-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NMbMnDwY3EeY3Xvw6k1ltLTilvbMPT1RQjazqn9S3EeMB4oo1jodyQWxqUn6YnRg leq3NkFMvZwjyJjhyN/cDw== 0000928385-99-002458.txt : 19990806 0000928385-99-002458.hdr.sgml : 19990806 ACCESSION NUMBER: 0000928385-99-002458 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19990805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCLEODUSA INC CENTRAL INDEX KEY: 0000919943 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 421407240 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-82851 FILM NUMBER: 99678079 BUSINESS ADDRESS: STREET 1: 6400 C ST SW STREET 2: PO BOX 3177 CITY: CEDAR RAPIDS STATE: IA ZIP: 52406-3177 BUSINESS PHONE: 3193640000 MAIL ADDRESS: STREET 1: 6400 C ST SW STREET 2: PO BOX 3177 CITY: CEDAR RAPIDS STATE: IA ZIP: 52406-3177 FORMER COMPANY: FORMER CONFORMED NAME: MCLEOD INC DATE OF NAME CHANGE: 19960403 S-3/A 1 AMENDMENT #2 TO FORM S-3 As filed with the Securities and Exchange Commission on August 4, 1999 Registration No. 333-82851 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- AMENDMENT NO. 2 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- McLeodUSA Incorporated (Exact name of registrant as specified in its charter) Delaware McLeodUSA Technology Park 42-1407240 (State or other 6400 C Street SW, P.O. Box 3177 (I.R.S. Employer jurisdiction of Cedar Rapids, IA 52406-3177 Identification Number) incorporation or (319) 364-0000 organization) (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ---------------- Clark E. McLeod Chairman and Chief Executive Officer McLeodUSA Incorporated McLeodUSA Technology Park 6400 C Street SW, P.O. Box 3177 Cedar Rapids, IA 52406-3177 (319) 364-0000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ---------------- Copies to: Joseph G. Connolly, Jr., Esq. James J. Junewicz, Esq. Hogan & Hartson L.L.P. Mayer, Brown & Platt 555 Thirteenth Street, N.W. 190 South LaSalle Street Washington, D.C. 20004 Chicago, Illinois 60603 (202) 637-5600 (312) 782-0600 ---------------- Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ---------------- CALCULATION OF REGISTRATION FEE - --------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------
Proposed Proposed maximum maximum Amount to be offering aggregate Amount of Title of each class of registered price per offering price registration securities to be registered (1)(2)(3) unit(1)(2)(3)(4) (1)(3)(5) fee(6) Class A common stock... Preferred stock........ Debt securities........ Depositary shares...... Warrants............... Subscription rights.... Stock purchase contracts and stock purchase units......... Total: $1,750,000,000 $486,500(7) - ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) In U.S. dollars or the equivalent thereof in one or more foreign currencies or currency units or composite currencies, including the European Currency Unit. (2) Such indeterminate number of amount of Class A common stock, preferred stock, debt securities, depositary shares, warrants, subscription rights and stock purchase contracts and stock purchase units, as may from time to time be issued at indeterminate prices, but with an aggregate initial offering price not to exceed $1,750,000,000, plus such indeterminate number of shares of Class A common stock and preferred stock as may be issued in exchange for, or upon conversion of, debt securities or other preferred stock registered hereunder. Debt securities may be issued with original issue discount such that the aggregate initial public offering price, together with the other securities issued hereunder, will not exceed $1,750,000,000. (3) Omitted pursuant to General Instruction II.D of Form S-3. (4) The proposed maximum initial offering price per unit will be determined, from time to time, by the Registrant. (5) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o). In no event will the aggregate initial offering price of all primary securities issued from time to time pursuant to this Registration Statement exceed $1,750,000,000. (6) Calculated pursuant to Rule 457 of the rules and regulations under the Securities Act of 1933. (7) Previously paid. ---------------- The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus supplement is not complete and may be + +changed. We may not sell these securities until the registration statement + +filed with the Securities and Exchange Commission is effective. This + +prospectus supplement is not an offer to sell these securities and it is not + +soliciting an offer to buy these securities in any state or jurisdiction + +where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED AUGUST 4, 1999 P R O S P E C T U S S U P P L E M E N T (To Prospectus dated , 1999) [LOGO OF McLEODUSA APPEARS HERE] 800,000 Shares McLeodUSA Incorporated % Series A Cumulative Convertible Preferred Stock -------- We are selling 800,000 shares of our % Series A cumulative convertible preferred stock, liquidation preference $500 per share which is convertible at the option of the holder into shares of our Class A common stock at a conversion price of $ per share of Class A common stock for each share of Series A preferred stock, equivalent to a conversion rate of shares of Class A common stock for each share of Series A preferred stock, subject to adjustments in certain circumstances. Our Class A common stock is quoted on the Nasdaq National Market under the symbol "MCLD", and the last reported price of the Class A common stock on , 1999 was $ per share. Other terms described in this prospectus supplement include: . The quarterly dividend will be $ per share, payable at our option in cash or shares of our Class A common stock, beginning , 1999. . Beginning on , 2001 and prior to , 2002, if the price of our Class A common stock equals or exceeds 150% of the conversion price for a specific period, we may redeem, for cash, shares of our Class A common stock or both, the Series A preferred stock at a redemption price of % of the liquidation preference, plus (1) unpaid dividends and (2) a make whole payment for future dividends. . Beginning on , 2002, we may redeem, for cash, the Series A preferred stock at prices declining to the liquidation preference, plus unpaid dividends. . On or after , 2002, we may convert the Series A preferred stock into our Class A common stock if the trading price of our Class A common stock equals or exceeds 135% of the conversion price for a specific period. . We will seek to have the Series A preferred stock listed on the Nasdaq National Market. -------- Investing in the Series A preferred stock involves various risks. See "Risk Factors" beginning on page S-10. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense. --------
Per Share Total --------- ----------- Public Offering Price.................................... $ $ Underwriting Discount.................................... $ $ Proceeds to the Company (before expenses)................ $ $
The underwriters are offering the Series A preferred stock subject to various conditions. The underwriters expect to deliver the Series A preferred stock to purchasers on or about , 1999. The underwriters may purchase up to 120,000 additional shares of Series A preferred stock to cover over-allotments. -------- Salomon Smith Barney Goldman, Sachs & Co. Morgan Stanley Dean Witter August , 1999 You should rely only on the information provided or incorporated by reference in this prospectus supplement and accompanying prospectus. Neither we nor the underwriters have authorized anyone to provide you with different or inconsistent information. You should assume that the information in this prospectus supplement and accompanying prospectus is accurate only as of the date on the front cover of such documents. Our business, financial information, results of operations and prospects may have changed since those dates. If it is against the law in any state to make an offer to sell these securities (or to solicit an offer from someone to buy these securities), then this offer does not apply to any person in that state, and no offer or solicitation is made by this prospectus supplement or accompanying prospectus to any such person. ---------------- TABLE OF CONTENTS Prospectus Supplement
Page ---- Summary.................................................................... S-1 Risk Factors............................................................... S-10 Cautionary Note Regarding Forward-Looking Statements....................... S-17 Use of Proceeds............................................................ S-18 Dividend Policy............................................................ S-18 Market Price of Class A Common Stock ...................................... S-18 Capitalization............................................................. S-19 Selected Consolidated Financial and Operating Data......................... S-20 Pro Forma Financial Data................................................... S-22 Description of the Series A Preferred Stock................................ S-25 Federal Tax Considerations................................................. S-37 Underwriting............................................................... S-43 Legal Matters.............................................................. S-45 Experts.................................................................... S-45 Where You Can Find More Information........................................ S-45
Prospectus
Page ---- About This Prospectus...................................................... 1 Where You Can Find More Information........................................ 1 Cautionary Note Regarding Forward-Looking Statements....................... 2 About McLeodUSA............................................................ 3 Coverage Ratios............................................................ 4 Use of Proceeds............................................................ 4 Description of Common Stock................................................ 5 Description of Preferred Stock............................................. 10 Description of Depositary Shares........................................... 13 Description of Debt Securities............................................. 16 Description of Warrants.................................................... 27 Description of Stock Purchase Contracts and Stock Purchase Units........... 29 Description of Subscription Rights......................................... 30 Plan of Distribution....................................................... 31 Legal Matters.............................................................. 32 Experts.................................................................... 32
SUMMARY The following summary highlights selected information about us. It does not contain all of the information that is important to you. You should carefully read this entire prospectus supplement and accompanying prospectus and the other documents to which those documents refer you. In addition, you should carefully consider the factors set forth under the caption "Risk Factors." Unless otherwise indicated, dollar amounts over $1 million have been rounded to one decimal place and dollar amounts less than $1 million have been rounded to the nearest thousand. Our Company We provide communications services to business and residential customers in the Midwestern and Rocky Mountain regions of the United States. We offer local, long distance, Internet access, data, voice mail and paging services, from a single company on a single bill. We believe we are the first company in many of our markets to offer one-stop shopping for communications services tailored to customers' specific needs. Our approach makes it easier for both our business and our residential customers to satisfy their communications needs. It also allows businesses to receive customized services, such as competitive long distance pricing and enhanced calling features, that might not otherwise be directly available on a cost-effective basis. As of March 31, 1999, we served over 494,700 local lines in 408 cities and towns and have a combined total of 488 switches and central office locations. In addition to our core business of providing competitive local, long distance and related communications services, we also derive revenue from: . sale of advertising space in telephone directories . traditional local telephone company services in east central Illinois and southeast South Dakota . special access, private line and data services . communications network maintenance services . telephone equipment sales, leasing, service and installation . video services . telemarketing services . computer networking services . other communications services, including cellular, operator, payphone, mobile radio, paging services and Web site development and hosting We plan to derive revenues from high-speed digital access and data services using Digital Subscriber Line and other technologies. In most of our markets, we compete with the existing local phone company by leasing its lines and switches. In other markets, primarily in east central Illinois and southeast South Dakota, we operate our own lines and switches. We provide long distance services by using our own communications network facilities and leasing capacity from long distance and local communications providers. We are constructing fiber optic communications networks in Iowa, Illinois, Wisconsin, Indiana, Missouri, Michigan, Minnesota, South Dakota, North Dakota, Colorado and Wyoming to carry additional communications traffic on our own network. Our Strategy We want to be the leading and most admired provider of communications services in our markets. To achieve this goal, we are: . aggressively capturing customer share and generating revenue using leased communications network capacity . concurrently building our own communications network . migrating customers to our communications network to provide enhanced services and to reduce our operating costs The principal elements of our business strategy are to: Provide integrated communications services. We believe we can rapidly penetrate our target markets and build customer loyalty by providing an integrated product offering to business and residential customers. S-1 Build customer share through branding. We believe we will create and strengthen brand awareness in our target markets by branding our communications services with the trade name McLeodUSA in combination with the distinctive black-and- yellow motif of our telephone directories. Provide outstanding customer service. Our customer service representatives are available 24 hours a day, seven days a week, to answer customer calls. Our customer-focused software and systems allow our representatives immediate access to our customer and network data, enabling a rapid and effective response to customer requests. Emphasize small and medium sized businesses. We primarily target small and medium sized businesses because we believe we can rapidly capture customer share by providing face-to-face business sales and strong service support to these customers. Expand our fiber optic communications network. We are building a state-of-the- art fiber optic communications network to deliver multiple services and reduce operating costs. Expand our intra-city fiber optic communications network. Within selected cities, we plan to extend our network directly to our customers' locations. This will allow us to provide expanded services and reduce the expense of leasing communications facilities from the existing local telephone company. Explore acquisitions and strategic alliances. We plan to pursue acquisitions, joint ventures and strategic alliances that expand or complement our business. Leverage proven management team. Our executive management team consists of veteran telecommunications managers who successfully implemented similar customer-focused telecommunications strategies in the past. ---------------- As of June 30, 1999, based on our business plan, capital requirements and growth projections as of that date, we estimated that we would require approximately $1.4 billion through 2001 to fund our planned capital expenditures and operating expenses. Our estimated aggregate capital requirements include the projected cost of: . building our fiber optic communications network, including intra-city fiber optic networks . expanding operations in existing and new markets . developing wireless services . funding general corporate expenses . integrating acquisitions . constructing, acquiring, developing or improving telecommunication assets We expect to use the following to address our capital needs: . approximately $ million in net proceeds from the sale of the Series A preferred stock . approximately $523.0 million of cash and investments on hand at June 30, 1999 . projected operating cash flow . additional issuances of debt or equity securities Our estimate of future capital requirements is a forward-looking statement within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The actual amount and timing of our future capital requirements is subject to risks and uncertainties and may differ materially from our estimates. Accordingly, we may need additional capital to continue to expand our markets, operations, facilities, network and services. See "Risk Factors--Failure to Raise Necessary Capital Could Restrict Our Ability to Develop Our Network and Services and Engage in Strategic Acquisitions." ---------------- Our principal executive offices are located at McLeodUSA Technology Park, 6400 C Street SW, P.O. Box 3177, Cedar Rapids, Iowa 52406-3177, and our phone number is (319) 364-0000. S-2 The Offering Series A Preferred Stock Offered......................... 800,000 Shares Over-Allotment Option............ We have granted the underwriters an option to purchase up to 120,000 additional shares of Series A preferred stock to cover over-allotments. If the over-allotment option is exercised in full by the underwriters, the total offering price, underwriters' discounts, and proceeds to us (before expenses) will be $ million, $ million and $ million, respectively. Dividends........................ Holders of Series A preferred stock will be entitled to receive cumulative dividends at an annual rate of % of the liquidation preference payable quarterly on each , , , and , commencing on , 1999. Dividends will accrue from the date of the original issuance of the Series A preferred stock. Any dividend on the Series A preferred stock shall be, at our option, payable (1) in cash or (2) through the issuance of a number of shares of our Class A common stock equal to the dividend amount divided by the Discounted Current Market Value. For the foreseeable future, we intend to pay these dividends solely in shares of Class A common stock. If, in the future, we were to consider paying cash dividends on the Series A preferred stock we would have to comply with the restrictions contained in the indentures governing our outstanding indebtedness. See "Risk Factors--We Are Restricted from Paying Cash Dividends" and "Description of the Series A Preferred Stock--Dividends." Conversion into Class A Common Series A preferred stock is convertible at the option of its holder, Stock........................... unless previously redeemed, at any time after the issue date, into shares of our Class A common stock at a conversion rate of shares of Class A common stock for each share of Series A preferred stock (representing a conversion price of $ per share of Class A common stock), subject to adjustment in certain events. In addition, if on or after , 2002, the closing price of our Class A common stock has equaled or exceeded 135% of the Conversion Price for at least 20 out of 30 consecutive days on which the Nasdaq National Market is open for the transaction of business, we will have the option to convert all the Series A preferred stock into Class A common stock at the then current conversion rate. See "Description of the Series A Preferred Stock-- Conversion Rights." Liquidation Preference........... $500 per share. See "Description of the Series A Preferred Stock --Liquidation Preference." Redemption....................... We may redeem, for cash, shares of our Class A common stock or both, the Series A preferred stock at a redemption price of % of the liquidation preference, plus accumulated and unpaid dividends to the redemption date, on or after , 2001, but prior to , 2002, if the closing price of our Class A common stock equals or exceeds 150% of the conversion price, currently equal to $ per share, for a specified trading period, which we refer to as the provisional redemption. In addition
S-3 to the payments in the previous sentence, holders will receive a payment equal to the present value of the dividends that would thereafter have been payable on the Series A preferred stock from the redemption date to , 2002. Except in the circumstances described above, we may not redeem the Series A preferred stock prior to , 2002. Thereafter, each share of Series A preferred stock may be redeemed, at our option, initially at a redemption price of % of the liquidation preference and thereafter at prices declining to 100% on and after , plus in each case, all accumulated and unpaid dividends. In addition, we may also redeem the Series A Preferred Stock under certain other limited circumstances as provided in our certificate of incorporation. See "Description of the Series A Preferred Stock--Redemption." Voting Rights.................... Except as required by law, the holders of the Series A preferred stock will not be entitled to any voting rights unless payments of dividends on the Series A preferred stock are in arrears and unpaid for an aggregate of six or more quarterly dividend payments. In such an event, the holders of the Series A preferred stock (together with holders of other series of preferred stock having similar rights) will be entitled to elect the lesser of two directors to the board of directors or that number of directors constituting at least 25% of the board of directors, until such time as all dividend arrearages have been paid. See "Description of the Series A Preferred Stock--Voting Rights." Change of Control................ Upon the occurrence of a Change of Control or a Common Stock Change of Control, we will adjust the Conversion Price. The terms "Change of Control," "Common Stock Change of Control" and "Conversion Price" are defined in the "Description of the Series A Preferred Stock--Conversion Rights." Ranking.......................... The Series A preferred stock will be, with respect to dividends and upon liquidation, dissolution or winding-up: . junior to all our existing and future debt obligations . junior to each class of capital stock or series of preferred stock, the terms of which expressly provide that it ranks senior to the Series A preferred stock . on a parity with each class of capital stock or series of preferred stock, the terms of which expressly provide that it ranks on a parity with the Series A preferred stock . senior to all classes of our common stock and each other class of capital stock or series of preferred stock, the terms of which do not expressly provide that it ranks senior to or on a parity with the Series A preferred stock See "Description of the Series A Preferred Stock--Ranking." Proposed Nasdaq National Market symbol................... MCLDA
S-4 Use of Proceeds.................. The net proceeds from the offering will be used to fund: . development and construction costs of our fiber optic network, and construction, acquisition, development and improvement of our telecommunications assets . market expansion activities . development, construction and operations necessary to include wireless services as part of our communications services and . additional working capital and general corporate purposes
Risk Factors You should consider carefully all of the information contained and incorporated by reference in this prospectus supplement and accompanying prospectus, including the information set forth under the caption "Risk Factors," before making an investment in the Series A preferred stock. S-5 Recent Developments Acquisition of Ovation Communications, Inc. On March 31, 1999, we acquired Ovation Communications, Inc. for an aggregate of 11,193,234 shares of our Class A common stock, after giving effect to the two-for-one stock split described below, and $121.3 million in cash. We paid approximately $105.6 million of the outstanding debt of Ovation at the time of the transaction. Ovation is a diversified communications services company serving business customers primarily in larger metropolitan areas in Minnesota, Illinois and Wisconsin (such as Minneapolis/St. Paul, Chicago and Milwaukee) and in small to mid-sized cities in Michigan. Ovation provides the following services: . local and network access . local and long distance telephone . voice mail, teleconferencing and calling card . Internet access Announcement of Data Strategy On April 14, 1999, we announced plans to offer high-speed digital access and data services as part of our integrated communications product package using DSL (Digital Subscriber Line) and other technologies. These services are expected to include: . basic dial tone transmitted digitally . high-speed data communications for Internet and intranet applications . commercial network connections for local area, metropolitan area and wide area networks Follow-on Offering of Secondary Shares On May 18, 1999, we completed the sale of 18,000,000 shares of Class A common stock in a secondary offering for the benefit of several selling stockholders at a sale price of $27 13/16 per share, after giving effect to the two-for-one stock split described below. We received no proceeds from the sale of these shares. Agreements to Acquire Access Communications Holdings, Inc. and S.J. Investments Holdings, Inc. On June 1, 1999, we entered into an Agreement and Plan of Merger with Access Communications Holdings, Inc., a Utah corporation and certain of the stockholders of Access, pursuant to which we will acquire Access. As a result of the Access merger, the outstanding shares of common stock of Access will be converted in the aggregate into the right to receive approximately $23.3 million and 1,939,864 shares of our Class A common stock, after giving effect to the two-for-one stock split described below. We also will assume approximately $48.3 million in Access debt. In a related transaction, on June 1, 1999, we entered into an Agreement and Plan of Merger with an affiliated company of Access, S.J. Investments Holdings, Inc., a Utah corporation, and the stockholders of SJIH, pursuant to which we will acquire SJIH. As a result of the SJIH merger, the outstanding shares of common stock of SJIH will be converted in the aggregate into the right to receive $25 million and 1,939,864 shares of our Class A common stock, after giving effect to the two-for-one stock split described below. We also will assume approximately $48.3 million in SJIH debt. Consummation of the Access merger and the SJIH merger are subject to the satisfaction of certain conditions. Although two legally separate corporations, Access and SJIH conduct business as Access Long Distance. Access Long Distance serves business and residential customers in the states of Arizona, California, Colorado, Florida, Idaho, Nevada, New Mexico, Oregon, Utah and Washington. As of March 31, 1999, Access Long Distance served approximately 17,500 commercial customers and approximately 11,600 residential customers, generating 1998 revenues of $87 million. Access S-6 Long Distance is a switch-based provider of commercial and residential telecommunications services, including long distance, toll-free and prepaid calling cards. In addition, Access Long Distance also sells enhanced toll-free services. Market Area Expansion As a result of the Access Long Distance agreements, we will add four new states to our current 16-state Midwest and Rocky Mountain market area: Arizona, New Mexico, Oregon and Washington, and provide coverage of the entire U S WEST geography. The additional states increase our addressable voice and data market by approximately 23%. Two-For-One Stock Split On June 30, 1999, we declared a two-for-one stock split to be effected in the form of a stock dividend on our Class A common stock. The record date for the stock split was July 12, 1999 and the distribution of the additional shares took place on July 26, 1999. S-7 Summary Consolidated Financial and Operating Data The information in the following table is based on historical financial information included in our prior SEC filings, including our annual report on Form 10-K for the fiscal year ended December 31, 1998. The following summary financial information should be read in connection with this historical financial information, including the notes which accompany such financial information. This historical financial information is considered a part of this document. See "Where You Can Find More Information." Our audited historical financial statements as of December 31, 1998 and 1997, and for each of the three years ended December 31, 1998 were audited by Arthur Andersen LLP, independent public accountants. The information in the table on the following page reflects consolidated financial information for the following companies we have acquired:
Acquired Company Date Acquired ---------------- ------------- MWR Telecom, Inc. April 28, 1995 Ruffalo, Cody & Associates, Inc. July 15, 1996 Telecom*USA Publishing Group Inc. September 20, 1996 Consolidated Communications, Inc. September 24, 1997 Ovation Communications, Inc. March 31, 1999
The operations statement data and other financial data in the table include the operations of these companies beginning on the dates they were acquired. The balance sheet data in the table include the financial position of these companies at the end of the periods presented, beginning with the period in which they were acquired. These acquisitions affect the comparability of the financial data for the periods presented. On June 30, 1999, we announced that our board of directors had declared a two-for-one stock split to be effected in the form of a stock dividend. The record date for the stock split was July 12, 1999. Stockholders of record at the market close on that date will receive one additional share of our Class A common stock for each share held. Distribution of the additional shares took place on July 26, 1999. All information in the following table has been adjusted to reflect the two-for-one stock split. The pro forma information presented in the operations statement data and other financial data in the table reflects the operations of Ovation as if the Ovation acquisition had occurred on January 1, 1998 and the pro forma information in the balance sheet data in the table includes Ovation's financial position as of December 31, 1998. The pro forma information presented in the operations statement data and other financial data in the table includes the effects of the issuance of $300 million principal amount of our 8 3/8% senior notes in March 1998, $300 million principal amount of our 9 1/2% senior notes in October 1998 and $500 million principal amount of the 8 1/8% senior notes in February 1999 as if they had occurred at the beginning of 1998 and the pro forma information presented in the balance sheet data in the table includes the effects of the issuance of the 8 1/8% senior notes as if it had occurred at the end of 1998. The ratio of earnings to fixed charges and preferred stock dividends is calculated as follows: earnings consist of net loss before income taxes plus fixed charges (excluding capitalized interest). Fixed charges consist of interest on all debt (including capitalized interest), amortization of debt discount and deferred loan costs and the portion of rental expense that is representative of the interest component of rental expense (deemed to be one- third of rental expense which management believes is a reasonable approximation of the interest component). Preferred stock dividends means the amount of pre- tax earnings that is required to pay the dividends on outstanding preferred stock. We had no shares of preferred stock outstanding during any of the periods presented. For each of the years ended December 31, 1994, 1995, 1996, 1997 and 1998, earnings were insufficient to cover fixed charges by $11.4 million, $11.4 million, $22.6 million, $84.4 million and $135.5 million, respectively. For the three months ended March 31, 1998 and 1999, earnings were insufficient to cover fixed charges by $32 million and $51.7 million, respectively. On a pro forma basis, earnings would not have been sufficient to cover fixed charges by $188.6 million and $61.7 million for the year ended December 31, 1998 and the three months ended March 31, 1999, respectively. (table begins on the next page) S-8 Summary Consolidated Financial and Operating Data (In thousands, except per share and operating data)
Year Ended December 31, Three Months Ended March 31, ------------------------------------------ ----------------------------------- Pro Forma Pro Forma 1996 1997 1998 1998 1998 1999 1999 -------- -------- --------- ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Operations Statement Data: Revenue................ $ 81,323 $267,886 $ 604,146 $ 625,181 $134,331 $181,109 $200,805 -------- -------- --------- --------- -------- -------- -------- Operating expenses: Cost of service....... 52,624 151,190 323,208 329,527 75,045 92,459 99,797 Selling, general and administrative....... 46,044 148,158 260,931 274,420 58,768 79,811 90,691 Depreciation and amortization......... 8,485 33,275 89,107 109,720 19,431 35,110 41,680 Other................. 2,380 4,632 5,575 5,575 1,900 -- -- -------- -------- --------- --------- -------- -------- -------- Total operating expenses............. 109,533 337,255 678,821 719,242 155,144 207,380 232,168 -------- -------- --------- --------- -------- -------- -------- Operating loss......... (28,210) (69,369) (74,675) (94,061) (20,813) (26,271) (31,363) Interest income (expense), net........ 5,369 (11,967) (52,234) (85,898) (10,141) (21,204) (26,074) Other non-operating income................ 495 1,426 1,997 1,997 687 (1) (1) Income taxes........... -- -- -- -- -- -- -- -------- -------- --------- --------- -------- -------- -------- Net loss............... $(22,346) $(79,910) $(124,912) $(177,962) $(30,267) $(47,476) $(57,438) ======== ======== ========= ========= ======== ======== ======== Loss per common share.. $ (.28) $ (.73) $ (.99) $ (1.30) $ (.24) $ (.36) $ (.40) ======== ======== ========= ========= ======== ======== ======== Weighted average common shares outstanding.... 81,012 109,948 125,614 136,808 124,454 132,242 143,436 ======== ======== ========= ========= ======== ======== ======== Ratio of earnings to fixed charges and preferred stock dividends............. -- -- -- -- -- -- -- ======== ======== ========= ========= ======== ======== ======== March 31, December 31, 1999 ------------------------------ ----------- 1996 1997 1998 Actual -------- ---------- ---------- ----------- (unaudited) Balance Sheet Data: Current assets..................... $224,401 $ 517,869 $ 793,192 $ 974,218 Working capital.................... $185,968 $ 378,617 $ 613,236 $ 740,191 Property and equipment, net........ $ 92,123 $ 373,804 $ 629,746 $ 828,591 Total assets....................... $452,994 $1,345,652 $1,925,197 $ 2,836,380 Long-term debt less current maturities........................ $ 2,573 $ 613,384 $1,245,170 $ 1,776,475 Stockholders' equity............... $403,429 $ 559,379 $ 462,806 $ 785,415
Year Ended December 31, Three Months Ended March 31, ---------------------------------------- ----------------------------------- Pro Forma Pro Forma 1996 1997 1998 1998 1998 1999 1999 -------- -------- -------- ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Other Financial Data: Capital expenditures, including business acquisitions.......... $173,782 $601,137 $339,660 $ 739,497 $ 48,930 $ 538,897 $ 560,894 EBITDA(1).............. $(17,345) $(31,462) $ 20,007 $ 21,234 $ 518 $ 8,839 $ 10,317
December 31, March 31, ---------------------- --------- 1996 1997 1998 1999 ------ ------- ------- --------- Operating Data: (unaudited) Local lines.................................... 65,400 282,600 397,600 494,700 Cities and towns served........................ 120 227 269 408 Central offices/switches....................... -- 366 415 488 Route miles.................................... 2,352 4,908 7,120 7,654 Employees...................................... 2,077 4,941 5,300 6,109
- -------- (1) EBITDA consists of operating loss before depreciation, amortization and other nonrecurring operating expenses. We have included EBITDA data because it is a measure commonly used in the industry. EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered an alternative to net income as a measure of performance or to cash flows as a measure of liquidity. S-9 RISK FACTORS You should carefully consider the following risk factors and the other information in this prospectus supplement before investing in our securities. You should also consider the additional information set forth in our SEC reports on Forms 10-K, 10-Q and 8-K and in the other documents considered a part of this prospectus supplement and accompanying prospectus. See "Where You Can Find More Information." Fluctuations in the Market Price of Our Class A Common Stock May Make it More Difficult for Us to Raise Capital. The market price of our Class A common stock is extremely volatile and has fluctuated over a wide range. These fluctuations may impair our ability to raise capital by offering equity securities. The market price may continue to fluctuate significantly in response to various factors, including: . market conditions in the industry . announcements or actions by competitors . low trading volume . sales of large amounts of our Class A common stock in the public market or the perception that such sales could occur . quarterly variations in operating results or growth rates . changes in estimates by securities analysts . regulatory and judicial actions . general economic conditions We May Not Be Able to Successfully Integrate Acquired Companies into Our Operations, Which Could Slow Our Growth. The integration of acquired companies into our operations involves a number of risks, including: . difficulty integrating new operations and personnel . diversion of management attention . potential disruption of ongoing business . inability to retain key personnel or customers . inability to successfully incorporate new assets and rights into our service offerings . inability to maintain uniform standards, controls, procedures and policies . impairment of relationships with employees, customers or vendors Failure to overcome these risks or any other problems encountered in connection with acquisition transactions could slow our growth or lower the quality of our services, which could reduce customer demand and adversely affect our business. Continued Rapid Growth of Our Network, Services and Subscribers Could Be Slowed if We Cannot Manage this Growth. We have rapidly expanded and developed our network, services and subscriber base. For example, we recently announced plans to offer high-speed digital access and data services. Our expansion and development have placed and will continue to place significant demands on our management, operational and financial systems and procedures and controls. We may not be able to manage our anticipated growth effectively, which would adversely affect our business, results of operations and financial condition. Further expansion and development will depend on a number of factors, including: . cooperation of the existing local telephone companies . regulatory, judicial and governmental developments . changes in the competitive climate in which we operate . development of customer billing, order processing and network management systems . availability of financing . technological developments . availability of rights-of-way, building access and antenna sites . existence of strategic alliances or relationships . emergence of future opportunities S-10 We will need to continue to improve our operational and financial systems and our procedures and controls as we grow. We must also develop, train and manage our employees. We Expect to Incur Significant Losses Over the Next Several Years. If we do not become profitable in the future, the value of our Class A common stock may fall and we could have difficulty obtaining funds to continue our operations. We have incurred net losses every year since we began operations. Since January 1, 1994, our net losses have been as follows: Net Losses
Period Amount - ------ -------------- 1994............................................................. $ 11.4 million 1995............................................................. $ 11.3 million 1996............................................................. $ 22.3 million 1997............................................................. $ 79.9 million 1998............................................................. $124.9 million
We expect to incur net losses during the next several years while we develop our businesses, expand our fiber optic communications network and develop wireless services. Failure to Raise Necessary Capital Could Restrict Our Ability to Develop Our Network and Services and Engage in Strategic Acquisitions. We need significant capital to continue to expand our operations, facilities, network and services. We cannot assure you that our capital resources will permit us to fund our planned network deployment and operations or achieve operating profitability. Our failure to generate or raise sufficient funds may require us to delay or abandon some of our expansion plans or expenditures, which could adversely affect our business and competitive position. As of June 30, 1999, based on our business plan, capital requirements and growth projections as of that date, we estimated that we would require approximately $1.4 billion through 2001 to fund our capital expenditures and operating expenses. Our estimated aggregate capital requirements include the projected costs of: . building our fiber optic communications network, including intra-city fiber optic networks . expanding operations in existing and new markets . developing wireless services . funding general corporate expenses . integrating acquisitions . constructing, acquiring, developing or improving telecommunications assets Our estimate of future capital requirements is a forward-looking statement within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The actual amount and timing of our future capital requirements may differ substantially from our estimate due to factors such as: . strategic acquisition costs and effects of acquisitions on our business plan, capital requirements and growth projections . unforeseen delays . cost overruns . engineering design changes . changes in demand for our services . regulatory, technological or competitive developments . new opportunities We also expect to evaluate potential acquisitions, joint ventures and strategic alliances on an ongoing basis. We may require additional financing if we pursue any of these opportunities. We may meet any additional capital needs by issuing additional debt or equity securities or borrowing funds from one or more lenders. We cannot assure you that we will have timely access to additional financing sources on acceptable terms. If we do not have such access, we may not be able to expand our markets, operations, facilities, network and services through acquisitions as we intend. S-11 Our High Level of Debt Could Limit Our Flexibility in Responding to Business Developments and Put Us at a Competitive Disadvantage. We have substantial debt, which could adversely affect us in a number of ways, including: . limiting our ability to obtain necessary financing in the future . limiting our flexibility to plan for, or react to, changes in our business . requiring us to use a substantial portion of our cash flow from operations to pay our debt obligations rather than for other purposes, such as working capital or capital expenditures . making us more highly leveraged than some of our competitors, which may place us at a competitive disadvantage . making us more vulnerable to a downturn in our business As of March 31, 1999, we had $1.8 billion of long-term debt and $785.4 million of stockholders' equity. As a result, we expect our fixed charges to exceed our earnings for the foreseeable future. Covenants in Debt Instruments Restrict Our Capacity to Borrow and Invest, Which Could Impair Our Ability to Expand or Finance Our Operations. The indentures governing the terms of our long-term debt impose operating and financial restrictions that limit our discretion on some business matters, which could make it more difficult for us to expand, finance our operations or engage in other business activities that may be in our interest. These restrictions limit or prohibit our ability to: . incur additional debt . pay dividends or make other distributions . make investments or other restricted payments . enter into sale and leaseback transactions . pledge or mortgage assets or otherwise create liens . enter into transactions with related persons . sell assets . consolidate, merge or sell all or substantially all of our assets If we fail to comply with these restrictions, all of our long-term debt could become immediately due and payable. Our Ability to Pay Cash Dividends is Restricted. We have never paid any cash dividends. We do not anticipate paying any cash dividends for the foreseeable future. The indentures governing our debt restrict our ability to pay cash dividends. You should not expect that cash dividends will be paid on the shares of our Series A preferred stock or on the shares of our Class A common stock that you may acquire upon the conversion of the Series A preferred stock. Our Dependence on Regional Bell Operating Companies to Provide Most of Our Communications Services Could Make it Harder for Us to Offer Our Services at a Profit. We depend on the regional Bell operating companies to provide most of our core local and some of our long distance services. Today, without using the communications facilities of these companies, we could not provide bundled local and long distance services to most of our customers. Because of this dependence, our communications services are highly susceptible to changes in the conditions for access to these facilities and we may therefore have difficulty offering our services at profitable and competitive rates. U S WEST Communications, Inc., Ameritech Corporation and Southwestern Bell Telephone Company are our primary suppliers of local lines to our customers and communications services that allow us to transfer and connect calls. Their communications facilities allow us to provide (1) local service, (2) long distance service and (3) private lines dedicated to our customers' use. If these or other companies deny or limit our access to their communications network elements or wholesale services, we may not be able to offer profitable communications services. S-12 Our plans to provide local service using our own communications network equipment also depend on the regional Bell operating companies. In order to interconnect our network equipment and other communications facilities to network elements controlled by the regional Bell operating companies, we must first negotiate and enter into interconnection agreements with them. Interconnection obligations imposed on the regional Bell operating companies by the Telecommunications Act of 1996 have been, and continue to be, subject to a variety of legal proceedings, which could affect our ability to obtain interconnection agreements on acceptable terms. We cannot assure you that we will succeed in obtaining interconnection agreements on terms that would permit us to offer local services using our own communications network facilities at profitable and competitive rates. Actions by U S WEST May Make it More Difficult for Us to Offer Our Communications Services. U S WEST has introduced several measures that may make it more difficult for us to offer our communications services. For example, in February 1996, U S WEST filed tariffs and other notices with the public utility commissions in its fourteen-state service region to limit future Centrex access to its switches. Centrex access allows us to aggregate lines, have control over several characteristics of those lines and provide a set of standard features on those lines. We use U S WEST's Centrex services to provide most of our local communications services in U S WEST's service territories. In January 1997, U S WEST also proposed interconnection surcharges in several of the states in its service region, which would increase our costs of providing communications services in those states. We have challenged or are challenging these actions by U S WEST before the FCC or applicable state public utility commissions. We cannot assure you we will succeed in our challenges to these or other actions by U S WEST that would prevent or deter us from using U S WEST's Centrex service or communications network elements. If U S WEST successfully withdraws or limits our access to Centrex services in any jurisdiction, we may not be able to offer communications services in that jurisdiction, which could adversely affect our business. We anticipate that U S WEST will also pursue legislation in states within our target market area to reduce state regulatory oversight over its rates and operations. If adopted, these initiatives could make it more difficult for us to challenge U S WEST's actions in the future. Competition in the Communications Services Industry Could Cause Us to Lose Customers and Revenue and Could Make it More Difficult for Us to Enter New Markets. We face intense competition in all of our markets. This competition could result in loss of customers and lower revenue for us. It could also make it more difficult for us to enter new markets. Existing local telephone companies, including U S WEST, Ameritech, Southwestern Bell and GTE, currently dominate their local telecommunications markets. Three major competitors, AT&T, MCI WorldCom and Sprint, dominate the long distance market. Hundreds of other companies also compete in the long distance marketplace. AT&T, MCI WorldCom and Sprint also offer local telecommunications services in many locations. We also compete with other communications services companies which, like us, compete with the existing local telephone companies in some markets. Other competitors may include cable television companies, providers of communications network facilities dedicated to particular customers, providers of digital access and data services, microwave and satellite carriers, wireless telecommunications providers, private networks owned by large end-users, and telecommunications management companies. These and other firms may enter the markets where we focus our sales efforts. Many of our existing and potential competitors have financial and other resources far greater than our own. In addition, the trend toward mergers and strategic alliances in the communications industry may strengthen some of our competitors, which could put us at a significant competitive disadvantage. We May Not Succeed in Developing or Making a Profit from Wireless Services. Our proposal to offer wireless services involves a high degree of risk and will impose significant S-13 demands on our management and financial resources. Developing wireless services may require us to, among other things, spend substantial time and money to acquire, build and test a wireless infrastructure and enter into roaming arrangements with wireless operators in other markets. We may not succeed in developing wireless services. Even if we spend substantial amounts to develop wireless services, we may not make a profit from wireless operations. Our ability to successfully offer wireless services will also depend on a number of factors beyond our control, including: . changes in communications service rates charged by other companies . changes in the supply and demand for wireless services due to competition with other wireline and wireless operators in the same geographic area . changes in the federal, state or local regulatory requirements affecting the operation of wireless systems . changes in wireless technologies that could render obsolete the technology and equipment we choose for our wireless services Competition in the Wireless Telecommunications Industry Could Make it Harder for Us to Successfully Offer Wireless Services. The wireless telecommunications industry is experiencing increasing competition and significant technological change. This will make it harder for us to gain a share of the wireless communications market. We expect up to eight wireless competitors in each of our target wireless markets. We could face additional competition from mobile satellite services. Many of our potential wireless competitors have financial and other resources far greater than our own and have more experience testing new or improved products and services. In addition, several wireless competitors operate or plan to operate, wireless telecommunications systems that encompass most of the United States, which could give them a significant competitive advantage, particularly if we only offer regional wireless services. The Success of Our Communications Services Will Depend on Our Ability to Keep Pace with Rapid Technological Changes in Our Industry. Communications technology is changing rapidly. These changes influence the demand for our services. We need to be able to anticipate these changes and to develop new and enhanced products and services quickly enough for the changing market. This will determine whether we can continue to increase our revenues and number of subscribers and be competitive. Failure to adapt to these changes may adversely affect our business. The Loss of Key Personnel Could Weaken Our Technical and Operational Expertise, Delay Our Introduction of New Services or Entry into New Markets and Lower the Quality of Our Service. We may not be able to attract, develop, motivate and retain experienced and innovative personnel. There is intense competition for qualified personnel in our business. The loss of the services of key personnel, or the inability to attract additional qualified personnel, could cause us to make less successful strategic decisions, which could hinder the introduction of new services or the entry into new markets. We could also be less prepared for technological or marketing problems, which could reduce our ability to serve our customers and lower the quality of our services. As a result, our financial condition could worsen. Our future success depends on the continued employment of our senior management team, particularly Clark E. McLeod, our Chairman and Chief Executive Officer, and Stephen C. Gray, our President and Chief Operating Officer. We do not have term employment agreements with these employees. Failure to Obtain and Maintain Necessary Permits and Rights-of-Way Could Delay Installation of Our Networks and Interfere with Our Operations. To obtain access to rights-of-way needed to install our fiber optic cable, we must reach agreements with state highway authorities, local governments, transit authorities, local telephone companies, other utilities, railroads, long distance carriers and other parties. The failure to obtain or maintain any rights-of-way could delay our planned network expansion, interfere with our operations and S-14 adversely affect our business. For example, if we lose access to a right-of- way, we may need to spend significant sums to remove and relocate our facilities. Government Regulation May Increase Our Cost of Providing Services, Slow Our Expansion into New Markets and Subject Our Services to Additional Competitive Pressures. Our facilities and services are subject to federal, state and local regulation. The time and expense of complying with these regulations could slow down our expansion into new markets, increase our costs of providing services and subject them to additional competitive pressures. One of the primary purposes of the Telecommunications Act of 1996 was to open the local telephone services market to competition. While this has presented us with opportunities to enter local telephone markets, it also has provided important benefits to the existing local telephone companies, such as the ability, under specified conditions, to provide out-of-region long distance service to customers in their respective regions. In addition, we need to obtain and maintain licenses, permits and other regulatory approvals in connection with some of our services. Any of the following could adversely affect our business: . failure to maintain proper federal and state tariffs . failure to maintain proper state certifications . failure to comply with federal, state or local laws and regulations . failure to obtain and maintain required licenses and permits . burdensome license or permit requirements to operate in public rights-of- way . burdensome or adverse regulatory requirements Our Management and Principal Stockholders Can Control McLeodUSA and May Have Different Interests Than Those of Other Stockholders. As of July 1, 1999, Interstate Energy Corporation, M/C Investors L.L.C., Media/Communications Partners III Limited Partnership, Richard A. Lumpkin and various trusts for the benefit of his family, Clark and Mary McLeod, and our directors and executive officers beneficially owned approximately 40% of our outstanding Class A common stock. These stockholders can collectively control management policy and may be able to control corporate actions requiring a stockholder vote, including election of the board of directors. Conflicts of interest may arise between the interests of these stockholders and our other stockholders. For example, the fact that these stockholders hold so much Class A common stock could make it more difficult for a third party to acquire us. You should expect these stockholders to resolve any conflicts in their favor. Computer Systems May Malfunction and Interrupt Our Services if We and Our Suppliers Do Not Attain Year 2000 Readiness. We and our major suppliers of communications services and network elements rely greatly on computer systems and other technological devices. These may not be capable of recognizing January 1, 2000 or subsequent dates. This problem could cause any or all of our systems or services to malfunction or fail. We are reviewing our computer systems and programs and other technological devices to determine which are not capable of recognizing the Year 2000 and to verify system readiness for the millennium date. The review covers all of our operations and is centrally managed. This review may not be sufficient, however, to prevent interruptions to our systems and services. Some of our critical operations and services depend on other companies. For example, we depend on the existing local telephone companies, primarily the regional Bell operating companies, to provide most of our local and some of our long distance services. To the extent U S WEST, Ameritech or Southwestern Bell fail to address Year 2000 issues which might interfere with their ability to fulfill their obligations to us, it could interfere with our operations. If we, our major vendors, our material service providers or our customers fail to address Year 2000 issues in a timely manner, our business, results of operations and financial condition could be adversely affected. S-15 Secondary Sales of Our Class A Common Stock in the Public Market Could Adversely Affect Our Stock Price. We cannot assure you that the market price of our Class A common stock will not fluctuate or decline significantly in the future as a consequence of sales by existing stockholders. Accordingly, there can be no assurance that the market price of the Class A common stock will exceed the Conversion Price of the Series A preferred stock. As of July 1, 1999, after giving effect to the two-for-one stock split announced June 30, 1999, there were outstanding: . 150.4 million shares of our Class A common stock . options to purchase 26.7 million shares of our Class A common stock . 62.8 million shares of Class A common stock owned by Interstate Energy, M/C Investors, Media/Communications Partners III, Richard A. Lumpkin and various trusts for the benefit of his family, Clark and Mary McLeod, and our directors and executive officers, all of which were eligible for sale in the public market either in accordance with Rule 144 under the Securities Act of 1933 or otherwise. Payment of Dividends in Shares of Class A Common Stock May Not Result in Stated Dividend Yield. In the event dividends are paid in shares of Class A common stock, the number of shares of Class A common stock to be issued on each dividend payment date will be determined by dividing the total dividend to be paid on each share of Series A preferred stock by the Discounted Current Market Value, as defined under "Description of the Series A Preferred Stock-- Dividends." If the market price of Class A common stock applicable in determining the Discounted Current Market Value is higher than the market price for the Class A common stock on the dividend payment date and you sell your Class A common stock at such lower price, your actual dividend yield could be lower than the stated dividend yield on the Series A preferred stock. In addition, you are likely to incur commissions and other transaction costs in connection with the sale of such Class A common stock. The Series A Preferred Stock is Subordinated to All Our Liabilities. In the event of our bankruptcy, liquidation or winding-up, our assets will be available to pay obligations on the Series A preferred stock only after all indebtedness and other liabilities, including our existing senior notes, and all subsequent series of preferred stock which rank senior to the Series A preferred stock, have been paid. There may not be sufficient assets remaining to pay amounts due on any or all of the Series A preferred stock then outstanding. As of March 31, 1999, the Series A preferred stock would have been junior in right of payment to our $1.8 billion of long-term debt, of which $325.0 million is attributed to our subsidiaries. Purchasers of Our Series A Preferred Stock Who Convert Their Shares to Class A Common Stock Will Incur Immediate Dilution. Persons purchasing Series A preferred stock who convert their shares into Class A common stock will incur immediate net tangible book value dilution of $ per share, assuming that they converted all of their shares of Series A preferred stock on March 31, 1999. Our existing stockholders will receive an immediate increase in net tangible book value of $ per share. The per share amounts give effect to the two-for-one stock split announced June 30, 1999. Our Series A Preferred Stock is a New Issue of Securities and Has Never Been Publicly Traded. Prior to this offering there has been no trading market for the Series A preferred stock. We will seek to have the Series A preferred stock listed for quotation on the Nasdaq National Market; however, no assurance can be given as to the liquidity of, or trading market for, the Series A preferred stock. If an active market for the Series A preferred stock fails to develop or be sustained, the trading price of such Series A preferred stock could be materially adversely affected. S-16 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus supplement and accompanying prospectus and the information incorporated by reference in them include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans, our future capital requirements, forecasted demographic and economic trends relating to our industry, our ability to complete acquisitions, to realize anticipated cost savings and other benefits from acquisitions and to recover acquisition-related costs, and similar matters are forward-looking statements. These statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the statements. The forward- looking information is based on various factors and was derived using numerous assumptions. In some cases, you can identify these statements by our use of forward-looking words such as "may," "will," "should," "anticipate," "estimate," "expect," "plan," "believe," "predict," "potential" or "intend." You should be aware that these statements only reflect our predictions. Actual events or results may differ substantially. Important factors that could cause our actual results to be materially different from our expectations include those discussed in this prospectus supplement under the caption "Risk Factors." We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. S-17 USE OF PROCEEDS We will use the net proceeds from the sale of Series A preferred stock along with funds available from prior offerings and from other financing sources: (1) to fund development and construction costs of our fiber optic network, including intra-city fiber optic networks, and construction, acquisition, development and improvement of telecommunications assets; (2) to fund market expansion activities in existing and new markets as well as acquisitions, joint ventures and strategic alliances; (3) to fund development, construction and operations necessary to include wireless services as part of our communications services; and (4) for additional working capital and other general corporate purposes, including funding operating deficits and net losses. DIVIDEND POLICY We have never declared or paid any cash dividends on our capital stock and do not anticipate paying cash dividends in the foreseeable future. The indentures that govern the terms of our debt restrict our ability to pay cash dividends. Future dividends on our Class A common stock, if any, will be at the discretion of our board of directors and will depend upon, among other things, our operations, capital requirements and surplus, general financial condition, contractual restrictions in financing agreements and such other factors as our board of directors may deem relevant. Although we have the option under the Certificate of Designations of the Series A preferred stock of paying dividends in cash, because of the restrictions contained in our indentures, we do not expect to pay dividends in cash in the foreseeable future. Rather, we expect to pay such dividends in shares of our Class A common stock. MARKET PRICE OF CLASS A COMMON STOCK Our Class A common stock is quoted on the Nasdaq National Market under the symbol "MCLD." The following table sets forth for the periods indicated the high and low sales price per share of our Class A common stock as reported by the Nasdaq National Market. All prices in the following table have been adjusted to reflect the two-for-one stock split effective July 26, 1999.
1997 High Low ---- ------- ------ First Quarter............................................. $14.375 $8.688 Second Quarter ........................................... 17.125 8.188 Third Quarter............................................. 20.000 14.313 Fourth Quarter............................................ 20.875 16.000 1998 ---- First Quarter............................................. 23.188 15.250 Second Quarter ........................................... 24.156 19.000 Third Quarter............................................. 20.063 10.688 Fourth Quarter............................................ 19.250 7.625 1999 ---- First Quarter............................................. 22.125 15.188 Second Quarter............................................ 30.938 21.188 Third Quarter (through August , 1999)....................
On August , 1999, the last reported sale price of our Class A common stock on the Nasdaq National Market was $ per share. S-18 CAPITALIZATION The following table shows our capitalization as of March 31, 1999, (1) on a historical basis as adjusted for the stock split announced June 30, 1999 and (2) as adjusted to reflect the sale of 800,000 shares of our Series A preferred stock and the application of the proceeds from this offering, net of our estimated offering expenses and the underwriting discount. You should read this table together with our consolidated financial statements and related notes and the other financial data appearing elsewhere, or incorporated by reference, into this prospectus supplement and the accompanying prospectus.
