebtedness of the Company, it being understood that the provisions of
this Section 6 are solely for the purpose of defining the relative rights of the
holders of such Senior Indebtedness of the Company, on the one hand, and the
Holders, on the other hand. A release of any claim by any holder of Senior
Indebtedness of the Company shall not limit the Holders' rights of subrogation
under this Section 6.5.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Section 6 shall have been
applied, pursuant to the provisions of this Section 6, to the payment of all
amounts payable under the Senior Indebtedness of the Company, then and in such
case, the Holders shall be entitled to receive from the holders of such Senior
Indebtedness of the Company at the time outstanding the full amount of any such
payments or distributions received by such holders of Senior Indebtedness of the
Company in excess of the amount sufficient to pay all Senior Indebtedness of the
Company payable under or in respect of the Senior Indebtedness of the Company in
full in cash or Cash Equivalents in accordance with the terms of Section 6.2.
6.6 Obligations of the Company Unconditional
----------------------------------------
Nothing contained in this Section 6 or elsewhere in this Note is
intended to or shall impair as between the Company and the Holders the
obligations of the Company, which are absolute and unconditional, to pay to the
Holders Obligations as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the holders of the
Senior Indebtedness of the Company, nor shall anything herein or therein prevent
the Holders from exercising all remedies otherwise permitted by applicable law
upon default under this Note, subject to the rights, if any, under this Section
6 of the holders of such Senior Indebtedness of the Company in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
The failure to make a payment on account of Obligations by reason of
any provision of this Section 6 shall not prevent the occurrence of an Event of
Default under Section 5.
58
SECTION 7 MISCELLANEOUS
7.1 Amendments and Waivers
----------------------
No amendment, modification, termination or waiver of any term or
provision of the Notes or consent to any departure by the Company therefrom
shall in any event be effective without the prior written concurrence of the
Company and the Required Holders; provided, however, that, without the prior
-------- -------
written consent of each Holder affected, an amendment, modification, termination
or waiver of this Note or consent to departure from a term or provision hereof
may not: (i) reduce the principal amount of Notes whose holders must consent to
any such amendment, modification, termination, waiver or consent; (ii) reduce
the rate of or extend the time for payment of principal, premium or interest on
any Note; (iii) reduce the principal amount of any Note; (iv) make any Note
payable in money other than that stated in the Note; (v) make any change in
Section 2.4 or in the definition of Change of Control, in the last paragraph of
Section 5 or this Section 7.1; (vi) reduce the rate or extend the time of
payment of fees or other compensation payable to the Holders hereunder; (vii)
modify the provisions of Section 6 or any of the defined terms related thereto
in any manner adverse to the Holders. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on the Company in any case shall entitle the
Company to any further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this Section 7.1 shall be binding upon each holder of the Notes at the time
outstanding, each further holder of the Notes and, if signed by the Company, on
the Company.
7.2 Independence of Covenants
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitation of, another covenant shall not avoid the occurrence of an Event of
Default or Potential Event of Default if such action is taken or condition
exists.
7.3 Notices
-------
Unless otherwise provided herein, any notice or other communications
herein required or permitted to be given shall be in writing and may be
personally served, telecopied, telexed or sent by mail and shall be deemed to
have been given when delivered in person, upon receipt of telecopy or telex
against receipt of answer back or four Business Days after depositing it in the
mail, registered or certified, with postage prepaid and properly addressed;
provided, however, that notices shall not be effective until received. For the
purposes hereof, the addresses
59
of the parties hereto (until notice of a change thereof is delivered as provided
in this Section 7.3) shall be set forth under each party's name on the signature
pages hereto.
7.4 Failure or Indulgence Not Waiver;
Remedies Cumulative
--------------------------------
No failure or delay on the part of any Holder of any Note in the
exercise of any power, right or privilege hereunder shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Note are
cumulative to and not exclusive of any rights or remedies otherwise available.
7.5 Severability
------------
In case any provision in or obligation under this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
7.6 Headings
--------
Sections and Section headings in this Note are included herein for
convenience of reference only and shall not constitute a part of this Note for
any other purpose or be given any substantive effect.
7.7 Applicable Law
--------------
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW.
7.8 Agent for Service; Submission to
Jurisdiction; Waiver of Immunities;
Judgment Currency
-----------------------------------
By the execution and delivery of this Note, the Company (i)
acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System, 1633 Broadway, New York, New York 10019 (the
"Agent") (and any successor entity) as its authorized agent upon which process
may be served in any suit or proceeding arising out of or relating to this Note
that may be instituted in any federal or state court in The City of New York,
Borough of Manhattan, State of New York, or brought under federal or state
securities laws and acknowledges that the Agent has accepted such designation,
(ii) submits to the jurisdiction of any such court in any such suit or
proceeding and
60
(iii) agrees that service of process upon the Agent and written notice of said
service to the Company and each Guarantor in accordance with Section 7.3 of this
Note shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. The Company further agrees to take any
and all action, including the execution and filing of any and all such documents
and instruments, as may be necessary to continue such designation and
appointment of the Agent in full force and effect without lapse for so long as
any of the Notes shall be outstanding; provided that the Company may (and, to
the extent the Agent ceases to be able to be served on the basis contemplated
herein, shall), by written notice to the Holders in accordance with Section 7.3
of this Note, designate such additional or alternative agent for service of
process under this Section 7.8 that (i) maintains an office located in The City
of New York, Borough of Manhattan, State of New York and (ii) is a corporate
service company which acts as agent for service of process for other persons in
the ordinary course of its business. Such written notice shall identify the
name of such agent for service of process and the address of the office of such
agent for service of process in The City of New York, Borough of Manhattan,
State of New York.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, it
hereby irrevocably waives such immunity in respect of its obligations under this
Note. In addition, the Company irrevocably waives and agrees not to assert, by
way of motion, as a defense, or otherwise in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
the above-mentioned courts for any reason whatsoever, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue for such suit
is improper, or that this Note or the subject matter hereof may not be enforced
in such courts.