March 31, 1999 -------------------------- As Historical adjusted ---------- ---------- (dollars in thousands) Cash and cash equivalents........................... $ 415,343 $ 802,343 Investments in available-for-sale securities........ 278,676 278,676 ---------- ---------- Total cash, cash equivalents and investments in available-for-sale securities.................. 694,019 1,081,019 ========== ========== Short-term debt..................................... 10,276 10,276 Long-term debt...................................... 1,776,475 1,776,475 ---------- ---------- Stockholders' equity: Class A common stock, $.01 par value, 250,000,000 shares authorized; 148,881,788 shares issued and outstanding, actual.............................. 1,489 1,489 Class B common stock, convertible, $.01 par value, 22,000,000 shares authorized; none issued or outstanding...................................... -- -- Series A preferred stock, convertible, $.01 par value, 920,000 shares authorized; 800,000 shares issued and outstanding, as adjusted.............. -- 8 Additional paid-in capital........................ 1,078,307 1,465,299 Accumulated deficit............................... (300,868) (300,868) Accumulated other comprehensive income............ 6,487 6,487 ---------- ---------- Total stockholders' equity...................... 785,415 1,172,415 ---------- ---------- Total capitalization............................ $2,572,166 $2,959,166 ========== ==========
S-19 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The information in the following table is based on historical financial information included in our prior SEC filings, including our annual report on Form 10-K for the fiscal year ended December 31, 1998. The following summary financial information should be read in connection with this historical financial information, including the notes which accompany such financial information. This historical financial information is considered a part of this document. See "Where You Can Find More Information." Our audited historical financial statements as of December 31, 1998 and 1997, and for each of the three years ended December 31, 1998 were audited by Arthur Andersen LLP, independent public accountants. The information in the table on the following page reflects consolidated financial information for the following companies we have acquired:
Acquired Company Date Acquired ---------------- ------------- MWR Telecom, Inc. April 28, 1995 Ruffalo, Cody & Associates, Inc. July 15, 1996 Telecom^USA Publishing Group Inc. September 20, 1996 Consolidated Communications, Inc. September 24, 1997 Ovation Communications, Inc. March 31, 1999
The operations statement data and other financial data in the table include the operations of these companies beginning on the dates they were acquired. The balance sheet data in the table include the financial position of these companies at the end of the periods presented, beginning with the period in which they were acquired. These acquisitions affect the comparability of the financial data for the periods presented. On June 30, 1999, we announced that our board of directors had declared a two-for-one stock split to be effected in the form of a stock dividend. The record date for the stock split was July 12, 1999. Stockholders of record at the market close on that date will receive one additional share of our Class A common stock for each share held. Distribution of the additional shares took place on July 26, 1999. All information in the following table has been adjusted to reflect the two-for-one stock split. The pro forma information presented in the operations statement data and other financial data in the table reflects the operations of Ovation as if the Ovation acquisition had occurred on January 1, 1998 and the pro forma information in the balance sheet data in the table includes Ovation's financial position as of December 31, 1998. The pro forma information presented in the operations statement data and other financial data in the table includes the effects of the issuance of $300 million principal amount of our 8 3/8% senior notes in March 1998, $300 million principal amount of our 9 1/2% senior notes in October 1998 and $500 million principal amount of the 8 1/8% notes in February 1999 as if they had occurred at the beginning of 1998 and the pro forma information presented in the balance sheet data in the table includes the effects of the issuance of the 8 1/8% notes as if it had occurred at the end of 1998. The ratio of earnings to fixed charges and preferred stock dividends is calculated as follows: earnings consist of net loss before income taxes plus fixed charges (excluding capitalized interest). Fixed charges consist of interest on all debt (including capitalized interest), amortization of debt discount and deferred loan costs and the portion of rental expense that is representative of the interest component of rental expense (deemed to be one- third of rental expense which management believes is a reasonable approximation of the interest component). Preferred stock dividends means the amount of pre- tax earnings that is required to pay the dividends on outstanding preferred stock. We had no preferred stock outstanding during any of the periods presented. For each of the years ended December 31, 1994, 1995, 1996, 1997 and 1998, earnings were insufficient to cover fixed charges by $11.4 million, $11.4 million, $22.6 million, $84.4 million and $135.5 million, respectively. For the three months ended March 31, 1998 and 1999, earnings were insufficient to cover fixed charges by $32 million and $51.7 million, respectively. On a pro forma basis, earnings would not have been sufficient to cover fixed charges by $188.6 and $61.7 million for the year ended December 31, 1998 and the three months ended March 31, 1999, respectively. (table begins on the next page) S-20 Selected Consolidated Financial and Operating Data (In thousands, except per share and operating data)
Year Ended December 31, Three Months Ended March 31, ------------------------------------------ ----------------------------------- Pro Forma Pro Forma 1996 1997 1998 1998 1998 1999 1999 -------- -------- --------- ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Operations Statement Data: Revenue................ $ 81,323 $267,886 $ 604,146 $ 625,181 $134,331 $181,109 $200,805 -------- -------- --------- --------- -------- -------- -------- Operating expenses: Cost of service....... 52,624 151,190 323,208 329,527 75,045 92,459 99,797 Selling, general and administrative....... 46,044 148,158 260,931 274,420 58,768 79,811 90,691 Depreciation and amortization......... 8,485 33,275 89,107 109,720 19,431 35,110 41,680 Other................. 2,380 4,632 5,575 5,575 1,900 -- -- -------- -------- --------- --------- -------- -------- -------- Total operating expenses............. 109,533 337,255 678,821 719,242 155,144 207,380 232,168 -------- -------- --------- --------- -------- -------- -------- Operating loss......... (28,210) (69,369) (74,675) (94,061) (20,813) (26,271) (31,363) Interest income (expense), net........ 5,369 (11,967) (52,234) (85,898) (10,141) (21,204) (26,074) Other non-operating income................ 495 1,426 1,997 1,997 687 (1) (1) Income taxes........... -- -- -- -- -- -- -- -------- -------- --------- --------- -------- -------- -------- Net loss............... $(22,346) $(79,910) $(124,912) $(177,962) $(30,267) $(47,476) $(57,438) ======== ======== ========= ========= ======== ======== ======== Loss per common share.. $ (.28) $ (.73) $ (.99) $ (1.30) $ (.24) $ (.36) $ (.40) ======== ======== ========= ========= ======== ======== ======== Weighted average common shares outstanding.... 81,012 109,948 125,614 136,808 124,454 132,242 143,436 ======== ======== ========= ========= ======== ======== ======== Ratio of earnings to fixed charges and preferred stock dividends............. -- -- -- -- -- -- -- ======== ======== ========= ========= ======== ======== ======== March 31, December 31, 1999 ------------------------------ ----------- 1996 1997 1998 Actual -------- ---------- ---------- ----------- (unaudited) Balance Sheet Data: Current assets..................... $224,401 $ 517,869 $ 793,192 $ 974,218 Working capital.................... $185,968 $ 378,617 $ 613,236 $ 740,191 Property and equipment, net........ $ 92,123 $ 373,804 $ 629,746 $ 828,591 Total assets....................... $452,994 $1,345,652 $1,925,197 $ 2,836,380 Long-term debt less current maturities........................ $ 2,573 $ 613,384 $1,245,170 $ 1,776,475 Stockholders' equity............... $403,429 $ 559,379 $ 462,806 $ 785,415
Year Ended December 31, Three Months Ended March 31, ---------------------------------------- ----------------------------------- Pro Forma Pro Forma 1996 1997 1998 1998 1998 1999 1999 -------- -------- -------- ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Other Financial Data: Capital expenditures, including business acquisitions.......... $173,782 $601,137 $339,660 $ 739,497 $ 48,930 $ 538,897 $ 560,894 EBITDA(1).............. $(17,345) $(31,462) $ 20,007 $ 21,234 $ 518 $ 8,839 $ 10,317
December 31, March 31, ---------------------- --------- 1996 1997 1998 1999 ------ ------- ------- --------- Operating Data: (unaudited) Local lines.................................... 65,400 282,600 397,600 494,700 Cities and towns served........................ 120 227 269 408 Central offices/switches....................... -- 366 415 488 Route miles.................................... 2,352 4,908 7,120 7,654 Employees...................................... 2,077 4,941 5,300 6,109
- -------- (1) EBITDA consists of operating loss before depreciation, amortization and other nonrecurring operating expenses. We have included EBITDA data because it is a measure commonly used in the industry. EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered an alternative to net income as a measure of performance or to cash flows as a measure of liquidity. S-21 PRO FORMA FINANCIAL DATA The following unaudited pro forma financial information has been prepared to give effect to: . the issuance of $300 million aggregate principal amount of our 8 3/8% senior notes in March 1998 . the issuance of $300 million aggregate principal amount of our 9 1/2% senior notes in October 1998 . the issuance of $500 million aggregate principal amount of our 8 1/8% senior notes in February 1999 . our acquisition of Ovation Communications, Inc. in March 1999 The Unaudited Pro Forma Condensed Consolidated Statements of Operations reflects the Ovation acquisition using the purchase method of accounting, and assumes that the Ovation acquisition and the issuance of the 8 3/8% senior notes, the 9 1/2% senior notes and the 8 1/8% senior notes were consummated at the beginning of 1998. The unaudited pro forma financial information is derived from and should be read in conjunction with our consolidated financial statements, Ovation's consolidated financial statements and the related notes thereto incorporated by reference in this prospectus. The pro forma adjustments are based upon available information and assumptions that management believes to be reasonable. Depreciation and amortization were adjusted to include amortization of intangibles acquired in the Ovation acquisition. The acquired intangibles will be amortized over periods ranging from 3 to 30 years. For purposes of this pro forma presentation, the issuance of the 8 3/8% senior notes, the 9 1/2% senior notes and the 8 1/8% senior notes are collectively referred to as the "Notes Offerings." The adjustments for the Ovation acquisition reflect the preliminary allocation of the net purchase price of Ovation to the assets of Ovation, including intangible assets, and record the payment of $121.3 million in cash and the issuance of 11,193,234 shares of our Class A common stock (as adjusted for the two-for-one stock split described below) valued at $16.88 per share (as adjusted for the two-for-one stock split described below). The value of $16.88 per share represents the average closing price of our Class A common stock on the Nasdaq National Market for the eleven trading days beginning five days prior to the date the agreement was announced, January 7, 1999, and ending five days after such announcement. The adjustments include the elimination of the Ovation equity components, including common stock, treasury stock, other capital and retained deficit. On June 30, 1999, we announced that our board of directors had declared a two-for-one stock split to be effected in the form of a stock dividend. The record date for the stock split was July 12, 1999. Stockholders of record at the market close on that date will receive one additional share of our Class A common stock for each share held. Distribution of the additional shares took place on July 26, 1999. All information in the Pro Forma Financial Data has been adjusted to reflect the two-for-one stock split. We have provided this unaudited pro forma financial data for informational purposes only. This data does not necessarily indicate the operating results that would have occurred had the Ovation acquisition been consummated at the beginning of 1998, nor does it necessarily indicate future operating results or financial position. S-22 McLeodUSA Incorporated and Subsidiaries Unaudited Pro Forma Condensed Consolidated Statements of Operations (In thousands, except per share information)
Year Ended December 31, 1998 ---------------------------------------------------------------- Adjustments Pro Forma Adjustments for the for the for the Notes Notes Ovation McLeodUSA Offerings Offerings Ovation Acquisition Total --------- ----------- --------- ------- ----------- --------- Operations Statement Data: Revenue............................... $ 604,146 $ -- $ 604,146 $21,035 $ -- $ 625,181 --------- -------- --------- ------- -------- --------- Operating Expenses: Cost of service...................... 323,208 -- 323,208 6,319 -- 329,527 Selling, general and administrative.. 260,931 -- 260,931 13,489 -- 274,420 Depreciation and amortization........ 89,107 -- 89,107 5,383 15,230 109,720 Other................................ 5,575 -- 5,575 -- -- 5,575 --------- -------- --------- ------- -------- --------- Total operating expenses............ 678,821 -- 678,821 25,191 15,230 719,242 --------- -------- --------- ------- -------- --------- Operating loss........................ (74,675) -- (74,675) (4,156) (15,230) (94,061) Interest expense, net................. (52,234) (32,056) (84,290) (1,608) -- (85,898) Other non-operating income............ 1,997 -- 1,997 -- -- 1,997 Income taxes.......................... -- -- -- -- -- -- --------- -------- --------- ------- -------- --------- Net loss............................. $(124,912) $(32,056) $(156,968) $(5,764) $(15,230) $(177,962) ========= ======== ========= ======= ======== ========= Loss per common share................. $ (0.99) $ (1.25) $ (1.30) ========= ========= ========= Weighted average common shares outstanding.......................... 125,614 125,614 136,808 ========= ========= ========= Other Financial Data: EBITDA(1)............................. $ 20,007 $ -- $ 20,007 $ 1,227 $ -- $ 21,234
- -------- (1) EBITDA consists of operating loss before depreciation, amortization and other nonrecurring operating expenses. We have included EBITDA data because it is a measure commonly used in the industry. EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered an alternative to net income as a measure of performance or to cash flows as a measure of liquidity. S-23 McLeodUSA Incorporated and Subsidiaries Unaudited Pro Forma Condensed Consolidated Statements of Operations (In thousands, except per share information)
Three Months Ended March 31, 1999 --------------------------------------------------------------- Adjustments Pro Adjustments for the Forma for for the Notes the Notes Ovation McLeodUSA Offerings Offerings Ovation Acquisition Total --------- ----------- --------- ------- ----------- -------- Operations Statement Data Revenue................ $181,109 $ -- $181,109 $19,696 $ -- $200,805 -------- ------- -------- ------- ------- -------- Operating expenses: Cost of service....... 92,459 -- 92,459 7,338 -- 99,797 Selling, general and administrative....... 79,811 -- 79,811 10,880 -- 90,691 Depreciation and amortization......... 35,110 -- 35,110 2,829 3,741 41,680 Other................. -- -- -- -- -- -- -------- ------- -------- ------- ------- -------- Total operating expenses............ 207,380 -- 207,380 21,047 3,741 232,168 -------- ------- -------- ------- ------- -------- Operating loss........ (26,271) -- (26,271) (1,351) (3,741) (31,363) Interest expense, net.................. (21,204) (2,487) (23,691) (2,383) -- (26,074) Other non-operating income............... (1) -- (1) -- -- (1) Income taxes.......... -- -- -- -- -- -- -------- ------- -------- ------- ------- -------- Net loss.............. $(47,476) $(2,487) $(49,963) $(3,734) $(3,741) $(57,438) ======== ======= ======== ======= ======= ======== Loss per common share................ $ (0.36) $ (0.38) $ (0.40) ======== ======== ======== Weighted average common shares outstanding.......... 132,242 132,242 143,436 ======== ======== ======== Other Financial Data: EBITDA(1).............. $ 8,839 $ -- $ 8,839 $ 1,478 $ -- $ 10,317
- -------- (1) EBITDA consists of operating loss before depreciation, amortization and other nonrecurring operating expenses. We have included EBITDA data because it is a measure commonly used in the industry. EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered an alternative to net income as a measure of performance or to cash flows as a measure of liquidity. S-24 DESCRIPTION OF THE SERIES A PREFERRED STOCK The following is a summary of certain provisions of the Certificate of Designations and the Series A preferred stock. Copies of the Certificate of Designations and the form of Series A preferred stock share certificate are available upon request at our address set forth under "Where You Can Find More Information." This summary is not intended to be complete and is subject to, and is qualified in its entirety by reference to, the Certificate of Designations. The definitions of certain capitalized terms used in the following summary that are not defined herein are defined in the Certificate of Designations. For purposes of this description of the Series A preferred stock, the words "McLeodUSA," "we," "our" or "us" refer to McLeodUSA Incorporated and do not include its subsidiaries. General At the consummation of this offering, we will issue 800,000 shares of our % Series A Cumulative Convertible Preferred Stock, $0.01 par value per share, designated as " % Series A Cumulative Convertible Preferred Stock." When issued, the Series A preferred stock will be validly issued, fully paid and nonassessable. The holders of the Series A preferred stock will have no preemptive or preferential right to purchase or subscribe to stock, obligations, warrants or any other of our securities of any class. We will seek to have the Series A preferred stock approved for listing on the Nasdaq National Market. Ranking The Series A preferred stock will, with respect to dividend rights and rights on liquidation, dissolution or winding-up, rank: . junior to all our existing and future debt obligations . junior to "Senior Stock," which is each class of our capital stock or series of preferred stock established after the Series A preferred stock by our board of directors that has terms which expressly provide that such class or series will rank senior to the Series A preferred stock . on a parity with "Parity Stock," which is each class of capital stock or series of preferred stock established after the Series A preferred stock by our board of directors that has terms which expressly provide that such class or series will rank on a parity with the Series A preferred stock . senior to "Junior Stock," which is all classes of our common stock, including our Class A common stock and Class B common stock, and any other class of our capital stock established after the Series A preferred stock by our board of directors whose terms do not expressly provide that such class or series ranks senior to, or on a parity with, our Series A preferred stock While any shares of Series A preferred stock are outstanding, we may not authorize, create or increase the authorized amount of any class or series of Senior Stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding-up without the consent of the holders of at least 66 2/3% of the outstanding shares of Series A preferred stock. We may, however, without the consent of any holder of Series A preferred stock, create additional classes of capital stock, increase the authorized number of shares of preferred stock or issue series of Parity Stock or Junior Stock. See "--Voting Rights." Dividends Subject to the rights of any holders of Senior Stock and Parity Stock, holders of shares of Series A preferred stock will be entitled to receive, when, as and if declared by the board of directors out of funds of McLeodUSA legally available for payment, cumulative dividends at the annual rate of % per share on the liquidation preference thereof of $500 per share of Series A preferred stock (equivalent to $ per share S-25 and of each year commencing , 1999, at such annual rate and shall accrue from the most recent date as to which dividends shall have been paid or, if no dividends have been paid, from the date of the original issuance of the Series A preferred stock. Each such dividend will be payable to holders of record as they appear on our stock records at the close of business on the record date immediately preceding such quarterly dividend payment date, which record dates will be established by the board of directors but, in any event, will be not more than 60 days nor less than 15 days before the respective quarterly dividend payment dates. Dividends will be cumulative from such quarterly dividend payment date, whether or not in any dividend period or periods there shall be funds of McLeodUSA legally available for the payment of such dividends. Accumulations of dividends on shares of Series A preferred stock will not bear interest. Dividends payable on the Series A preferred stock for any period greater or less than a full quarterly dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Any dividend on the Series A preferred stock shall be, at the option of McLeodUSA, payable (1) in cash or (2) through the issuance of shares of our Class A common stock. If we pay dividends in shares of Class A common stock, the number of shares of Class A common stock to be issued on each dividend payment date will be determined by dividing the total dividend to be paid on each share of Series A preferred stock by the applicable Discounted Current Market Value (as defined below) of the Class A common stock. No fractional shares of Class A common stock will be issued as a dividend on the Series A preferred stock. The transfer agent is authorized and directed in the Certificate of Designations to aggregate any fractional shares of Class A common stock that are issued as dividends, sell them at the best available price and distribute the proceeds to the holders of the Series A preferred stock in proportion to their respective interests. We will pay the expenses of the transfer agent with respect to such sale, including brokerage commissions. If we are not entitled to pay cash for fractional shares, we will pay cash to the holders of the Series A preferred stock for the fractional shares when we become legally and contractually able to pay such cash. All shares of Class A common stock distributed on the related dividend payment date in payment of dividends on the Series A preferred stock will be freely transferable without restriction under the Securities Act. The "Discounted Current Market Value" of the Class A common stock with respect to a dividend payment date means the product of (x) 97% and (y) the "Market Average Value" as of the record date relating to such dividend payment date. The "Market Average Value" will equal the average of the daily closing prices of the Class A common stock for the five consecutive Trading Days ending on (and including) the fourth Trading Day prior to such dividend payment date. The closing price for each Trading Day will be the last sales price on the Nasdaq National Market, or the principal securities exchange or other securities market on which the Class A common stock is then being traded. "Trading Day" means any day on which the Class A common stock is traded for any period on the Nasdaq National Market (or on the principal securities exchange or other securities market on which the Class A common stock is then being traded). No dividend will be declared or paid upon, or any sum set apart for the payment of dividends upon, any outstanding share of the Series A preferred stock with respect to any dividend period unless all dividends for all preceding dividend periods have been declared and paid, or declared and a sufficient sum set apart for the payment of such dividend, upon all outstanding shares of Series A preferred stock. We will not (1) declare, pay or set apart funds for the payment of any dividend or other distribution with respect to any Junior Stock or (2) redeem, purchase or otherwise acquire for consideration any Junior Stock through a sinking fund or otherwise, unless (A) all accrued and unpaid dividends with respect to the Series A preferred stock and any Parity Stock at the time such dividends are payable have been paid or funds have been set apart for payment of such dividends and (B) sufficient funds have been paid or set apart for the payment of the dividend for the current dividend period with respect to the Series A preferred stock and any Parity Stock. No dividend will be declared or paid on any Parity Stock unless full cumulative dividends have been paid on the Series A preferred stock for all prior dividend periods; provided, however, if accrued dividends on the Series A preferred stock for all prior dividend periods have not been paid in full, then any dividend declared for any dividend period on the Series A preferred stock and on any Parity Stock will be declared ratably in proportion to accrued and unpaid dividends on the Series A preferred stock and such Parity Stock. S-26 Notwithstanding anything herein to the contrary, we may declare and pay dividends on Parity Stock or Junior Stock which are payable solely in shares of Parity Stock or Junior Stock (in the case of Parity Stock) or of Junior Stock (in the case of Junior Stock) or by the increase in the liquidation value of Parity Stock or Junior Stock, as applicable, or repurchase, redeem or otherwise acquire Junior Stock in exchange for Junior Stock and Parity Stock in exchange for Parity Stock or Junior Stock. For the foreseeable future, we intend to pay all dividends on the Series A preferred stock (except with respect to cash paid in lieu of fractional shares) in shares of our Class A common stock. If, in the future, we were to consider paying cash dividends on the Series A preferred stock we would have to comply with the restrictions contained in the indentures governing our outstanding indebtedness. See "Risk Factors--We Are Restricted from Paying Cash Dividends." Redemption Provisional Redemption We may redeem Series A preferred stock, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each holder's registered address, at a redemption price of % of the liquidation preference, plus accumulated and unpaid dividends, if any, whether or not declared (including a prorated dividend for any partial dividend period), to the redemption date (the "Provisional Redemption Date"), on or after , 2001, but prior to , 2002, if the closing price of our Class A common stock equals or exceeds 150% of the Conversion Price for at least 20 Trading Days within any 30 Trading Day period. This type of redemption is a "Provisional Redemption." If we undertake a Provisional Redemption, the holders of shares of Series A preferred stock that are called for redemption also will receive a payment (referred to as the "additional payment") in an amount equal to the present value of the aggregate value of the dividends that would thereafter have been payable on the Series A preferred stock (whether or not such dividends have been declared) for the period from the Provisional Redemption Date to , 2002 (which period is referred to as the "additional period"). The present value will be calculated using the bond equivalent yield on U.S. Treasury notes or bills having a term nearest in length to that of the additional period as of the day immediately preceding the date on which a notice of Provisional Redemption is mailed. If we choose to pay all or a portion of the provisional redemption price (including any additional payment) through the delivery of shares of Class A common stock, the number of shares of Class A common stock that we will deliver for each share of Series A preferred stock will be determined by dividing the portion of the provisional redemption price (including any additional payment) that is to be paid in shares of Class A common stock by the Provisional Redemption Value (as defined below) of the Class A common stock. No fractional shares of Class A common stock will be delivered in connection with a Provisional Redemption. The transfer agent is authorized and directed in the Certificate of Designations to aggregate any fractional shares of Class A common stock that would otherwise be issued in connection with the Provisional Redemption, sell them at the best available price and distribute the proceeds to the holders of the Series A preferred stock in proportion to their respective interests. We will pay the expenses of the transfer agent with respect to such sale, including brokerage commissions. If we are not entitled to pay cash for fractional shares, we will pay cash to the holders of the Series A preferred stock for the fractional shares when we become legally and contractually able to pay such cash. The "Provisional Redemption Value" of the Class A common stock with respect to a Provisional Redemption Date means the product of (y) 97% and (z) the average of the daily closing prices of the Class A common stock for the five consecutive Trading Days ending on (and including) the fourth Trading Day preceding the Provisional Redemption Date. The closing price for each Trading Day will be the last sales price on the Nasdaq National Market or the principal securities exchange or other securities market on which the Class A common stock is then being traded. S-27 We may effect any Provisional Redemption, in whole or in part, at our option, by payment of the redemption price, including any additional payment, in cash, through delivery of shares of Class A common stock or a combination thereof, subject to applicable law, by delivering notice to the holders of the Series A preferred stock not less than 30 nor more than 60 days prior to the Provisional Redemption Date. Optional Redemption Except under the foregoing circumstances for a Provisional Redemption, and except under certain circumstances set forth in our certificate of incorporation (as described below), we may not redeem the Series A preferred stock prior to , 2002. Thereafter, each share of the Series A preferred stock may be redeemed, at our option, in whole or in part, at any time or from time to time, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each holder's registered address, at the following redemption prices, plus accumulated and unpaid dividends, if any, to the date fixed for redemption (the "Optional Redemption Date") (including a prorated dividend for any partial dividend period), payable in cash. This type of redemption is an "Optional Redemption." If redeemed during the 12-month period commencing on (or, if such date is not a date on which the Nasdaq National Market is open for business, then on the next day the Nasdaq National Market is open for business) of the years set forth below, the Optional Redemption prices shall be:
Period Redemption Price ------ ---------------- 2002..................................................... $ 2003..................................................... 2004..................................................... 2005 and thereafter...................................... $500.00
In the case of any partial Provisional Redemption or Optional Redemption, selection of the Series A preferred stock for redemption will be made by us in compliance with the requirements of the principal national securities exchange, if any, on which the Series A preferred stock is listed, or if the Series A preferred stock is not listed on a national securities exchange, on a pro rata basis, by lot or such other method as we, in our sole discretion, deem fair and appropriate; provided, however, that we may redeem all the shares held by holders of fewer than five shares (or all of the shares held by the holders who would hold fewer than five shares as a result of such redemption) as we may determine. If any Provisional Redemption Date or Optional Redemption Date falls after a dividend payment record date and prior to the related dividend payment date, the holders of the Series A preferred stock at the close of business on such record date will be entitled to receive the dividend payable on such shares on the corresponding dividend payment date, notwithstanding the redemption of such shares following such dividend payment record date. Except as provided for in the preceding sentence, no payment or allowance will be made for accrued dividends on any shares of Series A preferred stock called for redemption. Our ability to redeem the Series A preferred stock at our option is limited by the terms of our outstanding indebtedness. We may not be able to redeem the Series A preferred stock unless we simultaneously redeem or repay such indebtedness. Notwithstanding any of the foregoing provisions relating to a Provisional Redemption or an Optional Redemption, our certificate of incorporation provides that we may redeem shares of any class of our capital stock (thus including the Series A preferred stock) to the extent necessary to prevent the loss or secure the reinstatement of any license, operating authority or franchise from any governmental agency. Any redemption of shares of Series A preferred stock under such circumstances will be at the price, and on the other terms and conditions, specified in our certificate of incorporation. These provisions are described in the accompanying prospectus under "Description of Common Stock--Certain Charter and Statutory Provisions-Certain Statutory Provisions." S-28 Liquidation Preference Upon the voluntary or involuntary liquidation, dissolution or winding-up of McLeodUSA, and subject to the rights of the creditors of McLeodUSA and holders of Senior Stock and Parity Stock, each holder of Series A preferred stock will be entitled to be paid, out of the assets of McLeodUSA available for distribution to stockholders, an amount equal to the liquidation preference of $500 per share of Series A preferred stock held by such holder, plus 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 divided payment date to the date fixed for liquidation, dissolution or winding-up) before any distribution is made on any Junior Stock, including our Class A common stock. If, upon any voluntary or involuntary liquidation, dissolution or winding-up of McLeodUSA, the amounts payable with respect to the Series A preferred stock and all other Parity Stock are not paid in full, the holders of the Series A preferred stock and the Parity Stock will share equally and ratably in any distribution of the assets of McLeodUSA in proportion to the respective amounts to which they are entitled. After payment of the full amount of the liquidation preference of the Series A preferred stock, and, if applicable, an amount equal to a prorated dividend, the holders of shares of Series A preferred stock will not be entitled to any further participation in any distribution of the assets of McLeodUSA. However, 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 McLeodUSA nor the consolidation or merger of McLeodUSA with, or into, one or more entities will be deemed to be a liquidation, dissolution or winding-up of McLeodUSA. The Certificate of Designations will not contain any provision requiring funds to be set aside to protect the liquidation preference of the Series A preferred stock even though it is substantially in excess of the par value thereof. Voting Rights The holders of Series A preferred stock, except as otherwise required under Delaware law or as provided in the Certificate of Designations, shall not be entitled to vote on any matter required or permitted to be voted upon by our stockholders. In exercising any such vote, each outstanding share of Series A preferred stock will have one vote (excluding shares of Series A preferred stock held by McLeodUSA or any entity controlled by McLeodUSA, which shares will have no votes). The Certificate of Designations will provide that if dividends on the Series A preferred stock are in arrears and unpaid for six or more dividend periods (whether or not consecutive) then the holders of the outstanding shares of Series A preferred stock, voting separately and as a class together with the holders of any Parity Stock upon which like rights have been conferred and are exercisable, will be entitled to elect to serve on the board of directors the lesser of (x) two additional members to the board of directors or (y) that number of directors constituting at least 25% of the members of the board of directors, and the number of members of the board of directors will be immediately and automatically increased by such number. Such voting rights of the Series A preferred stock will continue until such time as all dividends in arrears on the Series A preferred stock are paid in full, at which time the term of any directors elected pursuant to the provisions of this paragraph (subject to the right of holders of any other preferred stock to elect such directors) shall terminate and the number of directors constituting the board of directors will be immediately and automatically decreased by such number (until the occurrence of any such subsequent event). The Certificate of Designations will also provide that, except as expressly set forth above under "--Ranking," (1) the creation, authorization or issuance of any shares of Junior Stock or Parity Stock, including the designation of a series thereof within the existing class of Series A preferred stock, or (2) the increase or decrease in the amount of authorized capital stock of any class, including any preferred stock, shall not require the consent of the holders of Series A preferred stock and shall not be deemed to affect adversely the rights, preferences, privileges or voting rights of shares of Series A preferred stock. S-29 Conversion Rights Shares of Series A preferred stock will be convertible, in whole or in part, at any time after the issue date, at the option of the holders thereof, into shares of Class A common stock initially at the conversion price of $ per share, subject to adjustment as described below ("Conversion Price"). The right to convert shares of Series A preferred stock called for redemption will terminate at the close of business on the relevant redemption date. We will have the option to convert all of the shares of Series A preferred stock into shares of Class A common stock at the Conversion Price if, on or after , 2002, the closing price of our Class A common stock has equaled or exceeded 135% of the Conversion Price for at least 20 out of 30 consecutive days on which the Nasdaq National Market (or the principal securities exchange or other securities market on which the Class A common stock is then being traded) is open for the transaction of business. Conversion of shares of Series A preferred stock, or a specified portion thereof, may be effected by delivering certificates evidencing such shares, together with written notice of conversion and a proper assignment of such certificates to McLeodUSA or in blank, to the office or agency to be maintained by McLeodUSA for that purpose. Initially, Norwest Shareowner Services will maintain such office. Each conversion will be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of Series A preferred stock shall have been surrendered and notice (and if applicable, payment of an amount equal to the dividends payable on such shares) received by McLeodUSA. McLeodUSA will issue a certificate evidencing the Class A common stock distributed upon conversion, plus payment in lieu of any fractional share of Class A common stock, as soon as reasonably practical after the conversion date. All shares of Class A common stock distributed upon conversion will be freely transferable without restriction under the Securities Act. Holders of shares of Series A preferred stock at the close of business on a dividend payment record date will be entitled to receive the dividend payable on such shares on the corresponding dividend payment date notwithstanding the conversion of such shares following the dividend payment record date and prior to such dividend payment date. However, shares of Series A preferred stock surrendered for conversion during the period between the close of business on any dividend payment record date and the opening of business on the corresponding dividend payment date (except shares converted after the issuance of a notice of redemption with respect to a redemption date during such period, which will be entitled to such dividend) must be accompanied by payment of an amount equal to the dividend payable on such shares on such dividend payment date. A holder of shares of Series A preferred stock on a dividend payment record date who (or whose transferee) tenders any such shares for conversion into shares of Class A common stock on such dividend payment date will receive the dividend payable on such shares of Series A preferred stock on such date, and the converting holder need not include payment of the amount of such dividend upon surrender of shares of Series A preferred stock for conversion. Except as provided above, we will make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or the dividends on the shares of Class A common stock issued upon such conversion. Fractional shares of Class A common stock will not be issued upon conversion but, in lieu thereof, we will pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the last sales price of the Class A common stock on the last Trading Day immediately preceding such conversion date. The Conversion Price is subject to adjustment upon certain events, including: (1) any redemption payment or payment of a dividend or other distribution payable in shares of Class A common stock to all holders of any class of capital stock of McLeodUSA, other than the issuance of shares of Class A common stock in connection with the payment (1) in redemption for, of dividends S-30 on or upon the conversion of the Series A preferred stock or (2) to all holders of the Series A preferred stock based upon the number of shares of Class A common stock into which the Series A preferred stock is then convertible; (2) any issuance to all holders of shares of Class A common stock of rights, options or warrants entitling them to subscribe for or purchase shares of Class A common stock or securities convertible into or exchangeable for shares of Class A common stock at an exercise price that is less than the closing price of a share of Class A common stock on the Nasdaq National Market (or the principal national securities exchange or other securities market on which the Class A common stock is then being traded) on the last Trading Day immediately preceding the date of issuance of such rights, options or warrants; provided, however, that no adjustment will be made with respect to such a distribution if the holder of shares of the Series A preferred stock would be entitled to receive such rights, options or warrants upon conversion at any time of shares of the Series A preferred stock into Class A common stock and provided, further, that if such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the Conversion Price will not be adjusted until such triggering events occur; (3) any subdivision, combination or reclassification of Class A common stock; (4) any distribution consisting exclusively of cash excluding any cash distributed in a transaction for which clause x, y or z below is applicable, which specifies that no antidilution adjustment shall be made, to all holders of shares of Class A common stock (which distribution is not also being made to the holders of Series A preferred stock based on the number of shares of Class A common stock into which the Series A preferred stock is then convertible) in an aggregate amount that, together with (1) all other such cash distributions made within the then preceding 12 months in respect of which no adjustment has been made and (2) any cash and the fair market value of other consideration paid or payable in respect of any tender offer by McLeodUSA or any of its subsidiaries for shares of Class A common stock concluded within the then preceding 12 months in respect of which no adjustment has been made, exceeds 15% of McLeodUSA's pre- distribution market capitalization (defined as the product of the closing price of the Class A common stock on the last Trading Day before the record date for such distribution times the number of shares of Class A common stock then outstanding on the record date of such distribution); (5) the completion of a tender or exchange offer which McLeodUSA or any of its subsidiaries makes for shares of Class A common stock that involves an aggregate consideration that, together with (1) any cash and other consideration payable in a tender or exchange offer by McLeodUSA or any of its subsidiaries for shares of Class A common stock expiring within the then preceding 12 months in respect of which no adjustment has been made and (2) the aggregate amount of any such cash distributions referred to in clause 4 above to all holders of shares of Class A common stock within the then preceding 12 months in respect of which no adjustments have been made, exceeds 15% of McLeodUSA's market capitalization on the Trading Day immediately after the expiration of such tender offer; or (6) a distribution to all holders of Class A common stock (which distribution is not also being made to the holders of Series A preferred stock based on the number of shares of Class A common stock into which the Series A preferred stock is then convertible) consisting of evidences of indebtedness, shares of capital stock other than Class A common stock or assets, including securities, but excluding those dividends and those issuances of rights, options, warrants and other distributions for which an adjustment to the Conversion Price as referred to above is applicable (other than in connection with a merger effected solely to reflect a change in the jurisdiction of incorporation of McLeodUSA). No adjustment of the Conversion Price will be required to be made: (A) until cumulative adjustments amount to one percent of such price, or (B) with respect to rights, options or warrants issued pursuant to certain employee benefit plans of McLeodUSA. S-31 McLeodUSA also may from time to time decrease the Conversion Price by any amount for any period of at least 20 days, so long as the decrease is irrevocable during such period, in which case McLeodUSA shall give at least 15 days' notice of such decrease. In addition to the foregoing adjustments, McLeodUSA will be permitted to make such reductions in the Conversion Price as it determines to be advisable in order that any stock dividend, subdivision of shares, distribution of rights to purchase stock or securities or distribution of securities convertible into or exchangeable for stock made by McLeodUSA to its stockholders will not be taxable to the recipients. In the event McLeodUSA elects to make such a reduction in the Conversion Price, McLeodUSA will comply with the requirements of Rule 14e-1 under the Securities Exchange Act, and any other securities laws and regulations thereunder, if and to the extent that such laws and regulations are applicable in connection with the reduction of the Conversion Price. See "Federal Tax Considerations." In the event that, after the issuance of the Series A preferred stock, McLeodUSA distributes rights, options or warrants (other than those referred to in clause 2 above) to all holders of Class A common stock, so long as any such rights, options or warrants have not expired or been redeemed by McLeodUSA, the holder of any shares of Series A preferred stock surrendered for conversion will be entitled to receive upon such conversion, in addition to the shares of Class A common stock then issuable upon such conversion, which we call the conversion shares, a number of rights, options or warrants to be determined as follows: (1) if such conversion occurs on or prior to the date for the distribution to the holders of rights, options or warrants of separate certificates evidencing such rights, options or warrants, called the distribution date, the same number of rights, options or warrants to which a holder of a number of shares of Class A common stock equal to the number of conversion shares is entitled at the time of such conversion in accordance with the terms and provisions applicable to the rights, options or warrants, and (2) if such conversion occurs after such distribution date, the same number of rights, options or warrants to which a holder of the number of shares of Class A common stock into which such Series A preferred stock was convertible immediately prior to such distribution date would have been entitled on such distribution date in accordance with the terms and provisions of and applicable to the rights, options or warrants. Except as stated above, the Conversion Price will not be adjusted for the issuance of common stock, or any securities convertible into or exchangeable for common stock or carrying the right to purchase any of the foregoing, in exchange for cash, property or services. In case of: (x) any merger or consolidation of McLeodUSA, other than a merger or consolidation in which (a) McLeodUSA is the continuing corporation and (b) the Class A common stock outstanding immediately prior to the merger or consolidation is not exchanged for cash, securities or other property of another corporation; (y) any sale, transfer or other disposition to another person of all or substantially all of the assets of McLeodUSA (other than the sale, transfer, assignment or distribution of shares of capital stock or assets to a subsidiary of McLeodUSA) computed on a consolidated basis; or (z) any statutory exchange of securities with another person, other than in connection with a merger or acquisition, there will be no adjustment of the Conversion Price. Each share of the then outstanding Series A preferred stock will, without the consent of the holder of any Series A preferred stock, become convertible only into the kind and amount of securities, cash or other property receivable upon such merger, consolidation, sale, transfer or statutory exchange by a holder of the number of shares of Class A common stock into which such Series A preferred stock was convertible immediately prior to such merger, consolidation, sale, transfer or statutory exchange, assuming such holder of Class A common stock failed to exercise his rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such merger, consolidation, sale, transfer or statutory exchange. In the case of a cash merger of McLeodUSA into another company or any other S-32 cash transaction of the type mentioned above, the effect of these provisions would be that thereafter each share of Series A preferred stock would be convertible at the Conversion Price in effect at such time into the same amount of cash per share into which each share of Series A preferred stock would have been convertible had such share been converted into Class A common stock immediately prior to the effective date of such cash merger or transaction. Depending upon the terms of such cash merger or transaction, the aggregate amount of cash into which such shares of Series A preferred stock would be converted could be more or less than the liquidation preference with respect to such Series A preferred stock. Change of Control Notwithstanding any other provision in the preceding paragraphs to the contrary, if any Change in Control (as defined) occurs, then the Conversion Price in effect will be adjusted immediately after such Change in Control as described below. In addition, in the event of a Common Stock Change in Control (as defined), each share of the Series A preferred stock shall be convertible solely into common stock of the kind received by holders of Class A common stock as the result of such Common Stock Change in Control. A "Change in Control" shall be deemed to have occurred at such time as: . the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all the assets of McLeodUSA and its subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Securities Exchange Act) . the adoption of a plan relating to the liquidation, dissolution or winding-up of McLeodUSA . the consummation of any transaction (including any merger or consolidation) the result of which is that any "person" (as defined above) other than any Permitted Holder (as defined below) becomes the beneficial owner (as such term is defined in Rules 13d-3 and 13d-5 promulgated under the Securities Exchange Act, except that a person will be deemed to have beneficial ownership of all shares that such person has the right to acquire whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the voting stock of McLeodUSA, or . the first day on which a majority of the members of the board of directors of McLeodUSA are not Continuing Directors (as defined in the Certificate of Designations) "Permitted Holders" include: IES Industries Inc. and its successors and assigns; Clark E. McLeod, Mary E. McLeod and Richard A. Lumpkin, and foundations and trusts controlled by any of them; and affiliates (other than the Company and its subsidiaries) of each of the foregoing. The term "Common Stock Change in Control" means any Change in Control in which more than 50% of the value (as determined in good faith by McLeodUSA's board of directors) or the consideration received by holders of Class A common stock consists of common stock of another company that for each of the 10 consecutive Trading Days referred to in the definition of "Applicable Price" below has been admitted for listing or admitted for listing subject to notice of issuance on a national securities exchange or quoted on the Nasdaq National Market; provided, however, that a Change in Control shall not be a Common Stock Change in Control unless either (1) McLeodUSA continues to exist after the occurrence of such Change in Control and the outstanding shares of Series A preferred stock continue to exist as outstanding shares of Series A preferred stock, or (2) not later than the occurrence of such Change in Control, the outstanding shares of Series A preferred stock are converted into or exchanged for shares of convertible preferred stock of a corporation succeeding to McLeodUSA's business, which convertible preferred stock has powers, preferences and relative, participating, optional or other rights, and qualifications, limitations and restrictions, substantially similar to those of the Series A preferred stock. The term "Non-Stock Change in Control" means any Change in Control other than a Common Stock Change in Control. S-33 The term "Applicable Price" means (i) in the event of a Non-Stock Change in Control in which the holders of the Class A common stock receive only cash, the amount of cash received by the holder of one share of Class A common stock and (ii) in the event of any other Non-Stock Change in Control or any Common Stock Change in Control, the average of the closing prices for the Class A common stock during the 10 Trading Days prior to and including the record date for the determination of the holders of Class A common stock entitled to receive cash, securities, property or other assets in connection with such Non-Stock Change in Control or Common Stock Change in Control or, if there is no such record date, the date upon which the holders of the Class A common stock shall have the right to receive such cash, securities, property or other assets, in each case as adjusted in good faith by the board of directors to appropriately reflect any of the events referred to in clauses 1 through 6 under "-- Conversion Rights." For purposes of calculating any adjustment to be made in the event of a Change of Control, immediately after such Change in Control: (1) in the case of a Non-Stock Change in Control, the Conversion Price will thereupon become the lower of (A) the Conversion Price in effect immediately prior to such Non-Stock Change in Control, but after giving effect to any other prior adjustments, and (B) the result obtained by multiplying the greater of the Applicable Price and the then applicable Reference Market Price (as defined) by a fraction of which the numerator will be $500 and the denominator will be the then current Optional Redemption price per share or, prior to , 2002, an amount per share of Series A preferred stock determined by McLeodUSA in its sole discretion, after consultation with an investment banking firm, to be the equivalent of the hypothetical Optional Redemption price that would have been applicable if the Series A preferred stock had been redeemable during such period; provided, however, that if, as a result of the operation of this clause (1), the cumulative number of shares of Class A common stock issued or issuable upon conversion of the Series A preferred stock, after giving effect to the adjustment described in this clause (1) and all prior conversions of Series A preferred stock, would exceed a number (the "Threshold Number") equal to 20% of the outstanding shares of Class A common stock as of the issue date of the Series A preferred stock, then until and unless McLeodUSA obtains the approval of its common stockholders for the issuance of any shares of Class A common stock in excess of the Threshold Number, the Conversion Price shall be adjusted pursuant to this clause (1) to that price that would entitle the holders of Series A preferred stock to receive in the aggregate, upon conversion of all the Series A preferred stock (including all prior conversions of Series A preferred stock), no more than the Threshold Number of shares of Class A common stock; and (2) in the case of a Common Stock Change in Control, the Conversion Price in effect immediately prior to such Common Stock Change in Control, but after giving effect to any other prior adjustments, will thereupon be adjusted by multiplying such Conversion Price by a fraction, of which the numerator will be the Purchaser Stock Price (as defined) and the denominator will be the Applicable Price; provided, however, that in the event of a Common Stock Change in Control in which (A) 100% of the value of the consideration received by a holder of Class A common stock is common stock of the successor, acquiror or other third party (and cash, if any, is paid with respect to any fractional interests in such common stock resulting from such Common Stock Change in Control) and (B) all the Class A common stock will have been exchanged for, converted into, or acquired for, common stock (and cash with respect to fractional interests) of the successor, acquiror or other third party, the Conversion Price in effect immediately prior to such Common Stock Change in Control will thereupon be adjusted by multiplying such Conversion Price by a fraction, of which the numerator will be one (1) and the denominator will be the number of shares of common stock of the successor, acquiror, or other third party received by a holder of one share of Class A common stock as a result of such Common Stock Change in Control. The foregoing Conversion Price adjustments in the event of a Non-Stock Change in Control will apply in situations whereby a Change in Control not involving a change in beneficial ownership of the Class A common stock has occurred or whereby all or substantially all of the Class A common stock is acquired in a transaction in which 50% or less of the value received by holders of such Class A common stock consists of common S-34 stock that has been admitted for listing on a national securities exchange or quoted on the Nasdaq National Market. If the market price of the Class A common stock immediately prior to a Non-Stock Change in Control is lower than the applicable Conversion Price then in effect, the Conversion Price will be adjusted as described in clause 1 above and the holders of the Series A preferred stock will be entitled to receive the amount and kind of consideration that would have been received if the Series A preferred stock had been converted into Class A common stock prior to the Non-Stock Change in Control after giving effect to such adjustment. The foregoing Conversion Price adjustments in the event of a Common Stock Change in Control will apply in situations whereby more than 50% of the value received by holders of Class A common stock consists of common stock of another company that has been admitted for listing on a national securities exchange or quoted on the Nasdaq National Market, in which case the Series A preferred stock will become convertible into shares of common stock of the other company. If consideration for the Class A common stock consists partly of common stock of another company and partly of other securities, cash or property, each share of Series A preferred stock will be convertible solely into a number of shares of such common stock determined so that the initial value of such shares (measured as described in the definition of Purchaser Stock Price) equals the value of the shares of Class A common stock into which such share of Series A preferred stock was convertible immediately before the transaction (measured as described in the definition of Applicable Price). If consideration for Class A common stock is solely common stock of another company, each share of Series A preferred stock will be convertible into the same number of shares of such common stock of another company receivable by a holder of the number of shares of Class A common stock into which such share of Series A preferred stock was convertible immediately before such transaction. The term "Purchaser Stock Price" means, with respect to any Common Stock Change in Control, the product of (1) the number of shares of common stock received as consideration in such Common Stock Change in Control for each share of Class A common stock, and (2) the average of the per share closing prices for the common stock received as consideration in such Common Stock Change in Control for the 10 consecutive Trading Days prior to and including the record date for the determination of the holders of Class A common stock entitled to receive such common stock, or, if there is no such record date, the date upon which the holders of the Class A common stock shall have the right to receive such common stock, in each case, as adjusted in good faith by the board of directors of McLeodUSA to appropriately reflect any of the events referred to in clauses 1 through 6 under "--Conversion Rights"; provided, however, that if no such closing prices exist, then the Purchaser Stock Price shall be set at a price determined in good faith by the board of directors of McLeodUSA. The term "Reference Market Price" shall initially mean $ (which is an amount equal to 66 2/3% of the reported last sale price for the Class A common stock on the Nasdaq National Market on , 1999), and in the event of any adjustment to the Conversion Price other than as a result of a Change in Control, the Reference Market Price shall also be adjusted so that the ratio of the Reference Market Price to the Conversion Price after giving effect to any such adjustment shall always be the same as the ratio of $ to the initial Conversion Price set forth on the cover page of this prospectus supplement. Depending upon whether a Change in Control is a Non-Stock Change in Control or Common Stock Change in Control, a holder of Series A preferred stock may receive significantly different consideration upon conversion. In the event of a Non-Stock Change in Control, the holder has the right to convert each share of the Series A preferred stock into the kind and amount of the shares of stock and other securities or property or assets receivable by a holder of the number of shares of Class A common stock issuable upon conversion of such share of the Series A preferred stock immediately prior to such Non-Stock Change in Control, but after giving effect to the adjustment described above. However, in the event of a Common Stock Change in Control in which less than 100% of the value of the consideration received by a holder of Class A common stock is common stock of the acquiror or other third party, a holder of a share of Series A preferred stock who converts a share following the Common Stock Change in Control will receive consideration in the form of such common stock only, whereas a holder who has converted his share prior to the Common Stock Change in Control will S-35 receive consideration in the form of common stock as well as any other securities or assets (which may include cash) receivable thereupon by a holder of the number of shares of Class A common stock issuable upon conversion of such share of Series A preferred stock immediately prior to such Common Stock Change in Control. In the case of certain reclassifications, consolidations, mergers, sales or transfers of assets or other transactions pursuant to which the Class A common stock is converted into the right to receive other securities, cash or other property, each share of Series A preferred stock then outstanding would, without the consent of any holders of Series A preferred stock, become convertible only into the kind and amount of securities, cash and other property receivable upon the transaction by a holder immediately prior to such transaction if such holder had converted its share of Series A preferred stock. If at any such time McLeodUSA makes a distribution of property to its stockholders that would be taxable to such stockholders as a dividend for federal income tax purposes (for example, distributions of evidences of indebtedness or assets of McLeodUSA, but generally not stock dividends or rights to subscribe for capital stock) and, pursuant to the antidilution provisions described above, the Conversion Price of the Series A preferred stock is reduced, such reduction may be deemed to be the receipt of taxable income by holders of the Series A preferred stock. Consolidation, Merger and Sale of Assets The Certificate of Designations will provide that McLeodUSA, without the consent of any holder of outstanding Series A preferred stock, may consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person or may permit any Person to consolidate with or merge into, or transfer or lease its properties substantially as an entirety to, McLeodUSA provided, however that (a) the successor, transferee or lessee (if not McLeodUSA) is organized under the laws of the United States, any state thereof or the District of Columbia, (b) the shares of Series A preferred stock shall become shares of such successor, transferee or lessee, having in respect of such successor, transferee or lessee the same powers, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereon, the Series A preferred stock had immediately prior to such transaction; and (c) certain other conditions are met. Under any consolidation by McLeodUSA with, or merger by McLeodUSA into, any other Person or any conveyance, transfer or lease of the properties and assets of McLeodUSA substantially as an entirety as described in the preceding paragraph, the successor resulting from such consolidation or into which McLeodUSA is merged or the transferee or lessee to which such conveyance, transfer or lease is made, will succeed to, and be substituted for, and may exercise every right and power of, McLeodUSA under the shares of Series A preferred stock, and thereafter, except in the case of a lease, the predecessor (if still in existence) will be released from its obligations and covenants with respect to the Series A preferred stock. SEC Reports and Reports to Holders Whether or not we are required to file reports with the SEC, if any shares of Series A preferred stock are outstanding, we will file with the SEC all such reports and other information as we would be required to file with the SEC by Sections 13(a) or 15(d) under the Securities Exchange Act. See "Where You Can Find More Information." We will supply each holder of Series A preferred stock, upon request, without cost to such holder, copies of such reports or other information. Transfer Agent, Registrar and Dividend Disbursing Agent The transfer agent, registrar, dividend disbursing agent and redemption agent for the shares of Series A preferred stock will be Norwest Bank Minnesota, N.A. S-36 FEDERAL TAX CONSIDERATIONS The following is a summary of certain material U.S. federal tax considerations relevant to the purchase, ownership and disposition of our Series A preferred stock and Class A common stock. This summary is based on the current provisions of the Internal Revenue Code of 1986, as amended, Treasury regulations and judicial and administrative authority, all of which are subject to change, possibly on a retroactive basis. This summary applies only to investors who hold our Series A preferred stock or Class A common stock as capital assets, within the meaning of section 1221 of the Internal Revenue Code, and does not discuss the tax consequences to special classes of investors, such as brokers or dealers in securities or currencies, financial institutions, tax-exempt entities, life insurance companies, persons holding our convertible preferred stock or common stock as a part of a hedging, short sale or conversion transaction or a straddle, investors whose functional currency is not the United States dollar, persons who hold our convertible preferred stock or common stock through partnerships or other pass-through entities, or, except as specifically noted, foreign holders and certain U.S. expatriates. State, local and foreign tax consequences of ownership of our Series A preferred stock and Class A common stock are not summarized. We have not requested, and do not intend to request, any rulings from the Internal Revenue Service concerning the federal tax consequences of an investment in our Series A preferred stock or Class A common stock. You are advised to consult with your own tax advisor regarding the consequences of acquiring, holding or disposing of our Series A preferred stock or Class A common stock in light of current tax laws, your particular investment circumstances, and the application of state, local and foreign tax laws. When we refer in the summary to a "United States Holder," we mean a beneficial owner of Series A preferred stock or Class A common stock that is: . a citizen or resident of the United States for United States federal income tax purposes . a corporation created or organized in the United States or under the laws of the United States or of any political subdivision thereof . an estate whose income is includible in gross income for United States federal income tax purposes regardless of its source, or . a trust if a court within the United States is able to exercise primary supervision of the administration of the trust and one or more United States persons has the authority to control all substantial decisions of the trust When we refer in the summary to a "Non-United States Holder," we mean a beneficial owner of convertible preferred stock or common stock that is not a United States Holder. United States Holders Distributions We have the right to pay distributions on the Series A preferred stock and the Class A common stock in cash or in shares of our Class A common stock. If we distribute our Class A common stock, the amount of the distribution for federal income tax purposes will be the fair market value (which may differ from the Discounted Current Market Value) of the Class A common stock on the date the distribution is paid, and the distribution will be subject to federal income tax to the same extent as a cash distribution. A distribution on the Series A preferred stock or Class A common stock will be treated as a dividend to the extent of our current or accumulated earnings and profits attributable to the distribution as determined under U.S. federal income tax principles. The amount of our earnings and profits at any time will depend upon our future actions and financial performance. If the amount of the distribution exceeds our current and accumulated earnings and profits attributable to the distribution, the distribution will be treated as a nontaxable return of capital and will be applied against and reduce your adjusted tax basis in the stock, but not below zero. The S-37 reduction in tax basis will increase the amount of any gain, or reduce the amount of any loss, which you would otherwise realize on the sale or other taxable disposition of the stock. If the distribution exceeds both our current and accumulated earnings and profits attributable to the distribution and your adjusted tax basis in your stock, the excess will be treated as capital gain and will be either long-term or short-term capital gain depending on your holding period for the stock. Corporate investors in our Series A preferred stock or Class A common stock generally should be eligible for the 70% dividends-received deduction with respect to the portion of any distribution on the stock taxable as a dividend. However, corporate investors should consider certain provisions that may limit the availability of a dividend received deduction, including the 46-day holding period required by section 246(c) of the Internal Revenue Code, the rules of section 246A which reduce the dividends-received deduction of dividends on certain debt-financed stock, and the rules in section 1059 of the Internal Revenue Code that reduce the basis of stock in respect of certain extraordinary dividends, as well as the effect of the dividends-received deduction on the determination of alternative minimum tax liability. Optional redemption for Class A common stock or cash If we redeem our Series A preferred stock for Class A common stock, the exchange should constitute a recapitalization within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code. You will not recognize gain or loss on the exchange unless some of the Class A common stock is received in discharge of dividend arrearages, in which case the redemption will be treated as a distribution on the Series A preferred stock to the extent of the dividends in arrears. The amount constituting a distribution will be taxed as a dividend to the extent of our current or accumulated earnings and profits attributable to the distribution at the time, in accordance with the treatment described above for distributions. Your tax basis in our Class A common stock received pursuant to the redemption generally will equal your tax basis in the Series A preferred stock surrendered in exchange, and your holding period for the Class A common stock generally will include the period you held your Series A preferred stock. However, the tax basis of Class A common stock received in discharge of dividend arrearages will be its fair market value on the date received and the holding period of that stock will commence on the day after its receipt. If we redeem our Series A preferred stock for cash, the redemption will be taxable to you. The redemption generally will be treated as a sale or exchange if you do not own, actually or constructively within the meaning of section 318 of the Internal Revenue Code, any stock of McLeodUSA other than the redeemed Series A preferred stock. If you do own, actually or constructively, other stock of McLeodUSA, a cash redemption of your Series A preferred stock may be taxable in accordance with the treatment described above for distributions. Such treatment as a distribution will not apply if the redemption (1) is "substantially disproportionate" with respect to you under section 302(b)(2) of the Internal Revenue Code, or (2) is "not essentially equivalent to a dividend" under section 302(b)(1) of the Internal Revenue Code. A distribution to you will be "not essentially equivalent to a dividend" if results in a meaningful reduction in your stock interest in us, which should be the case if your proportionate ownership interest, taking into account any actual ownership of Class A common stock and any stock constructively owned, is reduced, your relative stock interest in McLeodUSA is minimal, and you exercise no control over our business affairs. If a cash redemption of your Series A preferred stock is treated as a sale or exchange, it will result in capital gains or losses equal to the difference between the amount of cash received and the adjusted tax basis in the Series A preferred stock redeemed, except to the extent that the redemption price includes unpaid dividends which we declare prior to the redemption. The capital gain or loss will be long term if you have held the Series A preferred stock for more than one year. Any cash you receive in discharge of dividend arrearages on the Series A preferred stock will be treated as a distribution on the Series A preferred stock to the extent of the dividends in arrears, taxable in accordance with the treatment described above for distributions. If the cash you receive on redemption of your Series A preferred is taxed as a dividend, your tax basis (reduced for amounts, if any, treated as return of capital) in the redeemed Series A preferred stock will be S-38 transferred to any remaining other McLeodUSA stock you own, subject, in the case of a corporate taxpayer, to reduction of possible gain recognition under section 1059 of the Internal Revenue Code in an amount equal to the nontaxed portion of such dividend. If you do not actually own any other McLeodUSA stock, having a remaining stock interest only constructively, you may lose the benefit of your tax basis in the Series A preferred stock but the tax basis may be shifted to the stock of the related person whose stock you constructively own. Under certain circumstances, section 305(c) of the Internal Revenue Code requires that any excess of the redemption price of preferred stock over its issue price be treated as constructively distributed on a periodic basis prior to actual receipt. However, these rules do not apply if you and McLeodUSA are not "related" within the meaning of Treasury regulations under section 305(c), there are no plans, arrangements or agreements that effectively require or are intended to compel us to redeem the Series A preferred stock, and our exercise of the right to redeem would not reduce the yield of the Series A preferred stock, as determined under the regulations. We intend to take the position that the existence of our optional redemption rights does not result in a constructive distribution under section 305(c). The preferred stock will also be issued with a liquidation premium, since the liquidation preference will exceed the proceeds received by us after excluding amounts deposited in the deposit account. Although the regulations under section 305(c) do not specifically address the treatment of liquidation premiums, we believe that a similar rationale should apply to such premiums. Conversion You generally will not recognize gain or loss on conversion of shares of Series A preferred stock into our Class A common stock, except with respect to any cash paid in lieu of fractional shares of Class A common stock. However, you may recognize gain or dividend income to the extent there are dividends in arrears on such stock at the time of conversion into Class A common stock. Your tax basis in the common stock received upon conversion of Series A preferred stock generally will be equal to your tax basis in the Series A preferred stock and the holding period of the Series A common stock generally will include your holding period for the Series A preferred stock. However, the tax basis of any Class A common stock received on conversion which is treated as a dividend will be equal to its fair market value on the date of the distribution and the holding period of that Class A common stock will commence on the day after its receipt. You may be deemed to have received a constructive distribution of stock taxable as a dividend if the conversion ratio of the Series A preferred stock is adjusted to reflect a cash or property distribution on our Class A common stock or to prevent dilution in the case of certain issuances of rights or warrants to purchase Class A common stock at below market prices. Although an adjustment to the conversion price made pursuant to a bona fide reasonable adjustment formula which has the effect of preventing the dilution your interest in McLeodUSA generally will not be considered to result in a constructive distribution of stock, certain of the possible adjustments may trigger this rule. If a nonqualifying adjustment is made, or if we fail to make an adjustment in certain cases, you might be deemed to have received a taxable stock dividend. If so, the amount of the dividend to be included in income would be the fair market value of the additional Class A common stock to which you would be entitled by reason of the increase in your proportionate equity interest in McLeodUSA. Sale or other taxable disposition If you sell or dispose of your Series A preferred stock or Class A common stock in a taxable transaction other than a redemption or conversion by us, you will recognize capital gain or loss equal to the difference between the amount of cash and the fair market value of property received and your tax basis in the Series A preferred stock or Class A common stock. The gain or loss will be long-term capital gain or loss if your holding period for the stock exceeds one year. For corporate taxpayers, long-term capital gains are taxed at the same rate as ordinary income. For individual taxpayers, net capital gains--the excess of the taxpayer's net long-term capital gains over this net short-term capital losses--are subject to a maximum tax rate of 20% if the stock is held for more than one year. S-39 Non-United States Holders Distributions Distributions received by you as a Non-United States Holder in respect of the Series A preferred stock, whether in cash or shares of Class A common stock, and distributions in respect of Class A common stock, to the extent considered dividends for U.S. federal income tax purposes, generally will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty, unless the dividend is effectively connected with your conduct of a trade or business within the United States or, where a tax treaty applies, is attributable to a United States permanent establishment you maintain. For distributions of Class A common stock, any amounts we withhold will reduce the value of the Class A common stock distributed to you. If the dividend is effectively connected with your conduct of a trade or business within the United States or, where a tax treaty applies, is attributable to your United States permanent establishment, the dividend will be subject to federal income tax on a net income basis at applicable graduated individual or corporate rates and will be exempt from the 30% withholding tax. In addition to the graduated rate described above, dividends received by a corporate Non-United States Holder that are effectively connected with a United States trade or business or, where a tax treaty applies, is attributable to your United States permanent establishment, may, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or at a lower rate specified by an applicable income tax treaty. For purposes of obtaining a reduced rate of withholding under an income tax treaty, you will be required to provide certain information concerning your country of residence and entitlement to tax treaty benefits. If you claim exemption from withholding with respect to dividends effectively connected with your conduct of a business within the United States, you must provide appropriate certification, currently, Internal Revenue Service Form 4224, to McLeodUSA or its paying agent. If you are eligible for a reduced rate of U.S. federal withholding tax you may obtain a refund of any excess withheld amounts by timely filing an appropriate claim for refund. If a distribution exceeds our current and accumulated earnings and profits attributable to the distribution, it will be treated first as a return of your tax basis in the stock to the extent of your basis and then as gain from the sale of a capital asset which would be taxable as described below. Any withholding tax on distributions in excess of our current and accumulated earnings and profits is refundable to you upon the timely filing of an appropriate claim for refund with the Internal Revenue Service. Under currently applicable Treasury regulations, dividends paid to an address outside the United States are presumed to be paid to a resident of such country, unless the payor has knowledge to the contrary, for purposes of the withholding discussed above, and, under the current interpretation of these Treasury regulations, for purposes of determining the applicability of a tax treaty rate. Under Treasury regulations currently scheduled to be effective with respect to dividends paid after December 31, 2000, a Non-United States Holder of McLeodUSA stock who wishes to claim the benefit of an applicable treaty rate, and to avoid backup withholding as discussed below, will be required to satisfy applicable certification and other requirements. However, under either set of regulations, some payments to foreign partnership and fiscally transparent entities may not be eligible for a reduced rate of withholding tax under an applicable income tax treaty. Disposition of Series A preferred stock or Class A common stock Generally, you will not be subject to United States federal income tax on any gain recognized upon the sale or other disposition of Series A preferred stock or Class A common stock. However, you will be subject to federal income tax on the gain if: (1) the gain is effectively connected with your United States trade or, if a tax treaty applies, attributable to your United States permanent establishment; (2) you are an individual who is a former citizen of the United States who lost such citizenship within the preceding ten-year period, or former long-term resident of the United States who relinquished United States residency on or after February 6, 1995, and the loss of citizenship or permanent residency had as one of its principal purposes the avoidance of United States tax; or S-40 (3) you are a non-resident alien individual, are present in the United States for 183 days or more days in the taxable year of disposition and either (a) have a "tax home" in the United States for United States federal income tax purposes or (b) the gain is attributable to an office or other fixed place of business you maintain in the United States. You will also be subject to federal income tax on the gain from the sale of our Series A preferred stock or Class A common stock if we are or have been a "United States real property holding corporation"--which we refer to in this prospectus supplement as USRPHC--within the meaning of section 897(c)(2) of the Internal Revenue Code at any time you held the stock, or within the five- year period preceding the sale of the stock if you hold the stock for more than five years. We believe we are not now a USRPHC, that we have not been an USRPHC at any time since we were formed, and that it is unlikely we will become a USRPHC. If we were a USRPHC or were to become a USRPHC, you would be subject to U.S. income tax on any gain from your sale of Series A preferred stock or from your sale of Class A common stock if you beneficially own, or owned at any time during a specified 5-year period, more than 5 percent of the total fair market value of the class of stock you sold. Redemption and conversion of Series A preferred stock As a Non-United States Holder, you generally will not recognize any gain or loss for United States federal income tax purposes upon conversion of Series A preferred stock into Class A common stock, except with respect to any cash paid in lieu of fractional shares of Class A common stock, which would be subject to the rules described under "Disposition of Series A preferred stock or Class A common stock." However, you may recognize gain or dividend income to the extent there are dividends in arrears on the Series A preferred stock at the time of conversion into Class A common stock. A redemption of Series A preferred stock for cash will be an event which will constitute either a dividend to the extent of our current and accumulated earnings and profits or a sale or exchange. See "United States Holders-- Optional redemption for Class A common stock or cash." To the extent the redemption is treated as a dividend, the tax consequences are described in "Non-United States Holders--Distributions," and to the extent the redemption is treated as a sale or exchange, the tax consequences are described in "Non- United States Holders--Disposition of Series A preferred stock or Class A common stock." Federal estate taxes If you are an individual Non-United States Holder, Series A preferred stock or Class A common stock you hold or are treated as owning at the time of your death will be included in your United States gross estate for United States federal estate tax purposes and may be subject to United States federal estate tax, unless an applicable estate tax treaty provides otherwise. Information Reporting And Backup Withholding We generally will be required to report to certain holders of our Series A preferred stock or Class A common stock and to the Internal Revenue Service the amount of any dividends paid to the holder in each calendar year and the amounts of tax withheld, if any, with respect to such payments. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which a Non-United States Holder resides under the provisions of an applicable income tax treaty. Each holder of Series A preferred stock or Class A common stock--other than an exempt holder such as a corporation, tax-exempt organization, qualified pension or profit-sharing trust, individual retirement account, or a nonresident alien individual who provides certification as to his or her status as a nonresident--will be required to provide, under penalties of perjury, a certification setting forth the holder's name, address, correct federal taxpayer identification number and a statement that the holder is not subject to backup withholding. If a nonexempt holder fails to provide the required certification, we will be required to withhold 31% of the amount otherwise payable to the holder, and remit the withheld amount to the Internal Revenue Service as a credit S-41 against the holder's federal income tax liability. However, no backup withholding will be required with respect to any payment subject to the 30% United States withholding tax discussed above. You should consult your own tax advisor regarding your qualification for exemption from backup withholding and the procedure for obtaining any applicable exemption. The Internal Revenue Service has finalized Treasury regulations regarding the backup withholding and information rules which are effective for payments made after December 31, 2000 subject to certain transition rules. In general, these regulations unify certification procedures and forms and clarify and modify reliance standards. Among other provisions, these regulations also include the new provisions discussed below regarding sales of stock outside the United States by or for a broker. A Non-United States Holder should consult its own tax advisor regarding the application of the new regulations. Payment of the proceeds of a sale of Series A preferred stock or Class A common stock by or through a United States office of a broker is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that it is a Non-United States Holder or otherwise establishes an exemption. In general, backup withholding and information reporting will not apply to a payment of the proceeds of a sale of Series A preferred stock or Class A common stock by or through a foreign office of a broker. If, however, such broker is, for United States federal income tax purposes a United States person, a "controlled foreign corporation" for U.S. federal tax purposes, or a foreign person that derives 50% or more of its gross income for a certain period from the conduct of a trade or business in the United States, or, for taxable years beginning after December 31, 2000, a foreign partnership in which one or more United States persons, in the aggregate, own more than 50% of the income or capital interests in the partnership or if the partnership is engaged in a trade or business in the United States, such payments will be subject to information reporting, but not backup withholding, unless (1) such broker has documentary evidence in its records that the beneficial owner is a Non-United States Holder and certain other conditions are met, or (2) the beneficial owner otherwise establishes an exemption. For payments after December 31, 2000, certification will be required in the case of the disposition of shares of Series A preferred stock or Class A common stock held in an offshore account if the disposition is made through a foreign broker described in the immediately preceeding paragraph. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against the holder's United States federal income tax liability provided the required information is furnished to the Internal Revenue Service. The foregoing discussion is for general information and is not tax advice. Accordingly, each prospective holder of Series A preferred stock or Class A common stock should consult its tax advisor as to the particular tax consequences to it of the Series A preferred stock and Class A common stock, including the applicability and effect of any state, local or foreign income tax laws, and any recent or prospective changes in applicable tax laws. S-42 UNDERWRITING Subject to the terms and conditions stated in the underwriting agreement dated the date hereof, each underwriter has severally agreed to purchase from us and we have agreed to sell to the underwriters, the number of shares of Series A preferred stock shown opposite its name below. The obligations of the several underwriters to purchase these shares are subject to terms and conditions contained in the underwriting agreement.
Number of Underwriters Shares ------------ ------- Salomon Smith Barney Inc. ........................................ Goldman, Sachs & Co. ............................................. Morgan Stanley & Co. Incorporated................................. ------- Total .......................................................... 800,000 =======
In the underwriting agreement, the underwriters have severally agreed, subject to the terms and conditions set forth therein, to purchase all of the shares of Series A preferred stock offered hereby (other than those subject to the over-allotment option described below), if any such shares are purchased. In the event of a default by any underwriter, the underwriting agreement provides that, in certain circumstances, the purchase commitments of the non- defaulting underwriters may be increased or the underwriting agreement may be terminated. The underwriters, for whom Salomon Smith Barney Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated are acting as representatives, propose initially to offer the shares of Series A preferred stock to the public at the public offering price set forth on the cover page of this prospectus supplement, and to some dealers at such price less a concession not in excess of $ per share. The underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to other dealers. After the public offering, the public offering price and such concessions may be changed. We have granted the underwriters an option, exercisable within 30 days of the date of this prospectus supplement, to purchase up to 120,000 additional shares of Series A preferred stock to cover over-allotments, if any, at the public offering price set forth on the cover page of this prospectus supplement. To the extent that the underwriters exercise such option, in whole or in part, each underwriter will have a firm commitment, subject to several conditions, to purchase the same proportion of the option shares as the number of shares purchased by such underwriter in the above table bears to the total number of Series A preferred stock purchased by all of the underwriters in the table above. The following table shows the per share and total public offering price, the underwriting discount to be paid to the underwriters, and the proceeds before expenses to us. The totals are presented assuming either no exercise or full exercise by the underwriters of the over-allotment option.
Total ----------------- Per No Full Share Exercise Exercise ----- -------- -------- Public offering price ........................... $ $ $ Underwriting discount ........................... $ $ $ Proceeds to company ............................. $ $ $
In connection with the offering, Salomon Smith Barney Inc., on behalf of the underwriters, may purchase and sell the shares of Series A preferred stock and/or shares of our Class A common stock in the open market. These transactions may include over-allotment, syndicate covering transactions and stabilizing transactions. Over-allotment involves syndicate sales of our shares of Series A preferred stock in excess of the number of shares of Series A preferred stock to be purchased by the underwriters in the offering, which creates a syndicate short position. Syndicate covering transactions involve purchases of our shares of Series A preferred stock in the open market after the distribution has been completed in order to cover syndicate short positions. Stabilizing transactions consist of bids or purchases of our shares of Series A preferred stock and/or shares of our Class A common stock made for the purpose of preventing or retarding a decline in the market price of our shares of Series A preferred stock and/or shares of our Class A common stock while the offering is in progress. S-43 The underwriters also may impose a penalty bid. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the underwriters, in covering syndicate short positions or making stabilizing purchases, repurchase shares originally sold by that syndicate member. Any of these activities may cause the price of our shares of Series A preferred stock and/or our Class A common stock to be higher than the price that otherwise would exist in the open market in the absence of such transactions. These transactions may be effected on the Nasdaq National Market or in the over-the-counter market, or otherwise and, if commenced, may be discontinued at any time. In addition, in connection with this offering, the underwriters (and selling group members) may engage in passive market making transactions in our Class A common stock on the Nasdaq National Market prior to the pricing and completion of the offering. Passive market making consists of displaying bids on the Nasdaq National Market no higher than the bid prices of independent market makers and making purchases at no higher than those independent bids and effected in response to order flow. Net purchases by a passive market maker on each day are limited to a specified percentage of the passive market maker's average daily trading volume in our Class A common stock during a specified period and must be discontinued when such limit is reached. Passive market making may cause the price of our Class A common stock to be higher than the price that otherwise would exist in the open market in the absence of such transactions. If passive market making is commenced, it may be discontinued at any time. We estimate that the total expenses of this offering will be $ . Salomon Smith Barney Inc. and Morgan Stanley & Co. Incorporated have performed investment banking and advisory services for us from time to time for which they have received customary fees and expenses. They may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business. The underwriting agreement provides that we will indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or contribute to payments the underwriters may be required to make in respect of such liabilities. We, our directors and officers, and several other stockholders have each agreed with the underwriters that they will not offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offering of any shares of our Class A common stock or any securities convertible into, or exchangeable for, shares of Class A common stock for a period of 90 days from the date of this prospectus supplement, without the prior written consent of Salomon Smith Barney Inc., except: . in the case of McLeodUSA, any such transactions in connection with acquisitions, employee benefit or option plans, or upon conversion of outstanding securities . in the case of our directors, officers and stockholders, dispositions of shares of our Class A common stock as bona fide gifts or pledges where the recipients of such gifts or the pledgees, as the case may be, agree in writing with the underwriters to be bound by these same restrictions In addition, Clark E. McLeod, Mary E. McLeod, Interstate Energy, M/C, and Richard A. Lumpkin and Gail G. Lumpkin and several other parties related to the Lumpkins have agreed not to sell or otherwise dispose of any of our equity securities without the consent of the board of directors of McLeodUSA. See "Description of Capital Stock--Stockholders' Agreement." S-44 LEGAL MATTERS The validity of our Series A preferred stock offered hereby is being passed upon for us by Hogan & Hartson L.L.P., Washington, D.C., our special counsel. Certain legal matters relating to this offering are being passed upon for the underwriters by Mayer, Brown & Platt, Chicago, Illinois. EXPERTS The consolidated financial statements and schedule of McLeodUSA and subsidiaries as of December 31, 1998 and 1997, and for each of the three years in the period ended December 31, 1998, incorporated by reference in this registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in giving said reports. The consolidated financial statements of Ovation Communications, Inc. as of December 31, 1998 and 1997 and for the period from March 27, 1997 (inception) to December 31, 1997 and the year ended December 31, 1998 incorporated by reference in this registration statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon, and are incorporated by reference herein in reliance upon such report given upon the authority of said firm as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We have filed a registration statement of which this prospectus supplement forms a part. The registration statement, including the attached exhibits and schedules, contain additional relevant information about our Class A common stock. The rules and regulations of the SEC allow us to omit some of the information included in the registration statement from this prospectus supplement. In addition, we have filed reports, proxy statements and other information with the SEC under the Securities Exchange Act. You may read and copy any of this information at the following locations of the SEC: Public Reference Room New York Regional Office Chicago Regional Office 450 Fifth Street, N.W. 7 World Trade Center Citicorp Center Room 1024 Suite 1300 500 West Madison Street Washington, D.C. 20549 New York, New York 10048 Suite 1400 Chicago, Illinois 60661- 2511 You may obtain information on the operation of the SEC's Public Reference Room in Washington, D.C. by calling the SEC at 1-800-SEC-0330. The SEC file number for our documents filed under the Securities Exchange Act is 0-20763. The SEC also maintains an Internet web site that contains reports, proxy statements and other information regarding issuers, like McLeodUSA, that file electronically with the SEC. The address of that site is http://www.sec.gov. The SEC allows us to "incorporate by reference" information into this prospectus supplement and accompanying prospectus. This means we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be a part of this prospectus supplement, except for any such information that is superseded by information included directly in this document. S-45 This prospectus supplement incorporates by reference the documents listed below that we have previously filed or will file with the SEC. They contain important information about us and our financial condition. . Our Annual Report on Form 10-K for our fiscal year ended December 31, 1998, filed on March 24, 1999, as amended by Form 10-K/A filed on April 22, 1999 . Our Current Reports on Form 8-K filed on April 15, 1999, April 16, 1999, June 17, 1999, July 2, 1999 and August 4, 1999 . All documents filed with the SEC by us under Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act after the date of this prospectus supplement and before the offering is terminated, are considered to be a part of this prospectus, effective the date such documents are filed . The description of our Class A common stock set forth in our registration statement filed under Section 12 of the Securities Exchange Act on Form 8-A on May 24, 1996, including any amendment or report filed with the SEC for the purpose of updating such description . The consolidated financial statements of Ovation Communications, Inc. and subsidiaries appearing on pages F-1 through F-17 of our definitive prospectus dated March 24, 1999 and filed with the SEC on March 26, 1999 pursuant to Rule 424(b) under the Securities Act as part of our Registration Statement on Form S-4 (Registration No. 333-71811). In the event of conflicting information in these documents, the information in the latest filed document should be considered correct. You can obtain any of the documents listed above from the SEC, through the SEC's Web site at the address described above, or directly from us, by requesting them in writing or by telephone at the following address: McLeodUSA Incorporated McLeodUSA Technology Park 6400 C Street SW, P.O. Box 3177 Cedar Rapids, IA 52406-3177 Attn: General Counsel Telephone (319) 364-0000 We will provide a copy of any of these documents without charge, excluding any exhibits unless the exhibit is specifically listed as an exhibit to the registration statement of which this prospectus forms a part. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt means, within two business days after we receive your request. S-46 ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may + +not sell these securities until the registration statement filed with the + +Securities and Exchange Commission is effective. This prospectus is not an + +offer to sell these securities and it is not soliciting an offer to buy these + +securities in any state or jurisdiction where the offer or sale is not + +permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subject to Completion, Dated August 4, 1999 P R O S P E C T U S $1,750,000,000 McLeodUSA Incorporated Class A Common Stock, Preferred Stock, Depositary Shares, Debt Securities, Warrants, Subscription Rights, Stock Purchase Contracts and Stock Purchase Units We may offer, from time to time, in one or more series or classes the following securities: . Class A common stock .preferred stock .preferred stock represented by depositary shares .debt securities .warrants to purchase debt securities, Class A common stock, preferred stock or depositary shares .subscription rights to purchase any of the above securities .stock purchase contracts and stock purchase units The aggregate initial offering price of these securities will not exceed $1,750,000,000. We will provide you with specific terms of the applicable offered securities in supplements to this prospectus. The terms of the securities will include the initial offering price, aggregate amount of the offering, listing on any securities exchange or market, risk factors and the agents, dealers or underwriters, if any, to be used in connection with the sale of these securities. You should read this prospectus and any prospectus supplement carefully before you decide to invest. This prospectus may not be used to consummate sales of the offered securities unless it is accompanied by a prospectus supplement describing the method and terms of the offering of those offered securities. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these offered securities or determined if this prospectus is truthful or complete. It is illegal for any person to tell you otherwise. The date of this Prospectus is August , 1999. You should rely only on the information provided or incorporated by reference in this prospectus or any applicable prospectus supplement. We have not authorized anyone to provide you with different or inconsistent information. You should assume that the information in this prospectus or any applicable prospectus supplement is accurate only as of the date on the front cover of such documents. Our business, financial information, results of operations and prospects may have changed since those dates. If it is against the law in any state to make an offer to sell these securities (or to solicit an offer from someone to buy these securities), then this offer does not apply to any person in that state, and no offer or solicitation is made by this prospectus to any such person. TABLE OF CONTENTS
Page ---- About This Prospectus....................................................... 1 Where You Can Find More Information......................................... 1 Cautionary Note Regarding Forward-Looking Statements........................ 2 About McLeodUSA............................................................. 3 Coverage Ratios............................................................. 4 Use of Proceeds............................................................. 4 Description of Common Stock................................................. 5 Description of Preferred Stock.............................................. 10 Description of Depositary Shares............................................ 13 Description of Debt Securities.............................................. 16 Description of Warrants..................................................... 27 Description of Stock Purchase Contracts and Stock Purchase Units............ 29 Description of Subscription Rights.......................................... 30 Plan of Distribution........................................................ 31 Legal Matters............................................................... 32 Experts..................................................................... 32
ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission using a "shelf" registration process. Under the shelf process, we may sell any combination of the securities described in this prospectus in one or more offerings up to a total dollar amount of $1,750,000,000. This prospectus provides you with a general description of the securities we may offer. Each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement also may add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement, together with the additional information described below under the heading "Where You Can Find More Information." As used in this prospectus, "McLeodUSA," "the company," "we," "us," and "our" refer to McLeodUSA Incorporated, a Delaware corporation, and its subsidiaries. WHERE YOU CAN FIND MORE INFORMATION We have filed a registration statement of which this prospectus forms a part. The registration statement, including the attached exhibits and schedules, contains additional relevant information about us and the securities offered by this prospectus. The rules and regulations of the SEC allow us to omit some of the information included in the registration statement from this prospectus and any applicable prospectus supplement. We file reports, proxy statements and other information with the SEC under the Securities Exchange Act of 1934. You may read and copy any of this information at the following locations of the SEC: Public Reference Room New York Regional Office Chicago Regional Office 450 Fifth Street, N.W. 7 World Trade Center Citicorp Center Room 1024 Suite 1300 500 West Madison Street Washington, D.C. 20549 New York, New York 10048 Suite 1400 Chicago, Illinois 60661-2511 You may obtain information on the operation of the SEC's Public Reference Room in Washington, D.C. by calling the SEC at 1-800-SEC-0330. The SEC file number for our documents filed under the Securities Exchange Act is 0-20763. The SEC also maintains an Internet Web site that contains reports, proxy statements and other information regarding issuers, like McLeodUSA, that file electronically with the SEC. The address of that site is http://www.sec.gov. The SEC allows us to "incorporate by reference" information into this prospectus. This means we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be a part of this prospectus, except for any such information that is superseded by information included directly in this document or any prospectus supplement. This prospectus incorporates by reference the documents listed below that we have previously filed or will file with the SEC. They contain important information about us and our financial condition. . Our Annual Report on Form 10-K for our fiscal year ended December 31, 1998, filed on March 24, 1999, as amended by Form 10-K/A filed on April 22, 1999 . Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1999, filed on May 17, 1999 . Our Current Reports on Form 8-K filed on April 15, 1999, April 16, 1999, June 17, 1999 and July 2, 1999 1 . All documents filed subsequent to the date of this prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act until all of the securities offered by this prospectus are sold, effective the date such documents are filed . The description of our Class A common stock set forth in our registration statement filed under Section 12 of the Securities Exchange Act on Form 8-A on May 24, 1996, including any amendment or report filed with the SEC for the purpose of updating such description . The consolidated financial statements of Ovation Communications, Inc. and subsidiaries appearing on pages F-1 through F-17 of our definitive prospectus dated March 24, 1999 and filed with the SEC on March 26, 1999 pursuant to Rule 424(b) under the Securities Act of 1933 as part of our Registration Statement on Form S-4 (Registration No. 333-71811) In the event of conflicting information in these documents, the information in the latest filed document should be considered correct. You can obtain any of the documents listed above from the SEC, through the SEC's Web site at the address described above, or directly from us, by requesting them in writing or by telephone at the following address: McLeodUSA Incorporated McLeodUSA Technology Park 6400 C Street SW, P.O. Box 3177 Cedar Rapids, IA 52406-3177 Attn: General Counsel Telephone (319) 364-0000 We will provide a copy of any of these documents without charge, excluding any exhibits unless the exhibit is specifically listed as an exhibit to the registration statement of which this prospectus forms a part. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt means, within two business days after we receive your request. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus and the information incorporated by reference in it include "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans, our future capital requirements, forecasted demographic and economic trends relating to our industry, our ability to complete acquisitions, to realize anticipated cost savings and other benefits from acquisitions and to recover acquisition-related costs, and similar matters are forward-looking statements. These statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the statements. The forward-looking information is based on various factors and was derived using numerous assumptions. In some cases, you can identify these statements by our use of forward-looking words such as "may," "will," "should," "anticipate," "estimate," "expect," "plan," "believe," "predict," "potential" or "intend." You should be aware that these statements only reflect our predictions. Actual events or results may differ substantially. Important factors that could cause our actual results to be materially different from our expectations include those discussed in the applicable prospectus supplement under the caption "Risk Factors." We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 2 ABOUT McLEODUSA The following summary highlights selected information regarding McLeodUSA. It does not contain all of the information that is important to you. You should carefully read this entire prospectus and any prospectus supplement, together with the other documents to which this prospectus and any prospectus supplement refers you. In addition, you should carefully consider the factors set forth under the caption "Risk Factors" in the applicable prospectus supplement. Unless otherwise indicated, dollar amounts over $1 million have been rounded to one decimal place and dollar amounts less than $1 million have been rounded to the nearest thousand. Our Company We provide communications services to business and residential customers in the Midwestern and Rocky Mountain regions of the United States. We offer local, long distance, Internet access, data, voice mail and paging services, from a single company on a single bill. We believe we are the first company in many of our markets to offer one-stop shopping for communications services tailored to customers' specific needs. Our approach makes it easier for both our business and our residential customers to satisfy their communications needs. It also allows businesses to receive customized services, such as competitive long distance pricing and enhanced calling features, that might not otherwise be directly available on a cost-effective basis. In addition to our core business of providing competitive local, long distance and related communications services, we also derive revenue from: . sale of advertising space in telephone directories . traditional local telephone company services in east central Illinois and southeast South Dakota . special access, private line and data services . communications network maintenance services . telephone equipment sales, leasing, service and installation . video services . telemarketing services . computer networking services . other communications services, including cellular, operator, payphone, mobile radio, paging services and Web site development and hosting In most of our markets, we compete with the existing local phone company by leasing its lines and switches. In other markets, primarily in east central Illinois and southeast South Dakota, we operate our own lines and switches. We provide long distance services by using our own communications network facilities and leasing capacity from long distance and local communications providers. We are constructing fiber optic communications networks in Iowa, Illinois, Wisconsin, Indiana, Missouri, Michigan, Minnesota, South Dakota, North Dakota, Colorado and Wyoming to carry additional communications traffic on our own network. ---------------- Our principal executive offices are located at McLeodUSA Technology Park, 6400 C Street SW, P.O. Box 3177, Cedar Rapids, Iowa 52406-3177, and our phone number is (319) 364-0000. 3 COVERAGE RATIOS For each of the years ended December 31, 1994, 1995, 1996, 1997 and 1998, earnings were insufficient to cover fixed charges by $11.4 million, $11.4 million, $22.6 million, $84.4 million and $135.5 million, respectively. For the three months ended March 31, 1998 and 1999, earnings were insufficient to cover fixed charges by $32.0 million and $51.7 million, respectively. For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of net loss before income taxes plus fixed charges (excluding capitalized interest). Fixed charges consist of interest on all debt (including capitalized interest), amortization of debt discount and deferred loan costs and the portion of rental expense that is representative of the interest component of rental expense (deemed to be one-third of rental expense which management believes is a reasonable approximation of the interest component). Because we did not have any preferred stock outstanding during any of these periods, the ratio of earnings to fixed charges and preferred stock dividends is the same as the ratio of earnings to fixed charges. USE OF PROCEEDS Unless we specify otherwise in the applicable prospectus supplement, we will use the net proceeds from the sale of the offered securities for general corporate purposes, including working capital, the repayment or refinancing of our indebtedness, future acquisitions and/or capital expenditures. Until we apply the net proceeds for specific purposes, we may invest such net proceeds in short-term or marketable securities. 4 DESCRIPTION OF COMMON STOCK The following summary description of our capital stock is based on the provisions of our certificate of incorporation and bylaws and the applicable provisions of the Delaware General Corporation Law. For information on how to obtain copies of our certificate of incorporation and bylaws, see "Where You Can Find More Information." General Under our certificate of incorporation, we have authority to issue 274,000,000 shares of capital stock, consisting of 250,000,000 shares of Class A common stock, 22,000,000 shares of Class B common stock and 2,000,000 shares of preferred stock. We have declared a two-for-one stock split to be effected in the form of a stock dividend for our Class A common stock. The record date for the stock split was July 12, 1999 and distribution of the additional shares will take place on July 26, 1999. Giving effect to this stock split, we had issued and outstanding as of July 1, 1999, 150,417,738 shares of our Class A common stock, no shares of our Class B common stock and no shares of our preferred stock. The rights of the holders of our Class A common stock and our Class B common stock discussed below are subject to such rights as our board of directors may from time to time confer on holders of our preferred stock that may be issued in the future. Such rights may adversely affect the rights of holders of our Class A common stock or our Class B common stock, or both. Class A Common Stock Voting Rights. Each holder of our Class A common stock is entitled to attend all special and annual meetings of our stockholders and, together with the holders of all other classes of stock entitled to vote at such meetings, to vote upon any matter, including, without limitation, the election of directors. Holders of our Class A common stock are entitled to one vote per share. Liquidation Rights. In the event of any dissolution, liquidation or winding up of McLeodUSA, whether voluntary or involuntary, the holders of our Class A common stock, the holders of our Class B common stock and the holders of any class or series of stock entitled to participate with our Class A and Class B common stock, will become entitled to participate in the distribution of any of our assets remaining after we have paid, or provided for payment of, all of our debts and liabilities and after we have paid, or set aside for payment, to the holders of any class of stock having preference over our Class A common stock in the event of dissolution, liquidation or winding up, the full preferential amounts, if any, to which they are entitled. Dividends. Dividends may be paid on our Class A common stock, our Class B common stock and on any class or series of stock entitled to participate with our Class A and Class B common stock when and as declared by our board of directors. We have never paid, however, any cash dividends and the indentures governing our outstanding debt securities prohibit us from paying cash dividends. No Preemptive or Conversion Rights. The holders of our Class A common stock have no preemptive or subscription rights to purchase additional securities issued by us nor any rights to convert their Class A common stock into other of our securities or to have their shares redeemed by us. Class B Common Stock Voting Rights. Each holder of our Class B common stock is entitled to attend all special and annual meetings of our stockholders and, together with the holders of all other classes of stock entitled to vote at such meetings, to vote upon any matter or thing, including, without limitation, the election of directors. Holders of our Class B common stock are entitled to .40 vote per share. Liquidation Rights. In the event of any dissolution, liquidation or winding up of McLeodUSA, whether voluntary or involuntary, the holders of our Class B common stock, the holders of our Class A common stock 5 and the holders of any class or series of stock entitled to participate with our Class B and Class A common stock, will become entitled to participate in the distribution of any of our assets remaining after we have paid, or provided for payment of, all of our debts and liabilities and after we have paid, or set aside for payment, to the holders of any class of stock having preference over our Class B common stock in the event of dissolution, liquidation or winding up the full preferential amounts, if any, to which they are entitled. Dividends. Dividends may be paid on our Class B common stock, our Class A common stock and on any class or series of stock entitled to participate with our Class B and Class A common stock when and as declared by our board of directors. Conversion into Our Class A Common Stock; No Other Preemptive or Conversion Rights. The shares of our Class B common stock may be converted at any time at the option of the holder into fully paid and nonassessable shares of our Class A common stock at the rate of one share of our Class A common stock for each share of Class B common stock, as adjusted for any stock split. Except for this conversion right, the holders of our Class B common stock have no preemptive or subscription rights to purchase additional securities issued by us nor any rights to convert their Class B common stock into other of our securities or to have their shares redeemed by us. Certain Charter and Statutory Provisions Classified Board. Our certificate of incorporation provides for the division of our board of directors into three classes of directors, serving staggered three-year terms. Our certificate of incorporation further provides that the approval of the holders of at least two-thirds of the shares entitled to vote thereon and the approval of a majority of our entire board of directors are necessary for the alteration, amendment or repeal of certain sections of our certificate of incorporation relating to the election and classification of our board of directors, limitation of director liability, indemnification and the vote requirements for such amendments to our certificate of incorporation. These provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our company. Certain Statutory Provisions. We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, this statute prohibits a publicly held Delaware corporation like us from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless . before such date, the corporation's board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder, . upon consummation of the transaction that resulted in such person becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding, for purposes of determining the number of shares outstanding, shares owned by certain directors or certain employee stock plans, or . on or after the date the stockholder became an interested stockholder, the business combination is approved by the corporation's board of directors and authorized by the affirmative vote, and not by written consent, of at least two-thirds of the outstanding voting stock of the corporation excluding that stock owned by the interested stockholder. A "business combination" includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder. An "interested stockholder" is a person, other than the corporation and any direct or indirect wholly owned subsidiary of the corporation, who together with affiliates and associates, owns or, as an affiliate or associate, within three years prior, did own 15% or more of the corporation's outstanding voting stock. Section 203 expressly exempts from the requirements described above any business combination by a corporation with an interested stockholder who became an interested stockholder at a time when the section did not apply to the corporation. As permitted by the Delaware General Corporation Law, our original certificate of incorporation provided that it would not be governed by Section 203. Several of our stockholders, including 6 Clark E. and Mary E. McLeod and Interstate Energy Corporation became interested stockholders within the meaning of Section 203 while that certificate of incorporation was in effect. Accordingly, future transactions between us and any of these stockholders will not be subject to the requirements of Section 203. Our certificate of incorporation empowers our board of directors to redeem any of our outstanding capital stock at a price determined by our board of directors, which price will be at least equal to the lesser of . fair market value, as determined in accordance with our certificate of incorporation, or . in the case of a "Disqualified Holder," such holder's purchase price, if the stock was purchased within one year of such redemption, to the extent necessary to prevent the loss or secure the reinstatement of any license, operating authority or franchise from any governmental agency. A "Disqualified Holder" is any holder of shares of our capital stock whose holding of such stock may result in the loss of, or failure to secure the reinstatement of, any license or franchise from any governmental agency held by us or any of our subsidiaries to conduct any portion of our business or the business of any of our subsidiaries. Under the Telecommunications Act of 1996, non-U.S. citizens or their representatives, foreign governments or their representatives, or corporations organized under the laws of a foreign country may not own, in the aggregate, more than 20% of a common carrier licensee or more than 25% of the parent of a common carrier licensee if the Federal Communications Commission, or FCC, determines that the public interest would be served by prohibiting such ownership. Additionally, the FCC's rules may under some conditions limit the size of investments by foreign telecommunications carriers in U.S. international carriers. Limitation of Liability and Indemnification Limitations of Director Liability. Section 102(b)(7) of the Delaware General Corporation Law authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breach of directors' fiduciary duty of care. Although Section 102(b)(7) does not change directors' duty of care, it enables corporations to limit available relief to equitable remedies such as injunction or rescission. Our certificate of incorporation limits the liability of our directors to us or our stockholders to the full extent permitted by Section 102(b)(7). Specifically, our directors are not personally liable for monetary damages to us or our stockholders for breach of the director's fiduciary duty as a director, except for liability for: .any breach of the director's duty of loyalty to us or our stockholders . acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law . unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law . any transaction from which the director derived an improper personal benefit Indemnification. To the maximum extent permitted by law, our bylaws provide for mandatory indemnification of our directors and officers against any expense, liability or loss to which they may become subject, or which they may incur as a result of being or having been a director or officer of McLeodUSA. In addition, we must advance or reimburse directors and officers for expenses incurred by them in connection with indemnifiable claims. We also maintain directors' and officers' liability insurance. Transfer Agent and Registrar The transfer agent and registrar for our Class A common stock is Norwest Bank Minnesota, N.A. Stockholders' Agreements On November 18, 1998, we entered into a stockholders' agreement (the "Stockholders' Agreement") with several of our significant stockholders consisting of IES Investments Inc. (a subsidiary of Interstate Energy), Clark E. and Mary E. McLeod, and Richard A. and Gail G. Lumpkin and several other parties related to the Lumpkins. 7 The Stockholders' Agreement provides, among other things, that: . until December 31, 2001, the parties will not sell any of our equity securities without receiving the prior written consent of our board of directors, except for transfers specifically permitted by the Stockholders' Agreement . our board of directors will determine on a quarterly basis starting with the quarter ending December 31, 1998 and ending on December 31, 2001, the aggregate number, if any, of shares of our Class A common stock, not to exceed in the aggregate 150,000 shares per quarter, that the parties may sell during designated trading periods following the release of our quarterly or annual financial results . to the extent our board of directors grants registration rights to a party to the agreement in connection with a sale of our securities by such party, it will grant similar registration rights to the other parties . our board of directors will determine on an annual basis commencing with the year ending December 31, 1999 and ending on December 31, 2001 (each such year, an "Annual Period"), the aggregate number, if any, of shares of our Class A common stock, not to exceed in the aggregate on an annual basis a number of shares equal to 15% of the total number of shares of Class A common stock beneficially owned by the parties as of December 31, 1998 (the "Registrable Amount"), to be registered by us under the Securities Act for sale by the parties . in any underwritten offering of shares of Class A common stock by us, other than an offering on a registration statement on Form S-4 or Form S- 8 or any other form which would not permit the inclusion of shares of our Class A common stock owned by the parties, we will undertake to register the shares of our Class A common stock of such parties up to the Registrable Amount, if any, as determined by our board of directors . we may subsequently determine not to register any shares of the parties under the Securities Act and may either not file a registration statement or otherwise withdraw or abandon a registration statement previously filed The Stockholders' Agreement terminates on December 31, 2001. If during any Annual Period we have not provided a party a reasonable opportunity to sell an aggregate number of shares of Class A common stock equal to not less than 15% of the total number of shares of Class A common stock beneficially owned by such party as of December 31, 1998, then such party may terminate the Stockholders' Agreement as it applies to such party. Under the Stockholders' Agreement, each party also agreed, until such party owns less than 4 million shares of Class A common stock or until December 31, 2001, whichever occurs first, to vote such party's shares and take all action within its power to: . establish the size of our board of directors at up to 11 directors . cause to be elected to our board of directors one director designated by Interstate Energy for so long as IES Investments owns at least 4 million shares of Class A common stock . cause to be elected to our board of directors three directors who are executive officers of McLeodUSA designated by Clark McLeod for so long as Clark and Mary McLeod collectively own at least 4 million shares of Class A common stock . cause Richard Lumpkin to be elected to our board of directors for so long as the former stockholders of Consolidated Communications, Inc. who are a party to the agreement collectively own at least 4 million shares of Class A common stock . cause to be elected to our board of directors up to six non-employee directors nominated by our board 8 On January 7, 1999, in connection with the Ovation acquisition, M/C Investors L.L.C. and Media/Communications Partners III Limited Partnership (collectively, "M/C") entered into a separate stockholders' agreement (the "Ovation Stockholders' Agreement") with the parties to the Stockholders' Agreement. The Ovation Stockholders' Agreement provides that, until December 31, 2001, M/C will not sell any of our equity securities without receiving the prior written consent of our board of directors. The Ovation Stockholders' Agreement also contains various provisions intended to insure that M/C is treated on a basis similar to the parties to the Stockholders' Agreement in connection with permitted sales of our securities under the Stockholders' Agreement generally starting December 31, 1999. In addition, for so long as M/C owns at least 2.5 million shares of our Class A common stock, M/C has agreed to vote its shares in accordance with the voting agreement contained in the Stockholders' Agreement and the other parties have agreed to vote their shares to cause to be elected to our board of directors one director designated by M/C. The Ovation Stockholders' Agreement terminates on December 31, 2001. In addition, if (1) during each of the years ending December 31, 2000 and December 31, 2001, we have not provided M/C a reasonable opportunity to register under the Securities Act for sale an aggregate number of shares of our Class A common stock equal to not less than 15% of the total number of shares of Class A common stock beneficially owned by M/C as of March 31, 1999, or (2) after January 1, 2000, the Stockholders' Agreement has been terminated by all parties to such agreement, then M/C may terminate the Ovation Stockholders' Agreement. The Ovation Stockholders' Agreement will be terminated with respect to all parties other than M/C and us at such time as the Stockholders' Agreement is terminated. 9 DESCRIPTION OF PREFERRED STOCK The following description is a general summary of the terms of the preferred stock which we may issue. The description below and in any prospectus supplement does not purport to be complete and is subject to and qualified in its entirety by reference to our certificate of incorporation, the applicable certificate of designations to our certificate of incorporation which will determine the terms of the related series of preferred stock and our bylaws, each of which will be made available upon request. General Our certificate of incorporation authorizes our board of directors, from time to time and without further stockholder action, to provide for the issuance of up to 2,000,000 shares of preferred stock, par value $.01 per share, in one or more series, and to fix the relative rights and preferences of the shares, including voting powers, dividend rights, liquidation preferences, redemption rights and conversion privileges. As of the date of this prospectus, no shares of preferred stock are outstanding. As a result of its broad discretion with respect to the creation and issuance of preferred stock without stockholder approval, the board of directors could adversely affect the voting power of the holders of our Class A common stock and Class B common stock and, by issuing shares of preferred stock with certain voting, conversion and/or redemption rights, may discourage any attempt to obtain control of us. The rights, preferences, privileges and restrictions of the preferred stock of each series will be fixed by the certificate of designations relating to such issues. You should refer to the prospectus supplement relating to the class or series of preferred stock being offered for the specific terms of that class or series, including: (1) the title and stated value of the preferred stock being offered (2) the number of shares of preferred stock being offered, their liquidation preference per share, if any, and their purchase price (3) the dividend rate(s), period(s) and/or payment date(s) or method(s) of calculating the payment date(s) applicable to the preferred stock being offered (4) whether dividends shall be cumulative or non-cumulative and, if cumulative, the date from which dividends on the preferred stock being offered shall accumulate (5) the procedures for any auction and remarketing, if any, for the preferred stock being offered (6) the provisions for a sinking fund, if any, for the preferred stock being offered (7) the provisions for redemption, if applicable, of the preferred stock being offered (8) any listing of the preferred stock being offered on any securities exchange or market (9) the terms and conditions, if applicable, upon which the preferred stock being offered will be convertible into, or exchangeable for, our Class A common stock or debt securities, including the conversion or exchange price, or the manner of calculating the price, and the conversion or exchange period (10) voting rights, if any, of the preferred stock being offered (11) whether interests in the preferred stock being offered will be represented by depositary shares (12) a discussion of any material and/or special United States federal income tax considerations applicable to the preferred stock being offered 10 (13) the relative ranking and preferences of the preferred stock being offered as to dividend rights and rights upon liquidation, dissolution or winding up of our affairs (14) any limitations on the issuance of any class or series of preferred stock ranking senior to or on a parity with the series of preferred stock being offered as to dividend rights and rights upon liquidation, dissolution or winding up of our affairs (15) any other specific terms, preferences, rights, limitations or restrictions of the preferred stock being offered Rank Unless otherwise specified in the applicable prospectus supplement, the preferred stock will, with respect to distribution rights and rights upon liquidation, dissolution or winding up of McLeodUSA, rank: (1) senior to all of our classes or series of common stock and to all equity securities the terms of which specifically provide that such equity securities rank junior to the preferred stock being offered (2) on a parity with all equity securities we have issued, other than those referred to in clauses (1) and (3) of this subheading (3) junior to all equity securities we have issued, the terms of which specifically provide that such equity securities rank senior to the preferred stock being offered For purposes of this description, the term "equity securities" does not include convertible debt securities. Distributions Holders of the preferred stock of each series will be entitled to receive, when, as and if declared by our board of directors, out of our assets legally available for payment to stockholders, cash distributions, or distributions in kind or in other property if expressly permitted and described in the applicable prospectus supplement, at such rates and on such dates as will be set forth in the applicable prospectus supplement. Each such distribution shall be payable to holders of record as they appear on our stock transfer books on such record dates as shall be fixed by our board of directors. Distributions on any series of preferred stock, if cumulative, will be cumulative from and after the date set forth in the applicable prospectus supplement. Redemption The terms and conditions, if any, upon which the preferred stock will be subject to mandatory redemption or redemption at our option, either in whole or in part, will be described in the applicable prospectus supplement. Liquidation Preference Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, then, before any distribution or payment shall be made to the holders of any Class A common stock or Class B common stock or any other class or series of shares of our capital stock ranking junior to the preferred stock in the distribution of assets upon any liquidation, dissolution or winding up of our company, the holders of each series of preferred stock shall be entitled to receive out of our assets legally available for distribution to stockholders liquidating distributions in the amount of the liquidation preference set forth in the applicable prospectus supplement, plus an amount equal to all accumulated and unpaid distributions. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of shares of preferred stock will have no right or claim to any of our remaining assets. If, upon any such voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the amount of the liquidating distributions on all outstanding shares of preferred stock and the corresponding amounts payable on all shares of other classes or series of our shares of capital stock ranking on a parity with the preferred stock in the distribution of assets, then the holders of the preferred stock and all other such classes or series of shares of capital stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. 11 If liquidating distributions shall have been made in full to all holders of preferred stock, our remaining assets shall be distributed among the holders of any other classes or series of shares of capital stock ranking junior to the preferred stock upon liquidation, dissolution or winding up, according to their respective rights and preferences and in each case according to their respective number of shares. For such purposes, our consolidation or merger with or into any other corporation, trust or entity, or the sale, lease or conveyance of all or substantially all of our property or business, shall not be deemed to constitute a liquidation, dissolution or winding up of our company. Voting Rights Holders of preferred stock will have the voting rights as indicated in the applicable prospectus supplement. Conversion Rights The terms and conditions, if any, upon which any series of preferred stock is convertible into Class A common stock will be set forth in the applicable prospectus supplement relating thereto. Such terms will include the number of shares of Class A common stock into which the shares of preferred stock are convertible, the conversion price or the manner of calculating the conversion price, the conversion date(s) or period(s), provisions as to whether conversion will be at the option of the holders of the preferred stock or at our option, the events requiring an adjustment of the conversion price and provisions affecting conversion in the event of the redemption of such series of preferred stock. Transfer Agent and Registrar The transfer agent and registrar for the preferred stock will be set forth in the applicable prospectus supplement. 12 DESCRIPTION OF DEPOSITARY SHARES The following description is a general summary of the terms of the depositary shares which we may issue. This summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the applicable Deposit Agreement and related depositary receipts. General We may issue depositary receipts for depositary shares, each of which will represent a fractional interest of a share of a particular series of preferred stock, as specified in the applicable prospectus supplement. Shares of preferred stock of each series represented by depositary shares will be deposited under a separate Deposit Agreement between the "depositary" named in the Deposit Agreement and us. Subject to the terms of the Deposit Agreement, each owner of a depositary receipt will be entitled, in proportion to the fractional interest of a share of a particular series of preferred stock represented by the depositary shares evidenced by that depositary receipt, to all the rights and preferences of the preferred stock represented by those depositary shares, including dividend, voting, conversion, redemption and liquidation rights. The depositary shares will be evidenced by depositary receipts issued pursuant to the applicable Deposit Agreement. Immediately following the issuance and delivery of our preferred stock to the depositary, we will cause the depositary to issue, on our behalf, the depositary receipts. Copies of the applicable form of Deposit Agreement and depositary receipt may be obtained from us upon request, and the statements made in this summary relating to the Deposit Agreement and the depositary receipts to be issued under the Deposit Agreement are summaries of provisions of the Deposit Agreement and the related depositary receipts. Dividends and Other Distributions The depositary will distribute all cash dividends or other cash distributions received in respect of the preferred stock to the record holders of depositary receipts evidencing the related depositary shares in proportion to the number of such depositary receipts owned by such holders, subject to the obligations of holders to file proofs, certificates and other information and to pay some charges and expenses to the depositary. In the event of a distribution other than in cash, the depositary will distribute property received by it to the record holders of depositary receipts entitled to that property, subject to the obligations of holders to file proofs, certificates and other information and to pay some charges and expenses to the depositary, unless the depositary determines that it is not feasible to make the distribution, in which case the depositary may, with our approval, sell the property and distribute the net proceeds from the sale to the holders. No distribution will be made in respect of any depositary share to the extent that it represents any preferred stock converted into other securities. Withdrawal of Preferred Stock Upon surrender of the depositary receipts at the corporate trust office of the depositary, unless the related depositary shares have previously been called for redemption or converted into other securities, the holders of those depositary receipts will be entitled to delivery at the corporate trust office, to or upon the holder's order, of the number of whole or fractional shares of the preferred stock and any money or other property represented by the depositary shares evidenced by the depositary receipts. Holders of depositary receipts will be entitled to receive whole or fractional shares of the related preferred stock on the basis of the proportion of preferred stock represented by the depositary share as specified in the applicable prospectus supplement, but holders of the shares of preferred stock will not thereafter be entitled to receive depositary shares therefor. If the depositary receipts delivered by the holder evidence a number of depositary shares in excess of the number of depositary shares representing the number of shares of preferred stock to be withdrawn, the depositary will deliver to the holder at the same time a new depositary receipt evidencing the excess number of depositary shares. 13 Redemption of Depositary Shares Whenever we redeem shares of preferred stock held by the depositary, the depositary will redeem, as of the same redemption date, the number of depositary shares representing shares of the preferred stock so redeemed, provided we have paid in full to the depositary the redemption price of the preferred stock to be redeemed plus an amount equal to any accrued and unpaid dividends thereon to the date fixed for redemption. The redemption price per depositary share will be equal to the corresponding proportion of the redemption price and any other amounts per share payable with respect to the preferred stock. If fewer than all the depositary shares are to be redeemed, the depositary shares to be redeemed will be selected pro rata, as nearly as may be practicable without creating fractional depositary shares, or by another equitable method. From and after the date fixed for redemption, all dividends in respect of the shares of preferred stock called for redemption will cease to accrue, the depositary shares called for redemption will no longer be deemed to be outstanding and all rights of the holders of the depositary receipts evidencing the depositary shares called for redemption will cease, except the right to receive any moneys payable upon the redemption and any money or other property to which the holders of the depositary receipts were entitled upon the redemption and surrender thereof to the depositary. Voting of the Preferred Stock Upon receipt of notice of any meeting at which the holders of the preferred stock are entitled to vote, the depositary will mail the information contained in the notice of meeting to the record holders of the depositary receipts evidencing the depositary shares which represent such preferred stock. Each record holder of depositary receipts evidencing depositary shares on the record date, which will be the same date as the record date for the preferred stock, will be entitled to instruct the depositary as to the exercise of the voting rights pertaining to the amount of preferred stock represented by the holder's depositary shares. The depositary will vote the amount of preferred stock represented by the depositary shares in accordance with the instructions, and we will agree to take all reasonable action which may be deemed necessary by the depositary in order to enable the depositary to do so. The depositary will abstain from voting the amount of preferred stock represented by the depositary shares to the extent it does not receive specific instructions from the holders of depositary receipts evidencing the depositary shares. The depositary shall not be responsible for any failure to carry out any instruction to vote, or for the manner or effect of any such vote made, as long as such action or non- action is in good faith and does not result from negligence or willful misconduct of the depositary. Liquidation Preference In the event of our liquidation, dissolution or winding up, whether voluntary or involuntary, the holders of each depositary receipt will be entitled to the fraction of the liquidation preference accorded each share of preferred stock represented by the depositary shares evidenced by such depositary receipt, as set forth in the applicable prospectus supplement. Conversion of Preferred Stock The depositary shares, as such, are not convertible into our common stock or any of our other securities or property. Nevertheless, if specified in the applicable prospectus supplement relating to an offering of depositary shares, the depositary receipts may be surrendered by their holders to the depositary with written instructions to the depositary to instruct us to cause conversion of the preferred stock represented by the depositary shares evidenced by the depositary receipts into whole shares of our Class A common stock, other shares of our preferred stock or other of our equity or debt securities, and we have agreed that upon receipt of those instructions and any amounts payable in respect thereof, we will cause the conversion thereof utilizing the same procedures as those provided for delivery of preferred stock to effect such conversion. If the depositary shares evidenced by a depositary receipt are to be converted in part only, a new depositary receipt or receipts will be issued for any depositary shares not to be converted. No fractional shares of Class A common stock will be issued upon conversion, and if such conversion would result in a fractional share being issued, we will pay an amount in cash equal to the value of the fractional interest based upon the average of the closing prices of the Class A common stock for a specified period of time prior to the conversion. 