The Company and the Holder, by acceptance of this Note, agree that a
final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
The Company agrees to indemnify the Holders, the officers, directors
and agents of the Holders and each person, if any, who controls the Holders
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act against any loss incurred by any of them as a result of any
judgment or order being given or made for any amount due under this Note and
such judgment or order being expressed and paid in a currency (the "Judgment
Currency") other than United States dollars and as a result of any variation as
between (i) the rate of exchange at which the United States dollar amount is
converted into the
61
Judgment Currency for the purpose of such judgment or order and (ii) the spot
rate of exchange in The City of New York at which any such person on the date of
payment of such judgment or order is able to purchase United States dollars with
the amount of the Judgment Currency actually received by such person. The
foregoing indemnity shall continue in full force and effect notwithstanding any
such judgment or order as aforesaid. The term "spot rate of exchange" shall
include any premiums and costs of exchange payable in connection with the
purchase of, or conversion into, United States dollars.
7.9 Waiver of Stay, Extension or Usury Laws
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Note; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Holders, but will suffer and permit
the execution of every such power as though no such law had been enacted.
7.10 Additional Amounts
------------------
All payments made by the Company under or with respect to the Notes
will be made free and clear of and without withholding or deduction for or on
account of any present or future Taxes, (including penalties, interest and other
liabilities related thereto) imposed or levied by or on behalf of the government
of Bermuda or of any region or territory thereof or by any authority or agency
therein or thereof having power to tax, unless the Company is required to
withhold or deduct such Taxes by law or by the interpretation or administration
thereof. If the Company is required to withhold or deduct any amount for or on
account of Taxes from any payment made under or with respect to the Notes, the
Company will pay such additional amounts ("Additional Amounts") as may be
necessary so that the net amount received by each Holder (including Additional
Amounts) after such withholding or deduction will not be less than the amount
the Holder would have received if such Taxes had not been withheld or deducted;
provided, however, that no Additional Amounts shall be payable for or on account
of:
(1) any Tax which would not have been imposed but for the fact that
such holder of Notes:
(a) was or is a resident, domiciliary or national of, or engaged
in business or maintained a permanent
62
establishment or was physically present in, Bermuda or any political
subdivision thereof or therein or otherwise had some connection with
Bermuda other than the mere ownership of, or receipt of payment under,
such Note;
(b) presented such Note for payment in Bermuda or any political
subdivision thereof or therein, unless such Note could not have been
presented for payment elsewhere; or
(c) presented such Note for payment more than 30 days after the
date on which the payment in respect of such Note became due and
payable or provided for, whichever is later, except to the extent that
the holder of such Note would have been entitled to such Additional
Amounts if it had presented such Note for payment on any day within
such period of 30 days;
(2) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or other governmental charge;
(3) any Tax imposed on a holder that is not the beneficial owner of a
Note to the extent that the beneficial owner would not have been entitled to the
payment of Additional Amounts had the beneficial owner directly held the Note;
(4) any Tax that is imposed or withheld by reason of the failure of
such holder or other beneficial owner of such Note to comply with a request by
the Company addressed to such holder (A) to provide information concerning the
nationality, residence, or identity of such holder or such beneficial owner or
(B) to make any declaration or other similar claim or satisfy any information or
reporting requirement, which, in the case of (A) or (B) is required or imposed
by Law of the Taxing jurisdiction as a precondition to a partial or complete
exemption from such Tax; or
(5) any combination of items (1), (2), (3) or (4).
The Company will use its best efforts to obtain and furnish to each
Holder, within 30 calendar days after the date the payment of any Taxes is due
pursuant to applicable law, certified copies of tax receipts evidencing such
payment by the Company.
The Company will, upon written request of any Holder, reimburse each
such Holder for the amount of any Taxes so levied or imposed and paid by such
Holder as a result of payments made under or with respect to the Notes held by
such Holder during the taxable period in respect of which such Taxes were paid;
provided, however, that if the imposition of such Taxes is the subject of a good
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faith protest promptly instituted and
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diligently pursued by the Company, such reimbursement shall be deferred until a
final resolution of such protest and the amount of such reimbursement shall be
no greater than the amount of Taxes determined to be due, in respect of such
Notes and taxable period, as a result of such protest.
Each Holder agrees that if any Additional Amounts paid to, or in
respect of any payments made to, a Holder results in a tax credit or deduction
to such Holder, the Holder shall promptly (i) notify the Company and (ii)
furnish the Company with a computation of and pay to the Company an amount equal
to, any tax benefit resulting from such credit or deduction.
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IN WITNESS WHEREOF, the undersigned has executed and delivered this
Note.
COMPANY:
GLOBAL TELESYSTEMS LTD.
By: ______________________
Name:
Title:
Notice Address:
Telephone:
Telecopy:
65
[Holder] hereby acknowledges the provisions of this Note and agrees to be bound
by the provisions hereof.
[HOLDER]
By: ____________________
Name:
Title:
Notice Address:
Telephone:
Telecopy:
Bye-Laws - Global Telesystems Holdings Ltd.
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