14 Amendment and Termination of the Deposit Agreement The form of depositary receipt evidencing the depositary shares which represent the preferred stock and any provision of the Deposit Agreement may at any time be amended by agreement between the depositary and us. However, any amendment that materially and adversely alters the rights of the holders of depositary receipts or that would be materially and adversely inconsistent with the rights granted to the holders of the related preferred stock will not be effective unless such amendment has been approved by the existing holders of at least a majority of the depositary shares evidenced by the depositary receipts then outstanding. No amendment shall impair the right, subject to certain exceptions in the Deposit Agreement, of any holder of depositary receipts to surrender any depositary receipt with instructions to deliver to the holder the related preferred stock and all money and other property, if any, represented thereby, except in order to comply with law. Every holder of an outstanding depositary receipt at the time any such amendment becomes effective shall be deemed, by continuing to hold such receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. Unless specified otherwise in the applicable prospectus supplement, we may terminate the Deposit Agreement upon not less than 30 days prior written notice to the depositary if a majority of each class of depositary shares affected by such termination consents, whereupon the depositary shall deliver or make available to each holder of depositary receipts, upon surrender of the depositary receipts held by such holder, such number of whole or fractional shares of preferred stock as are represented by the depositary shares evidenced by such depositary receipts together with any other property held by the depositary with respect to such depositary receipt. In addition, the Deposit Agreement will automatically terminate if: (1) all outstanding depositary shares shall have been redeemed (2) there shall have been a final distribution in respect of the related preferred stock in connection with any liquidation, dissolution or winding up of our company and such distribution shall have been distributed to the holders of depositary receipts evidencing the depositary shares representing such preferred stock (3) each share of the related preferred stock shall have been converted into our securities not represented by depositary shares Charges of Preferred Stock Depositary We will pay all transfer and other taxes and governmental charges arising solely from the existence of the Deposit Agreement. In addition, we will pay the fees and expenses of the depositary in connection with the performance of its duties under the Deposit Agreement. However, holders of depositary receipts will pay the fees and expenses of the depositary for any duties requested by such holders to be performed which are outside of those expressly provided for in the Deposit Agreement. Miscellaneous The depositary will forward to holders of depositary receipts any reports and communications from us which are received by the depositary with respect to the related preferred stock. Unless specified otherwise in the applicable prospectus supplement, neither we nor the depositary will be liable if either of us is prevented from or delayed in, by law or any circumstances beyond its control, performing its obligations under the Deposit Agreement. The obligations of the depositary and our company under the Deposit Agreement will be limited to performing their duties thereunder in good faith and without negligence, in the case of any action or inaction in the voting of preferred stock represented by the depositary shares, gross negligence or willful misconduct, and we and the depositary will not be obligated to prosecute or defend any legal proceeding in respect of any depositary receipts, depositary shares or shares of preferred stock represented thereby unless satisfactory indemnity is furnished. We and the depositary may rely on written advice of counsel or accountants, or information provided by persons presenting shares of preferred stock represented thereby for deposit, holders of depositary receipts or other persons believed in good faith to be competent to give such information, and on documents believed in good faith to be genuine and signed by a proper party. In the event the depositary shall receive conflicting claims, requests or instructions from any holders of depositary receipts, on the one hand, and us, on the other hand, the depositary shall be entitled to act on such claims, requests or instructions received from us. 15 DESCRIPTION OF DEBT SECURITIES The following discussion describes certain general provisions of the debt securities to which this prospectus and any applicable prospectus supplement may relate. The particular terms of the debt securities being offered and the extent to which these general provisions may apply will be set forth in the indenture or supplemental indenture under which the particular debt securities are issued, and will be described in a prospectus supplement relating to such debt securities. A form of the senior indenture and a form of the subordinated indenture under which the debt securities may be issued have been filed as exhibits to the registration statement of which this prospectus is a part. All section references appearing in this prospectus are to sections of each indenture unless otherwise indicated, and capitalized terms used but not defined below shall have the respective meanings set forth in each Indenture. General Our debt securities will be unsecured general obligations and may be either senior debt securities, which we refer to as Senior Securities, or subordinated debt securities, which we refer to as Subordinated Securities. The debt securities will be issued pursuant to a written agreement, known as an Indenture, to be entered into by us and an independent third party, known as a Trustee, who will be legally obligated to carry out the terms of the Indenture. Senior Securities and Subordinated Securities will be issued under separate indentures referred to as a Senior Indenture and a Subordinated Indenture, respectively, or together referred to as the Indentures. The statements made under this heading relating to the debt securities and the Indentures are summaries of their anticipated provisions, do not purport to be complete and are qualified in their entirety by reference to the Indentures and the debt securities themselves. The indebtedness represented by Subordinated Securities will be subordinated in right of payment to the prior payment in full of our Senior Indebtedness (which term includes our Senior Securities), as described below under "-- Ranking." All of our operations are conducted through subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the debt securities or to make any funds available therefor, whether by dividends, loans or other payments, other than as expressly provided in a guarantee. The payment of dividends or the making of loans and advances to us by our subsidiaries may be subject to contractual, statutory or regulatory restrictions, which, if material, would be disclosed in the applicable prospectus supplement. Moreover, such payments, loans and advances would be contingent upon the earnings of the subsidiaries. Any right we may have to receive assets of any of our subsidiaries upon liquidation or recapitalization of the subsidiaries (and the consequent right of the holders of debt securities to participate in those assets) will be subject to the claims of the subsidiaries' creditors. In the event that we are recognized as a creditor of a subsidiary, our claims would still be subject to any security interest in the assets of such subsidiary and any indebtedness of such subsidiary senior to that of the debt securities, and would be dependent primarily upon the receipt of funds from our subsidiaries. Except as set forth in the applicable Indenture or in one or more supplemental indentures and described in an applicable prospectus supplement, the debt securities may be issued without limit as to aggregate principal amount, in one or more series, in each case as established from time to time in or under authority granted by a resolution of our board of directors or as established in the applicable Indenture or in one or more supplemental indentures. All debt securities of one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the holders of the debt securities of such series, for issuances of additional debt securities of such series. It is expected that each Indenture will provide that there may be more than one Trustee thereunder, each with respect to one or more series of debt securities. Any Trustee under an Indenture may resign or be removed with respect to one or more series of debt securities, and a successor Trustee may be appointed to act with 16 respect to such series. In the event that two or more persons are acting as Trustee with respect to different series of debt securities, each such Trustee will be a trustee of a trust under the applicable Indenture separate and apart from the trust administered by any other Trustee, and, except as otherwise provided in the Indenture or supplemental indenture, any action permitted to be taken by each Trustee may be taken by each such Trustee with respect to, and only with respect to, the one or more series of debt securities for which it is Trustee under the applicable Indenture. The applicable prospectus supplement will describe the specific terms of any series of debt securities being offered, including: (1) The title of such debt securities and whether such debt securities are Senior Securities or Subordinated Securities (2) The aggregate principal amount of such debt securities and any limit on such aggregate principal amount (3) The percentage of the principal amount at which such debt securities will be issued and, if other than the full principal amount thereof, the portion of the principal amount payable upon declaration of acceleration of the maturity thereof (4) The date or dates, or the method for determining such date or dates, on which the principal of such debt securities will be payable and the amount of principal payable thereon (5) The rate or rates (which may be fixed or variable), or the method by which such rate or rates will be determined, at which such debt securities will bear interest, if any (6) The date or dates, or the method for determining such date or dates, from which any such interest will accrue, the dates on which any such interest will be payable, the regular record dates for such interest payment dates, or the method by which record dates may be determined, the persons to whom such interest will be payable, and the basis upon which interest is to be calculated if other than a 360-day year of twelve 30-day months (7) The place or places where the principal of (and premium, if any) and interest, if any, on such debt securities will be payable, where such debt securities may be surrendered for registration of transfer or exchange and where notices or demands to or upon us in respect of such debt securities and the applicable Indenture may be served (8) The period or periods within which, the price or prices at which, and the other terms and conditions upon which, such debt securities may be redeemed, in whole or in part, at our option if we have such an option (9) Our obligation, if any, to redeem, repay or purchase such debt securities pursuant to any sinking fund or analogous provision or at the option of a holder thereof, and the period or periods within which, the date and dates on which, the price or prices at which, and the other terms and conditions upon which, such debt securities will be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation (10) If other than U.S. dollars, the currency or currencies in which such debt securities are denominated or in which the principal of (and premium, if any) or interest or Additional Amounts (as defined below), if any, on the debt securities is payable, which may be a foreign currency or units of two or more foreign currencies or a composite currency or currencies, and the terms and conditions relating thereto (11) Whether the amount of payments of principal of (and premium, if any) or interest or Additional Amounts, if any, on such debt securities may be determined with reference to an index, formula or other method (which index, formula or method may, but need not be, based on a currency, currencies, currency unit or units or composite currency or currencies) and the manner in which such amounts are to be determined 17 (12) Whether the principal of (and premium, if any) or interest or Additional Amounts, if any, on the debt securities are to be payable, at our election or at the election of a holder thereof, in a currency or currencies, currency unit or units or composite currency or currencies other than that in which such debt securities are denominated or stated to be payable, the period or periods within which (including the election date), and the terms and conditions upon which, such election may be made, and the time and manner of, and identity of the exchange rate agent with responsibility for, determining the exchange rate between the currency or currencies, currency unit or units or composite currency or currencies in which such debt securities are denominated or stated to be payable and the currency or currencies, currency unit or units or composite currency or currencies in which such debt securities are to be so payable (13) Any additions to, modifications of or deletions from the terms of such debt securities with respect to events of default, amendments, merger, consolidation and sale of assets or covenants set forth in the applicable Indenture (14) Whether such debt securities will be issued in certificate or book- entry form (15) Whether such debt securities will be in registered or bearer form and, if in registered form, the denominations thereof if other than $1,000 and any integral multiple thereof and, if in bearer form, the denominations thereof if other than $5,000, and terms and conditions relating thereto (16) The applicability, if any, of the defeasance and covenant defeasance provisions of the Indenture and any additional or different terms on which such series of debt securities may be defeased (17) Whether and under what circumstances we will pay any additional amounts (which we refer to as Additional Amounts) on such debt securities to a holder that is not a United States person in respect of any tax, assessment or governmental charge and, if so, whether we will have the option to redeem such debt securities in lieu of making such payment (18) Whether and the extent to which the payment of principal of, and premium, if any and interest on such debt securities are guaranteed by one or more of our Subsidiaries or by other persons (19) Whether and under what circumstances the debt securities are convertible into our Class A common stock, our preferred stock or other debt securities (20) If the debt securities are to be issued upon the exercise of debt warrants, the time, manner and place for such debt securities to be authenticated and delivered (21) Any other terms of such debt securities not inconsistent with the provisions of the applicable Indenture (Section 301) The debt securities may provide for less than the entire principal amount thereof to be payable upon declaration of acceleration of the maturity thereof or bear no interest or bear interest at a rate which at the time of issuance is below market rates, which we refer to as Original Issue Discount Securities. Special U.S. federal income tax, accounting and other considerations applicable to Original Issue Discount Securities will be described in the applicable prospectus supplement. Except as set forth in the applicable Indenture or in one or more supplemental indentures, the applicable Indenture will not contain any provisions that would limit our ability to incur indebtedness or that would afford you protection in the event of a highly leveraged or similar transaction involving us or in the event of a change of control. You should refer to the applicable prospectus supplement for information with respect to any deletions from, modifications of or additions to the Events of Default or our covenants that are described below, including any addition of a covenant or other provision providing event risk or similar protection. For the purposes of certain Events of Default described below and any additional covenants or other provisions that may be set forth in one or more supplemental indentures, we may designate certain of our Subsidiaries as "Unrestricted Subsidiaries." All Subsidiaries that are not designated as Unrestricted Subsidiaries will be "Restricted Subsidiaries." The terms and conditions, if any, under which a Subsidiary may be designated as an Unrestricted Subsidiary will be set forth in the applicable supplemental indenture and described in the applicable prospectus supplement. 18 We refer to a corporation, partnership, limited liability company, joint venture or similar entity in which we or one or more of our other Subsidiaries own or control, directly or indirectly, a majority of the outstanding voting stock, partnership interests, membership interests or similar interests, as the case may be, as a "Subsidiary." For the purposes of this definition, "voting stock" means stock or other equity interests having voting power for the election of directors, or comparable governing body, as the case may be, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. Denomination, Interest, Registration and Transfer Unless otherwise described in the applicable prospectus supplement, dollar- denominated debt securities that are in registered form will be issuable in denominations of $1,000 and any integral multiple thereof (except for registered debt securities issued in global form, which may be of any denomination), and dollar-denominated debt securities that are in bearer form will be issuable in denominations of $5,000 (except for bearer debt securities issued in global form, which may be of any denomination) (Section 302). Unless otherwise specified in the applicable prospectus supplement, the principal of (and applicable premium, if any) and interest (and Additional Amounts, if any) on any series of debt securities that are in registered form will be payable at the corporate trust office of the Trustee, the address of which will be stated in the applicable prospectus supplement. At our option, payment of interest on debt securities that are in registered form may be made by check mailed to the address of the person entitled thereto as it appears in the applicable register for such debt securities or by wire transfer of funds to such person at an account maintained within the United States. Unless otherwise specified in the applicable prospectus supplement, payment of the principal of (and applicable premium, if any) and interest (and Additional Amounts, if any) on any debt securities that are in bearer form will be made only at an office or agency of ours located outside the United States (Sections 301, 305, 306, 307 and 1002). Any interest not punctually paid or duly provided for on any interest payment date with respect to a debt security, which we refer to as Defaulted Interest, will forthwith cease to be payable to the holder on the applicable regular record date and may either be paid to the person in whose name such debt security is registered at the close of business on a special record date, which we refer to as the Special Record Date, for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof is to be given to the holder of such debt security not less than ten days before such Special Record Date, or may be paid at any time in any other lawful manner, all as more completely described in the applicable Indenture or supplemental indenture (Section 307). Subject to certain limitations imposed upon debt securities issued in book- entry form, the debt securities of any series will be exchangeable for other debt securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations upon surrender of such debt securities at the corporate trust office of the applicable Trustee. In addition, subject to certain limitations imposed upon debt securities issued in book-entry form, the debt securities of any series may be surrendered for registration of transfer or exchange thereof at the corporate trust office of the applicable Trustee. Every debt security surrendered for registration of transfer or exchange must be duly endorsed or accompanied by a written instrument of transfer. No service charge will be made for any registration of transfer or exchange of any debt securities, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith (Section 305). If the applicable prospectus supplement refers to any transfer agent (in addition to the applicable Trustee) initially designated by us with respect to any series of debt securities, we may at any time rescind the designation of such transfer agent or approve a change in the location through which any such transfer agent acts, except that we will be required to maintain a transfer agent in each place of payment for such series. We may at any time designate additional transfer agents with respect to any series of debt securities (Section 1002). 19 Neither we nor any Trustee will be required to: (1) issue, register the transfer of or exchange debt securities of any series during a period beginning at the opening of business 15 days before any selection of debt securities of that series to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption (2) register the transfer of or exchange any debt security, or portion thereof, called for redemption, except the unredeemed portion of any debt security being redeemed in part, or (3) issue, register the transfer of or exchange any debt security that has been surrendered for repayment at the option of the holder, except the portion, if any, of such debt security not to be repaid (Section 305) Merger, Consolidation or Sale of Assets We will be permitted to consolidate with, or sell, lease or convey all or substantially all of our assets to, or merge with or into, any other entity, provided that: (1) either we are the continuing entity, or the successor entity (if other than us) formed by or resulting from any such consolidation or merger or which has received the transfer of such assets is an entity organized or existing under the laws of the United States, any state thereof or the District of Columbia and expressly assumes payment of the principal of (and premium, if any), interest on, and all other amounts payable in connection with, all of the outstanding debt securities and the due and punctual performance and observance of all of the covenants and conditions contained in each Indenture (2) immediately after giving effect to such transaction and treating any indebtedness that becomes an obligation of us or any Subsidiary as a result thereof as having been incurred by us or such Subsidiary at the time of such transaction, no Event of Default under the Indentures or supplemental indentures, and no event which, after notice or the lapse of time, or both, would become such an Event of Default, will have occurred and be continuing, and (3) an officer's certificate and legal opinion covering such conditions are delivered to each Trustee (Sections 801 and 803) Certain Covenants Existence. Except as described above under "Merger, Consolidation or Sale of Assets," we will be required to do or cause to be done all things necessary to preserve and keep in full force and effect our existence, rights (by certificate of incorporation, by-laws and statute) and franchises, and those of our Restricted Subsidiaries, but we and any such Restricted Subsidiary will not be required to preserve the existence of a Restricted Subsidiary or any such right or franchise if we determine that the preservation of such existence, right or franchise is no longer desirable in the conduct of our business and that the loss of such right or franchise is not disadvantageous in any material respect to the holders of the debt securities. Furthermore, any Restricted Subsidiary may consolidate with, merge into, or sell, convey, lease or otherwise dispose of all of its property and assets to us or any wholly owned Restricted Subsidiary (Section 1004). Maintenance of Properties. We will be required to cause all of our properties used or useful in the conduct of our business or the business of any Restricted Subsidiary and material to us and our Restricted Subsidiaries taken as a whole to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and to cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in our judgment may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, but we and our Restricted Subsidiaries will not be prevented from discontinuing the operation or maintenance of any of such property if such discontinuance is in our judgment, desirable on the conduct of our business or the business of any of our Restricted Subsidiaries (Section 1005). 20 Payment of Taxes and Other Claims. We will be required to pay or discharge or cause to be paid or discharged, before the same become delinquent: (1) all material taxes, assessments and governmental charges levied or imposed upon us or any Restricted Subsidiary or upon our income, profits or property or that of any Restricted Subsidiary and (2) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a lien upon our property or that of any Restricted Subsidiary; but we will not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith in appropriate proceedings upon stay of execution or the enforcement thereof and for which adequate reserves in accordance with GAAP or other appropriate provision has been made. (Section 1007). Additional Covenants and/or Modifications to the Covenants Described Above Any additional covenants and/or modifications to the covenants described above with respect to any series of our debt securities, including any covenants relating to limitations on incurrence of indebtedness or other financial covenants, will be set forth in the applicable Indenture or supplemental indenture and described in the related prospectus supplement. Events of Default, Notice and Waiver Each Indenture may provide that some or all of the following events are "Events of Default" with respect to any series of debt securities issued thereunder, subject to any modifications, additions or deletions provided in any supplemental indenture with respect to any series of debt securities: (1) default for 30 days in the payment of any installment of interest on or any Additional Amounts payable in respect of any debt security of such series (2) default in the payment of principal of (or premium, if any, on) any debt security of such series when such amount becomes due and payable, whether upon its maturity, declaration of acceleration, call for redemption or otherwise (3) default in making any sinking fund payment as required for any debt security of such series (4) default in the performance, or breach, of any of our other covenants or warranties contained in the applicable Indenture (other than any covenant or warranty otherwise provided for in the provisions relating to Events of Default), continued for 60 days after written notice as provided in the applicable Indenture (5) certain events of bankruptcy, insolvency or reorganization, or court appointment of a receiver, liquidator or trustee of us or any Restricted Subsidiary or either of their property (6) any other Event of Default provided with respect to a particular series of debt securities (Section 501) If an Event of Default under an Indenture (other than an Event of Default described in clause 5 above) with respect to debt securities of any series at the time outstanding occurs and is continuing, then in every such case, unless the principal amount of all of the outstanding debt securities of such series has already become due and payable, the applicable Trustee or, generally, the holders of not less than 25% of the principal amount of the outstanding debt securities of that series will have the right to declare the principal amount (or, if the debt securities of that series are Original Issue Discount Securities or indexed securities, such portion of the principal amount as may be specified in the terms thereof) of all the debt securities of that series, and any accrued and unpaid interest thereon, to be due and payable immediately by written notice thereof to us (and to the applicable Trustee if given by the holders) and upon any such declaration such principal or specified portion thereof and any accrued and unpaid interest thereon shall become immediately due and payable. If an Event of Default described in clause 5 above occurs with respect to the debt securities of any series, then the principal amount of all debt securities of that series and any accrued and unpaid interest thereon shall become immediately due and payable without any act on the part of the Trustee or any holder of such debt securities. At any time after such a declaration of acceleration with respect to debt securities of such series (or of all debt securities then outstanding under any Indenture, as the case may be) 21 has been made, but before a judgment or decree for payment of the money due has been obtained by the applicable Trustee, however, the holders of not less than a majority in principal amount of the outstanding debt securities of such series (or of all debt securities then outstanding under the applicable Indenture, as the case may be) may rescind and annul such declaration and its consequences if: (1) we have deposited with the applicable Trustee all required payments of the principal of (and premium, if any) and interest and Additional Amounts, if any, on the debt securities of such series (or of all debt securities then outstanding under the applicable Indenture, as the case may be), plus certain fees, expenses, disbursements and advances of the applicable Trustee, and (2) all Events of Default, other than the non-payment of accelerated principal (or specified portion thereof), with respect to debt securities of such series (or of all debt securities then outstanding under the applicable Indenture, as the case may be) have been cured or waived as provided in such Indenture (Section 502) Each Indenture also will provide that the holders of not less than a majority in principal amount of the outstanding debt securities of any series (or of all debt securities then outstanding under the applicable Indenture, as the case may be) may waive any past default with respect to such series and its consequences, except a default: (1) in the payment of the principal of (or premium, if any) or interest or Additional Amounts, if any, on any debt security of such series, or (2) in respect of a covenant or provision contained in the applicable Indenture that cannot be modified or amended without the consent of the holder of each outstanding debt security affected thereby (Section 513) Each Trustee will be required to give notice to the holders of the applicable debt securities within 90 days of a default under the applicable Indenture unless such default has been cured or waived; but the Trustee may withhold notice of any default (except a default in the payment of the principal of (or premium, if any) or interest or Additional Amounts, if any, on such debt securities or in the payment of any sinking fund installment in respect of such debt securities) if specified responsible officers of such Trustee consider such withholding to be in the interest of such holders (Section 601). Each Indenture will provide that no holders of debt securities of any series may institute any proceedings, judicial or otherwise, with respect to such Indenture or for any remedy thereunder, except in the cases of failure of the applicable Trustee, for 60 days, to act after it has received a written request to institute proceedings in respect of an Event of Default from the holders of not less than 25% in principal amount of the outstanding debt securities of such series, as well as an offer of indemnity reasonably satisfactory to it (Section 507). This provision will not prevent any holder of debt securities from instituting suit for the enforcement of payment of the principal of (and premium, if any) and interest and Additional Amounts, if any, on such debt securities at the respective due dates thereof (Section 508). Subject to provisions in each Indenture relating to its duties in case of default, no Trustee will be under any obligation to exercise any of its rights or powers under an Indenture at the request or direction of any holders of any series of debt securities then outstanding under such Indenture, unless such holders offer to the Trustee reasonable security or indemnity (Section 602). The holders of not less than a majority in principal amount of the outstanding debt securities of any series (or of all debt securities then outstanding under an Indenture, as the case may be) will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the applicable Trustee, or of exercising any trust or power conferred upon such Trustee. A Trustee may refuse, however, to follow any direction that is in conflict with any law or with the applicable Indenture or that may involve such Trustee in personal liability or may be unduly prejudicial to the holders of debt securities of such series not joining therein (Section 512). Within 120 days after the close of each fiscal year, we will be required to deliver to each Trustee a certificate, signed by one of several specified officers, stating whether or not such officer has knowledge of any default under the applicable Indenture and, if so, specifying each such default and the nature and status thereof (Section 1008). 22 Modification of the Indentures Modifications and amendments of an Indenture will be permitted to be made only with the consent of the holders of not less than a majority in principal amount of all outstanding debt securities issued under such Indenture that are affected by such modification or amendment; but no such modification or amendment may, without the consent of the holder of each such debt security affected thereby: (1) change the stated maturity of the principal of (or the premium, if any), or any installment of interest (or Additional Amounts, if any) on, any such debt security (2) reduce the principal amount of, or the rate or amount of interest on, or any premium payable on redemption of, or any Additional Amounts payable with respect to, any such debt security, or reduce the amount of principal of an Original Issue Discount Security that would be due and payable upon declaration of acceleration of the maturity thereof or would be provable in bankruptcy, or adversely affect any right of repayment of the holder of any such debt security (3) change the place of payment, or the coin or currency for payment, of principal (or premium, if any) or interest or Additional Amounts, if any, on any such debt security (4) impair the right to institute suit for the enforcement of any payment on or with respect to any such debt security (5) release any guarantors from their guarantees of any such debt securities, or, except as contemplated in any supplemental indenture, make any change in a guarantee of such debt securities that would adversely affect the interests of the holders thereof (6) reduce the percentage in principal amount of outstanding debt securities of any series necessary to modify or amend the Indenture, to wave compliance with certain provisions thereof or certain defaults or consequences thereunder or to reduce the quorum or voting requirements in the Indenture, or (7) modify the ranking or priority of such debt securities (Section 902) The holders of not less than a majority in principal amount of the outstanding debt securities of each series affected thereby will have the right to waive compliance by us with certain covenants in such Indenture (Section 1010). Modifications and amendments of an Indenture will be permitted to be made by us and the Trustee thereunder without the consent of any holder of debt securities for any of the following purposes: (1) to evidence the succession of another person to us as obligor under such Indenture (2) to add to our covenants for the benefit of the holders of all or any series of debt securities or to surrender any right or power conferred upon us in the Indenture (3) to add Events of Default for the benefit of the holders of all or any series of debt securities (4) to add or change any provisions of an Indenture to facilitate the issuance of, or to liberalize certain terms of, debt securities in bearer form, or to permit or facilitate the issuance of debt securities in uncertificated form, provided that such action shall not adversely affect the interests of the holders of the debt securities of any series in any material respect (5) to change or eliminate any provisions of an Indenture, if such change or elimination becomes effective only when there are no debt securities outstanding of any series created prior thereto that are entitled to the benefit of such provision (6) to secure the debt securities (7) to establish the form or terms of debt securities of any series (8) to provide for the acceptance of appointment by a successor Trustee or facilitate the administration of the trusts under an Indenture by more than one Trustee (9) to cure any ambiguity, defect or inconsistency in an Indenture, provided that such modifications shall not adversely affect the interests of the holders of debt securities of any series 23 (10) to supplement any of the provisions of an Indenture to the extent necessary to permit or facilitate defeasance and discharge of any series of such debt securities, if such action does not adversely affect the interests of the holders of the debt securities of any series in any material respect (11) to make any change that does not adversely affect the legal rights under an Indenture of any holder of debt securities of any series issued thereunder (12) to add a guarantor of the securities of any series, or (13) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act (Section 901) Ranking The Senior Securities will constitute part of our Senior Indebtedness (as defined below) and will rank pari passu with all of our outstanding senior debt. Except as set forth in the applicable prospectus supplement, the Subordinated Securities will be subordinated, in right of payment, to the prior payment in full of the Senior Indebtedness, including the Senior Securities. However, our obligation to pay the principal of (and premium, if any) and interest and Additional Amounts (if any) on such Subordinated Securities will not otherwise be impaired (Section 1603 of the Subordinated Indenture). In the event of any distribution of our assets in connection with any dissolution, winding up, liquidation or reorganization of us, whether in a bankruptcy, insolvency, reorganization or receivership proceeding or upon an assignment for the benefit of creditors or any other marshalling of our assets and liabilities or otherwise, except a distribution in connection with a merger, consolidation or sale of assets that complies with the requirements described above under "Merger, Consolidation or Sale of Assets," the holders of all Senior Indebtedness will first be entitled to receive payment of the full amount due thereon before the holders of any of the Subordinated Securities will be entitled to receive any payment in respect of the Subordinated Securities. If a payment default occurs and is continuing with respect to any amount payable in respect of any Senior Indebtedness, or if any event occurs that would permit the holders of any Senior Indebtedness to accelerate the maturity thereof, the holders of all Senior Indebtedness will first be entitled to receive payment of the full amount due thereon before the holders of any of the Subordinated Securities will be entitled to receive any payment in respect of the Subordinated Securities. If the principal amount of the Subordinated Securities of any series is declared due and payable pursuant to the Subordinated Indenture and such declaration has not been rescinded and annulled, the holders of all Senior Indebtedness outstanding at the time of such declaration will first be entitled to receive payment of the full amount due thereon before the holders of any of the Subordinated Securities will be entitled to receive any payment in respect of the Subordinated Securities (Section 1601 of the Subordinated Indenture). After all Senior Indebtedness is paid in full and until the Subordinated Securities are paid in full, holders of Subordinated Securities will be subrogated to the right of holders of Senior Indebtedness to the extent that distributions otherwise payable to holders of Subordinated Securities have been applied to the payment of Senior Indebtedness (Section 1602 of the Subordinated Indenture). By reason of such subordination, in the event of a distribution of assets upon insolvency, certain of our general creditors may recover more, ratably, than holders of Subordinated Securities. Senior Indebtedness will be defined in the Subordinated Indenture as the principal of (and premium, if any) and interest and Additional Amounts, if any, on, or substantially similar payments to be made by us in respect of, the following, whether outstanding at the date of execution of the applicable Indenture or thereafter incurred, created, guaranteed or assumed, and whether or not contingent: (1) any obligation for money borrowed (2) any obligation evidenced by bonds, debentures, notes, guarantees or other similar instruments, including, without limitation, any such obligations incurred in connection with the acquisition of property, assets or businesses, excluding trade accounts payable made in the ordinary course of business 24 (3) any reimbursement obligation with respect to letters of credit, bankers' acceptances or similar facilities (4) any obligation issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business, which in either case are not more than 60 days overdue or which are being contested in good faith) (5) any capital lease obligation (6) the maximum fixed redemption or repurchase price of capital stock which, by its terms, matures, is mandatorily redeemable or redeemable at the option of the holder thereof, or is exchangeable for indebtedness at any time, and, to the extent held by persons other than us or our Restricted Subsidiaries, the maximum fixed redemption or repurchase price of any such stock of our Restricted Subsidiaries, at the time of determination (7) every obligation under interest rate and currency protection agreements (8) any attributable indebtedness with respect to any sale and leaseback transaction and (9) any obligation of the type referred to in clauses (1) through (8) of another person and all dividends and distributions of another person the payment of which, in either case, we have guaranteed or are responsible or liable, directly or indirectly, as obligor, guarantor or otherwise in each case other than (i) any such indebtedness, obligation or liability referred to in clauses (1) through (9) above as to which, in the instrument creating or evidencing the same pursuant to which the same is outstanding, it is provided that such indebtedness, obligation or liability is not superior in right of payment to the Subordinated Securities or ranks equally with the Subordinated Securities, (ii) any such indebtedness, obligation or liability which is subordinated to our indebtedness to substantially the same extent as or to a greater extent than the Subordinated Securities are subordinated, and (iii) the Subordinated Securities. Satisfaction and Discharge of the Indentures We may terminate our obligations under either Indenture with respect to debt securities of any series when: (1) either (A) all outstanding debt securities of such series have been delivered to the Trustee for cancellation or (B) all debt securities of such series not theretofore delivered to the Trustee for cancellation have become due and payable, will become due and payable at their Stated Maturity within one year or, if redeemable at our option, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in our name and at our expense, and we have irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire indebtedness on such debt securities not theretofore delivered to the Trustee for cancellation, for the principal of (and premium, if any,) and interest and Additional Amounts, if any, to the date of deposit or Stated Maturity or date of redemption, (2) we have paid or caused to be paid all sums payable by us under such Indenture, and (3) we have delivered a Company Certificate and an Opinion of Counsel relating to compliance with the conditions set forth in such Indenture (Section 401). Defeasance and Covenant Defeasance Each Indenture will provide that, if the provisions relating to defeasance or covenant defeasance or both are made applicable to the debt securities of or within any series, we may elect either: (1) to defease and be deemed to have paid and be discharged from any and all obligations with respect to such debt securities, which we refer to as defeasance (except for the obligation to pay additional amounts, if any, upon the occurrence of certain events of tax, assessment or governmental charge 25 with respect to payments on such debt securities, and the obligations to register the transfer or exchange of such debt securities, to replace temporary or mutilated, destroyed, lost or stolen debt securities, to maintain an office or agency in respect of such debt securities and to hold moneys for payment in trust) (Section 1402), or (2) to be released from our obligations with respect to such debt securities under certain specified covenants contained in Article Ten of such Indenture and, if so specified in any supplemental indenture relating to a series of debt securities, from any obligations arising under additional covenants applicable to such series of debt securities, all as described in the applicable prospectus supplement, and any omission to comply with such obligations shall not constitute an Event of Default with respect to such debt securities, which we refer to as covenant defeasance (Section 1403) in either case upon the irrevocable deposit by us with the applicable Trustee, in trust, of an amount, in such currency or currencies, currency unit or units or composite currency or currencies in which such debt securities are payable at stated maturity, or government obligations, or both, applicable to such debt securities which through the scheduled payment of principal and interest in accordance with their terms will provide money in an amount sufficient without reinvestment to pay the principal of (and premium, if any) and interest and Additional Amounts, if any, on such debt securities, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust will only be permitted to be established if, among other things, we have delivered to the applicable Trustee an opinion of counsel (as specified in the applicable Indenture) to the effect that the holders of such debt securities will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, and such opinion of counsel, in the case of defeasance, will be required to refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable U.S. federal income tax law occurring after the date of the Indenture (Section 1404). The applicable prospectus supplement may further describe the provisions, if any, permitting such defeasance or covenant defeasance, including any modifications to the provisions described above, with respect to the debt securities of or within a particular series. Conversion and Exchange The terms, if any, on which debt securities of any series are convertible into or exchangeable for Class A common stock, preferred stock, or other debt securities, including the initial conversion price or conversion rate, any adjustments to such conversion price or conversion rate and the conversion period, and the conditions upon which such conversion will be effected, will be set forth in the applicable prospectus supplement. Such terms may include provisions for conversion or exchange to be either mandatory or at the option of the holders or ourselves. Redemption and Repurchase The debt securities may be redeemable at our option, may be subject to mandatory redemption pursuant to a sinking fund or otherwise, or may be subject to repurchase by us at the option of the holders, in each case upon the terms, at the times and at the prices set forth in the applicable prospectus supplement. Global Securities The debt securities of a series may be issued in whole or in part in the form of one or more global securities, which we refer to as the Global Securities, to be deposited with, or on behalf of, a depository identified in the applicable prospectus supplement relating to such series. Global Securities may be issued in either registered or bearer form and in either temporary or permanent form. The specific terms of the depository arrangement with respect to a series of debt securities will be described in the applicable prospectus supplement relating to such series. 26 DESCRIPTION OF WARRANTS General We may issue, together with other securities or separately, warrants to purchase our debt securities, Class A common stock, Class B common stock, preferred stock or depositary shares. We will issue the warrants under Warrant Agreements to be entered into between us and a bank or trust company, as warrant agent, all as shall be set forth in the applicable prospectus supplement. The warrant agent will act solely as our agent in connection with the warrants of the series being offered and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants. The applicable prospectus supplement will describe the following terms, where applicable, of warrants in respect of which this prospectus is being delivered: (1) the title of the warrants (2) the designation, amount and terms of the securities for which the warrants are exercisable and the procedures and conditions relating to the exercise of such warrants (3) the designation and terms of the other securities, if any, with which the warrants are to be issued and the number of warrants issued with each such security (4) the price or prices at which the warrants will be issued (5) the aggregate number of warrants (6) any provisions for adjustment of the number or amount of securities receivable upon exercise of the warrants or the exercise price of the warrants (7) the price or prices at which the securities purchasable upon exercise of the warrants may be purchased (8) if applicable, the date on and after which the warrants and the securities purchasable upon exercise of the warrants will be separately transferable (9) if applicable, a discussion of the material United States federal income tax considerations applicable to the exercise of the warrants (10) any other terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants (11) the date on which the right to exercise the warrants shall commence, and the date on which the right shall expire (12) the maximum or minimum number of warrants which may be exercised at any time (13) information with respect to book-entry procedures, if any Exercise of Warrants Each warrant will entitle the holder thereof to purchase for cash the amount of debt securities, shares of preferred stock, shares of Class A common stock, shares of Class B common stock or depositary shares at the exercise price as shall in each case be set forth in, or be determinable as set forth in, the applicable prospectus supplement. Warrants may be exercised at any time up to the close of business on the expiration date set forth in the applicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void. 27 Warrants may be exercised as set forth in the applicable prospectus supplement relating to the warrants offered thereby. Upon receipt of payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement, we will, as soon as practicable, forward the purchased securities. If less than all of the warrants represented by the warrant certificate are exercised, a new warrant certificate will be issued for the remaining warrants. 28 DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS We may issue stock purchase contracts, including contracts obligating holders to purchase from us, and obligating us to sell to the holders, a specified number of shares of Class A common stock, Class B common stock or preferred stock at a future date or dates. The price per share of Class A common stock, Class B common stock or preferred stock may be fixed at the time the stock purchase contracts are issued or may be determined by a specific reference to a formula set forth in the stock purchase contracts. The stock purchase contracts may be issued separately or as part of stock purchase units consisting of (1) a stock purchase contract and (2) debt securities, preferred securities or debt obligations of third parties, including U.S. Treasury securities, securing the holders' obligations to purchase the Class A common stock, Class B common stock or the preferred stock under the stock purchase contracts. The stock purchase contracts may require us to make periodic payments to the holders of the stock purchase units or vice versa, and such payments may be unsecured or prefunded on some basis. The stock purchase contracts may require holders to secure their obligations thereunder in a specified manner. Unless otherwise specified in the applicable prospectus supplement, the securities related to the stock purchase contracts will be pledged to a collateral agent, for our benefit, pursuant to a pledge agreement. The pledged securities will secure the obligations of holders of stock purchase contracts to purchase Class A common stock, Class B common stock or preferred stock under the related stock purchase contracts. The rights of holders of stock purchase contracts to the related pledged securities will be subject to our security interest in those pledged securities. That security interest will be created by the pledge agreement. No holder of stock purchase contracts will be permitted to withdraw the pledged securities related to such stock purchase contracts from the pledge arrangement except upon the termination or early settlement of the related stock purchase contracts. Subject to that security interest and the terms of the purchase contract agreement and the pledge agreement, each holder of a stock purchase contract will retain full beneficial ownership of the related pledged securities. Except as described in the applicable prospectus supplement, the collateral agent will, upon receipt of distributions on the pledged securities, distribute such payments to us or a purchase contract agent, as provided in the pledge agreement. The purchase contract agent will in turn distribute payments it receives as provided in the stock purchase contract. The applicable prospectus supplement will describe the terms of any stock purchase contracts or stock purchase units. 29 DESCRIPTION OF SUBSCRIPTION RIGHTS General We may issue subscription rights to purchase our debt securities, Class A common stock, Class B common stock, preferred stock, depositary shares or warrants to purchase debt securities, preferred stock, Class A common stock or Class B common stock. We may issue subscription rights independently or together with any other offered security. The subscription rights may or may not be transferable by the purchaser receiving the subscription rights. In connection with any subscription rights offering to our stockholders, we may enter into a standby underwriting arrangement with one or more underwriters pursuant to which the underwriter(s) will purchase any offered securities remaining unsubscribed for after the subscription rights offering. In connection with a subscription rights offering to our stockholders, certificates evidencing the subscription rights and a prospectus supplement will be distributed to our stockholders on the record date for receiving subscription rights in the subscription rights offering set by us. The applicable prospectus supplement will describe the following terms of subscription rights in respect of which this prospectus is being delivered: (1) the title of the subscription rights (2) the securities for which the subscription rights are exercisable (3) the exercise price for the subscription rights (4) the number of subscription rights issued to each stockholder (5) the extent to which the subscription rights are transferable (6) if applicable, a discussion of the material United States federal income tax considerations applicable to the issuance or exercise of the subscription rights (7) any other terms of the subscription rights, including terms, procedures and limitations relating to the exchange and exercise of the subscription rights (8) the date on which the right to exercise the subscription rights shall commence, and the date on which the right shall expire (9) the extent to which the subscription rights include an over- subscription privilege with respect to unsubscribed securities (10) if applicable, the material terms of any standby underwriting arrangement entered into by us in connection with the subscription rights offering Exercise Of Subscription Rights Each subscription right will entitle the holder of subscription rights to purchase for cash the principal amount of debt securities, shares of preferred stock, depositary shares, Class A common stock, Class B common stock, warrants or any combination thereof, at the exercise price as shall in each case be set forth in, or be determinable as set forth in, the applicable prospectus supplement. Subscription rights may be exercised at any time up to the close of business on the expiration date for such subscription rights set forth in the applicable prospectus supplement. After the close of business on the expiration date, all unexercised subscription rights will become void. Subscription rights may be exercised as set forth in the applicable prospectus supplement. Upon receipt of payment and the subscription rights certificate properly completed and duly executed at the corporate trust office of the subscription rights agent or any other office indicated in the prospectus supplement, we will, as soon as practicable, forward the debt securities, shares of preferred stock, Class A common stock or Class B common stock, depositary shares or warrants purchasable upon such exercise. In the event that not all of the subscription rights issued in any offering are exercised, we may determine to offer any unsubscribed offered securities directly to persons other than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, including pursuant to standby underwriting arrangements, as set forth in the applicable prospectus supplement. 30 PLAN OF DISTRIBUTION The following summary of our plan for distributing the securities offered under this prospectus will be supplemented by a description of our specific plan for each offering in the applicable prospectus supplement relating to such offering. Such description will include, among other things, the terms of the underwriting arrangements applicable to such offering. We may sell the securities in any of the following ways, or in any combination thereof, as follows: . through underwriters or dealers . directly to one or more purchasers . through agents A prospectus supplement will set forth the terms of the offering of the securities offered thereby, including: . the name or names of any underwriters and the respective amounts of such securities underwritten or purchased by each of them . the purchase price of such securities and the proceeds to us . any discounts, commissions or concessions allowed or paid to dealers constituting underwriters' compensation, to the purchase price . any securities exchanges or markets on which such securities may be listed or quoted If underwriters are used in the sale of any securities, such securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Such securities may be either offered to the public through underwriting syndicates represented by one or more managing underwriters, or directly by one or more underwriters. Only underwriters named in such prospectus supplement are deemed to be underwriters in connection with the securities offered thereby. Unless otherwise set forth in the applicable prospectus supplement, the obligations of the underwriters to purchase such securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all of such securities if any are purchased. Any purchase price and any discounts or concessions allowed or paid to dealers may be changed from time to time. The securities may be sold directly by us or through agents designated by us from time to time. Any agent involved in the offer or sale of the securities in respect of which a prospectus supplement is delivered will be named, and any commissions payable by us to such agent will be set forth, in the prospectus supplement. Unless otherwise indicated in the prospectus supplement, any such agent will be acting on a best efforts basis for the period of its appointment. If so indicated in the applicable prospectus supplement, we will authorize underwriters, dealers or agents to solicit offers by institutional investors to purchase the securities from us at the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. There may be limitations on the minimum amount which may be purchased by any such institutional investor or on the portion of the aggregate principal amount of the particular securities which may be sold pursuant to such arrangements. Institutional investors to which such offers may be made, when authorized, include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions, and such other institutions as may be approved by us. The obligations of any such purchasers pursuant to such delayed delivery and payment arrangements will be subject only to those 31 conditions set forth in the prospectus supplement, and the prospectus supplement will set forth the commission payable for solicitation of such contracts. Underwriters, dealers or agents will not have any responsibility in respect of the validity of such arrangements or the performance of McLeodUSA or such institutional investors thereunder. Securities offered other than Class A common stock may be a new issue of securities with no established trading market. Unless otherwise indicated in the applicable prospectus supplement, we do not intend to list any offered securities other than our Class A common stock on any securities exchange or other market. Any underwriters to whom such securities are sold by us for public offering and sale may make a market in such securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of or the trading markets for any such securities. Agents and underwriters may be entitled under agreements entered into with us to indemnification by us against certain civil liabilities, including liabilities under the Securities Act of 1933, or to contribution with respect to payments which the agents, dealers or underwriters may be required to make in respect thereof. Agents, dealers and underwriters may be customers of, engage in transactions with, or perform services for us in the ordinary course of business. LEGAL MATTERS The legality of the securities offered hereby will be passed upon for McLeodUSA by Hogan & Hartson L.L.P., Washington, D.C., special counsel for McLeodUSA. EXPERTS The consolidated financial statements and schedule of McLeodUSA and subsidiaries as of December 31, 1998 and 1997, and for each of the three years in the period ended December 31, 1998, incorporated by reference in this registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in giving said reports. The consolidated financial statements of Ovation Communications, Inc. as of December 31, 1998 and 1997 and for the period from March 27, 1997 (inception) to December 31, 1997 and the year ended December 31, 1998 incorporated by reference in this registration statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report, and are incorporated by reference herein in reliance upon such report given upon the authority of said firm as experts in accounting and auditing. 32 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following table sets forth the estimated expenses to be incurred in connection with the issuance and distribution of the securities being registered. SEC Registration Fee............................................. $486,500 Fees of Rating Agencies.......................................... 20,000 Printing and Duplicating Expenses................................ 150,000 Legal Fees and Expenses.......................................... 150,000 Accounting Fees and Expenses..................................... 50,000 NASD Fees........................................................ 35,000 Blue Sky Fees and Expenses....................................... 15,000 Miscellaneous.................................................... 43,500 -------- Total.......................................................... $950,000
Item 15. Indemnification of Directors and Officers Under Section 145 of the Delaware General Corporation Law ("DGCL"), a corporation may indemnify its directors, officers, employees and agents and its former directors, officers, employees and agents and those who serve, at the corporation's request, in such capacities with another enterprise, against expenses (including attorneys' fees), as well as judgments, fines and settlements in nonderivative lawsuits, actually and reasonably incurred in connection with the defense of any action, suit or proceeding in which they or any of them were or are made parties or are threatened to be made parties by reason of their serving or having served in such capacity. The DGCL provides, however, that such person must have acted in good faith and in a manner such person reasonably believed to be in (or not opposed to) the best interests of the corporation and, in the case of a criminal action, such person must have had no reasonable cause to believe his or her conduct was unlawful. In addition, the DGCL does not permit indemnification in an action or suit by or in the right of the corporation, where such person has been adjudged liable to the corporation, unless, and only to the extent that, a court determines that such person fairly and reasonably is entitled to indemnity for costs the court deems proper in light of liability adjudication. Indemnity is mandatory to the extent a claim, issue or matter has been successfully defended. The Amended and Restated Certificate of Incorporation of the Company (the "Restated Certificate") contains provisions that provide that no director of the Company shall be liable for breach of fiduciary duty as a director except for (1) any breach of the directors' duty of loyalty to the Company or its stockholders; (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law; (3) liability under Section 174 of the DGCL; or (4) any transaction from which the director derived an improper personal benefit. The Restated Certificate contains provisions that further provide for the indemnification of directors and officers to the fullest extent permitted by the DGCL. Under the Bylaws of the Company, the Company is required to advance expenses incurred by an officer or director in defending any such action if the director or officer undertakes to repay such amount if it is determined that the director or officer is not entitled to indemnification. In addition, the Company has entered into indemnity agreements with each of its directors pursuant to which the Company has agreed to indemnify the directors as permitted by the DGCL. The Company has obtained directors and officers liability insurance against certain liabilities, including liabilities under the Securities Act. Item 16. Exhibits and Financial Statement Schedules (a) Exhibits II-1
Exhibit Number Exhibit Description ------- ------------------- *1.1 Form of Debt Securities Underwriting Agreement. *1.2 Form of Common Stock Underwriting Agreement. *1.3 Form of Preferred Stock Underwriting Agreement. *1.4 Form of Depositary Shares Underwriting Agreement. *1.5 Form of Warrants Underwriting Agreement. *1.6 Form of Subscription Rights Underwriting Agreement. 1.7 Form of Underwriting Agreement between McLeodUSA Incorporated and Salomon Smith Barney Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated relating to the % Series A Cumulative Convertible Preferred Stock of McLeodUSA Incorporated. 3.1 Amended and Restated Certificate of Incorporation of McLeod, Inc. (Filed as Exhibit 3.1 to Registration Statement on Form S-1, File No. 333-3112 ("Initial Form S-1"), and incorporated herein by reference). 3.2 Amended and Restated Bylaws of McLeod, Inc. (Filed as Exhibit 3.2 to Registration Statement on Form S-1, File No. 333-13885 (the "November 1996 Form S-1"), and incorporated herein by reference). 3.3 Certificate of Amendment of Amended and Restated Certificate of Incorporation of McLeod Inc. (Filed as Exhibit 3.3 to Registration Statement on Form S-4, File No. 333-27647 (the "July 1997 Form S-4"), and incorporated herein by reference). 3.4 Certificate of Change of Registered Agent and Registered Office of McLeodUSA Incorporated. (Filed as Exhibit 3.4 to Annual Report on Form 10-K, File No. 0-20763, filed with the Commission on March 6, 1998 (the "1997 Form 10-K") and incorporated herein by reference). 4.1 Form of Class A Common Stock Certificate of McLeod, Inc. (Filed as Exhibit 4.1 to Initial Form S-1 and incorporated herein by reference). 4.2 Indenture dated March 4, 1997 between McLeod, Inc. and United States Trust Company of New York, as Trustee, relating to the 10 1/2% Senior Discount Notes Due 2007 of McLeod, Inc. (Filed as Exhibit 4.2 to Annual Report on Form 10-K, File No. 0-20763, filed with the Commission on March 31, 1997 (the "1996 Form 10-K") and incorporated herein by reference). 4.3 Initial Global 10 1/2% Senior Discount Note Due March 1, 2007 of McLeod, Inc., dated March 4, 1997. (Filed as Exhibit 4.3 to the 1996 Form 10-K and incorporated herein by reference). 4.4 Form of Certificated 10 1/2% Senior Discount Note Due March 1, 2007 of McLeod, Inc. (Filed as Exhibit 4.4 to the 1996 Form 10-K and incorporated herein by reference). 4.5 Investor Agreement dated as of April 1, 1996 among McLeod, Inc., IES Investments Inc., Midwest Capital Group Inc., MWR Investments Inc., Clark and Mary McLeod, and certain other stockholders. (Filed as Exhibit 4.8 to Initial Form S-1 and incorporated herein by reference). 4.6 Amendment No. 1 to Investor Agreement dated as of October 23, 1996 by and among McLeod, Inc., IES Investments Inc., Midwest Capital Group Inc., MWR Investments Inc., Clark E. McLeod and Mary E. McLeod. (Filed as Exhibit 4.3 to the November 1996 Form S-1 and incorporated herein by reference). 4.7 Form of 10 1/2% Senior Discount Exchange Note Due 2007 of McLeodUSA Incorporated. (Filed as Exhibit 4.8 to the July 1997 Form S-4 and incorporated herein by reference). 4.8 Indenture dated as of July 21, 1997 between McLeodUSA Incorporated and United States Trust Company of New York, as Trustee, relating to the 9 1/4% Senior Notes Due 2007 of McLeodUSA Incorporated. (Filed as Exhibit 4.9 to the July 1997 Form S-4 and incorporated herein by reference). 4.9 Form of Initial Global 9 1/4% Senior Note Due 2007 of McLeodUSA Incorporated. (Filed as Exhibit 4.10 to the July 1997 Form S-4 and incorporated herein by reference).
II-2
Exhibit Number Exhibit Description ------- ------------------- 4.10 Stockholders' Agreement dated June 14, 1997 among McLeodUSA Incorporated, IES Investments Inc., Midwest Capital Group, Inc., MWR Investments Inc., Clark E. McLeod, Mary E. McLeod and Richard A. Lumpkin on behalf of each of the shareholders of Consolidated Communications Inc. listed on Schedule 1 of the Stockholders' Agreement. (Filed as Exhibit 4.12 to the July 1997 Form S-4 and incorporated herein by reference). 4.11 Amendment No. 1 to Stockholders' Agreement dated as of September 19, 1997 by and among McLeodUSA Incorporated, IES Investments Inc., Midwest Capital Group, Inc., MWR Investments Inc., Clark E. McLeod, Mary E. McLeod and Richard A. Lumpkin on behalf of each of the shareholders of Consolidated Communications Inc. listed in Schedule I thereto. (Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q, File No. 0-20763, filed with the Commission on November 14, 1997 and incorporated herein by reference). 4.12 Form of 9 1/4% Senior Exchange Note Due 2007 of McLeodUSA Incorporated. (Filed as Exhibit 4.14 to the 1997 Form 10-K and incorporated herein by reference). 4.13 Indenture dated as of March 16, 1998 between McLeodUSA Incorporated and United States Trust Company of New York, as Trustee, relating to the 8 3/8% Senior Notes Due 2008 of McLeodUSA Incorporated. (Filed as Exhibit 4.15 to Registration Statement on Form S-4, File No. 333- 52793 (the "May 1998 Form S-4") and incorporated herein by reference). 4.14 Form of Global 8 3/8% Senior Note Due 2008 of McLeodUSA Incorporated (Filed as Exhibit 4.16 to the May 1998 Form S-4 and incorporated herein by reference). 4.15 Stockholders' Agreement dated as of November 18, 1998 by and among McLeodUSA Incorporated, IES Investments Inc., Clark E. McLeod, Mary E. McLeod and Richard A. Lumpkin, Gail G. Lumpkin and certain of the former shareholders of Consolidated Communications Inc. ("CCI") and certain permitted transferees of the former CCI shareholders in each case who are listed in Schedule I thereto. (Filed as Exhibit 99.1 to the Current Report on Form 8-K, File No. 0-20763, filed with the Commission on November 19, 1998 and incorporated herein by reference). 4.16 Indenture dated as of October 30, 1998 between McLeodUSA Incorporated and United States Trust Company of New York, as Trustee, relating to the 9 1/2% Senior Notes Due 2008 of McLeodUSA Incorporated (Filed as Exhibit 4.19 to Registration Statement on Form S-4, File No. 333- 69621 (the "December 1998 Form S-4") and incorporated herein by reference). 4.17 Form of Global 9 1/2% Senior Note Due 2008 of McLeodUSA Incorporated (Filed as Exhibit 4.20 to the December 1998 Form S-4 and incorporated herein by reference). 4.18 Stockholders' Agreement dated as of January 7, 1999, by and among McLeodUSA Incorporated, IES Investments Inc., Clark E. McLeod, Mary E. McLeod, Richard A. Lumpkin, Gail G. Lumpkin, M/C Investors L.L.C. and Media/Communications Partners III Limited Partnership (Filed as Exhibit 4.1 to the Current Report on Form 8-K, File No. 0-20763, filed with the Commission on January 14, 1999 and incorporated herein by reference). 4.19 Indenture dated as of February 22, 1999 between McLeodUSA Incorporated and United States Trust Company of New York, as Trustee, relating to the 8 1/8% Senior Notes Due 2009 of McLeodUSA Incorporated (Filed as Exhibit 4.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998, File No. 0-20763, filed with the Commission on March 24, 1999 (the "1998 Form 10-K") and incorporated herein by reference). 4.20 Form of Global 8 1/8% Senior Note Due 2009 of McLeodUSA Incorporated (Filed as Exhibit 4.23 to the 1998 Form 10-K and incorporated herein by reference). 4.21 Form of Senior Debt Securities Indenture. 4.22 Form of Subordinated Debt Securities Indenture. *4.23 Form of Deposit Agreement.
II-3
Exhibit Number Exhibit Description ------- ------------------- 4.24 Form of Certificate of Designations of the Powers, Preferences and Relative, Participation, Optional and Other Special Rights of Series A % Cumulative, Convertible Preferred Stock and Qualifications, Limitations and Restrictions Thereof. 5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of the securities being registered. 5.2 Opinion of Hogan & Hartson L.L.P. regarding the legality of the Series A Preferred Stock being registered. 12.1 Statement regarding Computation of Ratios. 12.2 Statement regarding Computation of Ratios. 21.1 Subsidiaries of McLeodUSA Incorporated (Filed as Exhibit 21.1 to the 1998 Form 10-K and incorporated herein by reference). 23.1 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1). 23.2 Consent of Arthur Andersen LLP. 23.3 Consent of Ernst & Young LLP. 24.1 Power of attorney (included on signature page). 25.1 Statement on Form T-1 of Eligibility of Trustee for the Senior Debt Securities. 25.2 Statement on Form T-1 of Eligibility of Trustee for the Subordinated Debt Securities. 27.1 Financial Data Schedule (Filed as Exhibit 27.1 to the Quarterly Report on Form 10-Q, File No. 0-20763, filed with the Commission on May 17, 1999 and incorporated herein by reference).
- -------- * To be incorporated by reference herein in connection with the offering of each series of securities. (b) Financial Statement Schedules. The following financial statement schedule was filed with the Company's Annual Report on Form 10-K (File No. 0-20763), filed with the Commission on March 24, 1999, as amended by Form 10-K/A filed on April 22, 1999 and is incorporated herein by reference: Schedule II--Valuation and Qualifying Accounts Schedules not listed above have been omitted because they are inapplicable or the information required to be set forth therein is contained, or incorporated by reference, in the Consolidated Financial Statements of the Company or notes thereto. Item 17. Undertakings The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement; II-4 (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; provided, however, that subparagraphs (i) and (ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in the periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Act of 1934 that are incorporated by reference in this registration statement. (2) That for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the Securities offered herein, and the offering of such Securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the Securities being registered which remain unsold at the termination of the offering. The undersigned Registrant hereby undertakes that, for the purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned Registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance under Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15 above or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of each issue. The undersigned Registrant hereby undertakes to file an application for purposes of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the Company has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cedar Rapids, Iowa, on this 4th day of August, 1999. McLeodUSA Incorporated /s/ Clark E. McLeod By: _________________________________ Clark E. McLeod Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following persons, in the capacities indicated below, on this 4th day of August, 1999.
Signature Title --------- ----- /s/ Clark E. McLeod Chairman, Chief Executive Officer ______________________________________ and Director (Principal Executive Clark E. McLeod Officer) * Vice Chairman and Director ______________________________________ Richard A. Lumpkin * President, Chief Operating Officer ______________________________________ and Director Stephen C. Gray * Group Vice President and Director ______________________________________ Blake O. Fisher, Jr. * Group Vice President, Chief ______________________________________ Financial Officer and Treasurer J. Lyle Patrick (Principal Financial Officer and Principal Accounting Officer) Director ______________________________________ Anne K. Bingaman * Director ______________________________________ Peter H.O. Claudy * Director ______________________________________ Thomas M. Collins * Director ______________________________________ Robert J. Currey * Director ______________________________________ Lee Liu * Director ______________________________________ Paul D. Rhines * Director ______________________________________ Roy A. Wilkens
*By: /s/ Clark E. McLeod ------------------------------- Clark E. McLeod Attorney-In-Fact II-6 INDEX TO EXHIBITS
Exhibit Number Exhibit Description ------- ------------------- *1.1 Form of Debt Securities Underwriting Agreement. *1.2 Form of Common Stock Underwriting Agreement. *1.3 Form of Preferred Stock Underwriting Agreement. *1.4 Form of Depositary Shares Underwriting Agreement. *1.5 Form of Warrants Underwriting Agreement. *1.6 Form of Subscription Rights Underwriting Agreement. 1.7 Form of Underwriting Agreement between McLeodUSA Incorporated and Salomon Smith Barney Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated relating to the % Series A Cumulative Convertible Preferred Stock of McLeodUSA Incorporated. 3.1 Amended and Restated Certificate of Incorporation of McLeod, Inc. (Filed as Exhibit 3.1 to Registration Statement on Form S-1, File No. 333-3112 ("Initial Form S-1"), and incorporated herein by reference). 3.2 Amended and Restated Bylaws of McLeod, Inc. (Filed as Exhibit 3.2 to Registration Statement on Form S-1, File No. 333-13885 (the "November 1996 Form S-1"), and incorporated herein by reference). 3.3 Certificate of Amendment of Amended and Restated Certificate of Incorporation of McLeod Inc. (Filed as Exhibit 3.3 to Registration Statement on Form S-4, File No. 333-27647 (the "July 1997 Form S-4"), and incorporated herein by reference). 3.4 Certificate of Change of Registered Agent and Registered Office of McLeodUSA Incorporated. (Filed as Exhibit 3.4 to Annual Report on Form 10-K, File No. 0-20763, filed with the Commission on March 6, 1998 (the "1997 Form 10-K") and incorporated herein by reference). 4.1 Form of Class A Common Stock Certificate of McLeod, Inc. (Filed as Exhibit 4.1 to Initial Form S-1 and incorporated herein by reference). 4.2 Indenture dated March 4, 1997 between McLeod, Inc. and United States Trust Company of New York, as Trustee, relating to the 10 1/2% Senior Discount Notes Due 2007 of McLeod, Inc. (Filed as Exhibit 4.2 to Annual Report on Form 10-K, File No. 0-20763, filed with the Commission on March 31, 1997 (the "1996 Form 10-K") and incorporated herein by reference). 4.3 Initial Global 10 1/2% Senior Discount Note Due March 1, 2007 of McLeod, Inc., dated March 4, 1997. (Filed as Exhibit 4.3 to the 1996 Form 10-K and incorporated herein by reference). 4.4 Form of Certificated 10 1/2% Senior Discount Note Due March 1, 2007 of McLeod, Inc. (Filed as Exhibit 4.4 to the 1996 Form 10-K and incorporated herein by reference). 4.5 Investor Agreement dated as of April 1, 1996 among McLeod, Inc., IES Investments Inc., Midwest Capital Group Inc., MWR Investments Inc., Clark and Mary McLeod, and certain other stockholders. (Filed as Exhibit 4.8 to Initial Form S-1 and incorporated herein by reference). 4.6 Amendment No. 1 to Investor Agreement dated as of October 23, 1996 by and among McLeod, Inc., IES Investments Inc., Midwest Capital Group Inc., MWR Investments Inc., Clark E. McLeod and Mary E. McLeod. (Filed as Exhibit 4.3 to the November 1996 Form S-1 and incorporated herein by reference). 4.7 Form of 10 1/2% Senior Discount Exchange Note Due 2007 of McLeodUSA Incorporated. (Filed as Exhibit 4.8 to the July 1997 Form S-4 and incorporated herein by reference).
1
Exhibit Number Exhibit Description ------- ------------------- 4.8 Indenture dated as of July 21, 1997 between McLeodUSA Incorporated and United States Trust Company of New York, as Trustee, relating to the 9 1/4% Senior Notes Due 2007 of McLeodUSA Incorporated. (Filed as Exhibit 4.9 to the July 1997 Form S-4 and incorporated herein by reference). 4.9 Form of Initial Global 9 1/4% Senior Note Due 2007 of McLeodUSA Incorporated. (Filed as Exhibit 4.10 to the July 1997 Form S-4 and incorporated herein by reference). 4.10 Stockholders' Agreement dated June 14, 1997 among McLeodUSA Incorporated, IES Investments Inc., Midwest Capital Group, Inc., MWR Investments Inc., Clark E. McLeod, Mary E. McLeod and Richard A. Lumpkin on behalf of each of the shareholders of Consolidated Communications Inc. listed on Schedule 1 of the Stockholders' Agreement. (Filed as Exhibit 4.12 to the July 1997 Form S-4 and incorporated herein by reference). 4.11 Amendment No. 1 to Stockholders' Agreement dated as of September 19, 1997 by and among McLeodUSA Incorporated, IES Investments Inc., Midwest Capital Group, Inc., MWR Investments Inc., Clark E. McLeod, Mary E. McLeod and Richard A. Lumpkin on behalf of each of the shareholders of Consolidated Communications Inc. listed in Schedule I thereto. (Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q, File No. 0-20763, filed with the Commission on November 14, 1997 and incorporated herein by reference). 4.12 Form of 9 1/4% Senior Exchange Note Due 2007 of McLeodUSA Incorporated. (Filed as Exhibit 4.14 to the 1997 Form 10-K and incorporated herein by reference). 4.13 Indenture dated as of March 16, 1998 between McLeodUSA Incorporated and United States Trust Company of New York, as Trustee, relating to the 8 3/8% Senior Notes Due 2008 of McLeodUSA Incorporated. (Filed as Exhibit 4.15 to Registration Statement on Form S-4, File No. 333- 52793 (the "May 1998 Form S-4") and incorporated herein by reference). 4.14 Form of Global 8 3/8% Senior Note Due 2008 of McLeodUSA Incorporated (Filed as Exhibit 4.16 to the May 1998 Form S-4 and incorporated herein by reference). 4.15 Stockholders' Agreement dated as of November 18, 1998 by and among McLeodUSA Incorporated, IES Investments Inc., Clark E. McLeod, Mary E. McLeod and Richard A. Lumpkin, Gail G. Lumpkin and certain of the former shareholders of Consolidated Communications Inc. ("CCI") and certain permitted transferees of the former CCI shareholders in each case who are listed in Schedule I thereto. (Filed as Exhibit 99.1 to the Current Report on Form 8-K, File No. 0-20763, filed with the Commission on November 19, 1998 and incorporated herein by reference). 4.16 Indenture dated as of October 30, 1998 between McLeodUSA Incorporated and United States Trust Company of New York, as Trustee, relating to the 9 1/2% Senior Notes Due 2008 of McLeodUSA Incorporated (Filed as Exhibit 4.19 to Registration Statement on Form S-4, File No. 333- 69621 (the "December 1998 Form S-4") and incorporated herein by reference). 4.17 Form of Global 9 1/2% Senior Note Due 2008 of McLeodUSA Incorporated (Filed as Exhibit 4.20 to the December 1998 Form S-4 and incorporated herein by reference). 4.18 Stockholders' Agreement dated as of January 7, 1999, by and among McLeodUSA Incorporated, IES Investments Inc., Clark E. McLeod, Mary E. McLeod, Richard A. Lumpkin, Gail G. Lumpkin, M/C Investors L.L.C. and Media/Communications Partners III Limited Partnership (Filed as Exhibit 4.1 to the Current Report on Form 8-K, File No. 0-20763, filed with the Commission on January 14, 1999 and incorporated herein by reference). 4.19 Indenture dated as of February 22, 1999 between McLeodUSA Incorporated and United States Trust Company of New York, as Trustee, relating to the 8 1/8% Senior Notes Due 2009 of McLeodUSA Incorporated (Filed as Exhibit 4.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998, File No. 0-20763, filed with the Commission on March 24, 1999 (the "1998 Form 10-K") and incorporated herein by reference).
2
Exhibit Number Exhibit Description ------- ------------------- 4.20 Form of Global 8 1/8% Senior Note Due 2009 of McLeodUSA Incorporated (Filed as Exhibit 4.23 to the 1998 Form 10-K and incorporated herein by reference). 4.21 Form of Senior Debt Securities Indenture. 4.22 Form of Subordinated Debt Securities Indenture. *4.23 Form of Deposit Agreement. 4.24 Form of Certificate of Designations of the Powers, Preferences and Relative, Participation, Optional and Other Special Rights of Series A % Cumulative, Convertible Preferred Stock and Qualifications, Limitations and Restrictions Thereof. 5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of the securities being registered. 5.2 Opinion of Hogan & Hartson L.L.P. regarding the legality of the Series A Preferred Stock being registered. 12.1 Statement regarding Computation of Ratios. 12.2 Statement regarding Computation of Ratios. 21.1 Subsidiaries of McLeodUSA Incorporated (Filed as Exhibit 21.1 to the 1998 Form 10-K and incorporated herein by reference). 23.1 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1). 23.2 Consent of Arthur Andersen LLP. 23.3 Consent of Ernst & Young LLP. 24.1 Power of attorney (included on signature page). 25.1 Statement on Form T-1 of Eligibility of Trustee for the Senior Debt Securities. 25.2 Statement on Form T-1 of Eligibility of Trustee for the Subordinated Debt Securities. 27.1 Financial Data Schedule (Filed as Exhibit 27.1 to the Quarterly Report on Form 10-Q, File No. 0-20763, filed with the Commission on May 17, 1999 and incorporated herein by reference).
- -------- * To be incorporated by reference herein in connection with the offering of each series of securities. 3 EX-1.7 2 EXHIBIT 1.7 EXHIBIT 1.7 MCLEODUSA INCORPORATED 400,000 Shares ___% Series A Cumulative Convertible Preferred Stock ($.01 par value) UNDERWRITING AGREEMENT August __, 1999 Salomon Smith Barney Inc. Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated As Representatives of the several Underwriters c/o Salomon Smith Barney Inc. Seven World Trade Center New York, New York 10048 Dear Ladies and Gentlemen: McLeodUSA Incorporated, a corporation organized under the laws of the State of Delaware (the "Company") proposes to issue and sell to the several underwriters named in Schedule I hereto (the "Underwriters"), for whom you (the "Representatives") are acting as representatives, 400,000 shares of ___% Series A Cumulative Convertible Preferred Stock, $.01 par value ("Series A Preferred Stock"), of the Company (the "Securities") (said shares to be issued and sold by the Company being hereinafter called the "Underwritten Securities"). The Company also proposes to grant to the Underwriters an option to purchase up to 60,000 additional shares of Series A Preferred Stock to cover over-allotments (the "Option Securities"; the Option Securities, together with the Underwritten Securities, being hereinafter called the "Securities"). To the extent there are no additional Underwriters listed on Schedule I other than you, the term Representatives as used herein shall mean you, as Underwriters, and the terms Representatives and Underwriters shall mean either the singular or plural as the context requires. Any reference herein to the Registration Statement, the Base Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on or before the Effective Date of the Registration Statement or the issue date of the Base Prospectus, any Preliminary Final Prospectus or the Final Prospectus, as the case may be; and any reference herein to the terms "amend", "amendment" or "supplement" with respect to the Registration Statement, the Base Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Date of the Registration Statement, or the issue date of any Preliminary Final Prospectus or the Final Prospectus, as the case may be, deemed to be incorporated therein by reference. Certain terms used herein are defined in Section 17 hereof. 1. Representations and Warranties. ------------------------------ The Company represents and warrants to, and agrees with, each Underwriter that: (a) The Company meets the requirements for use of Form S-3 under the Act and has prepared and filed with the Commission a registration statement (File No. 333-82851) on Form S-3, including a related base prospectus, for registration under the Act of the offering and sale of the Securities. The Company may have filed one or more amendments thereto, including a related Preliminary Final Prospectus, each of which has previously been furnished to you. The Company will next file with the Commission one of the following: either (1) prior to the Effective Date of such registration statement, a further amendment to such registration statement (including the form of final prospectus supplement), (2) after the Effective Date of such registration statement, a final prospectus supplement in accordance with Rules 430A and 424(b) or (3) after the Effective Date of such registration statement, a post-effective amendment to such registration statement (including a final prospectus) in accordance with Rules 415 and 424(b). In the case of clause (2), the Company has included in such registration statement, as amended at the Effective Date, all information (other than Rule 430A Information) required by the Act and the rules thereunder to be included in such registration statement and the Final Prospectus. As filed, such final prospectus supplement or such amendment and form of final prospectus supplement, or such post-effective amendment and final prospectus supplement shall contain all Rule 430A Information, together with all other such required information, and, except to the extent the Representatives shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the Base Prospectus and any Preliminary Final Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein. The Registration Statement, at the Execution Time, meets the requirements set forth in Rule 415(a)(1)(x). (b) On the Effective Date, the Registration Statement did or will, and when the Final Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing Date (as defined herein) and on any date on which Option Securities are purchased, if such date is not the Closing Date (a "settlement date"), the Final Prospectus (and any supplements thereto), will comply in all material respects with the applicable requirements of the Act and the Exchange Act and the respective rules thereunder; on the Effective Date and at the Execution Time, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and, on the Effective Date, the Final Prospectus, if not filed pursuant to Rule 424(b), will not, and on the date of any filing pursuant to Rule 424(b) and on the Closing Date and any settlement date, the Final Prospectus (together with any amendment or supplement thereto) will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or -------- ------- warranties as to the information contained in or omitted from the Registration Statement or the Final Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion in the Registration Statement or the Final Prospectus (or any amendment or supplement thereto). (c) The Company's authorized equity capitalization is as set forth in the Final Prospectus; the capital stock of the Company conforms in all material respects to the description thereof contained in the Final Prospectus; the outstanding shares of Class A common stock have been duly and validly authorized and issued and are fully paid and nonassessable; the Securities are authorized for listing, subject to official notice of issuance, on the Nasdaq National Market; and the certificates for the Securities are in valid and sufficient form. (d) The Company has not taken and will not take, directly or indirectly, any action prohibited by Regulation M under the Exchange Act, in connection with the offering of the Securities. (e) The documents filed by the Company under the Exchange Act and incorporated by reference in the Final Prospectus, at the time they were filed with the Commission, complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein, in light of the circumstances under which they were made, or necessary to make the statements therein not misleading; and any further documents so filed and incorporated by reference in the Final Prospectus, when such documents are filed with the Commission, will conform in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein, in light of the circumstances under which they were made, or necessary to make the statements therein not misleading. (f) Since the date of the most recent financial statements included or incorporated by reference in the Final Prospectus, there has been no material adverse change, or any development which could reasonably be expected to result in a material adverse change, in the condition (financial or other), earnings, business, prospects or properties of the Company and its subsidiaries, whether or not arising from transactions in the ordinary course of business, except as set forth in or incorporated by reference in the Final Prospectus; and, since the respective dates as of which information is given or incorporated by reference in the Final Prospectus, there has not been any change in the capital stock (other than grants of options and issuances of common stock in connection with a two-for-one stock split effected as a stock dividend on July 26, 1999 and the Company's acquisitions of Millenium L.L.C. and Noverr Publishing, Inc., or pursuant to existing employee stock option plans, 401(k) plans, stock ownership plans or stock purchase plans, repurchases by the Company of its common stock in the ordinary course of business or conversions of outstanding convertible securities) of the Company or any of its subsidiaries or long-term debt (other than the issuance of $400 million aggregate principal amount of the Company's __% senior notes due 2009 being offered concurrently with the Underwritten Securities, changes in connection with the Company's acquisitions of Millenium L.L.C. and Noverr Publishing, Inc., changes as a result of borrowings of the Company or any of its subsidiaries in the ordinary course of business not exceeding $12,000,000, maturities, regularly scheduled payments and payments contemplated as a result of the application of proceeds of the offering of the Securities as described in the Final Prospectus, amortization of debt discount or currency fluctuations) of the Company or any of its subsidiaries. (g) Each of (i) the Company, and (ii) McLeodUSA Telecommunications Services, Inc., McLeodUSA Network Services, Inc., McLeodUSA Publishing Company, McLeodUSA Media Group, Inc., McLeodUSA Diversified, Inc., Ruffalo, Cody & Associates, Inc., Consolidated Communications Inc., Illinois Consolidated Telephone Company, Consolidated Communications Directories, Inc., Talking Directories, Inc., Ovation Communications, Inc., Ovation Communications of Minnesota, Inc., BRE Communications L.L.C. and Dakota Telecommunications Group, Inc., (individually a "Subsidiary" and collectively the "Subsidiaries") has been duly incorporated or organized and is validly existing as a corporation or, as applicable, limited liability company in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate or organizational power and authority to own its properties and conduct its business as described in or incorporated by reference in the Final Prospectus, and is duly qualified to do business as a foreign corporation or, as applicable, limited liability company and is in good standing under the laws of each jurisdiction which requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a material adverse effect on the Company and the Subsidiaries. Except for the Subsidiaries, the Company has no subsidiaries which, considered in the aggregate as a single subsidiary, would constitute a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X promulgated under the Act. (h) All the outstanding shares of capital stock of each Subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth or incorporated by reference in the Final Prospectus, as amended or supplemented, all outstanding shares of capital stock of the Subsidiaries are owned by the Company, either directly or through wholly owned subsidiaries, free and clear of any security interests, claims or liens. (i) Except as disclosed or incorporated by reference in the Final Prospectus, there is no pending or, to the Company's knowledge, threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries which, if finally determined adversely to the Company or any of its subsidiaries, would have a material adverse effect on the condition (financial or other), earnings, business, prospects or properties of the Company and its subsidiaries; and the statements in or incorporated by reference in the Final Prospectus, under the headings "Risk Factors - Our Dependence on Regional Bell Operating Companies to Provide Most of Our Communications Services Could Make it Harder for Us to Offer Our Services at a Profit," "Risk Factors - Actions by US WEST May Make It More Difficult for Us to Offer Our Communications Services," and "Business - Legal Proceedings" fairly summarize the actions, suits and proceedings therein described except for such changes with respect to such actions, suits and proceedings which could not have a material adverse effect on the Company and the statements in or incorporated by reference in the Final Prospectus concerning stockholders' agreements to which the Company is a party fairly summarize the franchises, contracts or other documents therein described except for such changes with respect to such franchises, contracts or other documents which could not have a material adverse effect on the Company. (j) This Agreement has been duly authorized, executed and delivered by the Company. (k) No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation by the Company of the transactions contemplated herein, except for the declaration of effectiveness of the Registration Statement and except such as may be required under all applicable state securities and blue sky laws of any jurisdiction and such other approvals as have been obtained. (l) Neither the issue and sale of the Securities, nor the consummation of any other of the transactions herein contemplated, nor the fulfillment of the terms hereof, in each case by the Company, will conflict with, result in a breach or violation of, or constitute a default under the charter or by-laws of the Company or the terms of any indenture or other agreement or instrument to which the Company or any of its Subsidiaries is a party or bound or (assuming compliance with all applicable state securities and blue sky laws and that the Registration Statement has been declared effective and, if required, that the Final Prospectus has been filed pursuant to Rule 424(b) any law, rule or regulation applicable to the Company or any of the Subsidiaries or any judgement, order or decree applicable to the Company or any of its Subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Company or any of its Subsidiaries. (m) Except as set forth in or incorporated by reference in the Final Prospectus, no holders of securities of the Company have rights to the registration of such securities under the Registration Statement that have not been duly waived. (n) Arthur Andersen LLP, who have reported upon the audited financial statements incorporated by reference in the Final Prospectus, are independent public accountants within the meaning of the Act and the rules and regulations of the Commission thereunder. (o) The consolidated financial statements of the Company and of certain Subsidiaries included or incorporated by reference in the Final Prospectus, present fairly the financial position of the Company and its subsidiaries and such Subsidiaries as of the dates indicated and the consolidated results of the operations and cash flows of the Company and its subsidiaries and such Subsidiaries for the periods specified. Such financial statements (except as disclosed in the notes thereto or otherwise stated therein) have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the entire period involved. The financial statement schedules, if any, included or incorporated by reference in the Final Prospectus, present fairly the information stated therein. The selected financial data included or incorporated by reference in the Final Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited consolidated financial statements included or incorporated by reference in the Final Prospectus. The pro forma financial statements and other pro forma financial information included or incorporated by reference in the Final Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements, have been properly compiled on the pro forma bases described therein, and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (p) Neither the Company nor any of the Subsidiaries is in violation of its charter or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any indenture or other agreement or instrument to which the Company or any of the Subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any of the Subsidiaries is subject, other than defaults (considered in the aggregate) which could not reasonably be expected to have a material adverse effect on the condition (financial or other), earnings, business, prospects or properties of the Company and its subsidiaries. (q) The Company and the Subsidiaries possess adequate certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the business now operated by them and are in compliance in all material respects with all such certificates, authorities and permits. Neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit, other than any such revocation or modification that could not reasonably be expected to, singly or in the aggregate, have a material adverse effect on the condition (financial or other), earnings, business, prospects or properties of the Company and its subsidiaries. (r) The Company and its subsidiaries have timely filed all United States federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due and payable (other than taxes, the payment of which are being contested in good faith), and no tax liens have been filed and no claims are being asserted with respect to any such taxes, which could reasonably be expected to have a material adverse effect on the condition (financial or other), earnings, business, prospects or properties of the Company and its subsidiaries. The provisions for taxes on the books of the Company are adequate in all material respects for all open years and for its current fiscal period. (s) The Company and the Subsidiaries (A) are in compliance with all applicable federal, state, local and foreign and other laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (B) have received all permits, licenses and other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (C) are in compliance with all terms and conditions of any such permit, license and approval, except, in each case, where such noncompliance with Environmental Law, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals could not reasonably be expected, singly or in the aggregate, to have a material adverse effect on the condition (financial or other), earnings, business, prospects or properties of the Company and its subsidiaries. (t) The Company and the Subsidiaries have good and marketable title to all real property and good and valid title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects, and any real property and buildings held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases, except, in each case, for such exceptions as are set forth or incorporated by reference in the Final Prospectus or which could not reasonably be expected to have a material adverse effect on the condition (financial or other), earnings, business, prospects or properties of the Company and its subsidiaries. (u) The Company and its subsidiaries own and possess all right, title and interest in and to, or have duly licensed from third parties a valid, enforceable right to use, all patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names currently employed by the Company and its subsidiaries in connection with the business conducted by them (collectively, "Patent and Proprietary Rights") and neither the Company nor any of its subsidiaries has received notice of infringement or misappropriation of or conflict with asserted rights of others with respect to any Patent and Proprietary Rights, or of any facts which would render any Patent and Proprietary Rights invalid or inadequate to protect the interest of the Company or of its subsidiaries therein, and which infringement, misappropriation or conflict or invalidity or inadequacy, individually or in the aggregate, could reasonably be expected to result in a material adverse effect on the condition (financial or other), earnings, business, prospects or properties of the Company and its subsidiaries. (v) The Company has complied with all provisions of Section 1 of Laws of Florida, Chapter 92-198 Securities-Business with Cuba. Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Underwriters in connection with the offering of the Securities shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Underwriter. 2. Purchase and Sale. (a) Subject to the terms and conditions and in ----------------- reliance upon the representations and warranties herein set forth: the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $______ per share, the amount of the Underwritten Securities set forth opposite such Underwriter's name in Schedule II hereto. (b) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to 60,000 Option Securities at the same purchase price per share as the Underwriters shall pay for the Underwritten Securities. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Securities by the Underwriters. Said option may be exercised in whole or in part at any time (but not more than once) on or before the 30th day after the date of the Final Prospectus upon written or telegraphic notice by the Representatives to the Company setting forth the aggregate number of shares of the Option Securities as to which the several Underwriters are exercising the option and the settlement date. The number of shares of the Option Securities to be purchased by each Underwriter shall be the same percentage of the total number of shares of the Option Securities to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Securities, subject to such adjustments as the Representatives in their absolute discretion shall make to eliminate any fractional shares. 3. Delivery and Payment. Delivery of and payment for the Underwritten -------------------- Securities and the Option Securities (if the option provided for in Section 2(b) hereof shall have been exercised on or before the third business day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on August __, 1999, which date and time may be postponed by agreement among the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being herein called the "Closing Date"). Delivery of such Securities shall be made to the Representatives for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same day funds to an account or accounts specified by the Company at least one business day prior to of the Closing Date. Delivery of such Securities shall be made at such location in New York, New York as Salomon Smith Barney Inc. shall reasonably designate at least one Business Day in advance of the Closing Date and payment for such Securities shall be made at the offices of Hogan & Hartson L.L.P., 555 Thirteenth Street, N.W., Washington, D.C. 20004. Certificates for the Securities shall be registered in such names and in such denominations as Salomon Smith Barney Inc. may request not less than two Business Days in advance of the Closing Date. The Company agrees to have the certificates for the Securities available for inspection, checking and packaging by the Representatives in New York, New York, not later than 1:00 PM on the Business Day prior to the Closing Date. If the option provided for in Section 2(b) hereof is exercised after the third business day prior to the Closing Date, the Company will deliver to the Representatives, at 388 Greenwich Street, New York, New York, on the date specified by the Representatives (which shall be within three business days after exercise of said option), the Option Securities in such names and denominations as the Representatives shall have requested at least two business days in advance of the settlement date against payment of the purchase price thereof to or upon the order of the Company by wire transfer payable in same day funds to an account specified by the Company at least one business day in advance of the settlement date. The Company agrees to have the certificates for the Option Securities available for inspection, checking and packaging by the Representatives in New York, New York, not later than 1:00 p.m. on the business day prior to the settlement date. If settlement for the Option Securities occurs after the Closing Date, the Company will deliver to the Representatives on the settlement date for the Option Securities, and the obligation of the Underwriters to purchase the Option Securities shall be conditioned upon receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered on the Closing Date pursuant to Section 6 hereof. 4. Offering by Underwriters. It is understood that the several ------------------------ Underwriters propose to offer the Securities for sale to the public as set forth in the Final Prospectus. 5. Agreements. ---------- The Company agrees with the several Underwriters that: (a) The Company will use its best efforts to cause the Registration Statement, if not effective at the Execution Time, and any amendment thereof, to become effective. Prior to the termination of the offering of the Securities, the Company will not file any amendment of the Registration Statement or supplement (including the Final Prospectus or any Preliminary Final Prospectus) to the Base Prospectus or any Rule 462(b) Registration Statement unless the Company has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. Subject to the foregoing sentence, if the Registration Statement has become or becomes effective pursuant to Rule 430A, or filing of the Final Prospectus is otherwise required under Rule 424(b), the Company will cause the Final Prospectus, properly completed, and any supplement thereto to be filed with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. The Company will promptly advise the Representatives (A) when the Registration Statement, if not effective at the Execution Time, shall have become effective, (B) when the Final Prospectus, and any supplement thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b) or when any Rule 462(b) Registration Statement shall have been filed with the Commission, (C) when, prior to termination of the offering of the Securities, any amendment to the Registration Statement shall have been filed or become effective, (D) of any request by the Commission or its staff for any amendment of the Registration Statement, or any Rule 462(b) Registration Statement or for any supplement to the Final Prospectus or for any additional information with respect to the Registration Statement or the Final Prospectus, (E) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose and (F) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs as a result of which the Final Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, or if it shall be necessary to amend the Registration Statement or supplement the Final Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, the Company promptly will (1) notify the Representatives of such event, (2) prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 5, an amendment or supplement which will correct such statement or omission or effect such compliance and (3) supply any supplemented Final Prospectus to you in such quantities as you may reasonably request. (c) As soon as reasonably practicable, the Company will make generally available to its security holders and to the Representatives an earnings statement or statements of the Company and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. (d) The Company will furnish to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement (including exhibits thereto) and to each other Underwriter a copy of the Registration Statement (without exhibits thereto) and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the Act, as many copies of each Preliminary Final Prospectus and the Final Prospectus and any supplement thereto as the Representatives may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering. (e) The Company will cooperate with the Representatives and counsel for the Underwriters for the qualification of the Securities for sale under the laws of such jurisdictions as the Representatives may designate, will maintain such qualifications in effect so long as required for the distribution of the Securities and will pay any fee of the National Association of Securities Dealers, Inc. in connection with its review of the offering; provided, however, that in no event shall the Company be -------- ------- obligated to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. (f) Unless this Agreement shall be terminated prior to the Closing Date, the Company will not, without the prior written consent of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge, or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company or any affiliate of the Company or any person in privity with the Company or any affiliate of the Company) directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, any shares of Class A common stock or any securities convertible into, or exercisable, or exchangeable for, shares of Class A common stock; or publicly announce an intention to effect any such transaction, for a period of 90 days after the date of this Agreement, provided, however, that -------- ------- the Company may (A) issue and sell Class A common stock or securities convertible into or exchangeable or exercisable for or repayable with Class A common stock in connection with acquisitions or any employee or director benefit or stock purchase or stock option plans, (B) grant or award Class A common stock, options to purchase Class A common stock, or other securities convertible into or exchangeable for or repayable with Class A common stock in connection with acquisitions or under such plans, as such plans are in effect at the Execution Time, (C) issue Class A common stock issuable upon the conversion of securities or the exercise of warrants outstanding at the Execution Time or issued, sold, granted or awarded pursuant to this proviso and (D) take any other actions necessary in connection with any of the foregoing in order to register such securities or Class A common stock with the Commission under the Act. (g) The Company will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. 6. Conditions to the Obligations of the Underwriters. The obligations of ------------------------------------------------- the Underwriters to purchase the Underwritten Securities and the Option Securities, as the case may be, shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time, the Closing Date and any settlement date pursuant to Section 3 hereof, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: (a) If the Registration Statement has not become effective prior to the Execution Time, unless the Representatives agree in writing to a later time, the Registration Statement will become effective not later than (i) 6:00 PM New York City time on the date of determination of the public offering price, if such determination occurred at or prior to 3:00 PM New York City time on such date or (ii) 9:30 AM on the Business Day following the day on which the public offering price was determined, if such determination occurred after 3:00 PM New York City time on such date; if filing of the Final Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the Final Prospectus, and any such supplement, will be filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened. (b) The Company shall have furnished to the Representatives the opinion of counsel for the Company, dated the Closing Date, substantially in the form of Exhibit A. (c) The Company shall have furnished to the Representatives the opinion of Swidler Berlin Shereff Friedman, LLP, special counsel to the Company on regulatory matters, dated the Closing Date, to the effect that: (i) the statements in or incorporated by reference in the Final Prospectus under the headings "Risk Factors - Competition in the Communications Services Industry Could Cause Us to Lose Customers and Revenue and Could Make it More Difficult for Us to Enter New Markets," "Risk Factors - We May Not Succeed in Developing or Making a Profit from Wireless Services," "Risk Factors - Competition in the Wireless Telecommunications Industry Could Make it Harder for Us to Successfully Offer Wireless Services," "Risk Factors - Government Regulation May Increase Our Cost of Providing Services, Slow Our Expansion into New Markets and Subject Our Services to Additional Competitive Pressures," "Business - Market Potential," "Business - Expansion of Services Using Our Own Communications Network Facilities," "Business - Proposed Wireless Services," "Business - Competition" and "Business - Regulation" fairly and accurately summarize the laws, case law, rules, regulations and orders of the Federal Communications Commission ("FCC") and the comparable state regulatory agencies or bodies with direct regulatory jurisdiction over telecommunications matters in the states in which the Company and any of the Subsidiaries provide intrastate services (the "State Regulatory Agencies") except for such changes with respect to such laws, case law, rules, regulations and orders which could not have a material adverse effect on the Company and, to the best knowledge of such counsel, the statements in or incorporated by reference in the Final Prospectus under the headings "Risk Factors - Our Dependence on Regional Bell Operating Companies to Provide Most of Our Communications Services Could Make it Harder for Us to Offer Our Services at a Profit," "Risk Factors - Actions by US WEST May Make it More Difficult for Us to Offer Our Communications Services" and "Legal Proceedings" fairly and accurately summarize the legal proceedings set forth therein with respect to US WEST Communications, Inc. except for such changes with respect to such legal proceedings and action which could not have a material adverse effect on the Company; (ii) the Company and the Subsidiaries possess all material certificates, authorities and permits required by the FCC and State Regulatory Agencies for the provision of the telecommunications services currently provided by the Company and the Subsidiaries, except where the failure to possess such certificates, authorities or permits could not reasonably be expected to have a material adverse effect on the Company and its subsidiaries; and the Company and the Subsidiaries are in compliance in all material respects with such certificates, authorities and permits; (iii) to the best knowledge of such counsel, neither the Company nor any of the Subsidiaries is subject to any pending or threatened action, suit or proceeding before the FCC or any State Regulatory Agency or (with respect to federal or state telecommunications laws) any court which could reasonably be expected to have a material adverse effect on the Company and its subsidiaries, except as disclosed in or incorporated by reference in the Final Prospectus; (iv) no consent, approval, authorization or order of the FCC or any State Regulatory Agency is required for the sale of the Securities or the consummation of the transactions contemplated hereby; and (v) neither the sale of the Securities nor the consummation of the transactions contemplated hereby will result in a breach or violation of any law, rule, regulation, judgment, order or decree of the FCC or any State Regulatory Agency applicable to the Company or any of the Subsidiaries. In rendering such opinion, such counsel may rely as to matters of fact, to the extent they deem proper and reasonable, on certificates of public officials and responsible officers of the Company, including certificates that define the scope of the telecommunications services provided by the Company and the Subsidiaries. (d) The Representatives shall have received from Mayer, Brown & Platt, counsel for the Underwriters, such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Securities, the Registration Statement, the Final Prospectus (together with any amendment or supplement thereof or thereto) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they may reasonably request for the purpose of enabling them to pass upon such matters. (e) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Final Prospectus, any amendment or supplement to the Final Prospectus and this Agreement and that: (i) the representations and warranties of the Company in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date and the Company has complied in all material respects with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date; (ii) the Registration Statement has become effective under the Act; any required filing of the Final Prospectus, and any supplement thereto, pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the Company's knowledge, threatened; and (iii) since the date of the most recent financial statements included or incorporated by reference in the Final Prospectus (exclusive of any supplement thereto), there has been no material adverse change in the condition (financial or other), earnings, business, prospects or properties of the Company and its subsidiaries, whether or not arising from transactions in the ordinary course of business, except as set forth, incorporated by reference or contemplated in the Final Prospectus (exclusive of any supplement thereto). (f) At the Execution Time and at the Closing Date, Arthur Andersen LLP shall have furnished to the Representatives a letter or letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable published rules and regulations thereunder and stating in effect that: (i) in their opinion the audited financial statements and financial statement schedules, if any, included or incorporated by reference in the Registration Statement or the Final Prospectus and reported on by them, as applicable, comply in form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; (ii) on the basis of a reading of the latest unaudited financial statements made available by the Company and its subsidiaries; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and the Audit and Compensation Committee of the Company and the Subsidiaries; and inquiries of certain officials of the Company who have responsibility for financial and accounting matters of the Company and its subsidiaries as to transactions and events subsequent to December 31, 1998, nothing came to their attention which caused them to believe that: (1) any unaudited financial statements included or incorporated by reference in the Registration Statement or the Final Prospectus do not comply in form in all material respects with applicable accounting requirements of the Act and with the published rules and regulations of the Commission with respect to financial statements included or incorporated in quarterly reports on Form 10-Q under the Exchange Act; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included or incorporated by reference in the Registration Statement or the Final Prospectus; or (2) with respect to the period subsequent to March 31, 1999, there were any changes, at a specified date not more than five business days prior to the date of the letter, in the long-term debt of the Company and its subsidiaries or capital stock of the Company (except in connection with the issuance of $400 million aggregate principal amount of the Company's __% senior notes due 2009 being offered concurrently with the Underwritten Securities, and the Company's acquisition of Millenium L.L.C. and Noverr Publishing, Inc.) or decreases in the stockholders' equity of the Company and its subsidiaries as compared with the amounts shown on the March 31, 1999 consolidated balance sheet included or incorporated by reference in the Registration Statement and the Final Prospectus, or for the period from April 1, 1999 to such specified date as compared with the corresponding period in the preceding year, there were any decreases in revenue or increases in operating loss or net loss of the Company and its subsidiaries, except in all instances for such changes, decreases or increases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Representatives; (iii) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company and its subsidiaries) set forth in or incorporated by reference in the Registration Statement or the Final Prospectus, including the information set forth under the captions "Selected Consolidated Financial Data", "Pro Forma Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in or incorporated by reference in the Registration Statement or the Final Prospectus, agrees with the accounting records of the Company and its subsidiaries, excluding any questions of legal interpretation; and (iv) on the basis of a reading of the unaudited pro forma financial statements included or incorporated by reference in the Registration Statement or the Final Prospectus (the "pro forma financial statements"); carrying out certain specified procedures; inquiries of certain officials of the Company who have responsibility for financial and accounting matters; and proving the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the pro forma financial statements, nothing came to their attention which caused them to believe that the pro forma financial statements do not comply in form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such statements. References to the Final Prospectus in this paragraph (f) include any amendment or supplement thereof or thereto at the date of the letter. (g) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Final Prospectus (exclusive of any amendment or supplement thereof or thereto), there shall not have been (i) any change, decrease or increase specified in the letter or letters referred to in paragraph (f) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business, prospects or properties of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Prospectus (exclusive of any supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment thereof) and the Final Prospectus (exclusive of any supplement thereto). (h) The Securities shall have been authorized for listing and trading, subject to official notice of issuance, on the Nasdaq Stock Market's National Market System, and satisfactory evidence of such actions shall have been provided to the Representatives. (i) At the Execution Time, the Company shall have furnished to the Representatives a letter substantially in the form of Exhibit A hereto from each officer and director of the Company addressed to the Representatives. (j) Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to the Company in writing or by telephone or telegraph confirmed in writing. The documents required to be delivered by this Section 6 shall be delivered at the office of Hogan & Hartson L.L.P., Columbia Square, 555 Thirteenth Street, N.W., Washington, DC 20004, counsel for the Company, at 9:00 a.m., on the Closing Date. 7. Reimbursement of Underwriters' Expenses. If the sale of the --------------------------------------- Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally through Salomon Smith Barney Inc. upon demand for all reasonable out- of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. 8. Indemnification and Contribution. (a) The Company agrees to -------------------------------- indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained or incorporated by reference in the Registration Statement as originally filed or in any amendment thereof, or in the Base Prospectus, any Preliminary Final Prospectus or the Final Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, -------- however, that the Company will not be liable in any such case to the extent that - ------- any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion therein; and provided, further, -------- ------- that the foregoing indemnity agreement with respect to any Preliminary Final Prospectus or Final Prospectus shall not inure to the benefit of any Underwriter from whom the person asserting or causing any such losses, claims, damages or liabilities purchased Securities (or to the benefit of any person controlling such Underwriter or any directors, officers, employees and agents of such Underwriter), if a copy of the Preliminary Final Prospectus (or the Final Prospectus as amended or supplemented), if the Company shall have timely furnished the Underwriters with sufficient copies thereof, was not sent or given by or on behalf of such Underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Securities to such person and if the Preliminary Final Prospectus (or the Final Prospectus as amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Underwriter severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each person who controls the Company within the meaning of either the Act or the Exchange Act to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with reference to information relating to such Underwriter furnished in writing to the Company by or on behalf of such Underwriter through the Representatives specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have. The Company acknowledges that the statements regarding delivery set forth in the last paragraph of the cover page and under the heading "Underwriting," the list of Underwriters and their respective participation in the sale of the Securities, the sentences related to concessions and reallowances and the paragraph related to stabilization, syndicate covering transactions and penalty bids in any Preliminary Final Prospectus and the Final Prospectus constitute the only information furnished in writing by or on behalf of the several Underwriters for inclusion in any Preliminary Final Prospectus or the Final Prospectus, and you, as the Representatives, confirm that such statements are correct. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be -------- ------- reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason in respect of any and all losses, claims, damages or liabilities (or actions in respect thereof), the indemnifying party agrees to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnifyied party may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand and by the Underwriters, on the other, from the offering of the Securities; provided, however, that in no case shall -------- ------- any Underwriter (except as may be provided in any agreement among Underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such Underwriter hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company, and the Underwriters severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it and benefits received by the Underwriters shall be deemed to be equal to the total underwriting discounts and commissions, in each case as set forth on the cover page of the Final Prospectus. Relative fault shall be determined by reference to whether any alleged untrue statement of a material fact or the omission or alleged omission of a material fact relates to information provided by the Company on the one hand, or the Underwriters on the other. The Company and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Underwriter within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each director of the Company and each officer who shall have signed the Registration Statement shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). 9. Default by an Underwriter. If any one or more Underwriters shall fail ------------------------- to purchase and pay for any of the Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the amount of Underwritten Securities set forth opposite their names in Schedule I hereto bears to the aggregate amount of Underwritten Securities set forth opposite the names of all the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however, that in the event -------- ------- that the aggregate amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate amount of Underwritten Securities set forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of such Securities, and if such nondefaulting Underwriters do not purchase all such Securities, this Agreement will terminate without liability to any nondefaulting Underwriter or the Company. In the event of a default by any Underwriter as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Registration Statement and the Final Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to the Company and any nondefaulting Underwriter for damages occasioned by its default hereunder. 10. Termination. This Agreement shall be subject to termination in the ----------- absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if prior to such time (i) trading in the Company's Class A common stock shall have been suspended by the Commission or the Nasdaq National Market or trading in securities generally on the New York Stock Exchange or the Nasdaq National Market shall have been suspended or limited or minimum prices shall have been established on either of such Exchange or Market, (ii) a banking moratorium shall have been declared either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Final Prospectus (exclusive of any supplement thereto). 11. Representations and Indemnities to Survive. The respective ------------------------------------------ agreements, representations, warranties, indemnities and other statements of the Company or its officers, and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter, or the Company or any of the officers, directors or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancellation of this Agreement. 12. Notices. All communications hereunder will be in writing and ------- effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or sent by facsimile transmission and confirmed to Salomon Smith Barney Inc., General Counsel (fax no.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith Barney Inc., at 388 Greenwich Street, New York, New York, 10013; or, if sent to the Company, will be mailed, delivered or sent by facsimile transmission and confirmed to it at McLeodUSA Incorporated, McLeodUSA Technology Park, 6400 C Street SW, P.O. Box 3177, Cedar Rapids, Iowa 52406, attention of the legal department. 13. Successors. This Agreement will inure to the benefit of and be ---------- binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder. 14. Applicable Law. This Agreement will be governed by and construed in -------------- accordance with the laws of the State of New York. 15. Counterparts. This Agreement may be signed in one or more ------------ counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement. 16. Headings. The section headings used herein are for convenience only -------- and shall not affect the construction hereof. 17. Definitions. The terms which follow, when used in this Agreement, ----------- shall have the meanings indicated. "Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Base Prospectus" shall mean the base prospectus referred to in the first sentence of Section 1(a) above contained in the Registration Statement at the Effective Date. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. "Commission" shall mean the Securities and Exchange Commission. "Effective Date" shall mean each date and time that the Registration Statement, any post-effective amendment or amendments thereto and any Rule 462(b) Registration Statement became or become effective. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Execution Time" shall mean the date and time that this Agreement is executed and delivered by the parties hereto. "Final Prospectus" shall mean the prospectus supplement relating to the Securities that was first filed pursuant to Rule 424(b) after the Execution Time, together with the Base Prospectus. "Preliminary Final Prospectus" shall mean any preliminary prospectus supplement to the Base Prospectus which describes the Securities and the offering thereof and is used prior to filing of the Final Prospectus, together with the Base Prospectus. "Registration Statement" shall mean the registration statement referred to in Section 1(a) above, including exhibits and financial statements, as amended at the Execution Time (or, if not effective at the Execution Time, in the form in which it shall become effective) and, in the event any post-effective amendment thereto or any Rule 462(b) Registration Statement becomes effective prior to the Closing Date, shall also mean such registration statement as so amended or such Rule 462(b) Registration Statement, as the case may be. Such term shall include any Rule 430A Information deemed to be included therein at the Effective Date as provided by Rule 430A. "Rule 424", "Rule 430A" and "Rule 462" refer to such rules under the Act. "Rule 430A Information" shall mean information with respect to the Securities and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A. "Rule 462(b) Registration Statement" shall mean a registration statement and any amendments thereto filed pursuant to Rule 462(b) relating to the offering covered by the registration statement referred to in Section 1(a) hereof. If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement between the Company and the several Underwriters. Very truly yours, MCLEODUSA INCORPORATED By: Name: Title: The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Salomon Smith Barney Inc. Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated By: Salomon Smith Barney Inc. By: Name: Title: For themselves and the other several Underwriters, if any, named in Schedule I. SCHEDULE I
Number of Shares of Number of Shares Underwritten Securities of Option Securities Underwriters To Be Purchased To Be Purchased - ----------------------------------- ----------------------- -------------------- Salomon Smith Barney Inc. Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated Total 400,000 60,000
Exhibit A --------- [Letterhead of officer or director of McLeodUSA Incorporated] McLeodUSA Incorporated Public Offering of Series A Preferred Stock ------------------------------------------- __________________, 1999 Salomon Smith Barney Inc. Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated As Representative of the several Underwriters, c/o Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: This letter is being delivered to you in connection with the proposed Underwriting Agreement (the "Underwriting Agreement"), between McLeodUSA Incorporated, a Delaware corporation (the "Company"), and each of you as representatives of a group of Underwriters named therein, relating to an underwritten public offering of Series A Preferred Stock, $.01 par value, of the Company. In order to induce you and the other Underwriters to enter into the Underwriting Agreement, the undersigned will not, without the prior written consent of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge or otherwise dispose of, or file (or participate in the filing of) a registration statement with the Securities and Exchange Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder with respect to, any shares of Class A common stock of the Company or any securities convertible into or exercisable or exchangeable for such Class A common stock, or publicly announce an intention to effect any such transaction, for a period of 90 days after the Agreement is executed, other than shares of Class A common stock disposed of as bona fide gifts or pledges where the recipient of such gift or the pledgee, as the case may be, agrees in writing with the Underwriters to be bound by the terms of this letter. If for any reason the Underwriting Agreement shall be terminated prior to the Closing Date (as defined in the Underwriting Agreement), the agreement set forth above shall likewise be terminated. Yours very truly, EX-4.21 3 EXHIBIT 4.21 EXHIBIT 4.21 ================================================================================ MCLEODUSA INCORPORATED and UNITED STATES TRUST COMPANY OF NEW YORK, Trustee ______________________ Indenture Dated as of August __, 1999 ______________________ Senior Debt Securities ================================================================================ TABLE OF CONTENTS =================
Page ---- RECITALS ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions............................................... 1 Act................................................................. 2 Additional Amounts.................................................. 2 Affiliate........................................................... 2 Authenticating Agent................................................ 2 Authorized Newspaper................................................ 2 Bearer Security..................................................... 2 Board of Directors.................................................. 2 Board Resolution.................................................... 2 Business Day........................................................ 3 Capital Stock....................................................... 3 CEDEL............................................................... 3 Class A Common Stock................................................ 3 Commission.......................................................... 3 Common Depositary................................................... 3 Company............................................................. 3 Company Certificate................................................. 3 Company Request" and "Company Order................................. 3 Conversion Event.................................................... 4 Corporate Trust Office.............................................. 4 corporation......................................................... 4 coupon.............................................................. 4 covenant defeasance................................................. 4 Default............................................................. 4 Defaulted Interest.................................................. 4 defeasance.......................................................... 4 Dollar" or " $...................................................... 4 DTC................................................................. 4 ECU................................................................. 4 Euroclear........................................................... 4 European Communities................................................ 4 European Monetary System............................................ 5 Event of Default.................................................... 5 Exchange Act........................................................ 5 Exchange Date....................................................... 5 Foreign Currency.................................................... 5
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Page ---- GAAP................................................................ 5 Government Obligations.............................................. 5 Holder.............................................................. 6 Indenture........................................................... 6 Indexed Security.................................................... 6 interest............................................................ 6 Interest Payment Date............................................... 6 mandatory sinking fund payment...................................... 6 Maturity............................................................ 6 Notice of Default................................................... 6 Opinion of Counsel.................................................. 6 optional sinking fund payment....................................... 7 Original Issue Discount Security.................................... 7 Outstanding......................................................... 7 Paying Agent........................................................ 8 Payment Default..................................................... 8 Person.............................................................. 8 Place of Payment.................................................... 8 Predecessor Security................................................ 8 Property............................................................ 9 Redemption Date..................................................... 9 Redemption Price.................................................... 9 Registered Security................................................. 9 Regular Record Date................................................. 9 Repayment Date...................................................... 9 Repayment Price..................................................... 9 Responsible Officer................................................. 9 Restricted Subsidiary............................................... 9 Securities Act...................................................... 9 Security............................................................ 9 Security Register" and "Security Registrar.......................... 10 Special Record Date................................................. 10 Stated Maturity..................................................... 10 Subsidiary.......................................................... 10 Trust Indenture Act................................................. 10 Trustee............................................................. 10 Trustee Permitted Investments....................................... 10 United States....................................................... 12 United States person................................................ 12 Unrestricted Subsidiary............................................. 12 Voting Stock........................................................ 12 Yield to Maturity................................................... 12
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Page ---- SECTION 102. Compliance Certificates and Opinions.................. 12 SECTION 103. Form of Documents Delivered to Trustee................ 13 SECTION 104. Acts of Holders....................................... 14 SECTION 105. Notices to Trustee and Company........................ 15 SECTION 106. Notice to Holders; Waiver............................. 16 SECTION 107. Effect of Headings and Table of Contents.............. 17 SECTION 108. Successors and Assigns................................ 17 SECTION 109. Separability Clause................................... 17 SECTION 110. Benefits of Indenture................................. 17 SECTION 111. No Personal Liability................................. 17 SECTION 112. Governing Law......................................... 17 SECTION 113. Legal Holidays........................................ 18 SECTION 114. Counterparts.......................................... 18 ARTICLE TWO SECURITIES FORMS SECTION 201. Forms of Securities................................... 18 SECTION 202. Form of Trustee's Certificate of Authentication....... 19 SECTION 203. Securities Issuable in Global Form.................... 19 ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series.................. 20 SECTION 302. Denominations......................................... 24 SECTION 303. Execution, Authentication, Delivery and Dating........ 24 SECTION 304. Temporary Securities.................................. 26 SECTION 305. Registration, Registration of Transfer and Exchange... 29 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities...... 32 SECTION 307. Payment of Interest; Interest Rights Preserved........ 34 SECTION 308. Persons Deemed Owners................................. 36 SECTION 309. Cancellation.......................................... 36 SECTION 310. Computation of Interest............................... 37 SECTION 311. CUSIP Numbers......................................... 37 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture............... 37 SECTION 402. Application of Trust Funds............................ 39
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Page ---- ARTICLE FIVE REMEDIES SECTION 501. Events of Default................................................ 39 SECTION 502. Acceleration of Maturity; Rescission and Annulment............... 41 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.. 42 SECTION 504. Trustee May File Proofs of Claim................................. 43 SECTION 505. Trustee May Enforce Claims Without Possession of Securities or Coupons............................................ 43 SECTION 506. Application of Money Collected................................... 44 SECTION 507. Limitation on Suits.............................................. 44 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium, Interest and Additional Amounts......................... 45 SECTION 509. Restoration of Rights and Remedies............................... 45 SECTION 510. Rights and Remedies Cumulative................................... 45 SECTION 511. Delay or Omission Not Waiver..................................... 46 SECTION 512. Control by Holders of Securities................................. 46 SECTION 513. Waiver of Past Defaults.......................................... 46 SECTION 514. Waiver of Usury, Stay or Extension Laws.......................... 46 SECTION 515. Undertaking for Costs............................................ 47 ARTICLE SIX THE TRUSTEE SECTION 601. Notice of Defaults............................................... 47 SECTION 602. Certain Rights of Trustee........................................ 47 SECTION 603. Not Responsible for Recitals or Issuance of Securities........... 49 SECTION 604. May Hold Securities.............................................. 49 SECTION 605. Money Held in Trust; Trustee Permitted Investments............... 49 SECTION 606. Compensation and Reimbursement................................... 50 SECTION 607. Trustee Eligibility; Conflicting Interests....................... 51 SECTION 608. Resignation and Removal; Appointment of Successor................ 51 SECTION 609. Acceptance of Appointment by Successor........................... 53 SECTION 610. Merger, Conversion, Consolidation or Succession to Business...... 54 SECTION 611. Appointment of Authenticating Agent.............................. 54 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Disclosure of Names and Addresses of Holders..................... 56 SECTION 702. Reports by Trustee............................................... 56 SECTION 703. Reports by Company............................................... 56
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Page ---- SECTION 704. Company to Furnish Trustee Names and Addresses of Holders...... 58 ARTICLE EIGHT CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE SECTION 801. Consolidations and Mergers of Company and Sales, Leases and Conveyances......................................... 58 SECTION 802. Rights and Duties of Successor Entity.......................... 59 SECTION 803. Company Certificate and Opinion of Counsel..................... 59 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders............. 59 SECTION 902. Supplemental Indentures with Consent of Holders................ 61 SECTION 903. Execution of Supplemental Indentures........................... 62 SECTION 904. Effect of Supplemental Indentures.............................. 62 SECTION 905. Conformity with Trust Indenture Act............................ 63 SECTION 906. Reference in Securities to Supplemental Indentures............. 63 SECTION 907. Notice of Supplemental Indentures.............................. 63 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, Interest and Additional Amounts............................................. 63 SECTION 1002. Maintenance of Office or Agency................................ 63 SECTION 1003. Money for Securities Payments to Be Held in Trust.............. 65 SECTION 1004. Existence...................................................... 66 SECTION 1005. Maintenance of Property........................................ 67 SECTION 1006. [intentionally omitted]........................................ 67 SECTION 1007. Payment of Taxes and Other Claims.............................. 67 SECTION 1008. Statement as to Compliance..................................... 67 SECTION 1009. Additional Amounts............................................. 68 SECTION 1010. Waiver of Certain Covenants.................................... 69 ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article....................................... 69 SECTION 1102. Election to Redeem; Notice to Trustee.......................... 69 SECTION 1103. Selection by Trustee of Securities to Be Redeemed.............. 69
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Page ---- SECTION 1104. Notice of Redemption......................................... 70 SECTION 1105. Deposit of Redemption Price.................................. 71 SECTION 1106. Securities Payable on Redemption Date........................ 71 SECTION 1107. Securities Redeemed in Part.................................. 72 ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article..................................... 72 SECTION 1202. Satisfaction of Sinking Fund Payments with Securities........ 73 SECTION 1203. Redemption of Securities for Sinking Fund.................... 73 ARTICLE THIRTEEN REPAYMENT AT THE OPTION OF HOLDERS SECTION 1301. Applicability of Article..................................... 74 SECTION 1302. Repayment of Securities...................................... 74 SECTION 1303. Exercise of Option........................................... 74 SECTION 1304. When Securities Presented for Repayment Become Due and Payable.............................................. 75 SECTION 1305. Securities Repaid in Part.................................... 76 ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1401. Applicability of Article; Company's Option to Effect Defeasance or Covenant Defeasance............................ 76 SECTION 1402. Defeasance and Discharge..................................... 76 SECTION 1403. Covenant Defeasance.......................................... 77 SECTION 1404. Conditions to Defeasance or Covenant Defeasance.............. 77 SECTION 1405. Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous Provisions................ 79 SECTION 1406. Reinstatement................................................ 80 ARTICLE FIFTEEN MEETINGS OF HOLDERS OF SECURITIES SECTION 1501. Purposes for Which Meetings May Be Called.................... 81 SECTION 1502. Call, Notice and Place of Meetings........................... 81 SECTION 1503. Persons Entitled to Vote at Meetings......................... 81 SECTION 1504. Quorum; Action............................................... 82
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Page ---- SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of Meetings............................ 83 SECTION 1506. Counting Votes and Recording Action of Meetings.... 84 SECTION 1507. Evidence of Action Taken by Holders................ 84 SECTION 1508. Proof of Execution of Instruments.................. 84
TESTIMONIUM SIGNATURES ACKNOWLEDGMENTS EXHIBIT A - FORMS OF CERTIFICATION vii Reconciliation and tie between Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and Indenture Trust Indenture Act Section Indenture Section --------------------------- ----------------- 310(a)(1), (2) and (5) 607(a) 310(a)(3) and (4) Not applicable 310(b) 608(d) 310(c) Not applicable 311 Not applicable 312(a) 704 312(b) Not applicable 312(c) 701 313(a) and (c) 702 313(b) Not applicable 314(a)(1), (2) and (3) 703 314(a)(4) 1008 314(b) Not applicable 314(c) and (e) 102 314(d) Not applicable 315(a), (c), (d) and (e) Not applicable 315(b) 601 316(a) (last sentence) 101 ("Outstanding") 316(a)(1)(A) 512 316(a)(1)(B) 513 316(a)(2) and (c) Not applicable 316(b) 508 317(a)(1) 503 317(a)(2) 504 317(b) Not applicable 318(a) 112 NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. Attention should also be directed to Section 318(c) of the Trust Indenture Act, which provides that the provisions of Sections 310 to and including 317 of the Trust Indenture Act are a part of and govern every qualified indenture, whether or not physically contained therein. viii INDENTURE, dated as of August __, 1999, by and between MCLEODUSA INCORPORATED, a Delaware corporation (hereinafter called the "Company"), having ------- its principal office at 6400 C Street, S.W., Cedar Rapids, Iowa 52406 and UNITED STATES TRUST COMPANY OF NEW YORK, a bank and trust company organized under the New York banking law, as trustee hereunder (hereinafter called the "Trustee"), ------- currently having its Corporate Trust Office at 114 West 47th Street, New York, New York 10036. RECITALS The Company deems it necessary to issue from time to time for its lawful purposes senior debt securities (hereinafter called the "Securities") evidencing ---------- its unsecured and unsubordinated indebtedness, and has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of the Securities, unlimited as to aggregate principal amount, to bear interest at the rates or formulas, to mature at such times and to have such other provisions as shall be fixed therefor as hereinafter provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. This Indenture is subject to the provisions of the Trust Indenture Act (as herein defined) and the rules and regulations of the Commission (as herein defined) promulgated thereunder which are required to be part of this Indenture and, to the extent applicable, shall be governed by such provisions. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders (as herein defined) thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as ----------- otherwise expressly provided or the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein, and the terms "cash transaction" and "self- ---------------- ---- liquidating paper," as used in Section 311 of the Trust Indenture Act, ----------------- shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act; 1 (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP (as herein defined); and (4) the words "herein," "hereof" and "hereunder" and other words of ------ ------ --------- similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 104(a). --- "Additional Amounts" means any additional amounts which are required by a ------------------ Security, under circumstances specified therein, to be paid by the Company in respect of certain taxes imposed on certain Holders and which are owing to such Holders. "Affiliate" means, as to any Person, any other Person which directly or --------- indirectly controls, or is under common control with, or is controlled by, such Person; provided that each Unrestricted Subsidiary shall be deemed to be an Affiliate of the Company and of each other Subsidiary of the Company; provided, further, that, except for the purposes of the definition of "Outstanding" and Section 607, neither the Company nor any of its Restricted Subsidiaries shall be deemed to be Affiliates of each other. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "under common control with" and "controlled by"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise. "Authenticating Agent" means any authenticating agent appointed by the -------------------- Trustee pursuant to Section 611. "Authorized Newspaper" means a newspaper, printed in the English language -------------------- or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in each place in connection with which the term is used or in the financial community of each such place. Whenever successive publications are required to be made in Authorized Newspapers, the successive publications may be made in the same or in different Authorized Newspapers in the same city meeting the foregoing requirements and in each case on any Business Day. "Bearer Security" means a Security which is payable to bearer. --------------- "Board of Directors" means the board of directors of the Company, the ------------------ executive committee or any other committee of such board duly authorized to act for it in respect hereof. "Board Resolution" means a copy of a resolution certified by the Secretary ---------------- or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, and to be in full force and effect on the date of such certification, and delivered to the Trustee. 2 "Business Day" when used with respect to any Place of Payment or any other ------------ particular location referred to in this Indenture or in the Securities, means, unless otherwise specified with respect to any Securities pursuant to Section 301, any day, other than a Saturday or Sunday, which is neither a legal holiday nor a day on which banking institutions in such Place of Payment or particular location are authorized or required by law, regulation or executive order to close. "Capital Stock" in any Person means any and all shares, interests, ------------- participations or other equivalents in the equity interest (however designated) in such Person and any rights (other than indebtedness convertible into an equity interest), warrants or options to subscribe for or acquire an equity interest in such Person. "CEDEL" means Centrale de Livraison de Valeurs Mobilieres, S.A., or its ----- successor. "Class A Common Stock" means the Class A Common Stock, par value $0.01 per -------------------- share, of the Company. "clearing agency" has the meaning set forth in Section 3(a)(23) of the --------------- Exchange Act. "Commission" means the United States Securities and Exchange Commission, ---------- as from time to time constituted, created under the Exchange Act, or, if at any time after execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Common Depositary" has the meaning specified in Section 304(b). ----------------- "Company" means the Person named as the "Company" in the first paragraph ------- of this Indenture until a successor corporation has become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation, and any other obligor on the Securities. "Company Certificate" means a certificate signed in the name of the ------------------- Company by (i) the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, the President, the Chief Executive Officer or a Vice President, and (ii) the Chief Financial Officer, the Chief Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, and delivered to the Trustee, which certificate shall comply with the provisions of Section 102 hereof. "Company Request" and "Company Order" mean, respectively, a written --------------- ------------- request or order signed in the name of the Company by (i) the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, the President, the Chief Executive Officer or a Vice President, and (ii) the Chief Financial Officer, the Chief Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, and delivered to the Trustee. 3 "Conversion Event" means the cessation of use of (i) a Foreign Currency ---------------- (other than the ECU or other currency unit) both by the government of the country which issued such currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community, (ii) the ECU both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities or (iii) any currency unit (or composite currency) other than the ECU for the purposes for which it was established. "Corporate Trust Office" means the principal office of the Trustee in the ---------------------- Borough of Manhattan, The City of New York, New York which at any particular time its corporate trust business shall be principally administered, which at the date hereof is located at 114 West 47th Street, New York, New York 10036. "corporation" includes corporations, associations, companies, real estate ----------- investment trusts and business trusts. "coupon" means any interest coupon appertaining to a Bearer Security. ------ "covenant defeasance" has the meaning specified in Section 1403. ------------------- "Default" means any event, act or condition, the occurrence of which is, ------- or after notice or the passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning specified in Section 307. ------------------ "defeasance" has the meaning specified in Section 1402. ---------- "Dollar" or "$" means a dollar or other equivalent unit in such coin or ------ - currency of the United States of America as at the time is legal tender for the payment of public and private debts. "DTC" means The Depository Trust Company. --- "ECU" means the European Currency Unit as defined and revised from time to --- time by the Council of the European Communities. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels --------- Office, or its successor as operator of the Euroclear System. "European Communities" means the European Economic Community, the European -------------------- Coal and Steel Community and the European Atomic Energy Community. 4 "European Monetary System" means the European Monetary System established ------------------------ by the Resolution of December 5, 1978 of the Council of the European Communities. "Event of Default" has the meaning specified in Section 501. ---------------- "Exchange Act" means the Securities Exchange Act of 1934, as amended, and ------------ the rules and regulations promulgated thereunder by the Commission. "Exchange Date" has the meaning specified in Section 304(b). ------------- "Foreign Currency" means any currency, currency unit or composite ---------------- currency, including, without limitation, the ECU issued by the government of one or more countries other than the United States of America or by any recognized confederation or association of such governments. "GAAP" means United States generally accepted accounting principles, ---- consistently applied, as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, that are applicable to the circumstances as of the date of determination; provided that, except as otherwise specifically provided herein, -------- all calculations made for purposes of determining compliance with Section 801 and Article Ten hereof with respect to a series of Securities shall utilize GAAP as in effect on the date of the original issuance and authentication of the Securities of such series pursuant to this Indenture. "Government Obligations" means securities which are (i) direct obligations ---------------------- of the United States of America or the government which issued the Foreign Currency in which the Securities of a particular series are payable, for the payment of which its full faith and credit is pledged, or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such government which issued the Foreign Currency in which the Securities of such series are payable, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other government, which, in either case, are not callable or redeemable at the option of the issuer thereof, and also includes a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required -------- by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt. 5 "Holder" when used with respect to a Registered Security, means the Person ------ in whose name such Registered Security is registered in the Security Register and, when used with respect to a Bearer Security or any coupon, means the bearer thereof. "Indenture" means this instrument as originally executed or as it may from --------- time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, and includes the terms of particular series of Securities established as contemplated by Section 301; provided, however, that, if at any time more than one Person is -------- ------- acting as Trustee under this instrument, "Indenture" when used with respect to any one or more series of Securities with respect to which such Person is acting as Trustee, shall mean this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of those particular series of Securities with respect to which such Person is acting as Trustee established as contemplated by Section 301, exclusive, however, of any provisions or terms which relate solely to other series of Securities with respect to which such Person is not acting as Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party. "Indexed Security" means a Security the terms of which provide that the ---------------- principal amount thereof payable at Stated Maturity may be more or less than the principal face amount thereof at original issuance. "interest" when used with respect to an Original Issue Discount Security -------- which by its terms bears interest only after Maturity, means interest payable after Maturity, and, when used with respect to a Security which provides for the payment of Additional Amounts pursuant to Section 1009, includes such Additional Amounts. "Interest Payment Date" when used with respect to any Security, means the --------------------- Stated Maturity of an installment of interest on such Security. "mandatory sinking fund payment" has the meaning specified in Section ------------------------------ 1201. "Maturity" when used with respect to any Security, means the date on which -------- the principal of such Security or an installment of principal become due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption, notice of option to elect repayment, repurchase or otherwise. "Notice of Default" has the meaning specified in Section 501. ----------------- "Opinion of Counsel" means a written opinion of counsel, who may be an ------------------ employee of or counsel for the Company or other counsel satisfactory to the Trustee. 6 "optional sinking fund payment" has the meaning specified in Section 1201. ----------------------------- "Original Issue Discount Security" means any Security which provides for -------------------------------- an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding" when used with respect to Securities, means, as of the date ----------- of determination, all Securities theretofore authenticated and delivered under this Indenture, exclusive of: (1) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (2) Securities, or portions thereof, for whose payment or redemption or repayment at the option of the Holder money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company is acting as its own Paying Agent) for the holders of such Securities and any coupons appertaining thereto, provided that, if such -------- Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or other provision therefor satisfactory to the Trustee has been made; (3) Securities, except solely to the extent provided in Section 401, 1402 or 1403, as applicable, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Four or Fourteen; and (4) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there has been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the required - -------- ------- principal amount of the Outstanding Securities have concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a meeting of Holders for quorum purposes, and for the purpose of making the calculations required by Section 313 of the Trust Indenture Act, (i) the principal amount of an Original Issue Discount Security which may be counted in making such determination or calculation and which shall be deemed Outstanding for such purpose shall be equal to the amount of principal thereof which would be (or has been declared to be) due and payable, at the time of such determination, upon a declaration of acceleration of the maturity thereof pursuant to Section 502, (ii) the principal amount of any Security denominated in a Foreign Currency which may be counted in making such determination or calculation and which shall be deemed Outstanding for such purpose shall be equal to the Dollar equivalent, determined pursuant to Section 301 as of the date such Security is originally issued 7 by the Company, of the principal amount (or, in the case of an Original Issue Discount Security, the Dollar equivalent as of such date of original issuance of the amount determined as provided in clause (i) above) of such Security, (iii) the principal amount of any Indexed Security which may be counted in making such determination or calculation and which shall be deemed Outstanding for such purpose shall be equal to the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Indexed Security pursuant to Section 301, and (iv) Securities owned by the Company or any other obligor on the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not Outstanding, except that, for the purposes of determining whether the Trustee is protected in making such calculation or in relying on any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor on the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the ------------ principal of (and premium, if any, on) and interest and Additional Amounts, if any, on any Securities or coupons on behalf of the Company, or if no such Person is authorized, the Company. "Payment Default" means any failure to pay any scheduled installment of --------------- principal of, premium, if any, or interest on any indebtedness within the grace period provided for such payment in the documentation governing such indebtedness. "Person" means any individual, corporation, partnership, limited liability ------ company, limited liability partnership, joint venture, association, joint-stock company, real estate investment trust, business trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment" when used with respect to the Securities of or within ---------------- any series, means the Corporate Trust Office of the Trustee and any place or places which the Company may from time to time designate as the place or places where the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on such Securities are payable as specified as contemplated by Sections 301 and 1002 and presentations, surrenders, notices and demands with respect to such Securities and this Indenture may be made. "Predecessor Security" when used with respect to any particular Security, -------------------- means every previous Security evidencing all or a portion of the same debt as evidenced by such Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security or a Security to which a mutilated, destroyed, lost or stolen coupon appertains shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security or the Security to which the mutilated, destroyed, lost or stolen coupon appertains. 8 "Property" means, with respect to any Person, any interest of such Person -------- in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, excluding Capital Stock in any other Person. "Redemption Date" when used with respect to any Security to be redeemed, --------------- means the date fixed for such redemption by or pursuant to this Indenture or the terms of such Security. "Redemption Price" when used with respect to any Security to be redeemed, ---------------- means the price at which it is to be redeemed pursuant to this Indenture or the terms of such Security. "Registered Security" means any Security which is registered in the ------------------- Security Register. "Regular Record Date" when used with respect to an installment of interest ------------------- payable on any Interest Payment Date on the Registered Securities of or within any series, means the date specified for that purpose as contemplated by Section 301, whether or not a Business Day. "Repayment Date" when used with respect to any Security to be repaid or -------------- repurchased at the option of the Holder, means the date fixed for such repayment or repurchase by or pursuant to this Indenture or the terms of such Security. "Repayment Price" when used with respect to any Security to be repaid or --------------- repurchased at the option of the Holder, means the price at which it is to be repaid or repurchased by or pursuant to this Indenture or the terms of such Security. "Responsible Officer" when used with respect to the Trustee, means any ------------------- vice president (whether or not designated by numbers or words added before or after said title), any assistant vice president, any assistant secretary or any other officer or assistant officer of the Trustee in the corporate trust department or similar group of the Trustee or, with respect to any particular matter arising hereunder, any officer of the Trustee to whom such matter has been assigned. "Restricted Subsidiary" means any Subsidiary of the Company that has not --------------------- been designated as an Unrestricted Subsidiary pursuant to this Indenture. "Securities Act" means the Securities Act of 1933, as amended, and the -------------- rules and regulations promulgated thereunder by the Commission. "Security" has the meaning specified in the first recital of this -------- Indenture and, more particularly, means any Security or Securities authenticated and delivered under this Indenture; provided, however, that, if at any time -------- ------- there is more than one Person acting as Trustee under this Indenture, "Securities" when used with respect to the Indenture with respect to which such Person is acting as Trustee, shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive, however, of Securities of or within any series with respect to which such Person is not acting as Trustee. 9 "Security Register" and "Security Registrar" have the respective meanings ----------------- ------------------ specified in Section 305. "Special Record Date" when used with respect to the payment of any ------------------- Defaulted Interest on the Registered Securities of or within any series, means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity" when used with respect to any Security or any --------------- installment of principal thereof or interest thereon or any Additional Amounts with respect thereto, means the date specified in such Security or a coupon representing such installment of interest as the fixed date on which the principal of such Security or such installment of principal or interest is, or such Additional Amounts are, due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such Security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subsidiary" means, with respect to any Person, (i) any corporation more ---------- than 50 percent of the outstanding shares of Voting Stock of which is owned, directly or indirectly, by such Person, or by one of more other Subsidiaries of such Person, or by such Person and one or more other Subsidiaries of such Person, (ii) any general partnership, limited liability company, joint venture or similar entity, more than 50 percent of the outstanding partnership, membership or similar interests of which are owned, directly or indirectly, by such Person, or by one or more other Subsidiaries of such Person, or by such Person and one or more other Subsidiaries of such Person and (iii) any limited partnership of which such Person or any Subsidiary of such Person is a general partner. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended ------------------- and as in force at the date as of which this Indenture was executed, except as provided in Section 905. "Trustee" means the Person named as the "Trustee" in the first paragraph ------- of this Indenture until a successor Trustee has become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then acting as a Trustee hereunder; provided, -------- however, that, if at any time there is more than one such Person, "Trustee" when - ------- used with respect to the Securities of or within any series, shall mean only the Trustee with respect to the Securities of such series, and no Trustee of Securities for any series shall be responsible for the acts or omissions of a Trustee for any other series of Securities. "Trustee Permitted Investments" means: ----------------------------- (1) Government Obligations; (2) Direct obligations and fully guaranteed certificates of beneficial interest of the Export-Import Bank of the United States; consolidated debt obligations and letter of credit-backed issues of the Federal Home Loan Banks; participation certificates and 10 senior debt obligations of the Federal Home Loan Mortgage Corporation; debentures of the Federal Housing Administration; mortgage-backed securities (except stripped mortgage securities which are valued greater than par on the portion of unpaid principal) and senior debt obligations of the Federal National Mortgage Association; participation certificates of the General Services Administration; guaranteed mortgage-backed securities and guaranteed participation certificates and guaranteed pool certificates of the Small Business Administration; debt obligations and letter of credit-backed issues of the Student Loan Marketing Association; local authority bonds of the U.S. Department of Housing and Urban Development; guaranteed Title XI financing of the U.S. Maritime Administration; guaranteed transit bonds of the Washington Metropolitan Area Transit Authority; or Resolution Funding Corporation securities; (3) Direct obligations of any state of the United States of America or any subdivision or agency thereof whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, at least as high as the rating then in effect on the Securities by Standard & Poor's Rating Services, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, at least as high as the rating then in effect on the Securities by Standard & Poor's Rating Services; (4) Commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, "A-1+" by Standard & Poor's Rating Services or "P-1" by Moody's Investors Services, Inc.; (5) Federal funds, unsecured certificates of deposit, time deposits or bankers acceptances (in each case having maturities of not more than 365 days) of any domestic bank (including the Trustee in its commercial capacity), including a branch office of a foreign bank which branch office is located in the United States, provided that written legal opinions in -------- form acceptable to the Trustee are received to the effect that full and timely payment of such deposit or similar obligation is enforceable against the principal office or any branch of such bank, which, at the time of purchase, has a rating of "A-1+" by Standard & Poor's Rating Services or "P-1" by Moody's Investors Services, Inc.; (6) Deposits of any bank or savings and loan association which has combined capital, surplus and undivided profits of not less than $3,000,000, provided that such deposits are continuously and fully insured -------- by the Federal Deposit Insurance Corporation, including, without limitation, an insured money market account of the Trustee; (7) Investments in money-market funds rated in the highest rating category by Standard & Poor's Rating Services or Moody's Investors Services, Inc.; such funds may include those for which the Trustee or an affiliate of the Trustee provides services for 11 a fee, whether as investment advisor, custodian, transfer agent, sponsor, distributor or otherwise; and (8) Shares of an open-end, diversified investment company which is registered under the Investment Company Act of 1940, as amended, and which (i) invests exclusively in permitted investments of the type set forth in clauses (1) through (7) above; (ii) seeks to maintain a constant net asset value per share in accordance with regulations of the Commission; and (iii) has aggregate net assets of at least $50,000,000 on the date of purchase. Any investment made in accordance with this Indenture may (i) be executed by the Trustee or the Company with or through the Trustee or its affiliates and (ii) be made in securities of any entity for which the Trustee or any of its affiliates serves as offeror, distributor, advisor or other service provider. "United States" means, unless otherwise specified with respect to any ------------- Securities pursuant to Section 301, the United States of America (including the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. "United States person" means, unless otherwise specified with respect to -------------------- any Securities pursuant to Section 301, an individual who is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or an estate or trust the income of which is subject to United States federal income taxation regardless of its source. "Unrestricted Subsidiary" means any Subsidiary of the Company that the ----------------------- Company has classified as an Unrestricted Subsidiary and that has not been reclassified as a Restricted Subsidiary pursuant to this Indenture. "Voting Stock" means with respect to any Person, securities of any class ------------ or classes of Capital Stock in such Person entitling the holders thereof (whether at all times or at the times that such class of Capital Stock has voting power by reason of the happening of any contingency) to vote in the election of members of the board of directors or comparable body of such Person. "Yield to Maturity" means the yield to maturity, computed at the time of ----------------- issuance of a Security (or, if applicable, at the most recent redetermination of interest on such Security) and as set forth in such Security in accordance with generally accepted United States bond yield computation principles. SECTION 102. Compliance Certificates and Opinions. Upon any application or ------------------------------------ request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee a Company Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenants, compliance with which constitute 12 conditions precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than certificates provided pursuant to Section 1008) shall include: (1) a statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation on which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such condition or covenant has been complied with; and (4) a statement as to whether or not, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case in which -------------------------------------- several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion as to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, on an Opinion of Counsel, or a certificate or representations by counsel, unless such officer knows, or in the exercise of reasonable care should know, that the opinion, certificate or representations with respect to the matters on which his or her certificate or opinion is based are erroneous. Any such Opinion of Counsel or certificate or representations may be based, insofar as it relates to factual matters, on a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information as to such factual matters is in the possession of the Company, unless such counsel knows that the certificate or opinion or representations as to such matters are erroneous. 13 If any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders. --------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of the Outstanding Securities of all series or one or more series, as the case may be, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing. If Securities of a series are issuable as Bearer Securities, any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of the Outstanding Securities of such series may, alternatively, be embodied in and evidenced by the record of such Holders voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of such Holders duly called and held in accordance with the provisions of Article Fifteen, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, if expressly required herein, to the Company. Such instrument or instrument and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such --- instrument or instruments or so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company and any agent of the Trustee or the Company, if made in the manner provided in this Section. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 1506. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof or by any other means acceptable to the Trustee. If such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) The ownership of Registered Securities shall be proved by the Security Register. (d) The ownership of Bearer Securities may be proved by the production of such Bearer Securities or by a certificate executed, as depositary, by any trust company, 14 bank, banker or other depositary, wherever situated, if such certificate is deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such Person had on deposit with such depositary, or exhibited to it, the Bearer Securities therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Bearer Securities, if such certificate or affidavit is deemed by the Trustee to be satisfactory. The Trustee and the Company may assume that such ownership of any Bearer Security continues until (i) another certificate or affidavit bearing a later date issued in respect of the same Bearer Security is produced, (ii) such Bearer Security is produced to the Trustee by some other Person, (iii) such Bearer Security is surrendered in exchange for a Registered Security or (iv) such Bearer Security is no longer Outstanding. The ownership of Bearer Securities may also be proved in any other manner which the Trustee deems sufficient. (e) If the Company shall solicit from the Holders of Registered Securities any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, in or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall not be obligated to do so. Notwithstanding Section 316(c) of the Trust Indenture Act, such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purpose of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the -------- Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. (f) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, any Security Registrar, any Paying Agent, any Authenticating Agent or the Company in reliance thereon, whether or not notation of such action is made on such Security. SECTION 105. Notices to Trustee and Company. Any request, demand, ------------------------------ authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made on, given or furnished to, or filed with: 15 (1) the Trustee by any Holder or the Company shall be sufficient for every purpose hereunder if in writing and mailed, first class postage prepaid, to the Trustee addressed to it at the address of its Corporate Trust Office specified in the first paragraph of this Indenture, Attention: Corporate Trust Administration; or (2) the Company by the Trustee or any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. When this Indenture provides for ------------------------- notice of any event to Holders of Registered Securities by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at such Holder's address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case in which notice to Holders of Registered Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Registered Securities or the sufficiency of any notice to Holders of Bearer Securities given as provided herein. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. If, by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it is impracticable to give such notice by mail, then such notification to Holders of Registered Securities as is made with the approval of the Trustee shall constitute a sufficient notification to such Holders for every purpose hereunder. Except as otherwise expressly provided herein or otherwise specified with respect to any Securities pursuant to Section 301, when this Indenture provides for notice to Holders of Bearer Securities of any event, such notices shall be sufficiently given if published in an Authorized Newspaper in The City of New York and in such other city or cities as may be specified in such Securities and, if the Securities of such series are listed on any securities exchange outside the United States, in any place at which such Securities are listed on a securities exchange to the extent that such securities exchange so requires, on a Business Day, such publication to be not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the date of the first such publication. If, by reason of the suspension of publication of any Authorized Newspaper or Authorized Newspapers or by reason of any other cause, it is impracticable to publish any notice to Holders of Bearer Securities as provided above, then such notification to Holders of Bearer Securities as is given with the approval of the Trustee shall constitute sufficient notice to such 16 Holders for every purpose hereunder. Neither the failure to give notice by publication to any particular Holder of Bearer Securities as provided above, nor any defect in any notice so published, shall affect the sufficiency of such notice with respect to other Holders of Bearer Securities or the sufficiency of any notice to Holders of Registered Securities given as provided herein. Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication. When this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance on such waiver. SECTION 107. Effect of Headings and Table of Contents. The Article and ---------------------------------------- Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 108. Successors and Assigns. All covenants and agreements in this ---------------------- Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 109. Separability Clause. In case any provision in this Indenture ------------------- or in any Security or any coupon shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 110. Benefits of Indenture. Nothing in this Indenture or in any --------------------- Security or any coupon, express or implied, shall give to any Person, other than the parties hereto, any Security Registrar, any Paying Agent, any Authenticating Agent and their successors hereunder and the Holders any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 111. No Personal Liability. No recourse under or on any obligation, --------------------- covenant or agreement contained in this Indenture or in any Security or any coupon, or because of any indebtedness evidenced thereby, shall be had against any promoter, as such or, against any past, present or future director, officer, employee or shareholder, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the consideration for the issue of the Securities. SECTION 112. Governing Law. This Indenture and the Securities and any ------------- coupons shall be governed by and construed in accordance with the laws of the State of New York 17 applicable to agreements made and to be performed in such State. This Indenture is subject to the provisions of the Trust Indenture act which, by the provisions thereof, are deemed or required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by operation of Section 318(c) of the Trust Indenture Act, the imposed duties shall control. SECTION 113. Legal Holidays. In any case in which any Interest Payment -------------- Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity of any Security is not a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or any Security or any coupon other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu hereof), payment of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on such Security need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date, Redemption Date, Repayment Date or sinking fund payment date, or at the Stated Maturity or Maturity; provided, however, that no interest shall accrue on the -------- ------- amount so payable for the period from and after such Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity, as the case may be. SECTION 114. Counterparts. This Indenture may be executed in several ------------ counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. ARTICLE TWO SECURITIES FORMS SECTION 201. Forms of Securities. The Registered Securities, if any, of ------------------- each series and the Bearer Securities, if any, and any coupons of each series, shall be in substantially the forms as are established in or pursuant to one or more indentures supplemental hereto and/or Board Resolutions, shall have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or any indenture supplemental hereto, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Securities may be listed, or to conform to usage. Unless otherwise specified as contemplated by Section 301, Bearer Securities shall have interest coupons attached. The definitive Securities and coupons shall be printed, lithographed or engraved or produced by any combination of these methods on a steel engraved border or steel engraved 18 borders or may be produced in any other manner, all as determined by the officers executing such Securities or coupons, as evidenced by their execution of such Securities or coupons. SECTION 202. Form of Trustee's Certificate of Authentication. Subject to ----------------------------------------------- Section 611, the Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. _____________________, as Trustee By:___________________________________________ Authorized Officer SECTION 203. Securities Issuable in Global Form. If Securities of or within ---------------------------------- a series are issuable in global form, as specified as contemplated by Section 301, then, notwithstanding clause (8) of Section 301 and the provisions of Section 302, any such Security shall represent such of the Outstanding Securities of such series as are specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities of such series from time to time endorsed thereon and that the aggregate amount of Outstanding Securities of such series represented thereby may from time to time be increased or decreased to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee in the manner and in accordance with instructions given by such Person or Persons specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 303 or 304. Subject to the provisions of Section 303 and, if applicable, Section 304, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and in accordance with instructions given by the Person or Persons specified therein or in the applicable Company Order. If a Company Order pursuant to Section 303 or 304 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 102 and need not be accompanied by an Opinion of Counsel. The provisions of the last sentence of Section 303 shall apply to any Security represented by a Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 303. 19 Notwithstanding the provisions of Section 307, unless otherwise specified as contemplated by Section 301, payment of principal of (and premium, if any, on) and interest and Additional Amounts, if any, on any Security in permanent global form shall be made to the Person or Persons specified therein. Notwithstanding the provisions of Section 308 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company or the Trustee shall treat as the Holder of such principal amount of Outstanding Securities represented by a permanent global Security (i) in the case of a permanent global Security in registered form, the Holder of such permanent global Security in registered form, or (ii) in the case of a permanent global Security in bearer form, Euroclear or CEDEL. ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal ------------------------------------ amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to one or more Board Resolutions, and/or indentures supplemental hereto, prior to the issuance of Securities of any series, any or all of the following, as applicable (each of which (except for the matters set forth in clauses (1), (2) and (15) below), if so provided, may be determined from time to time by the Company with respect to unissued Securities of or within the series when issued from time to time): (1) the title of the Securities of or within the series (which shall distinguish the Securities of such series from all other series of Securities); (2) any limit on the aggregate principal amount of the Securities of or within the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of or within the series pursuant to Section 304, 305, 306, 906, 1107 or 1305); (3) the date or dates, or the method by which such date or dates will be determined, on which the principal of the Securities of or within the series shall be payable and the amount of principal payable thereon; (4) the rate or rates at which the Securities of or within the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue or the method by which such date or dates shall be determined, the Interest Payment Dates on which such interest will be payable and the Regular Record Date, if any, for the interest payable on any Registered Security on any Interest Payment Date, or the method by which such date shall be determined, 20 and the basis on which interest shall be calculated if other than a 360-day year comprised of twelve 30-day months; (5) the place or places, if any, other than or in addition to the Corporate Trust Office where the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on Securities of or within the series shall be payable, any Registered Securities of or within the series may be surrendered for registration of transfer, exchange or conversion and notices or demands to or on the Company in respect of the Securities of or within the series and this Indenture may be served; (6) the period or periods within which, the price or prices (including the premium, if any) at which, the currency or currencies, currency unit or units or composite currency or currencies in which, and other terms and conditions upon which Securities of or within the series may be redeemed, in whole or in part, at the option of the Company, if the Company is to have the option; (7) the obligation, if any, of the Company to redeem, repay or purchase Securities of or within the series pursuant to any sinking fund or analogous provision or at the option of a Holder thereof, and the period or periods within which or the date or dates on which, the price or prices at which, the currency or currencies, currency unit or units or composite currency or currencies in which, and other terms and conditions upon which Securities of or within the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which any Registered Securities of or within the series shall be issuable and, if other than the denomination of $5,000, the denomination or denominations in which any Bearer Securities of or within the series shall be issuable; (9) if other than the Trustee, the identity of each Security Registrar and/or Paying Agent; (10) the percentage of the principal amount at which Securities will be issued and, if other than the principal amount thereof, the portion of the principal amount of Securities of or within the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502, or, if applicable, the portion of the principal amount of Securities which is convertible in accordance with the provisions of this Indenture, or the method by which such portion shall be determined; (11) if other than Dollars, the Foreign Currency or Currencies in which payment of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on the Securities of or within the series shall be payable or in which the Securities of or within the series shall be denominated; 21 (12) whether the amount of payments of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on the Securities of or within the series may be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on one or more currencies, currency units, composite currencies, commodities, equity indices or other indices), and the manner in which such amounts shall be determined; (13) whether the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on the Securities of or within the series are to be payable, at the election of the Company or a Holder thereof, in a currency or currencies, currency unit or units or composite currency or currencies other than that in which such Securities are denominated or stated to be payable, the period or periods within which (including the Election Date), and the terms and conditions upon which, such election may be made, and the time and manner of, and identity of the exchange rate agent with responsibility for, determining the exchange rate between the currency or currencies, currency unit or units or composite currency or currencies in which such Securities are denominated or stated to be payable and the currency or currencies, currency unit or units or composite currency or currencies in which such Securities are to be so payable; (14) provisions, if any, granting special rights to the Holders of Securities of or within the series on the occurrence of such events as may be specified; (15) any deletions from, modifications of or additions to the Events of Default or covenants of the Company with respect to Securities of or within the series, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein; (16) whether Securities of or within the series are to be issuable as Registered Securities, Bearer Securities (with or without coupons) or both, any restrictions applicable to the offer, sale or delivery of Bearer Securities and the terms upon which Bearer Securities of or within the series may be exchanged for Registered Securities of or within the series and vice versa (if permitted by applicable laws and regulations), whether any Securities of or within the series are to be issuable initially in temporary global form and whether any Securities of or within the series are to be issuable in permanent global form (with or without coupons) and, if so, whether beneficial owners of interests in any such permanent global Security may exchange such interests for Securities of such series and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in Section 305, and, if Registered Securities of or within the series are to be issuable as a global Security, the identity of the depositary for such series, and the date as of which any Bearer Securities of or within the series and any temporary global Security representing Outstanding Securities of or within the series shall be dated if other than the date of original issuance of the first Security of the series to be issued; 22 (17) the Person to whom any interest on any Registered Security of the series shall be payable, if other than the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the manner in which, or the Person to whom, any interest on any Bearer Security of the series shall be payable, if otherwise than upon presentation and surrender of the coupons appertaining thereto as they severally mature, and the extent to which, or the manner in which, any interest payable on a temporary global Security on an Interest Payment Date will be paid if other than in the manner provided in Section 304; (18) the applicability, if any, of Sections 1402 and/or 1403 to the Securities of or within the series and any provisions in modification of, in addition to or in lieu of any of the provisions of Article Fourteen; (19) if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, then the form and/or terms of such certificates, documents or conditions; (20) if the Securities of or within the series are to be issued upon the exercise of debt warrants, the time, manner and place for such Securities to be authenticated and delivered; (21) whether and under what circumstances the Company will pay Additional Amounts as contemplated by Section 1009 on the Securities of or within the series to any Holder who is not a United States person (including any modification to the definition of such term) in respect of any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Securities rather than pay such Additional Amounts (and the terms of any such option); (22) the obligation, if any, of the Company to permit the conversion of the Securities of such series into Class A Common Stock, preferred stock of the Company or other debt securities of the Company, and the terms and conditions on which such conversion shall be effected (including, without limitation, the initial conversion price or rate, the conversion period, any adjustment of the applicable conversion price and any requirements relative to the reservation of such shares for purposes of conversion; (23) whether and to what extent the Securities of the series are to be guaranteed by one or more of the Subsidiaries of the Company or by other Persons; and (24) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture). 23 All Securities of any one series and the coupons appertaining to any Bearer Securities of such series, if any, shall be substantially identical except, in the case of Registered or Bearer Securities issued in global form, as to denomination and except as may otherwise be provided in or pursuant to such Board Resolution or in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the Holders, for issuances of additional Securities of such series. If any of the terms of the Securities of any series are established by action taken pursuant to one or more Board Resolutions or supplemental indentures, a copy of an appropriate record of such action(s) shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order for authentication and delivery of such Securities. SECTION 302. Denominations. The Securities of each series shall be issuable ------------- as Bearer Securities, as Registered Securities or in any combination thereof, and in such denominations and amounts as are specified as contemplated by Section 301. With respect to any series denominated in Dollars, in the absence of any such provisions with respect to the Securities of any series, the Registered Securities of such series, other than Registered Securities issued in global form (which may be of any denomination), shall be issuable in denominations of $1,000 and any integral multiple thereof and the Bearer Securities of such series, other than Bearer Securities issued in global form (which may be of any denomination), shall be issuable in denominations of $5,000. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities ---------------------------------------------- and any coupons shall be executed on behalf of the Company by its Chief Executive Officer, its President or any Executive Vice President and shall be attested by the Company's Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities and any coupons may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Securities and such coupons. Any Securities or any coupons bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities or any coupons. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, together with any coupons, executed by the Company, to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee shall authenticate and deliver such Securities in accordance with the Company Order; provided, however, that, in connection with its original -------- ------- issuance, no Bearer Security shall be mailed or otherwise delivered to any location in the United States; and provided, further, that, unless otherwise -------- ------- specified with respect to any 24 series of Securities pursuant to Section 301, a Bearer Security may be delivered in connection with its original issuance only if the Person entitled to receive such Bearer Security has furnished a certificate to Euroclear or CEDEL, as the case may be, in the form set forth in Exhibit A-1 to this Indenture or such other certificate as may be specified with respect to any series of Securities pursuant to Section 301, dated no earlier than 15 days prior to the earlier of the date on which such Bearer Security is delivered and the date on which any temporary Security first becomes exchangeable for such Bearer Security in accordance with the terms of such temporary Security and this Indenture. Except as permitted by Section 306, the Trustee shall not authenticate and deliver any Bearer Security unless all appurtenant coupons for interest then matured have been detached and canceled. If all of the Securities of any series are not to be issued at one time and if the Board Resolution or supplemental indenture establishing such series so permits, such Company Order may set forth procedures acceptable to the Trustee for the issuance of such Securities and determining the terms of particular Securities of such series, such as the interest rate or formula, maturity date, date of issuance and date from which interest shall accrue. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities and any coupons appertaining thereto, the Trustee shall be entitled to receive, and (subject to Section 315(a) through 315(d) of the Trust Indenture Act) shall be fully protected in relying on: (1) an Opinion of Counsel complying with Section 102 and stating that: (A) the form or forms of such Securities and any coupons appertaining thereto have been, or will have been upon compliance with such procedures as may be specified therein, established in conformity with the provisions of this Indenture; (B) the terms of such Securities and any coupons appertaining thereto have been, or will have been upon compliance with such procedures as may be specified therein, established in conformity with the provisions of this Indenture; and (C) such Securities, together with any coupons appertaining thereto, when executed by the Company, completed pursuant to such procedures as may be specified therein and delivered by the Company to the Trustee for authentication in accordance with this Indenture, authenticated and delivered by the Trustee in accordance with this Indenture and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or 25 affecting the enforcement of creditors' rights generally and to general equitable principles and to such other matters as may be specified therein; and (2) a Company Certificate complying with Section 102 and stating that all conditions precedent provided for in this Indenture relating to the issuance of such Securities have been, or will have been upon compliance with such procedures as may be specified therein, complied with and that, to the best of the knowledge of the signers of such certificate, no Event of Default with respect to such Securities has occurred and is continuing. The Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties, obligations or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all the Securities of any series are not to be issued at one time, it shall not be necessary to deliver a Company Order, an Opinion of Counsel or a Company Certificate otherwise required pursuant to the preceding paragraph at the time of issuance of each Security of such series, but such order, opinion and certificate with appropriate modifications to cover such future issuances, shall be delivered at or before the time of issuance of the first Security of such series. Each Registered Security shall be dated the date of its authentication and each Bearer Security shall be dated as of the date specified as contemplated by Section 301. No Security or coupon shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security or the Security to which such coupon appertains a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized officer, and such certificate on any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security has been authenticated and delivered hereunder but never issued and sold by the Company, and the Company delivers such Security to the Trustee for cancellation as provided in Section 309 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued or sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 304. Temporary Securities. -------------------- (a) Pending the preparation of definitive Securities of any series, the Company may execute, and upon a Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or 26 otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form, or, if authorized, in bearer form (with or without coupons), and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in global form. Except in the case of temporary Securities in global form (which shall be exchanged in accordance with Section 304(b) or as otherwise provided in or pursuant to a Board Resolution), if temporary Securities of any series are issued, the Company shall cause definitive Securities of such series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for such series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, together with any non-matured coupons appertaining thereto, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations; provided, however, that no -------- ------- definitive Bearer Security shall be delivered in exchange for a temporary Registered Security; and provided, further, that a definitive Bearer -------- ------- Security shall be delivered in exchange for a temporary Bearer Security only in compliance with the conditions set forth in Section 303. Until so exchanged, the temporary Securities or coupons appertaining thereto of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities or coupons appertaining thereto of such series. (b) Unless otherwise provided as contemplated in Section 301, this Section 304(b) shall govern the exchange of temporary Securities issued in global form other than through the facilities of DTC. If any such temporary Security is issued in global form, then such temporary global Security shall, unless otherwise provided therein, be delivered to the London office of a depositary or common depositary (the "Common Depositary"), for the ----------------- benefit of Euroclear and CEDEL. Without unnecessary delay but in any event not later than the date specified in, or determined pursuant to the terms of, any such temporary global Security (the "Exchange Date"), the Company shall deliver to the ------------- Trustee definitive Securities, in an aggregate principal amount equal to the principal amount of such temporary global Security, executed by the Company. On or after the Exchange Date, such temporary global Security shall be surrendered by the Common Depositary to the Trustee, as the Company's agent for such purpose, to be exchanged, in whole or from time to time in part, for definitive Securities without charge, and the Trustee shall authenticate and deliver, in the name of Euroclear or CEDEL, as the case may be, in exchange for each 27 portion of such temporary global Security, an equal aggregate principal amount of definitive Securities of or within the same series of authorized denominations and of like tenor as the portion of such temporary global Security to be exchanged. The definitive Securities to be delivered in exchange for any such temporary global Security shall be in bearer form, registered form, permanent global bearer form or permanent global registered form, or any combination thereof, as specified as contemplated by Section 301, and, if any combination thereof is so specified, as requested by the Common Depositary; provided, however, that, unless -------- ------- otherwise specified in such temporary global Security, upon such presentation by the Common Depositary, such temporary global Security shall be accompanied by a certificate dated the Exchange Date or a subsequent date and signed by Euroclear as to the portion of such temporary global Security held for its account then to be exchanged and a certificate dated the Exchange Date or a subsequent date and signed by CEDEL as to the portion of such temporary global Security held for its account then to be exchanged, each in the form set forth in Exhibit A-2 to this Indenture or in such other form as may be established pursuant to Section 301; and provided, further, that definitive Bearer Securities shall be delivered in -------- ------- exchange for a portion of a temporary global Security only in compliance with the requirements of Section 303. Unless otherwise specified in such temporary global Security, the interest of a beneficial owner of Securities of a series in a temporary global Security shall be exchanged for definitive Securities of the same series and of like tenor following the Exchange Date when the account holder instructs Euroclear or CEDEL, as the case may be, to request such exchange on his behalf and delivers to Euroclear or CEDEL, as the case may be, a certificate in the form set forth in Exhibit A-1 to this Indenture (or in such other form as may be established pursuant to Section 301), dated no earlier than 15 days prior to the Exchange Date, copies of which certificate shall be available from the offices of Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed for such series of Securities and each Paying Agent. Unless otherwise specified in such temporary global Security, any such exchange shall be made free of charge to the beneficial owners of such temporary global Security, except that a Person receiving definitive Securities must bear the cost of insurance, postage, transportation and the like unless such Person takes delivery of such definitive Securities in person at the offices of Euroclear or CEDEL. Definitive Securities in bearer form to be delivered in exchange for any portion of a temporary global Security shall be delivered only outside the United States. Until exchanged in full as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder, except that, unless otherwise specified as contemplated by Section 301, interest payable on a temporary global Security on an Interest Payment Date for Securities of such series occurring prior to the applicable Exchange Date shall be payable to Euroclear and CEDEL on such Interest Payment Date upon delivery by Euroclear and 28 CEDEL to the Trustee of a certificate or certificates in the form set forth in Exhibit A-2 to this Indenture (or in such other forms as may be established pursuant to Section 301), for credit without further interest on or after such Interest Payment Date to the respective accounts of Persons who are the beneficial owners of such temporary global Security on such Interest Payment Date and who have each delivered to Euroclear or CEDEL, as the case may be, a certificate dated no earlier than 15 days prior to the Interest Payment Date occurring prior to such Exchange Date in the form set forth in Exhibit A-1 to this Indenture (or in such other forms as may be established pursuant to Section 301). Notwithstanding anything to the contrary herein contained, the certifications made pursuant to this paragraph shall satisfy the certification requirements of the preceding two paragraphs of this Section 304(b) and of the third paragraph of Section 303 of this Indenture and the interests of the Persons who are the beneficial owners of the temporary global Security with respect to which such certification was made will be exchanged for definitive Securities of the same series and of like tenor on the Exchange Date or the date of certification if such date occurs after the Exchange Date, without further act or deed by such beneficial owners. Except as otherwise provided in this paragraph, no payments of principal or interest owing with respect to a beneficial interest in a temporary global Security will be made unless and until such interest in such temporary global Security has been exchanged for an interest in a definitive Security. Any interest so received by Euroclear and CEDEL and not paid as herein provided shall be returned to the Trustee prior to the expiration of two years after such Interest Payment Date in order to be repaid to the Company. SECTION 305. Registration, Registration of Transfer and Exchange. The --------------------------------------------------- Company shall cause to be kept at the Corporate Trust Office of the Trustee or in any office or agency of the Company in a Place of Payment a register for each series of Securities (the registers maintained in such office or in any such office or agency of the Company in a Place of Payment being herein sometimes referred to collectively as the "Security Register") in which, subject to such ----------------- reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. The Trustee, at its Corporate Trust Office, is hereby initially appointed "Security Registrar" for ------------------ the purpose of registering Registered Securities and transfers of Registered Securities on such Security Register as herein provided. In the event that the Trustee ceases to be Security Registrar, it shall have the right to examine the Security Register at all reasonable times. Subject to the provisions of this Section 305, upon surrender for registration of transfer of any Registered Security of any series at any office or agency of the Company in a Place of Payment for such series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount, being a number not contemporaneously outstanding, and containing identical terms and provisions. 29 Subject to the provisions of this Section 305, at the option of the Holder, Registered Securities of any series may be exchanged for other Registered Securities of the same series, of any authorized denomination or denominations and of a like aggregate principal amount, containing identical terms and provisions, upon surrender of the Registered Securities to be exchanged at any such office or agency. Whenever any such Registered Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Registered Securities which the Holder making the exchange is entitled to receive. Unless otherwise specified with respect to any series of Securities as contemplated by Section 301, Bearer Securities may not be issued in exchange for Registered Securities. If (but only if) permitted as contemplated by Section 301, at the option of the Holder, Bearer Securities of any series may be exchanged for Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Bearer Securities to be exchanged at any such office or agency, with all unmatured coupons and all matured coupons in default appertaining thereto. If the Holder of a Bearer Security is unable to produce any such unmatured coupon or coupons or matured coupon or coupons in default, any such permitted exchange may be effected if the Bearer Securities are accompanied by payment in funds acceptable to the Company in an amount equal to the face amount of such missing coupon or coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Bearer Security surrenders to any Paying Agent any such missing coupon in respect of which such a payment has been made, such Holder shall be entitled to receive the amount of payment; provided, however, that, except as -------- ------- otherwise provided in Section 1002, interest represented by a coupon shall be payable only upon presentation and surrender of such coupons at an office or agency located outside the United States. Notwithstanding the foregoing, in case a Bearer Security of any series is surrendered at any such office or agency in a permitted exchange for a Registered Security of the same series and like tenor after the close of business at such office or agency on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date or proposed date for payment, as the case may be, and interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, any permanent global Security shall be exchangeable only as provided in this paragraph. If the depositary for any permanent global Security is DTC, then, unless the terms of such global Security expressly permit such global Security to be exchanged in whole or in part for 30 definitive Securities, a global Security may be transferred, in whole but not in part, only to a nominee of DTC, or by a nominee of DTC to DTC, or to a successor to DTC for such global Security selected and approved by the Company or to a nominee of such successor to DTC. If at any time DTC notifies the Company that it is unwilling or unable to continue as depositary for the applicable global Security or Securities or if at any time DTC ceases to be a clearing agency registered under the Exchange Act if so required by applicable law or regulation, the Company shall appoint a successor depositary with respect to such global Security or Securities. If (i) a successor depositary for such global Security or Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such unwillingness, inability or ineligibility, (ii) an Event of Default has occurred and is continuing and the beneficial owners representing a majority in principal amount of the applicable series of Securities represented by such global Security or Securities advise DTC to cease acting as depositary for such global Security or Securities or (iii) the Company, in its sole discretion, determines at any time that all Outstanding Securities (but not less than all) Securities of any series issued or issuable in the form of one or more global Securities shall no longer be represented by such global Security or Securities (provided, however, that -------- ------- the Company may not make such determination during the 40-day restricted period provided by Regulation S under the Securities Act or during any other similar period during which the Securities must be held in global form as may be required by the Securities Act), then, upon surrender of the global Security or Securities appropriately endorsed, the Company shall execute, and the Trustee shall authenticate and deliver definitive Securities of like series, rank, tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such global Security or Securities. If any beneficial owner of an interest in a permanent global Security is otherwise entitled to exchange such interest for Securities of such series and of like tenor and principal amount of another authorized form and denomination, as specified as contemplated by Section 301 and provided that any applicable notice provided in the permanent global Security has been given, then without unnecessary delay but in any event not earlier than the earliest date on which such interest may be so exchanged, upon surrender of the global Security or Securities appropriately endorsed, the Company shall execute, and the Trustee shall authenticate and deliver definitive Securities in aggregate principal amount equal to the principal amount of such beneficial owner's interest in such permanent global Security. On or after the earliest date on which such interests may be so exchanged, such permanent global Security shall be surrendered for exchange by DTC or such other depositary as is specified in the Company Order with respect thereto to the Trustee, as the Company's agent for such purpose; provided, however, that no such exchanges may -------- ------- occur during a period beginning at the opening of business 15 days before any selection of Securities to be redeemed and ending on the relevant Redemption Date if the Security for which exchange is requested may be among those selected for redemption; and provided, further, that no Bearer Security delivered in -------- ------- exchange for a portion of a permanent global Security shall be mailed or otherwise delivered to any location in the United States. If a Registered Security is issued in exchange for any portion of a permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, interest or Defaulted 31 Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such Registered Security, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom interest in respect of such portion of such permanent global Security is payable in accordance with the provisions of this Indenture. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Registered Security presented or surrendered for registration of transfer or for exchange or redemption shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge which may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any transfer. The Company or the Trustee, as applicable, shall not be required (i) to issue, register the transfer of or exchange any Security if such Security may be among those selected for redemption during a period beginning at the opening of business 15 days before selection of the Securities to be redeemed under Section 1103 and ending at the close of business on (A) if such Securities are issuable only as Registered Securities, the day of the mailing of the relevant notice of redemption and (B) if such Securities are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption or, if such Securities are also issuable as Registered Securities and there is no publication, the day of the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except, in the case of any Registered Security to be redeemed in part, the portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so selected for redemption except that such a Bearer Security may be exchanged for a Registered Security of such series and like tenor, provided that such Registered Security is simultaneously -------- surrendered for redemption, or (iv) to issue, register the transfer of or exchange any Security which has been surrendered for repayment at the option of the Holder, except the portion, if any, of such Security not to be so repaid. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any ------------------------------------------------ mutilated Security or a Security with a mutilated coupon appertaining thereto is surrendered to the Trustee or the Company, together with, in proper cases, such security or indemnity as may be required by the Company or the Trustee to save each of them or any of their agents harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new 32 Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to the surrendered Security. If there is delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security or coupon, and (ii) such security or indemnity as may be required by them to save each of them and any of their agents harmless, then, in the absence of notice to the Company or the Trustee that such Security or coupon has been acquired by a bona fide purchaser, the Company shall execute, and upon Company Request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security or in exchange for the Security to which a destroyed, lost or stolen coupon appertains (with all appurtenant coupons not destroyed, lost or stolen), a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains. Notwithstanding the provisions of the previous two paragraphs, in case any such mutilated, destroyed, lost or stolen Security or coupon has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains, pay such Security or coupon; provided, however, that payment of principal of (and premium, if any, -------- ------- on) and interest and Additional Amounts, if any, on any Bearer Securities shall, except as otherwise provided in Section 1002, be payable only at an office or agency located outside the United States and, unless otherwise specified as contemplated by Section 301, any interest on Bearer Securities shall be payable only upon presentation and surrender of the coupons appertaining thereto. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge which may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series and any coupons appertaining thereto issued pursuant to this Section in lieu of any destroyed, lost or stolen Security, or in exchange for a Security to which a destroyed, lost or stolen coupon appertains, shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security and any coupons appertaining thereto or the destroyed, lost or stolen coupon are at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of such series and any coupons appertaining thereto duly issued hereunder. 33 The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons. SECTION 307. Payment of Interest; Interest Rights Preserved. Except as ---------------------------------------------- otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, interest on any Registered Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; provided, however, that each -------- ------- installment of interest on any Registered Security may at the Company's option be paid by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears on the Security Register or (ii) transfer to an account maintained by the payee located inside the United States. Unless otherwise provided as contemplated by Section 301 with respect to the Securities of any series, payment of interest may be made, in the case of a Bearer Security, by transfer to an account maintained by the payee with a bank located outside the United States. Unless otherwise provided as contemplated by Section 301, every permanent global Security will provide that interest, if any, payable on any Interest Payment Date will be paid to DTC, Euroclear and/or CEDEL, as the case may be, with respect to that portion of such permanent global Security held for its account by Cede & Co. or the Common Depositary, as the case may be, for the purpose of permitting such party to credit the interest received by it in respect of such permanent global Security to the accounts of the beneficial owners thereof. In case a Bearer Security of any series is surrendered in exchange for a Registered Security of such series after the close of business (at an office or agency in a Place of Payment for such series) on any Regular Record Date and before the opening of business (at such office or agency) on the next succeeding Interest Payment Date, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date and interest will not be payable on such Interest Payment Date in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture. Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, any interest on any Registered Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date ("Defaulted Interest") shall ------------------ forthwith cease to be payable to the registered Holder thereof upon the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election, as provided in paragraph (1) or (2) below: 34 (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Registered Security of such series and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company shall deposit with the Trustee an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this paragraph. Thereupon, the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Registered Securities of such series at such Holder's address as it appears in the Security Register not less than 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Company cause a similar notice to be published at least once in an Authorized Newspaper in each place of payment, but such publications shall not be a condition precedent to the establishment of such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to paragraph (2) below. In case a Bearer Security of any series is surrendered at the office or agency in a Place of Payment for such series in exchange for a Registered Security of such series after the close of business at such office or agency on any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such proposed date of payment and Defaulted Interest will not be payable on such proposed date of payment in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture. (2) The Company may make payment of any Defaulted Interest on the Registered Securities of any series in any other lawful manner not inconsistent with the 35 requirements of any securities exchange on which such Securities may be listed, and on such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this paragraph, such manner of payment is deemed practicable by the Trustee. Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 308. Persons Deemed Owners. Prior to due presentment of a --------------------- Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Registered Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any, on) and (subject to Sections 305 and 307) interest and Additional Amounts, if any, on such Registered Security and for all other purposes whatsoever, whether or not such Registered Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Title to any Bearer Security and any coupons shall pass by delivery. The Company, the Trustee and any agent of the Company or the Trustee may treat the Holder of any Bearer Security and the Holder of any coupon as the absolute owner of such Security or coupon for the purpose of receiving payment thereof or on account thereof and for all other purposes whatsoever, whether or not such Security or coupon be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. None of the Company, the Trustee, any Paying Agent or the Security Registrar shall have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, with respect to any global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any depositary, as a Holder, with respect to such global Security or impair, as between such depositary and owners of beneficial interests in such global Security, the operation of customary practices governing the exercise of the rights of such depositary (or its nominee) as Holder of such global Security. SECTION 309. Cancellation. All Securities and coupons surrendered for ------------ payment, redemption, repayment at the option of the Holder, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and coupons and any Securities and coupons surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities 36 previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. If the Company so acquires any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. Canceled Securities and coupons held by the Trustee shall be destroyed by the Trustee and the Trustee shall deliver a certificate of such destruction to the Company unless the Company delivers a Company Order which directs their return to it. SECTION 310. Computation of Interest. Except as otherwise specified as ----------------------- contemplated by Section 301 with respect to Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months. SECTION 311. CUSIP Numbers. The Company in issuing the Securities may use ------------- "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall --------------------------------------- upon Company Request cease to be of further effect with respect to any series of Securities specified in such Company Request (except as to any surviving rights of registration of transfer or exchange of Securities of such series herein expressly provided for and any right to receive Additional Amounts, as provided in Section 1009), and the Trustee, upon receipt of a Company Order and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture as to such series when: (1) either: (A) all Securities of such series theretofore authenticated and delivered and any coupons appertaining thereto (other than (i) coupons appertaining to Bearer Securities surrendered for exchange for Registered Securities and maturing after such exchange, whose surrender is not required or has been waived as provided in Section 305, (ii) Securities of such series and coupons appertaining 37 thereto which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306, (iii) coupons appertaining to Securities called for redemption and maturing after the relevant Redemption Date, whose surrender has been waived as provided in Section 1106, and (iv) Securities of such series and coupons appertaining thereto for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all Securities of such series and, in the case of clauses (i) and (ii) below, any coupons appertaining thereto not theretofore delivered to the Trustee for cancellation: (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of clause (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee funds in trust for the purpose, in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable, and in an amount sufficient to pay and discharge the entire indebtedness on such Securities and such coupons not theretofore delivered to the Trustee for cancellation, for the principal (and premium, if any) and interest and Additional Amounts, if any, to the date of such deposit (in the case of Securities which have become due and payable) or the Stated Maturity or Redemption Date, as the case may be; (2) The Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) The Company has delivered to the Trustee a Company Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee and any predecessor Trustee under Section 606, the obligations of the Company 38 to any Authenticating Agent under Section 611 and, if money has been deposited with and held by the Trustee pursuant to subparagraph (B) of paragraph (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003, shall survive. SECTION 402. Application of Trust Funds. Subject to the provisions of the -------------------------- last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities, the coupons and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest and Additional Amounts, if any, for the payment of which such money has been deposited with or received by the Trustee, but such money need not be segregated from other funds except to the extent required by law. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. Subject to any modifications, additions or ----------------- deletions relating to any series of Securities as contemplated pursuant to Section 301, "Event of Default," whenever used herein with respect to any ---------------- particular series of Securities, means any one of the following events (whatever the reason for such Event of Default and whether or not it is voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest on or any Additional Amounts payable in respect of any Security of or within such series or of any coupon appertaining thereto, when such interest, Additional Amounts or coupon becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security of such series when the same becomes due and payable at its Maturity, or the failure to make an offer to purchase any Security of such series with respect to which a repurchase is required by the terms thereof; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of any Security of such series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture with respect to any Security of such series (other than a covenant or warranty a default in the performance of which or the breach of which is elsewhere specifically provided for in this Section), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of such series, a written 39 notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or ----------------- (5) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Company or any Restricted Subsidiary of the Company in an involuntary case or proceeding under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state, or foreign bankruptcy, insolvency, or other similar law or (ii) a decree or order adjudging the Company or any Restricted Subsidiary of the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of, or in respect of, the Company or any Restricted Subsidiary of the Company under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state or foreign bankruptcy, insolvency, or similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Restricted Subsidiary of the Company or of any substantial part of the Property or assets of the Company or any Restricted Subsidiary of the Company, or ordering the winding-up or liquidation of the affairs of the Company or any Restricted Subsidiary of the Company, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive calendar days; or (6) (i) the commencement by the Company or any Restricted Subsidiary of the Company of a voluntary case or proceeding under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state, or foreign bankruptcy, insolvency or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent; or (ii) the consent by the Company or any Restricted Subsidiary of the Company to the entry of a decree or order for relief in respect of the Company or any Restricted Subsidiary of the Company in an involuntary case or proceeding under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state, or foreign bankruptcy, insolvency, or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company or any Restricted Subsidiary of the Company; or (iii) the filing by the Company or any Restricted Subsidiary of the Company of a petition or answer or consent seeking reorganization or relief under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state or foreign bankruptcy, insolvency or other similar law; or (iv) the consent by the Company or any Restricted Subsidiary of the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary of the Company or of any substantial part of the Property or assets of the Company or any Restricted Subsidiary of the Company, or the making by the Company or any Restricted Subsidiary of the Company of an assignment for the benefit of creditors; or (v) the admission by the Company or any Restricted Subsidiary of the Company in writing of its inability to pay its debts generally 40 as they become due; or (vi) the taking of corporate action by the Company or any Restricted Subsidiary of the Company in furtherance of any such action. SECTION 502. Acceleration of Maturity; Rescission and Annulment. (1) If an -------------------------------------------------- Event of Default (other than an Event of Default set forth in Section 501(5) or (6)) with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case, unless the principal of all of the Outstanding Securities of such series already has become due and payable, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of such series may declare the principal (or, if any Securities are Original Issue Discount Securities or Indexed Securities, such portion of the principal as may be specified in the terms thereof) of all the Securities of such series and any accrued and unpaid interest thereon to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such declaration such principal or specified portion thereof and any accrued and unpaid interest thereon shall become immediately due and payable. If an Event of Default set forth in Section 501(5) or (6) occurs with respect to the Securities of any series, then in each such case, the principal of all the Securities of such series and any accrued and unpaid interest thereon shall be due and payable immediately, without notice to the Company and without any declaration or other act on the part of the Trustee or any Holder of any Securities of such series. (2) At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in principal amount of the Outstanding Securities of such series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (A) The Company has paid or deposited with the Trustee a sum sufficient to pay, in the currency, currency unit or composite currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series): (i) all overdue installments of interest on and any Additional Amounts payable in respect of all Outstanding Securities of such series and any coupons appertaining thereto; (ii) the principal of (and premium, if any, on) any Outstanding Securities of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates borne by or provided for in such Securities; (iii) to the extent that payment of such interest is lawful, interest on overdue installments of interest and any Additional Amounts at the rate or rates borne by or provided for in such Securities; and 41 (iv) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (B) all Events of Default with respect to Securities of such series, other than the nonpayment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on Securities of such series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right resulting therefrom. SECTION 503. Collection of Indebtedness and Suits for Enforcement by ------------------------------------------------------- Trustee. The Company covenants that if: - ------- (1) default is made in the payment of any installment of interest or Additional Amounts, if any, on any Security of any series or any coupon appertaining thereto when such interest or Additional Amount becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security of any series at its Maturity, then the Company shall, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of the Securities of such series and any such coupons, the whole amount then due and payable on such Securities and any such coupons for principal (and premium, if any) and interest and Additional Amounts, if any, with interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest is legally enforceable, on any overdue installments of interest or Additional Amounts, if any, at the rate or rates borne by or provided for in such Securities, and, in addition thereto, such further amount as is sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor on the Securities of such series and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor on the Securities of such series, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series and any coupons appertaining thereto by such appropriate judicial proceedings as the Trustee deems most effectual to protect and enforce any such rights, 42 whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of -------------------------------- any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor on the Securities of such series or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities of any series is then due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee has made any demand on the Company for the payment of overdue principal, premium, if any, or interest or Additional Amounts, if any) shall be entitled and empowered, by intervention in such proceeding or otherwise: (1) to file and prove a claim for the whole amount, or such lesser amount as may be provided for in the Securities of such series, of principal (and premium, if any) and interest and Additional Amounts, if any, owing and unpaid in respect of the Securities of such series and to file such other papers or documents and take such other action, including participating as a member of any official creditors committee appointed in the matter, as it may deem necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (2) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder of Securities of such series and any coupons appertaining thereto to make such payments to the Trustee, and in the event that the Trustee consents to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee and any predecessor Trustee, their agents and counsel, and any other amounts due the Trustee or any predecessor Trustee under Section 606. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security or coupon any plan of reorganization, arrangement, adjustment or composition affecting the Securities or coupons or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of a Security or coupon in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Securities or -------------------------------------------------------------- Coupons. All rights of action and claims under this Indenture or any of the - ------- Securities or any coupons may be prosecuted and enforced by the Trustee without the possession of any of the Securities or coupons or the production thereof in any proceeding relating thereto, and any such 43 proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities and coupons in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected by the ------------------------------ Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest or Additional Amounts, if any, on presentation of the Securities or coupons, or both, as the case may be, and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: (1) to the payment of all amounts due the Trustee and any predecessor Trustee under Section 606; (2) to the payment of the amounts then due and unpaid on the Securities and coupons for principal (and premium, if any) and interest and Additional Amounts, if any, payable, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the aggregate amounts due and payable on such Securities and coupons for principal (and premium, if any) and interest and Additional Amounts, if any, respectively; and (3) to the payment of the remainder, if any, to the Company. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 506. At least 15 calendar days before such record date, the Company shall mail to each Holder and the Trustee a notice that states such record date, the payment date and amount to be paid. The Trustee may mail such notice in the name and at the expense of the Company. SECTION 507. Limitation on Suits. No Holder of any Security of any series ------------------- or any coupon appertaining thereto shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of such series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of such series have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; 44 (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of such series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium, ------------------------------------------------------------- Interest and Additional Amounts. Notwithstanding any other provision in this - ------------------------------- Indenture, the Holder of any Security or coupon shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any, on ) and (subject to Sections 305 and 307) interest and Additional Amounts, if any, on such Security or payment of such coupon on or after the respective due dates expressed in such Security or coupon (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired or affected without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any ---------------------------------- Holder of a Security or coupon has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders of Securities and coupons shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided ------------------------------ with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons in the last paragraph of Section 306, no right or remedy herein conferred on or reserved to the Trustee or to the Holders of Securities or coupons is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 45 SECTION 511. Delay or Omission Not Waiver. No delay or omission of the ---------------------------- Trustee or of any Holder of any Security or coupon to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders of Securities or coupons, as the case may be. SECTION 512. Control by Holders of Securities. The Holders of not less than -------------------------------- a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Securities of such series, provided -------- that: (1) such direction is not in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) the Trustee need not take any action which might involve it in personal liability or be unduly prejudicial to the Holders of Securities of such series not joining therein (but the Trustee shall have no obligation as to the determination of such undue prejudice). SECTION 513. Waiver of Past Defaults. The Holders of at least a majority in ----------------------- principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series and any coupons appertaining thereto waive any past default hereunder with respect to such series and its consequences, except a default: (1) in the payment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on any Security of such series or any coupons appertaining thereto, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected thereby. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right resulting therefrom. SECTION 514. Waiver of Usury, Stay or Extension Laws. The Company covenants --------------------------------------- (to the extent which it may lawfully do so) that it shall not at any time insist on, or plead, or in any 46 manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent which it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 515. Undertaking for Costs. All parties to this Indenture agree, --------------------- and each Holder of any Security by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of any undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). ARTICLE SIX THE TRUSTEE SECTION 601. Notice of Defaults. Within 90 days after the occurrence of any ------------------ default hereunder known to a Responsible Officer with respect to the Securities of any series, the Trustee shall give to the Holders of the Securities of such series, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, notice of such default hereunder known to the Trustee, unless such default has been cured or waived; provided, however, that, except in the -------- ------- case of a default in the payment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on any Security of such series, or in the payment of any sinking fund installment with respect to the Securities of such series, the Trustee shall be protected in withholding such notice if and so long as Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of the Securities and coupons of such series; and provided, further, that in the case of any -------- ------- default or breach of the character specified in clause (4) of Section 501 with respect to the Securities of such series and any coupons appertaining thereto, no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purposes of this Section, the term "default" means ------- any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to the Securities of such series. SECTION 602. Certain Rights of Trustee. Subject to the provisions of ------------------------- Section 315(a) through 315(d) of the Trust Indenture Act: 47 (1) the Trustee shall perform only such duties as are expressly undertaken by it to perform under this Indenture; (2) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (3) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order (other than delivery of any Security, together with any coupons appertaining thereto, to the Trustee for authentication and delivery pursuant to Section 303, which shall be sufficiently evidenced as provided therein) and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution; (4) whenever, in the administration of this Indenture, the Trustee deems it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence is specifically prescribed herein) may, in the absence of bad faith on its part, rely on a Company Certificate; (5) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (6) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities of any series or any coupons appertaining thereto pursuant to this Indenture, unless such Holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (7) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee determines to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (8) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee 48 shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (9) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred on it by this Indenture; (10) The Trustee shall not be deemed to have knowledge of any event or fact upon the occurrence of which it may be required to take action hereunder unless a Responsible Officer of the Trustee has actual knowledge of the occurrence of such event or fact; and (11) The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 603. Not Responsible for Recitals or Issuance of Securities. The ------------------------------------------------------ recitals contained herein and in the Securities, except the Trustee's certificate of authentication, and in any coupons shall be taken as the statements of the Company and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities or any coupons, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 604. May Hold Securities. The Trustee, any Paying Agent, Security ------------------- Registrar, Authenticating Agent or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and coupons and, subject to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such other agent. SECTION 605. Money Held in Trust; Trustee Permitted Investments. Money held -------------------------------------------------- by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on, or investment of, any money received by it hereunder except as otherwise agreed with and for the sole benefit of the Company. Pending their use under this Indenture, moneys held by the Trustee hereunder may be invested in Trustee Permitted Investments maturing or redeemable at the option of the holder at or before the time when such moneys are expected to be needed by the Trustee and shall be 49 so invested pursuant to a Company Order if no Event of Default known to the Trustee then exists under this Indenture and otherwise at the discretion of the Trustee. Any investment pursuant to this Section 605 shall be held by the Trustee as a part of the moneys held by the Trustee hereunder, as applicable, and shall be sold or redeemed to the extent necessary to make payments or transfers or anticipated payments from such moneys. The Trustee shall be entitled to rely on all written investment instructions provided by the Company hereunder, and shall have no duty to monitor the compliance thereof with the restrictions set forth herein. The Trustee shall have no responsibility or liability for any depreciation in the value of any investment or for any loss, direct or indirect, resulting from any investment made in accordance with a Company Order. The Trustee shall be without liability to the Company or any Holder or any other person in the event that any investment made in accordance with a Company Order shall cause any person to incur any liability or rebates or other monies payable pursuant to the Internal Revenue Code of 1986, as amended. Any interest realized on investments and any profit realized upon the sale or other disposition thereof shall be credited to moneys held by the Trustee hereunder and any loss shall be charged thereto. SECTION 606. Compensation and Reimbursement. The Company agrees: ------------------------------ (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse each of the Trustee and any predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by it in connection with its administration of the trust hereunder (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except to the extent any such expense, disbursement or advance may be attributable to its negligence or bad faith; and (3) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any loss, liability or expense, arising out of or in connection with the acceptance or administration of the trust or trusts or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder except to the extent any such loss, liability or expense may be attributable to its own negligence or bad faith. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a lien prior to the Securities on all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (or premium, if any, on) or interest or Additional Amounts, if any, on particular Securities or any coupons. 50 The Company's payment obligations pursuant to this Section 606 shall survive the resignation or removal of the Trustee and discharge of this Indenture. Subject to any other rights available to the Trustee under applicable bankruptcy law, when the Trustee incurs expenses after the occurrence of a Default specified in Section 501(5) or Section 501(6) hereof, the expenses are intended to constitute expenses of administration under bankruptcy law. SECTION 607. Trustee Eligibility; Conflicting Interests. There shall at all ------------------------------------------ times be a Trustee hereunder which is eligible to act as Trustee under Section 310(a)(1) of the Trust Indenture Act and has a combined capital and surplus of at least $50,000,000. If such Trustee publishes reports of condition at least annually, pursuant to law or the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Trustee shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. No obligor on the Securities or Affiliate of any such obligor shall serve as Trustee on such Securities. If at any time the Trustee ceases to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 608. Resignation and Removal; Appointment of Successor. ------------------------------------------------- (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 609. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee has not been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Trustee and the Company. (d) If at any time: (1) the Trustee fails to comply with the provisions of Section 310(b) of the Trust Indenture Act after written request therefor by the Company or any Holder of a Security who has been a bona fide Holder of a Security for at least six months, unless the Trustee's duty to resign is stayed in accordance with the provisions of Section 310(b) of the Trust Indenture Act, or 51 (2) the Trustee ceases to be eligible under Section 607 and fails to resign after written request therefor by the Company or any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or (3) the Trustee shall become incapable of acting or a decree or order for relief by a court having jurisdiction in the premises shall have been entered in respect of the Trustee in an involuntary case under the United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or similar law; or a decree or order by a court having jurisdiction in the premises shall have been entered for the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Trustee or of its Property and assets or affairs, or any public officer shall take charge or control of the Trustee or of its Property and assets or affairs for the purpose of rehabilitation, conservation, winding up or liquidation, or (4) the Trustee shall commence a voluntary case under the United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or similar law or shall consent to the appointment of or taking possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Trustee or its Property and assets or affairs, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall take corporate action in furtherance of any such action, then, in any such case, (i) the Company, by or pursuant to a Board Resolution, may remove the Trustee and appoint a successor Trustee with respect to all Securities, or (ii) subject to Section 315(e) of the Trust Indenture Act, any Holder of a Security who has been a bona fide Holder of a Security for at least six months may, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee resigns, is removed or becomes incapable of acting, or if a vacancy occurs in the office of Trustee for any cause with respect to the Securities of one or more series, the Company, by or pursuant to a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of such series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series). If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series is appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed 52 shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series has been so appointed by the Company or the Holders of Securities and accepted appointment in the manner hereinafter provided, any Holder of a Security who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series in the manner provided for notices to the Holders of Securities in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 609. Acceptance of Appointment by Successor. -------------------------------------- (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall execute, acknowledge and deliver to the Company and the retiring Trustee an instrument accepting such appointment, and, thereupon, the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its claim, if any, provided for in Section 606. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto, pursuant to Article Nine, wherein each successor Trustee shall accept such appointment and which (i) shall contain such provisions as are necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of such series to which the appointment of such successor Trustee relates, (ii) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as are necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of such series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee and (iii) shall add to or change any of the provisions of this Indenture 53 as are necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co- trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and, upon the execution and delivery of such supplemental indenture, the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of such series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of such series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article and under the Trust Indenture Act. SECTION 610. Merger, Conversion, Consolidation or Succession to Business. ----------------------------------------------------------- Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such -------- corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities or coupons have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities or coupons so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities or coupons. In case any Securities or coupons have not been authenticated by such predecessor Trustee, any such successor Trustee may authenticate and deliver such Securities or coupons, in either its own name or that of its predecessor Trustee, with the full force and effect which this Indenture provides for the certificate of authentication of the Trustee. SECTION 611. Appointment of Authenticating Agent. At any time when any of ----------------------------------- the Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer 54 or partial redemption or repayment thereof, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, a copy of which instrument shall be promptly furnished to the Company. Whenever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and, except as may otherwise be provided pursuant to Section 301, shall at all times be a bank or trust company or corporation organized and doing business and in good standing under the laws of the United States of America or of any State or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State or District of Columbia authorities. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time an Authenticating Agent ceases to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent is a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation is otherwise eligible under this Section, without the execution or filing of any paper or further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent for any series of Securities may at any time resign by giving written notice of resignation to the Trustee for such series and the Company. The Trustee for any series of Securities may at any time terminate the agency of an Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent ceases to be eligible in accordance with the provisions of this Section, the Trustee for such series may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment to all Holders of Securities of or within the series with respect to which such Authenticating Agent will serve in the manner set forth in Section 106. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. 55 The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation including reimbursement of its reasonable expenses for its services under this Section. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to or in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication substantially in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By:____________________________________, as Authenticating Agent By:____________________________________ Authorized Officer ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Disclosure of Names and Addresses of Holders. Every Holder of -------------------------------------------- Securities or coupons, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any Authenticating Agent nor any Paying Agent nor any Security Registrar shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders of Securities in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act. SECTION 702. Reports by Trustee. Within 60 days after August 1 of each year ------------------ commencing with the first August 1 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in Section 313(c) of the Trust Indenture Act a brief report dated as of such August 1 if required by Section 313(a) of the Trust Indenture Act. SECTION 703. Reports by Company. The Company will: ------------------ 56 (1) deliver to the Trustee and each Holder, within 15 days after the same are filed with the Commission, copies of all reports and information (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe), if any, exclusive of exhibits, which the Company and any guarantors are required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act or pursuant to the immediately following sentence. So long as any Securities remain outstanding, the Company and any Subsidiary guarantors shall file with the Commission such reports as may be required pursuant to Section 13 of the Exchange Act in respect of a security registered pursuant to Section 12 of the Exchange Act. If the Company or any Subsidiary guarantors are not subject to the requirements of Section 13 or 15(d) of the Exchange Act (or otherwise required to file reports pursuant to the immediately preceding sentence), the Company shall deliver to the Trustee and to each Holder, within 15 days after the Company and any Subsidiary guarantors would have been required to file such information with the Commission were they required to do so, financial statements, including any notes thereto (and, in the case of a fiscal year end, an auditors' report by an independent certified public accounting firm of established national reputation), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," substantially equivalent to that which they would have been required to include in such quarterly or annual reports, information, documents or other reports if they had been subject to the requirements of Section 13 or 15(d) of the Exchange Act. Notwithstanding the foregoing, to the extent then permitted by federal securities laws or regulations or "no- action" letters interpreting such laws or regulations, separate financial statements and other information of any Subsidiary guarantors shall not be required. The Company and any Subsidiary guarantors shall also comply with the other provisions of Section 314(a) of the Trust Indenture Act; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (3) transmit by mail to the Holders of Securities, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission; and (4) delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants 57 hereunder (as to which the Trustee is entitled to rely exclusively on Company Certificates). SECTION 704. Company to Furnish Trustee Names and Addresses of Holders. The --------------------------------------------------------- Company shall furnish or cause to be furnished to the Trustee: (a) semi-annually, not later than 15 days after the Regular Record Date for interest for each series of Securities, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Registered Securities of such series as of such Regular Record Date, or if there is no Regular Record Date for interest for such series of Securities, semi-annually, on such dates as are set forth in the Board Resolution or indenture supplemental hereto authorizing such series, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that, so long as the Trustee is the Security Registrar, no - -------- ------- such list shall be required to be furnished. ARTICLE EIGHT CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE SECTION 801. Consolidations and Mergers of Company and Sales, Leases and ----------------------------------------------------------- Conveyances. Except as otherwise provided with respect to any series of - ----------- Securities, the Company may consolidate or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another Person, provided that in any such case (i) either the Company shall be the continuing corporation or the surviving Person or the Person formed by or surviving such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized and validly existing under the laws of the United States, any state thereof or the District of Columbia; (ii) such surviving Person assumes all the obligations, including the due and punctual payment of the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on all Securities, according to their tenor, and the due and punctual performance and observance of all covenants and conditions, of the Company under the Securities and the Indenture pursuant to a supplemental Indenture in form reasonably satisfactory to the Trustee; and (iii) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or any Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of the transaction, no Event of Default and no event which, after notice or the lapse of time or both, would become an Event of Default shall have occurred and be continuing. 58 SECTION 802. Rights and Duties of Successor Entity. In case of any such ------------------------------------- consolidation, merger, sale, lease or conveyance and upon any such assumption by the successor entity, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part, and the predecessor entity, except in the event of a lease, shall be relieved of any further obligation under this Indenture and the Securities. Such successor entity thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder which theretofore have not been signed by the Company and delivered to the Trustee; and, upon the order of such successor entity, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such successor entity thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, lease or conveyance, such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. SECTION 803. Company Certificate and Opinion of Counsel. Any consolidation, ------------------------------------------ merger, sale, lease or conveyance permitted under Section 801 is also subject to the condition that the Trustee receive a Company Certificate and an Opinion of Counsel to the effect that any such consolidation, merger, sale, lease or conveyance, and the assumption by any successor entity, complies with the provisions of this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without -------------------------------------------------- the consent of any Holders of Securities or coupons, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for 59 the benefit of such series) or to surrender any right or power herein conferred on the Company; or (3) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are expressly being included solely for the benefit of such series); provided, however, that, in respect of any such -------- ------- additional Events of Default, such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount of such series of Securities to which such additional Events of Default apply to waive such default; or (4) to add to or change any of the provisions of this Indenture to provide that Bearer Securities may be registrable as to principal, to change or eliminate any restrictions on the payment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on Bearer Securities, to permit Bearer Securities to be issued in exchange for Registered Securities, to permit Bearer Securities to be issued in exchange for Bearer Securities of other authorized denominations or to permit or facilitate the issuance of Securities in uncertificated form, provided that -------- any such action shall not adversely affect the interests of the Holders of Securities of any series or any coupons appertaining thereto in any material respect; or (5) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only -------- when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or (6) to secure the Securities; or (7) to establish the form or terms of Securities of any series and any coupons appertaining thereto as permitted by Sections 201 and 301; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as are necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; or (9) to cure any ambiguity, to correct or supplement any provision hereof which may be defective or inconsistent with any other provision hereof, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture or to make any other changes, provided -------- that, in each case, such provisions shall not adversely affect the 60 interests of the Holders of Securities of any series or any coupons appertaining thereto in any material respect; or (10) to supplement any of the provisions of this Indenture to such extent as are necessary to permit or facilitate the defeasance and discharge of any series of Securities pursuant to Sections 401, 1402 and 1403; provided that, in each case, any such action shall not adversely -------- affect the interests of the Holders of Securities of such series and any coupons appertaining thereto or any other series of Securities in any material respect; or (11) to make any change that does not adversely affect the legal rights under this Indenture of any Holder of Securities of any series; or (12) to add a guarantor of the Securities of any series; or (13) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act. SECTION 902. Supplemental Indentures with Consent of Holders. With the ----------------------------------------------- consent of the Holders of not less than a majority in principal amount of all Outstanding Securities affected by such supplemental indenture, by Act of such Holders delivered to the Company and the Trustee, the Company (when authorized by or pursuant to a Board Resolution) and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities and coupons under this Indenture; provided, however, that no such -------- ------- supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby: (1) change the Stated Maturity of the principal of (or premium, if any, on) or any installment of principal of or interest on, any Security; or reduce the principal amount thereof or the rate or amount of interest thereon or any Additional Amounts payable in respect thereof, or any premium payable upon the redemption thereof, or change any obligation of the Company to pay Additional Amounts pursuant to Section 1009 (except as contemplated by clause (1) of Section 801 and permitted by clause (1) of Section 901), or reduce the amount of the principal of an Original Issue Discount Security which would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502 or the amount thereof provable in bankruptcy pursuant to Section 504; or adversely affect any right of repayment at the option of the Holder of any Security, or change any Place of Payment where, or the currency or currencies, currency unit or units or composite currency or currencies in which, the principal of any Security or any premium or any Additional Amounts payable in respect thereof or the interest thereon is payable; or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment at the option of the Holder, on or after the Redemption Date or the Repayment Date, as the case may be); or 61 (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver with respect to such series (or compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or reduce the requirements of Section 1504 for quorum or voting; or (3) modify any of the provisions of this Section, Section 513 or Section 1010, except to increase the required percentage to effect such action or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; or (4) release any guarantors from their guarantees of the Securities, or, except as contemplated in any supplemental indenture, make any change in a guarantee of a Security that would adversely affect the interests of the Holders, or (5) modify the ranking or priority of the Securities. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act approves the substance thereof. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. SECTION 903. Execution of Supplemental Indentures. In executing, or ------------------------------------ accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying on, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any --------------------------------- supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder and of any coupon appertaining thereto shall be bound thereby. 62 SECTION 905. Conformity with Trust Indenture Act. Every supplemental ----------------------------------- indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. -------------------------------------------------- Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall, if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company so determines, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. SECTION 907. Notice of Supplemental Indentures. Promptly after the --------------------------------- execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Security affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, Interest and Additional ------------------------------------------------------ Amounts. The Company covenants and agrees for the benefit of the Holders of each series of Securities that it shall duly and punctually pay to the Trustee on the applicable date of payment the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on the Securities of such series in accordance with the terms of such series of Securities, any coupons appertaining thereto and this Indenture. Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, any interest and Additional Amounts, if any, on Bearer Securities on or before Maturity, other than Additional Amounts, if any, payable as provided in Section 1009 in respect of principal of (or premium, if any, on) such a Security, shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature. Unless otherwise specified with respect to Securities of any series pursuant to Section 301, at the option of the Company, all payments of principal may be paid by check to the registered Holder of the Registered Security or other person entitled thereto against surrender of such Security. SECTION 1002. Maintenance of Office or Agency. If Securities of a series ------------------------------- are issuable only as Registered Securities, the Company shall maintain in each Place of Payment for any series of Securities an office or agency where Securities of such series may be presented or surrendered for payment, where Securities of such series may be surrendered for registration of transfer or exchange and where notices and demands to or on the Company in respect of the Securities of such series and this Indenture may be served. If Securities of a series are issuable as Bearer Securities, the Company shall maintain: (i) in the Borough of Manhattan, The City of 63 New York, an office or agency where any Registered Securities of such series may be presented or surrendered for payment, where any Registered Securities of such series may be surrendered for exchange, where notices and demands to or on the Company in respect of the Securities of such series and this Indenture may be served and where Bearer Securities of such series and any coupons appertaining thereto may be presented or surrendered for payment in the circumstances described in the following paragraph (and not otherwise); (ii) subject to any laws or regulations applicable thereto, in a Place of Payment for such series which is located outside the United States, an office or agency where Securities of such series and any coupons appertaining thereto may be presented and surrendered for payment (including payment of any Additional Amounts payable on Securities of such series pursuant to Section 1009); provided, however, that if -------- ------- the Securities of such series are listed on the Luxembourg Stock Exchange, The International Stock Exchange or any other stock exchange located outside the United States and such stock exchange so requires, the Company shall maintain a Paying Agent for the Securities of such series in Luxembourg, London or any other required city located outside the United States, as the case may be, so long as the Securities of such series are listed on such exchange; and (iii) subject to any laws or regulations applicable thereto, in a Place of Payment for such series located outside the United States an office or agency where any Securities of such series may be surrendered for registration of transfer, where Securities of such series may be surrendered for exchange and where notices and demands to or on the Company in respect of the Securities of such series and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, except that Bearer Securities of such series and the related coupons may be presented and surrendered for payment (including payment of any Additional Amounts payable on Bearer Securities of such series pursuant to Section 1009) at the offices specified in the Security, in London, England, and the Company hereby appoints the same as its agent to receive all such presentations, surrenders, notices and demands, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. Unless otherwise specified with respect to any Securities pursuant to Section 301, no payment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on Bearer Securities shall be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States; provided, however, that, if the Securities of a series are -------- ------- payable in Dollars, payment of the principal of (and premium, if any, on) and interest and Additional Amounts; if any, on any Bearer Security shall be made at the office of the Company's Paying Agent in the Borough of Manhattan, The City of New York, if (but only if) payment in Dollars of the full amount of such principal, premium, interest or Additional Amounts, as the case may be, at all offices or agencies outside the United States maintained for the purpose by the Company in accordance with this Indenture, is illegal or effectively precluded by exchange controls or other similar restrictions. 64 The Company may from time to time designate one or more other offices or agencies where the Securities of one or more series and any coupons appertaining thereto may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such -------- ------- designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities of any series for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless otherwise specified with respect to any Securities pursuant to Section 301, the Company hereby designates as a Place of Payment for each series of Securities the office or agency of the Company in The City of New York, and initially appoints the Trustee at its Corporate Trust Office as Paying Agent in such city and as its agent to receive all such presentations, surrenders, notices and demands. Unless otherwise specified with respect to any Securities pursuant to Section 301, if and so long as the Securities of any series (i) are denominated in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long as it is required under any other provision of the Indenture, then the Company shall maintain with respect to each such series of Securities, or as so required, at least one exchange rate agent. SECTION 1003. Money for Securities Payments to Be Held in Trust. If the ------------------------------------------------- Company at any time acts as its own Paying Agent with respect to any series of any Securities and any coupons appertaining thereto, it shall, on or before each due date of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on any of the Securities of such series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (and premium, if any) or interest or Additional Amounts, if any, so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure so to act. Whenever the Company has one or more Paying Agents for any series of Securities and any coupons appertaining thereto, it shall, on or before each due date of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on any Securities of such series, deposit with a Paying Agent a sum (in the currency or currencies, currency unit or units or composite currency or currencies described in the preceding paragraph) sufficient to pay the principal (and premium, if any) or interest or Additional Amounts, if any, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium, interest or Additional Amounts and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of its action or failure so to act. The Company shall cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent shall: 65 (1) hold all sums held by it for the payment of principal of (and premium, if any, on) or interest or Additional Amounts, if any, on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor on the Securities) in the making of any such payment of principal (and premium, if any) or interest or Additional Amounts, if any; and (3) at any time during the continuance of any such default, on the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee on the same trusts as those on which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Except as otherwise provided in the Securities of any series, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on any Security of any series and remaining unclaimed for two years after such principal (and premium, if any) interest or Additional Amounts, if any, has become due and payable shall be paid to the Company upon Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment of the principal of (and premium, if any, on) and interest and any Additional Amounts, if any, on any Security of such series, without interest thereon, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required - -------- ------- to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. Existence. Subject to Article Eight, the Company shall do or --------- cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory) and franchises of the Company and each of its Restricted Subsidiaries; provided that the Company and any such Restricted Subsidiary shall not be required to preserve the corporate existence of any such Restricted Subsidiary or any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer 66 desirable in the conduct of the business of the Company and provided further that any Restricted Subsidiary may consolidate with, merge into, or sell, convey, lease or otherwise dispose of all of its property and assets to the Company or any wholly owned Restricted Subsidiary. SECTION 1005. Maintenance of Property. The Company shall cause all Property ----------------------- used or useful in the conduct of its business or the business of any of its Restricted Subsidiaries and material to the Company and its Restricted Subsidiaries taken as a whole to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as, in the judgment of the Company, may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided that nothing in this Section 1005 shall prevent the Company from discontinuing the operation or maintenance of any of such Property if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any of its Restricted Subsidiaries. SECTION 1006. [intentionally omitted] SECTION 1007. Payment of Taxes and Other Claims. The Company shall pay or --------------------------------- discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon the Company or any of its Restricted Subsidiaries or upon the income, profits or Property of the Company or any of its Restricted Subsidiaries and (b) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the Property of the Company or any of its Restricted Subsidiaries; provided that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings upon stay of execution or the enforcement thereof and for which adequate reserves in accordance with GAAP or other appropriate provision has been made. SECTION 1008. Statement as to Compliance. The Company shall deliver to the -------------------------- Trustee within 120 calendar days after the end of each fiscal year of the Company ending after the date hereof, a brief certificate from its principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture and, in the event of any noncompliance, specifying such noncompliance and the nature and status thereof. For purposes of this Section 1008, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. The Company shall deliver written notice to the Trustee within 30 calendar days after any executive officer of the Company becomes aware of the occurrence of any event which constitutes, or with the giving of notice or the lapse of time or both would constitute, a Default or Event of Default, describing such Default or Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. 67 SECTION 1009. Additional Amounts. If any Securities of a series provide for ------------------ the payment of Additional Amounts, the Company covenants and agrees for the benefit of the Holders of Securities of such series that it shall pay to the Holder of any Security of such series or any coupon appertaining thereto Additional Amounts as may be specified as contemplated by Section 301. Whenever in this Indenture there is mentioned, in any context except in the case of clause (1) of Section 502, the payment of the principal of or of any premium or interest on, or in respect of, any Security of any series or payment of any coupon or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of Additional Amounts provided by the terms of such series established pursuant to Section 301 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to such terms and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof in which such express mention is not made. Except as otherwise specified as contemplated by Section 301, if the Securities of a series provide for the payment of Additional Amounts, at least 10 days prior to the first Interest Payment Date with respect to Securities of such series (or if the Securities of such series will not bear interest prior to Maturity, the first day on which a payment of principal and any premium is made), and at least 10 days prior to each date of payment of principal and any premium or interest, if there has been any change with respect to the matters set forth in the below-mentioned Company Certificate, the Company shall furnish the Trustee and the principal Paying Agent or Paying Agents, if other than the Trustee, with a Company Certificate instructing the Trustee and such Paying Agent or Paying Agents whether such payment of principal of and any premium or interest on the Securities of such series shall be made to Holders of Securities of such series or any coupons appertaining thereto who are not United States persons without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of or within the series. If any such withholding is required, then such Company Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities of such series or any coupons appertaining thereto and the Company shall pay to the Trustee or such Paying Agent the Additional Amounts required by the terms of such Securities. In the event that the Trustee or any Paying Agent, as the case may be, shall not so receive the above-mentioned certificate, then the Trustee or such Paying Agent shall be entitled (i) to assume that no such withholding or deduction is required with respect to any payment of principal or interest with respect to any Securities of such series or any coupons appertaining thereto until it has received a certificate advising otherwise and (ii) to make all payments of principal and interest with respect to the Securities of such series or any coupons appertaining thereto without withholding or deductions until otherwise advised. The Company covenants to indemnify the Trustee and any Paying Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them or in reliance on any Company Certificate furnished pursuant to this Section or in reliance on the Company's not furnishing such a Company Certificate. 68 SECTION 1010. Waiver of Certain Covenants. The Company may omit in any --------------------------- particular instance to comply with any term, provision or condition set forth in Sections 1004 to 1008, inclusive, and with any other term, provision or condition with respect to the Securities of any series specified in accordance with Section 301 (except any such term, provision or condition which could not be amended without the consent of all Holders of Securities of such series pursuant to Section 902), if before or after the time for such compliance the Holders of at least a majority in principal amount of all outstanding Securities of such series, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. Securities of any series which are ------------------------ redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 1102. Election to Redeem; Notice to Trustee. The election of the ------------------------------------- Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company of less than all of the Securities of any series, the Company shall, at least 30 days prior to the giving of the notice of redemption in Section 1104 (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with a Company Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If less ------------------------------------------------- than all the Securities of any series issued on the same day with the same terms are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series issued on such date with the same terms not previously called for redemption, by lot, on a pro rata basis or such method as the Trustee deems fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of such series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of such series. The Trustee shall promptly notify the Company and the Security Registrar (if other than itself) in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. 69 For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Notice of redemption shall be given in -------------------- the manner provided in Section 106, not less than 30 days nor more than 60 days prior to the Redemption Date, unless a shorter period is specified by the terms of such series established pursuant to Section 301, to each Holder of Securities to be redeemed, but failure to give such notice in the manner herein provided to the Holder of any Security designated for redemption as a whole or in part, or any defect in the notice to any such Holder, shall not affect the validity of the proceedings for the redemption of any other such Security or portion thereof. Any notice which is mailed to the Holders of Registered Securities in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. All notices of redemption shall state: (1) the Redemption Date; (2) the Redemption Price, accrued interest to the Redemption Date payable as provided in Section 1106, if any, and Additional Amounts, if any; (3) if less than all Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amount) of the particular Security or Securities to be redeemed; (4) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, on surrender of such Security, the holder will receive, without a charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed; (5) that on the Redemption Date, the Redemption Price and accrued interest to the Redemption Date payable as provided in Section 1106, if any, will become due and payable on each such Security, or the portion thereof, to be redeemed and, if applicable, that interest thereon shall cease to accrue on and after such date; (6) the Place or Places of Payment where such Securities, together in the case of Bearer Securities with all coupons appertaining thereto, if any, maturing after the Redemption Date, are to be surrendered for payment of the Redemption Price and accrued interest, if any; (7) that the redemption is for a sinking fund, if such is the case; 70 (8) that, unless otherwise specified in such notice, Bearer Securities of any series, if any, surrendered for redemption must be accompanied by all coupons appertaining thereto maturing subsequent to the date fixed for redemption or the amount of any such missing coupon or coupons will be deducted from the Redemption Price, unless security or indemnity satisfactory to the Company, the Trustee for such series and any Paying Agent is furnished; (9) if Bearer Securities of any series are to be redeemed and any Registered Securities of such series are not to be redeemed, and if such Bearer Securities may be exchanged for Registered Securities not subject to the redemption on this Redemption Date pursuant to Section 305 or otherwise, the last date, as determined by the Company, on which such exchanges may be made; and (10) the CUSIP number of such Security, if any, provided that neither -------- the Company nor the Trustee shall have any responsibility for any such CUSIP number. Notice of redemption of Securities to be redeemed shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1105. Deposit of Redemption Price. At least one Business Day prior --------------------------- to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, which it may not do in the case of a sinking fund payment under Article Twelve, segregate and hold in trust as provided in Section 1003) an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay on the Redemption Date the Redemption Price of, and (except if the Redemption Date is an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be redeemed on such date. SECTION 1106. Securities Payable on Redemption Date. Notice of redemption ------------------------------------- having been given as provided above, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company defaults in the payment of the Redemption Price and accrued interest) such Securities shall, if the same were interest-bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be redeemed, except to the extent provided below, shall be void. Upon surrender of any such Security for redemption in accordance with such notice, together with any coupons appertaining thereto maturing after the Redemption Date, such Security shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest on -------- ------- Bearer Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable only at an office or agency located outside the United States (except as otherwise 71 provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of coupons for such interest; and provided, further, that, installments of interest on Registered Securities -------- ------- whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Bearer Security surrendered for redemption is not accompanied by all coupons appertaining thereto maturing after the Redemption Date, such Security may be paid after deducting from the Redemption Price an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security surrenders to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction has been made from the Redemption Price, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented -------- ------- by a coupon shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of such coupon. If any Security called for redemption is not so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. SECTION 1107. Securities Redeemed in Part. Any Security which is to be --------------------------- redeemed only in part (pursuant to the provisions of this Article or of Article Twelve) shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing and accompanied by appropriate evidence of genuineness and authority) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Security or Securities of the same series, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article. The provisions of this Article ------------------------ shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund ---------------------- payment," and any - ------- 72 payment in excess of such minimum amount provided for by the terms of such Securities of any series is herein referred to as an "optional sinking fund --------------------- payment." If provided for by the terms of any Securities of any series, the cash - ------- amount of any mandatory sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. The ----------------------------------------------------- Company may, in satisfaction of all or any part of any mandatory sinking fund with respect to the Securities of a series, (i) deliver Outstanding Securities of such series (other than any previously called for redemption), together in the case of any Bearer Securities of such series with all unmatured coupons appertaining thereto, and (ii) apply as a credit Securities of such series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, as provided for by the terms of such Securities, or which have otherwise been acquired by the Company, provided that such Securities so delivered or applied as a credit have not been - -------- previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the applicable Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly. SECTION 1203. Redemption of Securities for Sinking Fund. Not less than 60 ----------------------------------------- days prior to each sinking fund payment date for Securities of any series, the Company shall deliver to the Trustee a Company Certificate specifying the amount of the next ensuing mandatory sinking fund payment for such series pursuant to the terms of such series, the portion thereof, if any, which is to be satisfied by payment of cash in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of such series pursuant to Section 1202, and the optional amount, if any, to be added in cash to the next ensuing mandatory sinking fund payment, and shall also deliver to the Trustee any Securities to be so delivered and credited. If such Company Certificate specifies an optional amount to be added in cash to the next ensuing mandatory sinking fund payment, the Company shall thereupon be obligated to pay the amount therein specified. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed on such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. 73 ARTICLE THIRTEEN REPAYMENT AT THE OPTION OF HOLDERS SECTION 1301. Applicability of Article. Repayment of Securities of any ------------------------ series before their Stated Maturity at the option of Holders thereof shall be made in accordance with the terms of such Securities, if any, and (except as otherwise specified by the terms of such series established pursuant to Section 301) in accordance with this Article. SECTION 1302. Repayment of Securities. Securities of any series subject to ----------------------- repayment in whole or in part at the option of the Holders thereof will, unless otherwise provided in the terms of such Securities, be repaid at a price equal to the principal amount thereof, together with interest, if any, thereon accrued to the Repayment Date specified in or pursuant to the terms of such Securities. The Company covenants that at least one Business Day prior to the Repayment Date it shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as it own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (or, if so provided by the terms of the Securities of any series, a percentage of the principal) of, and (except if the Repayment Date is an Interest Payment Date) accrued interest on, all the Securities or portions thereof, as the case may be, to be repaid on such date. SECTION 1303. Exercise of Option. Securities of any series subject to ------------------ repayment at the option of the Holders thereof will contain an "Option to Elect Repayment" form on the reverse of such Securities. In order for any Security to be repaid at the option of the Holder, the Trustee must receive at the Place of Payment therefor specified in the terms of such Security (or at such other place or places of which the Company shall from time to time notify the Holders of such Securities), not earlier than 60 days nor later than 30 days prior to the Repayment Date, (i) the Security so providing for such repayment together with the "Option to Elect Repayment" form on the reverse thereof duly completed by the Holder (or by the Holder's attorney duly authorized in writing) or (ii) a telegram, telex, facsimile transmission or a letter from a member of a national securities exchange, or the National Association of Securities Dealers, Inc., or a commercial bank or trust company in the United States setting forth the name of the Holder of the Security, the principal amount of the Security, the principal amount of the Security to be repaid, the CUSIP number, if any, or a description of the tenor and terms of the Security, a statement that the option to elect repayment is being exercised thereby and a guarantee that the Security to be repaid, together with the duly completed form entitled "Option to Elect Repayment" on the reverse of the Security, will be received by the Trustee not later than the fifth Business Day after the date of such telegram, telex, facsimile transmission or letter; provided, however, that such telegram, telex, -------- ------- facsimile transmission or letter shall only be effective if such Security and form duly completed are received by the Trustee by such fifth Business Day. If less than the entire principal amount of such Security is to be repaid in accordance with the terms of such Security, the principal amount of such Security to be repaid, in increments of the minimum denomination for Securities of such series, and the denomination 74 or denominations of the Security or Securities to be issued to the Holder for the portion of the principal amount of such Security surrendered which is not to be repaid, must be specified. The principal amount of any Security providing for prepayment at the option of the Holder thereof may not be repaid in part if, following such repayment, the unpaid principal amount of such Security would be less than the minimum authorized denomination of Securities of or within the series of which such Security to be repaid is a part. Except as otherwise may be provided by the terms of any Security providing for repayment at the option of the Holder thereof, exercise of the repayment option by the Holder shall be irrevocable unless waived by the Company. SECTION 1304. When Securities Presented for Repayment Become Due and ------------------------------------------------------ Payable. If Securities of any series providing for repayment at the option of - ------- the Holders thereof have been surrendered as provided in this Article and as provided by or pursuant to the terms of such Securities, such Securities or the portions thereof, as the case may be, to be repaid shall become due and payable and shall be paid by the Company on the Repayment Date therein specified, and on and after such Repayment Date (unless the Company defaults in the payment of such Securities on such Repayment Date) such Securities shall, if the same were interest-bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be repaid, except to the extent provided below, shall be void. Upon surrender of any such Security for repayment in accordance with such provisions, together with any coupons appertaining thereto maturing after the Repayment Date, the principal amount of such security so to be repaid shall be paid by the Company, together with accrued interest, if any, to the Repayment Date; provided, however, that coupons whose Stated -------- ------- Maturity is on or prior to the Repayment Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified pursuant to Section 301, only upon presentation and surrender of such coupons; and provided, further, that, in the -------- ------- case of Registered Securities, installments of interest, if any, whose Stated Maturity is on or prior to the Repayment Date shall be payable (but without interest thereon, unless the Company defaults in the payment thereof) to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Bearer Security surrendered for repayment is not accompanied by all coupons appertaining thereto maturing after the Repayment Date, such Security may be paid after deducting from the amount payable therefor as provided in Section 1302 an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security surrenders to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction has been made as provided in the preceding sentence, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by a coupon shall be -------- ------- payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of such coupon. 75 If the principal amount of any Security surrendered for repayment shall not be so repaid upon surrender thereof, such principal amount (together with interest, if any, thereon accrued to such Repayment Date) shall, until paid, bear interest from the Repayment Date at the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) set forth in such Security. SECTION 1305. Securities Repaid in Part. Upon surrender of any Registered ------------------------- Security which is to be repaid in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge and at the expense of the Company, a new Registered Security or Securities of the same series, of any authorized denomination specified by the Holder, in an aggregate principal amount equal to and in exchange for the portion of the principal of such Security so surrendered which is not to be repaid. ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1401. Applicability of Article; Company's Option to Effect ---------------------------------------------------- Defeasance or Covenant Defeasance. If, pursuant to Section 301, provision is - --------------------------------- made for either or both of (i) defeasance of the Securities of or within a series under Section 1402 or (ii) covenant defeasance of the Securities of or within a series under Section 1403 to be applicable to the Securities of any series, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article (with such modifications thereto as may be specified pursuant to Section 301 with respect to any Securities), shall be applicable to such Securities and any coupons appertaining thereto, and the Company may at its option by Board Resolution, at any time, with respect to such Securities and any coupons appertaining thereto, elect to defease such Outstanding Securities and any coupons appertaining thereto pursuant to Section 1402 (if applicable) or Section 1403 (if applicable) upon compliance with the conditions set forth below in this Article. SECTION 1402. Defeasance and Discharge. Upon the Company's exercise of the ------------------------ above option applicable to this Section with respect to any Securities of or within a series, the Company shall be deemed to have been discharged from its obligations with respect to such Outstanding Securities and any coupons appertaining thereto on the date the conditions set forth in Section 1404 are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means ---------- that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Outstanding Securities and any coupons appertaining thereto, which shall thereafter be deemed "Outstanding" only for the purposes of Section 1405 and the other Sections of this Indenture referred to in clauses (i) and (ii) below, and to have satisfied all of its other obligations under such Securities and any coupons appertaining thereto and this Indenture insofar as such Securities and any coupons appertaining thereto are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of such Outstanding Securities and any coupons appertaining thereto to receive, solely from the trust fund described in Section 1404 and as more fully set forth in such Section, 76 payments in respect of the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on such Securities and any coupons appertaining thereto when such payments are due; (ii) the Company's obligations with respect to such Securities under Sections 305, 306, 1002 and 1003 and with respect to the payment of Additional Amounts, if any, on such Securities as contemplated by Section 1010; (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder; and (iv) this Article. Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section notwithstanding the prior exercise of its option under Section 1403 with respect to such Securities and any coupons appertaining thereto. SECTION 1403. Covenant Defeasance. Upon the Company's exercise of the above ------------------- option applicable to this Section with respect to any Securities of or within a series, the Company shall be released from its obligations under Sections 1004 to 1008, inclusive, and, if specified pursuant to Section 301, its obligations under any other covenant, with respect to such Outstanding Securities and any coupons appertaining thereto on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter, "covenant defeasance"), and such ------------------- Securities and any coupons appertaining thereto shall thereafter be deemed not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with Sections 1005 to 1008, inclusive, or such other covenant, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Outstanding Securities and any coupons appertaining thereto, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or such other covenant or by reason of reference in any such Section or such other covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under clause (4) of Section 501 or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities and any coupons appertaining thereto shall be unaffected thereby. SECTION 1404. Conditions to Defeasance or Covenant Defeasance. The ----------------------------------------------- following shall be the conditions to application of Section 1402 or Section 1403 to any Outstanding Securities of or within a series and any coupons appertaining thereto: (a) The Company has irrevocably deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 607 who shall agree to comply with the provisions of this Article Fourteen applicable to it) funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities and any coupons appertaining thereto: (i) an amount in such currency or currencies, currency unit or units or composite currency or currencies in which such Securities and any coupons appertaining thereto are then specified as payable at Stated Maturity, or (ii) Government Obligations applicable to such Securities and any coupons appertaining thereto (determined on the basis of the currency or currencies, currency unit or units or composite currency or currencies in which such Securities and any coupons appertaining 77 thereto are then specified as payable at Stated Maturity) which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment of principal of (and premium, if any, on) and interest and Additional Amounts, if any, on such Securities and any coupons appertaining thereto, money in an amount, or (iii) a combination thereof in an amount, sufficient, without consideration of any reinvestment of such principal and interest, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, (A) the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on such Outstanding Securities and any coupons appertaining thereto on the Stated Maturity of such principal or installment of principal or interest and (B) any mandatory sinking fund payments or analogous payments applicable to such Outstanding Securities and any coupons appertaining thereto on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities and any coupons appertaining thereto, provided that the Trustee has been irrevocably -------- instructed to apply such money or the proceeds of such Government Obligations to such payments with respect to such Securities. Before such a deposit, the Company may give to the Trustee, in accordance with Section 1102, a notice of its election to redeem all or any portion of such Outstanding Securities at a future date in accordance with the terms of the Securities of such series and Article Eleven, which notice shall be irrevocable. Such irrevocable redemption notice, if given, shall be given effect in applying the foregoing. (b) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound (and shall not cause the Trustee to have a conflicting interest pursuant to Section 310(b) of the Trust Indenture Act with respect to any Security of the Company). (c) No Event of Default or event which with notice or lapse of time or both would become an Event of Default with respect to such Securities and any coupons appertaining thereto has occurred and is continuing on the date of such deposit or, insofar as clauses (5) and (6) of Section 501 are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (d) In the case of an election under Section 1402, the Company has delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of 78 such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. (e) In the case of an election under Section 1403, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (f) The Company has delivered to the Trustee a Company Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance under Section 1402 or the covenant defeasance under Section 1403 (as the case may be) have been complied with and an Opinion of Counsel to the effect that either (i) as a result of a deposit pursuant to paragraph (a) above and the related exercise of the Company's option under Section 1402 or Section 1403 (as the case may be), registration is not required under the Investment Company Act of 1940, as amended, by the Company with respect to the trust funds representing such deposit or by the Trustee for such trust funds or (ii) all necessary registrations under such Act have been effected. (g) After the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally. (h) Notwithstanding any other provisions of this Section, such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations which may be imposed on the Company in connection therewith pursuant to Section 301. SECTION 1405. Deposited Money and Government Obligations to Be Held in -------------------------------------------------------- Trust; Other Miscellaneous Provisions. Subject to the provisions of the last - ------------------------------------- paragraph of Section 1003, all money and Government Obligations (or other property as may be provided pursuant to Section 301) (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee) pursuant to Section 1404 in respect of any Outstanding Securities of any series and any coupons appertaining thereto shall be held in trust and applied by the Trustee or such other qualifying trustee, in accordance with the provisions of such Securities and any coupons appertaining thereto and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee or such other qualifying trustee may determine, to the Holders of such Securities and any coupons appertaining thereto of all sums due and to become due thereon in respect of principal (and premium, if any) and interest and Additional Amounts, if any, but such money need not be segregated from other funds except to the extent required by law. 79 Unless otherwise specified with respect to any Security pursuant to Section 301, if, after a deposit referred to in Section 1404(a) has been made, (i) the Holder of a Security in respect of which such deposit was made is entitled to, and does, elect pursuant to Section 301 or the terms of such Security to receive payment in a currency, currency unit or composite currency other than that in which the deposit pursuant to Section 1404(a) has been made in respect of such Security or (ii) a Conversion Event occurs in respect of the currency, currency unit or composite currency in which the deposit pursuant to Section 1404(a) has been made, the indebtedness represented by such Security and any coupons appertaining thereto shall be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any, on), and interest and Additional Amounts, if any, on such Security as the same become due out of the proceeds yielded by converting (from time to time as specified below in the case of any such election) the amount or other property deposited in respect of such Security into the currency, currency unit or composite currency in which such Security becomes payable as a result of such election or Conversion Event based on the applicable market exchange rate for such currency, currency unit or composite currency in effect on the second Business Day prior to each payment date, except, with respect to a Conversion Event, for such currency, currency unit or composite currency in effect (as nearly as feasible) at the time of the Conversion Event. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of such Outstanding Securities and any coupons appertaining thereto. Anything in this Article to the contrary notwithstanding, the Trustee or such other qualifying trustee shall deliver or pay to the Company, from time to time upon Company Request, any money or Government Obligations (or other property and any proceeds therefrom) held by it as provided in Section 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee or such other qualifying trustee, are in excess of the amount thereof which would then be required to be deposited to effect a defeasance or covenant defeasance, as applicable, in accordance with this Article. SECTION 1406. Reinstatement. If the Trustee or Paying Agent is unable to ------------- apply any money in accordance with this Article Fourteen with respect to any Securities by reason of any order or judgement of any court or governmental authority enjoining, restraining or otherwise prohibiting such application then the obligations under this Indenture and such Securities from which the Company has been discharged or released pursuant to Sections 1402 or 1403 hereof shall be revived and reinstated as though no deposit had occurred pursuant to this Article Fourteen with respect to such Securities, until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 1405 hereof with respect to such Notes in accordance with this Article Fourteen; provided that if the Company makes any payment of principal of or any premium or interest or Additional Amounts on any such Security following such reinstatement of its obligations, the Company shall be subrogated to the rights 80 (if any) of the Holders of such Securities to receive such payment from the money so held in trust. ARTICLE FIFTEEN MEETINGS OF HOLDERS OF SECURITIES SECTION 1501. Purposes for Which Meetings May Be Called. A meeting of ----------------------------------------- Holders of Securities of any series may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series. SECTION 1502. Call, Notice and Place of Meetings. ---------------------------------- (a) The Trustee may at any time call a meeting of Holders of Securities of any series for any purpose specified in Section 1501, to be held at such time and at such place in The City of New York, as the Trustee determines. Notice of every meeting of Holders of Securities of any series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 106, not less than 21 nor more than 180 days prior to the date fixed for the meeting. (b) In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities of any series have requested the Trustee to call a meeting of the Holders of Securities of such series for any purpose specified in Section 1501, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee has not made the first publication of the notice of such meeting within 21 days after receipt of such request or does not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in The City of New York, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in paragraph (a) above. SECTION 1503. Persons Entitled to Vote at Meetings. To be entitled to vote ------------------------------------ at any meeting of Holders of Securities of any series, a Person shall be (i) a Holder of one or more Outstanding Securities of such series or (ii) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Securities of any series are the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel, and any representatives of the Company and its counsel. 81 SECTION 1504. Quorum; Action. The Persons entitled to vote a majority in -------------- principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of Securities of such series; provided, however, -------- ------- that if any action is to be taken at such meeting with respect to a consent or waiver which this Indenture expressly provides may be given by the Holders of not less than a specified percentage in principal amount of the Outstanding Securities of a series, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series shall constitute a quorum. In the absence of a quorum within 30 minutes after the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 1502(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of any adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum. Except as limited by the proviso to Section 902, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Securities of such series; provided, -------- however, that, except as limited by the proviso to Section 902, any resolution - ------- with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of such series. Any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series and any coupons appertaining thereto, whether or not present or represented at the meeting. Notwithstanding the foregoing provisions of this Section 1504, if any action is to be taken at a meeting of Holders of Securities of any series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal amount of all Outstanding Securities affected thereby, or of the Holders of such series and one or more additional series; 82 (1) there shall be no minimum quorum requirement for such meeting; and (2) the principal amount of the Outstanding Securities of such series which vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under this Indenture. SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of ---------------------------------------------------------- Meetings. - -------- (a) Notwithstanding any provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities of a series in regard to proof of the holding of Securities of such series and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it deems appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 104 and the appointment of any proxy shall be proved in the manner specified in Section 104 or by having the signature of the Person executing the proxy witnessed or guaranteed by any trust company, bank or banker authorized by Section 104 to certify to the holding of Bearer Securities. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 104 or other proof. (b) The Trustee shall, by an instrument in writing appoint a temporary chairman of the meeting, unless the meeting has been called by the Company or by Holders of Securities as provided in Section 1502(b), in which case the Company or the Holders of Securities of or within the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting. (c) At any meeting each Holder of a Security of such series or proxy shall be entitled to one vote for each $1,000 principal amount of the Outstanding Securities of such series held or represented by such Holder; provided, however, that no vote shall be cast or counted at any meeting in -------- ------- respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or proxy. (d) Any meeting of Holders of Securities of any series duly called pursuant to Section 1502 at which a quorum is present may be adjourned from time to time by 83 Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting, and the meeting may be held as so adjourned without further notice. SECTION 1506. Counting Votes and Recording Action of Meetings. The vote on ----------------------------------------------- any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and series numbers of the Outstanding Securities of such series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities of any series shall be prepared by the secretary of the meeting and there shall be attached to such record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the fact, setting forth a copy of the notice of the meeting and showing that such notice was given as provided in Section 1502 and, if applicable, Section 1504. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 1507. Evidence of Action Taken by Holders. Any request, demand, ----------------------------------- authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage in principal amount of the Holders of any or all series may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Holders in person or by agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Article Six) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Article. SECTION 1508. Proof of Execution of Instruments. Subject to Article Six, --------------------------------- the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. 84 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. MCLEODUSA INCORPORATED By:_____________________________ Name: Title: Attest: __________________ Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK, As Trustee By:_____________________________ Name: Title: Attest: ___________________ Name: Title: 85 STATE OF IOWA ) ) SS.: COUNTY OF LINN ) On the _______ day of _______, 1999, before me personally came _________________, to me known, who, being by me duly sworn, did depose and say that he is ________________________________________ of McLeodUSA Incorporated, one of the corporations described in and which executed the foregoing instrument and that he signed his name thereto by authority of the Board of Directors of said corporation. _______________________________________ Notary Public State of My commission expires / / [Seal] 86 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On the _____ day of ________, 1999, before me personally came _________________, to me known, who, being by me duly sworn, did depose and say that he is ____________________ of United States Trust Company of New York, one of the corporations described in and which executed the foregoing instrument and that he signed his name thereto by authority of the Board of Directors of said corporation. ______________________________________________ Notary Public State of My commission expires / / [Seal] 87 EXHIBIT A FORMS OF CERTIFICATION EXHIBIT A-1 FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE CERTIFICATE [Insert title or sufficient description of Securities to be delivered] This is to certify that, as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by person(s) which are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States federal income taxation regardless of its source ("United States person(s)"), (ii) are owned by United States person(s) which are (a) foreign branches of United States financial institutions (financial institutions, as defined in United States Treasury Regulations Section 1.165- 12(c)(1)(v) are herein referred to as "financial institutions") purchasing for their own account or for resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise McLeodUSA Incorporated or its agent that such financial institution will provide a certificate within a reasonable time stating that it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by a financial institution for purposes of resale during the restricted period (as defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, such financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)), certifies that it has not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the above-captioned Securities held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certificate excepts and does not relate to [U.S.$] _______________ of such interest in the above-captioned Securities in respect of which we are not able to certify and as to which we understand an exchange for an interest in a Permanent Global Security or an exchange for and delivery of definitive Securities (or, if relevant, collection of any interest) cannot be made until we do so certify. We understand that this certificate may be required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings. Dated: __________ ___, 19___ [To be dated no earlier than the 15th day prior to the earlier of (i) the Exchange Date or (ii) the relevant Interest Payment Date occurring prior to the Exchange Date, as applicable] [Name of Person Making Certification] ______________________________ (Authorized Signatory) Name: Title: EXHIBIT A-2 FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR AND CEDEL S.A. IN CONNECTION WITH THE EXCHANGE OF A PORTION OF A TEMPORARY GLOBAL SECURITY OR TO OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE CERTIFICATE [Insert title or sufficient description of Securities to be delivered] This is to certify that, based solely on written certifications that we have received in writing, by tested telex or by electronic transmission from each of the persons appearing in our records as persons entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially in the form attached hereto, as of the date hereof, [U.S.$] _______________ principal amount of the above-captioned Securities (i) is owned by person(s) which are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States person(s)"), (ii) is owned by United States persons(s) which are (a) foreign branches of United States financial institutions (financial institutions, as defined in United States Treasury Regulations Section 1.165-12(c)(1)(v) are herein referred to as "financial institutions") purchasing for their own account or for resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such financial institution has agreed, on its own behalf or through its agent, that we may advise McLeodUSA Incorporated or its agent that such financial institution will provide a certificate within a reasonable time stating that it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by a financial institution for purposes of resale during the restricted period (as defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and that such financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We further certify that (i) we are not making available herewith for exchange (or, if relevant, collection of any interest) any portion of the temporary global Security representing the above-captioned Securities excepted in the above-referenced certificates of Member Organizations and (ii) as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith for exchange (or, if relevant, collection of any interest) are no longer true and cannot be relied on as of the date hereof. We understand that this certification is required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings. Dated: __________ ___, 19___ [To be dated no earlier than the earlier of the Exchange Date or the relevant Interest Payment Date occurring prior to the Exchange Date, as applicable] [Morgan Guaranty Trust Company of New York, Brussels Office,] as Operator of the Euroclear System [Cedel S.A.] By:______________________________ ______________________________ ______________________________ EX-4.22 4 EXHIBIT 4.22 EXHIBIT 4.22 ================================================================================ MCLEODUSA INCORPORATED and UNITED STATES TRUST COMPANY OF NEW YORK, Trustee ____________________ Indenture Dated as of August __, 1999 ____________________ Subordinated Debt Securities ================================================================================ TABLE OF CONTENTS
RECITALS Page ---- ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions.................................................................. 1 Act................................................................................... 2 Additional Amounts.................................................................... 2 Affiliate............................................................................. 2 Attributable Indebtedness............................................................. 2 Authenticating Agent.................................................................. 2 Authorized Newspaper.................................................................. 2 Bearer Security....................................................................... 3 Board of Directors.................................................................... 3 Board Resolution...................................................................... 3 Business Day.......................................................................... 3 Capital Lease Obligation.............................................................. 3 Capital Stock......................................................................... 3 CEDEL................................................................................. 3 Class A Common Stock.................................................................. 3 Commission............................................................................ 3 Common Depositary..................................................................... 3 Company............................................................................... 4 Company Certificate................................................................... 4 Company Request" and "Company Order................................................... 4 Conversion Event...................................................................... 4 Corporate Trust Office................................................................ 4 corporation........................................................................... 4 coupon................................................................................ 4 covenant defeasance................................................................... 4 Default............................................................................... 4 Defaulted Interest.................................................................... 4 defeasance............................................................................ 4 Disqualified Stock.................................................................... 5 Dollar" or " $........................................................................ 5 DTC................................................................................... 5 ECU................................................................................... 5 Euroclear............................................................................. 5 European Communities.................................................................. 5 European Monetary System.............................................................. 5 Event of Default...................................................................... 5
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Page ---- Exchange Act........................................................................... 5 Exchange Date.......................................................................... 5 Foreign Currency....................................................................... 5 GAAP................................................................................... 5 Government Obligations................................................................. 6 Guarantee.............................................................................. 6 Holder................................................................................. 6 Indebtedness........................................................................... 6 Indenture.............................................................................. 7 Indexed Security....................................................................... 7 interest............................................................................... 7 Interest Payment Date.................................................................. 8 Interest Rate or Currency Protection Agreement......................................... 8 mandatory sinking fund payment......................................................... 8 Maturity............................................................................... 8 Notice of Default...................................................................... 8 Opinion of Counsel..................................................................... 8 optional sinking fund payment.......................................................... 8 Original Issue Discount Security....................................................... 8 Outstanding............................................................................ 8 Paying Agent........................................................................... 9 Payment Default........................................................................ 10 Person................................................................................. 10 Place of Payment....................................................................... 10 Predecessor Security................................................................... 10 Property............................................................................... 10 Redemption Date........................................................................ 10 Redemption Price....................................................................... 10 Registered Security.................................................................... 10 Regular Record Date.................................................................... 10 Repayment Date......................................................................... 10 Repayment Price........................................................................ 11 Responsible Officer.................................................................... 11 Restricted Subsidiary.................................................................. 11 Sale and Leaseback Transaction......................................................... 11 Securities Act......................................................................... 11 Security............................................................................... 11 Security Register" and "Security Registrar............................................. 11 Senior Discount Notes.................................................................. 11 Senior Indebtedness.................................................................... 11 Special Record Date.................................................................... 12 Stated Maturity........................................................................ 12
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Page ---- Subsidiary....................................................................... 12 Trust Indenture Act.............................................................. 12 Trustee.......................................................................... 12 Trustee Permitted Investments.................................................... 12 United States.................................................................... 14 United States person............................................................. 14 Unrestricted Subsidiary.......................................................... 14 Voting Stock..................................................................... 14 Yield to Maturity................................................................ 14 SECTION 102. Compliance Certificates and Opinions................................... 14 SECTION 103. Form of Documents Delivered to Trustee................................. 15 SECTION 104. Acts of Holders........................................................ 16 SECTION 105. Notices to Trustee and Company......................................... 17 SECTION 106. Notice to Holders; Waiver.............................................. 18 SECTION 107. Effect of Headings and Table of Contents............................... 19 SECTION 108. Successors and Assigns................................................. 19 SECTION 109. Separability Clause.................................................... 19 SECTION 110. Benefits of Indenture.................................................. 19 SECTION 111. No Personal Liability.................................................. 19 SECTION 112. Governing Law.......................................................... 19 SECTION 113. Legal Holidays......................................................... 20 SECTION 114. Counterparts........................................................... 20 ARTICLE TWO SECURITIES FORMS SECTION 201. Forms of Securities.................................................... 20 SECTION 202. Form of Trustee's Certificate of Authentication........................ 21 SECTION 203. Securities Issuable in Global Form..................................... 21 ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series.................................. 22 SECTION 302. Denominations......................................................... 26 SECTION 303. Execution, Authentication, Delivery and Dating........................ 26 SECTION 304. Temporary Securities.................................................. 28 SECTION 305. Registration, Registration of Transfer and Exchange................... 31 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities...................... 34 SECTION 307. Payment of Interest; Interest Rights Preserved........................ 36 SECTION 308. Persons Deemed Owners................................................. 38
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Page ---- SECTION 309. Cancellation.......................................................... 38 SECTION 310. Computation of Interest............................................... 39 SECTION 311. CUSIP Numbers......................................................... 39 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture................................ 39 SECTION 402. Application of Trust Funds............................................. 41 ARTICLE FIVE REMEDIES SECTION 501. Events of Default..................................................... 41 SECTION 502. Acceleration of Maturity; Rescission and Annulment.................... 43 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee....... 44 SECTION 504. Trustee May File Proofs of Claim...................................... 45 SECTION 505. Trustee May Enforce Claims Without Possession of Securities or Coupons................................................. 45 SECTION 506. Application of Money Collected........................................ 46 SECTION 507. Limitation on Suits................................................... 46 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium, Interest and Additional Amounts.............................. 47 SECTION 509. Restoration of Rights and Remedies.................................... 47 SECTION 510. Rights and Remedies Cumulative........................................ 47 SECTION 511. Delay or Omission Not Waiver.......................................... 48 SECTION 512. Control by Holders of Securities...................................... 48 SECTION 513. Waiver of Past Defaults............................................... 48 SECTION 514. Waiver of Usury, Stay or Extension Laws............................... 48 SECTION 515. Undertaking for Costs................................................. 49 ARTICLE SIX THE TRUSTEE SECTION 601. Notice of Defaults.................................................... 49 SECTION 602. Certain Rights of Trustee............................................. 49 SECTION 603. Not Responsible for Recitals or Issuance of Securities................ 51 SECTION 604. May Hold Securities................................................... 51 SECTION 605. Money Held in Trust; Trustee Permitted Investments.................... 51 SECTION 606. Compensation and Reimbursement........................................ 52 SECTION 607. Trustee Eligibility; Conflicting Interests............................ 53 SECTION 608. Resignation and Removal; Appointment of Successor..................... 53
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Page ---- SECTION 609. Acceptance of Appointment by Successor............................... 55 SECTION 610. Merger, Conversion, Consolidation or Succession to Business.......... 56 SECTION 611. Appointment of Authenticating Agent.................................. 56 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Disclosure of Names and Addresses of Holders......................... 58 SECTION 702. Reports by Trustee................................................... 58 SECTION 703. Reports by Company................................................... 58 SECTION 704. Company to Furnish Trustee Names and Addresses of Holders............ 60 ARTICLE EIGHT CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE SECTION 801. Consolidations and Mergers of Company and Sales, Leases and Conveyances............................................... 60 SECTION 802. Rights and Duties of Successor Entity................................ 61 SECTION 803. Company Certificate and Opinion of Counsel........................... 61 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders................... 61 SECTION 902. Supplemental Indentures with Consent of Holders...................... 63 SECTION 903. Execution of Supplemental Indentures................................. 64 SECTION 904. Effect of Supplemental Indentures.................................... 64 SECTION 905. Conformity with Trust Indenture Act.................................. 65 SECTION 906. Reference in Securities to Supplemental Indentures................... 65 SECTION 907. Notice of Supplemental Indentures.................................... 65 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, Interest and Additional Amounts................................................... 65 SECTION 1002. Maintenance of Office or Agency...................................... 65 SECTION 1003. Money for Securities Payments to Be Held in Trust.................... 67 SECTION 1004. Existence............................................................ 68 SECTION 1005. Maintenance of Property.............................................. 69 SECTION 1006. [intentionally omitted].............................................. 69 SECTION 1007. Payment of Taxes and Other Claims.................................... 69
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Page ---- SECTION 1008. Statement as to Compliance........................................... 69 SECTION 1009. Additional Amounts................................................... 70 SECTION 1010. Waiver of Certain Covenants.......................................... 71 ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article............................................. 71 SECTION 1102. Election to Redeem; Notice to Trustee................................ 71 SECTION 1103. Selection by Trustee of Securities to Be Redeemed.................... 71 SECTION 1104. Notice of Redemption................................................. 72 SECTION 1105. Deposit of Redemption Price.......................................... 73 SECTION 1106. Securities Payable on Redemption Date................................ 73 SECTION 1107. Securities Redeemed in Part.......................................... 74 ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article............................................. 74 SECTION 1202. Satisfaction of Sinking Fund Payments with Securities................ 75 SECTION 1203. Redemption of Securities for Sinking Fund............................ 75 ARTICLE THIRTEEN REPAYMENT AT THE OPTION OF HOLDERS SECTION 1301. Applicability of Article............................................. 76 SECTION 1302. Repayment of Securities.............................................. 76 SECTION 1303. Exercise of Option................................................... 76 SECTION 1304. When Securities Presented for Repayment Become Due and Payable...................................................... 77 SECTION 1305. Securities Repaid in Part............................................ 78 ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1401. Applicability of Article; Company's Option to Effect Defeasance or Covenant Defeasance.................................... 78 SECTION 1402. Defeasance and Discharge............................................. 78 SECTION 1403. Covenant Defeasance.................................................. 79 SECTION 1404. Conditions to Defeasance or Covenant Defeasance...................... 79 SECTION 1405. Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous Provisions........................ 81
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Page ---- SECTION 1406. Reinstatement.................................................... 82 ARTICLE FIFTEEN MEETINGS OF HOLDERS OF SECURITIES SECTION 1501. Purposes for Which Meetings May Be Called........................ 83 SECTION 1502. Call, Notice and Place of Meetings............................... 83 SECTION 1503. Persons Entitled to Vote at Meetings............................. 83 SECTION 1504. Quorum; Action................................................... 84 SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of Meetings.......................................... 85 SECTION 1506. Counting Votes and Recording Action of Meetings.................. 86 SECTION 1507. Evidence of Action Taken by Holders.............................. 86 SECTION 1508. Proof of Execution of Instruments................................ 86 ARTICLE SIXTEEN SUBORDINATION OF SECURITIES SECTION 1601. Securities Subordinated to Senior Indebtedness................... 87 SECTION 1602. Subrogation...................................................... 88 SECTION 1603. Obligation of the Company Unconditional.......................... 88 SECTION 1604. Payments on Securities Permitted................................. 89 SECTION 1605. Effectuation of Subordination by Trustee......................... 89 SECTION 1606. Knowledge of Trustee............................................. 89 SECTION 1607. Trustee May Hold Senior Indebtedness............................. 89 SECTION 1608. Rights of Holders of Senior Indebtedness Not Impaired............ 90
TESTIMONIUM SIGNATURES ACKNOWLEDGMENTS EXHIBIT A - FORMS OF CERTIFICATION vii Reconciliation and tie between Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and Indenture Trust Indenture Act Section Indenture Section --------------------------- ----------------- 310(a)(1), (2) and (5) 607(a) 310(a)(3) and (4) Not applicable 310(b) 608(d) 310(c) Not applicable 311 Not applicable 312(a) 704 312(b) Not applicable 312(c) 701 313(a) and (c) 702 313(b) Not applicable 314(a)(1), (2) and (3) 703 314(a)(4) 1008 314(b) Not applicable 314(c) and (e) 102 314(d) Not applicable 315(a), (c), (d) and (e) Not applicable 315(b) 601 316(a)(1)(A) 101 ("Outstanding") 316(a) (last sentence) 512 316(a)(1)(B) 513 316(a)(2) and (c) Not applicable 316(b) 508 317(a)(1) 503 317(a)(2) 504 317(b) Not applicable 318(a) 112 NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. Attention should also be directed to Section 318(c) of the Trust Indenture Act, which provides that the provisions of Sections 310 to and including 317 of the Trust Indenture Act are a part of and govern every qualified indenture, whether or not physically contained therein. viii INDENTURE, dated as of August __, 1999, by and between MCLEODUSA INCORPORATED, a Delaware corporation (hereinafter called the "Company"), having ------- its principal office at 6400 C Street, S.W., Cedar Rapids, Iowa 52406 and UNITED STATES TRUST COMPANY OF NEW YORK, a bank and trust company organized under the New York banking law, as trustee hereunder (hereinafter called the "Trustee"), ------- currently having its Corporate Trust Office at 114 West 47th Street, New York, New York 10036. RECITALS The Company deems it necessary to issue from time to time for its lawful purposes subordinated debt securities (hereinafter called the "Securities") ---------- evidencing its unsecured and subordinated indebtedness, and has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of the Securities, unlimited as to aggregate principal amount, to bear interest at the rates or formulas, to mature at such times and to have such other provisions as shall be fixed therefor as hereinafter provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. This Indenture is subject to the provisions of the Trust Indenture Act (as herein defined) and the rules and regulations of the Commission (as herein defined) promulgated thereunder which are required to be part of this Indenture and, to the extent applicable, shall be governed by such provisions. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders (as herein defined) thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101 Definitions. For all purposes of this Indenture, except as ----------- otherwise expressly provided or the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein, and the terms "cash transaction" and "self- ---------------- ---- liquidating paper," as used in Section 311 of the Trust Indenture Act, ----------------- shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act; 1 (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP (as herein defined); and (4) the words "herein," "hereof" and "hereunder" and other words of ------ ------ --------- similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 104(a). --- "Additional Amounts" means any additional amounts which are required by a ------------------ Security, under circumstances specified therein, to be paid by the Company in respect of certain taxes imposed on certain Holders and which are owing to such Holders. "Affiliate" means, as to any Person, any other Person which directly or --------- indirectly controls, or is under common control with, or is controlled by, such Person; provided that each Unrestricted Subsidiary shall be deemed to be an Affiliate of the Company and of each other Subsidiary of the Company; provided, further, that, except for the purposes of the definition of "Outstanding" and Section 607, neither the Company nor any of its Restricted Subsidiaries shall be deemed to be Affiliates of each other. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "under common control with" and "controlled by"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise. "Attributable Indebtedness" means, with respect to any Sale and Leaseback ------------------------- Transaction of any Person, as at the time of determination, the greater of (i) the capitalized amount in respect of such transaction that would appear on the balance sheet of such Person in accordance with GAAP and (ii) the present value (discounted at a rate consistent with accounting guidelines, as determined in good faith by the responsible accounting officer of such Person) of the payments during the remaining term of the lease (including any period for which such lease has been extended or may, at the option of the lessor, be extended) or until the earliest date on which the lessee may terminate such lease without penalty or upon payment of a penalty (in which case the rental payments shall include such penalty). "Authenticating Agent" means any authenticating agent appointed by the -------------------- Trustee pursuant to Section 611. "Authorized Newspaper" means a newspaper, printed in the English language -------------------- or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in each place in connection with which the term is used or in the financial community of each such place. Whenever successive publications are required to be made in Authorized Newspapers, the successive publications may be made in the same or in different Authorized Newspapers in the same city meeting the foregoing requirements and in each case on any Business Day. 2 "Bearer Security" means a Security which is payable to bearer. --------------- "Board of Directors" means the board of directors of the Company, the ------------------ executive committee or any other committee of such board duly authorized to act for it in respect hereof. "Board Resolution" means a copy of a resolution certified by the Secretary ---------------- or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" when used with respect to any Place of Payment or any other ------------ particular location referred to in this Indenture or in the Securities, means, unless otherwise specified with respect to any Securities pursuant to Section 301, any day, other than a Saturday or Sunday, which is neither a legal holiday nor a day on which banking institutions in such Place of Payment or particular location are authorized or required by law, regulation or executive order to close. "Capital Lease Obligation" of any Person means the obligation to pay rent ------------------------ or other payment amounts under a lease of (or other Indebtedness arrangement conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person prepared in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" in any Person means any and all shares, interests, ------------- participations or other equivalents in the equity interest (however designated) in such Person and any rights (other than indebtedness convertible into an equity interest), warrants or options to subscribe for or acquire an equity interest in such Person. "CEDEL" means Centrale de Livraison de Valeurs Mobilieres, S.A., or its ----- successor. "Class A Common Stock" means the Class A Common Stock, par value $0.01 per -------------------- share, of the Company. "clearing agency" has the meaning set forth in Section 3(a)(23) of the --------------- Exchange Act. "Commission" means the United States Securities and Exchange Commission, ---------- as from time to time constituted, created under the Exchange Act, or, if at any time after execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Common Depositary" has the meaning specified in Section 304(b). ----------------- 3 "Company" means the Person named as the "Company" in the first paragraph ------- of this Indenture until a successor corporation has become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation, and any other obligor on the Securities. "Company Certificate" means a certificate signed in the name of the ------------------- Company by (i) the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, the President, the Chief Executive Officer or a Vice President, and (ii) the Chief Financial Officer, the Chief Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, and delivered to the Trustee, which certificate shall comply with the provisions of Section 102 hereof. "Company Request" and "Company Order" mean, respectively, a written --------------- ------------- request or order signed in the name of the Company by (i) the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, the President, the Chief Executive Officer or a Vice President, and (ii) the Chief Financial Officer, the Chief Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, and delivered to the Trustee. "Conversion Event" means the cessation of use of (i) a Foreign Currency ---------------- (other than the ECU or other currency unit) both by the government of the country which issued such currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community, (ii) the ECU both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities or (iii) any currency unit (or composite currency) other than the ECU for the purposes for which it was established. "Corporate Trust Office" means the principal office of the Trustee in the ---------------------- Borough of Manhattan, The City of New York, New York which at any particular time its corporate trust business shall be principally administered, which at the date hereof is located at 114 West 47th Street, New York, New York 10036. "corporation" includes corporations, associations, companies, real estate ----------- investment trusts and business trusts. "coupon" means any interest coupon appertaining to a Bearer Security. ------ "covenant defeasance" has the meaning specified in Section 1403. ------------------- "Default" means any event, act or condition, the occurrence of which is, ------- or after notice or the passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning specified in Section 307. ------------------ "defeasance" has the meaning specified in Section 1402. ---------- 4 "Disqualified Stock" means any Capital Stock which, by its terms (or by ------------------ the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, or otherwise, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, or is exchangeable for Indebtedness at any time, in whole or in part, on or prior to the Stated Maturity of the Notes. "Dollar" or "$" means a dollar or other equivalent unit in such coin or ------ - currency of the United States of America as at the time is legal tender for the payment of public and private debts. "DTC" means The Depository Trust Company. --- "ECU" means the European Currency Unit as defined and revised from time to --- time by the Council of the European Communities. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels --------- Office, or its successor as operator of the Euroclear System. "European Communities" means the European Economic Community, the European -------------------- Coal and Steel Community and the European Atomic Energy Community. "European Monetary System" means the European Monetary System established ------------------------- by the Resolution of December 5, 1978 of the Council of the European Communities. "Event of Default" has the meaning specified in Section 501. ---------------- "Exchange Act" means the Securities Exchange Act of 1934, as amended, and ------------ the rules and regulations promulgated thereunder by the Commission. "Exchange Date" has the meaning specified in Section 304(b). ------------- "Foreign Currency" means any currency, currency unit or composite ---------------- currency, including, without limitation, the ECU issued by the government of one or more countries other than the United States of America or by any recognized confederation or association of such governments. "GAAP" means United States generally accepted accounting principles, ---- consistently applied, as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, that are applicable to the circumstances as of the date of determination; provided that, except as -------- 5 otherwise specifically provided herein, all calculations made for purposes of determining compliance with Section 801 and Article Ten hereof with respect to a series of Securities shall utilize GAAP as in effect on the date of the original issuance and authentication of the Securities of such series pursuant to this Indenture. "Government Obligations" means securities which are (i) direct obligations ---------------------- of the United States of America or the government which issued the Foreign Currency in which the Securities of a particular series are payable, for the payment of which its full faith and credit is pledged, or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such government which issued the Foreign Currency in which the Securities of such series are payable, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other government, which, in either case, are not callable or redeemable at the option of the issuer thereof, and also includes a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required -------- by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt. "Guarantee" means any direct or indirect obligation, contingent or --------- otherwise, of a Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person in any manner. The terms "Guaranteed," "Guaranteeing" and "Guarantor" shall have correlative meanings. "Holder" when used with respect to a Registered Security, means the Person ------ in whose name such Registered Security is registered in the Security Register and, when used with respect to a Bearer Security or any coupon, means the bearer thereof. "Indebtedness" means, at any time (without duplication), with respect to ------------ any Person, whether recourse as to all or a portion of the assets of such Person, and whether or not contingent, (i) any obligation of such Person for money borrowed, (ii) any obligation of such Person evidenced by bonds, debentures, notes, Guarantees or other similar instruments, including, without limitation, any such obligations incurred in connection with the acquisition of Property, assets or businesses, excluding trade accounts payable made in the ordinary course of business, (iii) any reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) any obligation of such Person issued or assumed as the deferred purchase price of Property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business, which in either case are not more than 60 days overdue or which are being contested in good faith), (v) any Capital Lease Obligation of such Person, (vi) the maximum fixed redemption or repurchase price of Disqualified Stock of such Person and, to the extent held 6 by Persons other than such Person or its Restricted Subsidiaries, the maximum fixed redemption or repurchase price of Disqualified Stock of such Person's Restricted Subsidiaries, at the time of determination, (vii) every obligation under Interest Rate and Currency Protection Agreements of such Person, (viii) any Attributable Indebtedness with respect to any Sale and Leaseback Transaction to which such Person is a party and (ix) any obligation of the type referred to in clauses (i) through (viii) of this definition of another Person and all dividends and distributions of another Person the payment of which, in either case, such Person has Guaranteed or is responsible or liable, directly or indirectly, as obligor, Guarantor or otherwise. For purposes of the preceding sentence, the maximum fixed repurchase price of any Disqualified Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture; provided that, if such Disqualified Stock is not then permitted to be repurchased, the repurchase price shall be the book value of such Disqualified Stock. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided that the amount outstanding at any time of any Indebtedness issued with original issue discount (including, without limitation, the Senior Discount Notes) is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP. "Indenture" means this instrument as originally executed or as it may from --------- time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, and includes the terms of particular series of Securities established as contemplated by Section 301; provided, however, that, if at any time more than one Person is -------- ------- acting as Trustee under this instrument, "Indenture" when used with respect to any one or more series of Securities with respect to which such Person is acting as Trustee, shall mean this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of those particular series of Securities with respect to which such Person is acting as Trustee established as contemplated by Section 301, exclusive, however, of any provisions or terms which relate solely to other series of Securities with respect to which such Person is not acting as Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party. "Indexed Security" means a Security the terms of which provide that the ---------------- principal amount thereof payable at Stated Maturity may be more or less than the principal face amount thereof at original issuance. "interest" when used with respect to an Original Issue Discount Security -------- which by its terms bears interest only after Maturity, means interest payable after Maturity, and, when used 7 with respect to a Security which provides for the payment of Additional Amounts pursuant to Section 1009, includes such Additional Amounts. "Interest Payment Date" when used with respect to any Security, means the --------------------- Stated Maturity of an installment of interest on such Security. "Interest Rate or Currency Protection Agreement" of any Person means any ---------------------------------------------- forward contract, futures contract, swap, option, future option or other financial agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements) relating to, or the value of which is dependent upon, interest rates or currency exchange rates or indices. "mandatory sinking fund payment" has the meaning specified in Section ------------------------------ 1201. "Maturity" when used with respect to any Security, means the date on which -------- the principal of such Security or an installment of principal become due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption, notice of option to elect repayment, repurchase or otherwise. "Notice of Default" has the meaning specified in Section 501. ----------------- "Opinion of Counsel" means a written opinion of counsel, who may be an ------------------ employee of or counsel for the Company or other counsel satisfactory to the Trustee. "optional sinking fund payment" has the meaning specified in Section 1201. ----------------------------- "Original Issue Discount Security" means any Security which provides for -------------------------------- an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding" when used with respect to Securities, means, as of the date ----------- of determination, all Securities theretofore authenticated and delivered under this Indenture, exclusive of: (1) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (2) Securities, or portions thereof, for whose payment or redemption or repayment at the option of the Holder money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company is acting as its own Paying Agent) for the holders of such Securities and any coupons appertaining thereto, provided that, if such -------- Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or other provision therefor satisfactory to the Trustee has been made; 8 (3) Securities, except solely to the extent provided in Section 401, 1402 or 1403, as applicable, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Four or Fourteen; and (4) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there has been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the required - -------- ------- principal amount of the Outstanding Securities have concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a meeting of Holders for quorum purposes, and for the purpose of making the calculations required by Section 313 of the Trust Indenture Act, (i) the principal amount of an Original Issue Discount Security which may be counted in making such determination or calculation and which shall be deemed Outstanding for such purpose shall be equal to the amount of principal thereof which would be (or has been declared to be) due and payable, at the time of such determination, upon a declaration of acceleration of the maturity thereof pursuant to Section 502, (ii) the principal amount of any Security denominated in a Foreign Currency which may be counted in making such determination or calculation and which shall be deemed Outstanding for such purpose shall be equal to the Dollar equivalent, determined pursuant to Section 301 as of the date such Security is originally issued by the Company, of the principal amount (or, in the case of an Original Issue Discount Security, the Dollar equivalent as of such date of original issuance of the amount determined as provided in clause (i) above) of such Security, (iii) the principal amount of any Indexed Security which may be counted in making such determination or calculation and which shall be deemed Outstanding for such purpose shall be equal to the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Indexed Security pursuant to Section 301, and (iv) Securities owned by the Company or any other obligor on the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not Outstanding, except that, for the purposes of determining whether the Trustee is protected in making such calculation or in relying on any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor on the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the ------------ principal of (and premium, if any, on) and interest and Additional Amounts, if any, on any Securities or coupons on behalf of the Company, or if no such Person is authorized, the Company. 9 "Payment Default" means any failure to pay any scheduled installment of --------------- principal of, premium, if any, or interest on any indebtedness within the grace period provided for such payment in the documentation governing such indebtedness. "Person" means any individual, corporation, partnership, limited liability ------ company, limited liability partnership, joint venture, association, joint-stock company, real estate investment trust, business trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment" when used with respect to the Securities of or within ---------------- any series, means the Corporate Trust Office of the Trustee and any place or places which the Company may from time to time designate as the place or places where the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on such Securities are payable as specified as contemplated by Sections 301 and 1002 and presentations, surrenders, notices and demands with respect to such Securities and this Indenture may be made. "Predecessor Security" when used with respect to any particular Security, -------------------- means every previous Security evidencing all or a portion of the same debt as evidenced by such Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security or a Security to which a mutilated, destroyed, lost or stolen coupon appertains shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security or the Security to which the mutilated, destroyed, lost or stolen coupon appertains. "Property" means, with respect to any Person, any interest of such Person -------- in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, excluding Capital Stock in any other Person. "Redemption Date" when used with respect to any Security to be redeemed, --------------- means the date fixed for such redemption by or pursuant to this Indenture or the terms of such Security. "Redemption Price" when used with respect to any Security to be redeemed, ---------------- means the price at which it is to be redeemed pursuant to this Indenture or the terms of such Security. "Registered Security" means any Security which is registered in the ------------------- Security Register. "Regular Record Date" when used with respect to an installment of interest ------------------- payable on any Interest Payment Date on the Registered Securities of or within any series, means the date specified for that purpose as contemplated by Section 301, whether or not a Business Day. "Repayment Date" when used with respect to any Security to be repaid or --------------- repurchased at the option of the Holder, means the date fixed for such repayment or repurchase by or pursuant to this Indenture or the terms of such Security. 10 "Repayment Price" when used with respect to any Security to be repaid or --------------- repurchased at the option of the Holder, means the price at which it is to be repaid or repurchased by or pursuant to this Indenture or the terms of such Security. "Responsible Officer" when used with respect to the Trustee, means any ------------------- vice president (whether or not designated by numbers or words added before or after said title), any assistant vice president, any assistant secretary or any other officer or assistant officer of the Trustee in the corporate trust department or similar group of the Trustee or, with respect to any particular matter arising hereunder, any officer of the Trustee to whom such matter has been assigned. "Restricted Subsidiary" means any Subsidiary of the Company that has not --------------------- been designated as an Unrestricted Subsidiary pursuant to this Indenture. "Sale and Leaseback Transaction" means, with respect to any Person, any ------------------------------ direct or indirect arrangement pursuant to which Property is sold or transferred by such Person or a Restricted Subsidiary of such Person and is thereafter leased back from the purchaser or transferee thereof by such Person or one of its Restricted Subsidiaries. "Securities Act" means the Securities Act of 1933, as amended, and the -------------- rules and regulations promulgated thereunder by the Commission. "Security" has the meaning specified in the first recital of this -------- Indenture and, more particularly, means any Security or Securities authenticated and delivered under this Indenture; provided, however, that, if at any time -------- ------- there is more than one Person acting as Trustee under this Indenture, "Securities" when used with respect to the Indenture with respect to which such Person is acting as Trustee, shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive, however, of Securities of or within any series with respect to which such Person is not acting as Trustee. "Security Register" and "Security Registrar" have the respective meanings ----------------- ------------------ specified in Section 305. "Senior Discount Notes" means the Company's 10 1/2% Senior Discount Notes --------------------- due March 1, 2007. "Senior Indebtedness" means, with respect to the Company, the principal of ------------------- (and premium, if any) and interest and Additional Amounts, if any, on, or substantially similar payments to be made by the Company in respect of, any Indebtedness, whether the same is outstanding as of the date hereof or hereafter incurred, created, guaranteed, or assumed, and whether or not contingent, other than (i) any such Indebtedness as to which, in the instrument, agreement or other document creating or evidencing such Indebtedness pursuant to which such Indebtedness is outstanding, it is expressly provided that such Indebtedness is not superior in right of payment to the Securities issued hereunder or ranks equally with the Securities issued 11 hereunder, (ii) any such Indebtedness which is subordinated to the Indebtedness of the Company to substantially the same extent as or to a greater extent than the Securities issued hereunder are subordinated and (iii) the Securities issued hereunder. "Special Record Date" when used with respect to the payment of any ------------------- Defaulted Interest on the Registered Securities of or within any series, means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity" when used with respect to any Security or any --------------- installment of principal thereof or interest thereon or any Additional Amounts with respect thereto, means the date specified in such Security or a coupon representing such installment of interest as the fixed date on which the principal of such Security or such installment of principal or interest is, or such Additional Amounts are, due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such Security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subsidiary" means, with respect to any Person, (i) any corporation more ---------- than 50 percent of the outstanding shares of Voting Stock of which is owned, directly or indirectly, by such Person, or by one of more other Subsidiaries of such Person, or by such Person and one or more other Subsidiaries of such Person, (ii) any general partnership, limited liability company, joint venture or similar entity, more than 50 percent of the outstanding partnership, membership or similar interests of which are owned, directly or indirectly, by such Person, or by one or more other Subsidiaries of such Person, or by such Person and one or more other Subsidiaries of such Person and (iii) any limited partnership of which such Person or any Subsidiary of such Person is a general partner. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended ------------------- and as in force at the date as of which this Indenture was executed, except as provided in Section 905. "Trustee" means the Person named as the "Trustee" in the first paragraph ------- of this Indenture until a successor Trustee has become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then acting as a Trustee hereunder; provided, -------- however, that, if at any time there is more than one such Person, "Trustee" when - ------- used with respect to the Securities of or within any series, shall mean only the Trustee with respect to the Securities of such series, and no Trustee of Securities for any series shall be responsible for the acts or omissions of a Trustee for any other series of Securities. "Trustee Permitted Investments" means: ----------------------------- (1) Government Obligations; (2) Direct obligations and fully guaranteed certificates of beneficial interest of the Export-Import Bank of the United States; consolidated debt obligations and letter 12 of credit-backed issues of the Federal Home Loan Banks; participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation; debentures of the Federal Housing Administration; mortgage- backed securities (except stripped mortgage securities which are valued greater than par on the portion of unpaid principal) and senior debt obligations of the Federal National Mortgage Association; participation certificates of the General Services Administration; guaranteed mortgage- backed securities and guaranteed participation certificates and guaranteed pool certificates of the Small Business Administration; debt obligations and letter of credit-backed issues of the Student Loan Marketing Association; local authority bonds of the U.S. Department of Housing and Urban Development; guaranteed Title XI financing of the U.S. Maritime Administration; guaranteed transit bonds of the Washington Metropolitan Area Transit Authority; or Resolution Funding Corporation securities; (3) Direct obligations of any state of the United States of America or any subdivision or agency thereof whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, at least as high as the rating then in effect on the Securities by Standard & Poor's Rating Services, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, at least as high as the rating then in effect on the Securities by Standard & Poor's Rating Services; (4) Commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, "A-1+" by Standard & Poor's Rating Services or "P-1" by Moody's Investors Services, Inc.; (5) Federal funds, unsecured certificates of deposit, time deposits or bankers acceptances (in each case having maturities of not more than 365 days) of any domestic bank (including the Trustee in its commercial capacity), including a branch office of a foreign bank which branch office is located in the United States, provided that written legal opinions in -------- form acceptable to the Trustee are received to the effect that full and timely payment of such deposit or similar obligation is enforceable against the principal office or any branch of such bank, which, at the time of purchase, has a rating of "A-1+" by Standard & Poor's Rating Services or "P-1" by Moody's Investors Services, Inc.; (6) Deposits of any bank or savings and loan association which has combined capital, surplus and undivided profits of not less than $3,000,000, provided that such deposits are continuously and fully insured -------- by the Federal Deposit Insurance Corporation, including, without limitation, an insured money market account of the Trustee; (7) Investments in money-market funds rated in the highest rating category by Standard & Poor's Rating Services or Moody's Investors Services, Inc.; such funds may include those for which the Trustee or an affiliate of the Trustee provides services for 13 a fee, whether as investment advisor, custodian, transfer agent, sponsor, distributor or otherwise; and (8) Shares of an open-end, diversified investment company which is registered under the Investment Company Act of 1940, as amended, and which (i) invests exclusively in permitted investments of the type set forth in clauses (1) through (7) above; (ii) seeks to maintain a constant net asset value per share in accordance with regulations of the Commission; and (iii) has aggregate net assets of at least $50,000,000 on the date of purchase. Any investment made in accordance with this Indenture may (i) be executed by the Trustee or the Company with or through the Trustee or its affiliates and (ii) be made in securities of any entity for which the Trustee or any of its affiliates serves as offeror, distributor, advisor or other service provider. "United States" means, unless otherwise specified with respect to any ------------- Securities pursuant to Section 301, the United States of America (including the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. "United States person" means, unless otherwise specified with respect to -------------------- any Securities pursuant to Section 301, an individual who is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or an estate or trust the income of which is subject to United States federal income taxation regardless of its source. "Unrestricted Subsidiary" means any Subsidiary of the Company that the ----------------------- Company has classified as an Unrestricted Subsidiary and that has not been reclassified as a Restricted Subsidiary pursuant to this Indenture. "Voting Stock" means with respect to any Person, securities of any class ------------ or classes of Capital Stock in such Person entitling the holders thereof (whether at all times or at the times that such class of Capital Stock has voting power by reason of the happening of any contingency) to vote in the election of members of the board of directors or comparable body of such Person. "Yield to Maturity" means the yield to maturity, computed at the time of ----------------- issuance of a Security (or, if applicable, at the most recent redetermination of interest on such Security) and as set forth in such Security in accordance with generally accepted United States bond yield computation principles. SECTION 102. Compliance Certificates and Opinions. Upon any application or ------------------------------------ request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee a Company Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenants, compliance with which constitute 14 conditions precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than certificates provided pursuant to Section 1008) shall include: (1) a statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation on which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such condition or covenant has been complied with; and (4) a statement as to whether or not, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case in which -------------------------------------- several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion as to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, on an Opinion of Counsel, or a certificate or representations by counsel, unless such officer knows, or in the exercise of reasonable care should know, that the opinion, certificate or representations with respect to the matters on which his or her certificate or opinion is based are erroneous. Any such Opinion of Counsel or certificate or representations may be based, insofar as it relates to factual matters, on a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information as to such factual matters is in the possession of the Company, unless such counsel knows that the certificate or opinion or representations as to such matters are erroneous. 15 If any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders. --------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of the Outstanding Securities of all series or one or more series, as the case may be, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing. If Securities of a series are issuable as Bearer Securities, any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of the Outstanding Securities of such series may, alternatively, be embodied in and evidenced by the record of such Holders voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of such Holders duly called and held in accordance with the provisions of Article Fifteen, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, if expressly required herein, to the Company. Such instrument or instrument and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such --- instrument or instruments or so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company and any agent of the Trustee or the Company, if made in the manner provided in this Section. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 1506. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof or by any other means acceptable to the Trustee. If such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) The ownership of Registered Securities shall be proved by the Security Register. (d) The ownership of Bearer Securities may be proved by the production of such Bearer Securities or by a certificate executed, as depositary, by any trust company, 16 bank, banker or other depositary, wherever situated, if such certificate is deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such Person had on deposit with such depositary, or exhibited to it, the Bearer Securities therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Bearer Securities, if such certificate or affidavit is deemed by the Trustee to be satisfactory. The Trustee and the Company may assume that such ownership of any Bearer Security continues until (i) another certificate or affidavit bearing a later date issued in respect of the same Bearer Security is produced, (ii) such Bearer Security is produced to the Trustee by some other Person, (iii) such Bearer Security is surrendered in exchange for a Registered Security or (iv) such Bearer Security is no longer Outstanding. The ownership of Bearer Securities may also be proved in any other manner which the Trustee deems sufficient. (e) If the Company shall solicit from the Holders of Registered Securities any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, in or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall not be obligated to do so. Notwithstanding Section 316(c) of the Trust Indenture Act, such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purpose of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the -------- Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. (f) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, any Security Registrar, any Paying Agent, any Authenticating Agent or the Company in reliance thereon, whether or not notation of such action is made on such Security. SECTION 105. Notices to Trustee and Company. Any request, demand, ------------------------------ authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made on, given or furnished to, or filed with: 17 (1) the Trustee by any Holder or the Company shall be sufficient for every purpose hereunder if in writing and mailed, first class postage prepaid, to the Trustee addressed to it at the address of its Corporate Trust Office specified in the first paragraph of this Indenture, Attention: Corporate Trust Administration; or (2) the Company by the Trustee or any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. When this Indenture provides for ------------------------- notice of any event to Holders of Registered Securities by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at such Holder's address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case in which notice to Holders of Registered Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Registered Securities or the sufficiency of any notice to Holders of Bearer Securities given as provided herein. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. If, by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it is impracticable to give such notice by mail, then such notification to Holders of Registered Securities as is made with the approval of the Trustee shall constitute a sufficient notification to such Holders for every purpose hereunder. Except as otherwise expressly provided herein or otherwise specified with respect to any Securities pursuant to Section 301, when this Indenture provides for notice to Holders of Bearer Securities of any event, such notices shall be sufficiently given if published in an Authorized Newspaper in The City of New York and in such other city or cities as may be specified in such Securities and, if the Securities of such series are listed on any securities exchange outside the United States, in any place at which such Securities are listed on a securities exchange to the extent that such securities exchange so requires, on a Business Day, such publication to be not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the date of the first such publication. If, by reason of the suspension of publication of any Authorized Newspaper or Authorized Newspapers or by reason of any other cause, it is impracticable to publish any notice to Holders of Bearer Securities as provided above, then such notification to Holders of Bearer Securities as is given with the approval of the Trustee shall constitute sufficient notice to such 18 Holders for every purpose hereunder. Neither the failure to give notice by publication to any particular Holder of Bearer Securities as provided above, nor any defect in any notice so published, shall affect the sufficiency of such notice with respect to other Holders of Bearer Securities or the sufficiency of any notice to Holders of Registered Securities given as provided herein. Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication. When this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance on such waiver. SECTION 107. Effect of Headings and Table of Contents. The Article and ---------------------------------------- Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 108. Successors and Assigns. All covenants and agreements in this ---------------------- Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 109. Separability Clause. In case any provision in this Indenture ------------------- or in any Security or any coupon shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 110. Benefits of Indenture. Nothing in this Indenture or in any --------------------- Security or any coupon, express or implied, shall give to any Person, other than the parties hereto, any Security Registrar, any Paying Agent, any Authenticating Agent and their successors hereunder and the Holders any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 111. No Personal Liability. No recourse under or on any obligation, --------------------- covenant or agreement contained in this Indenture or in any Security or any coupon, or because of any indebtedness evidenced thereby, shall be had against any promoter, as such or, against any past, present or future director, officer, employee or shareholder, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the consideration for the issue of the Securities. SECTION 112. Governing Law. This Indenture and the Securities and any ------------- coupons shall be governed by and construed in accordance with the laws of the State of New York 19 applicable to agreements made and to be performed in such State. This Indenture is subject to the provisions of the Trust Indenture Act which, by the provisions thereof, are deemed or required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions. if any provision of this indenture limits, qualifies or conflicts with the duties imposed by operation of Section 318(c) of the Trust Indenture Act, the imposed duties shall control. SECTION 113. Legal Holidays. In any case in which any Interest Payment -------------- Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity of any Security is not a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or any Security or any coupon other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu hereof), payment of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on such Security need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date, Redemption Date, Repayment Date or sinking fund payment date, or at the Stated Maturity or Maturity; provided, however, that no interest shall accrue on the -------- ------- amount so payable for the period from and after such Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity, as the case may be. SECTION 114. Counterparts. This Indenture may be executed in several ------------ counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. ARTICLE TWO SECURITIES FORMS SECTION 201. Forms of Securities. The Registered Securities, if any, of ------------------- each series and the Bearer Securities, if any, and any coupons of each series, shall be in substantially the forms as are established in or pursuant to one or more indentures supplemental hereto and/or Board Resolutions, shall have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or any indenture supplemental hereto, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Securities may be listed, or to conform to usage. Unless otherwise specified as contemplated by Section 301, Bearer Securities shall have interest coupons attached. The definitive Securities and coupons shall be printed, lithographed or engraved or produced by any combination of these methods on a steel engraved border or steel engraved 20 border or steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities or coupons, as evidenced by their execution of such Securities or coupons. SECTION 202. Form of Trustee's Certificate of Authentication. Subject to ----------------------------------------------- Section 611, the Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. _____________________, as Trustee By:________________________________ Authorized Officer SECTION 203. Securities Issuable in Global Form. If Securities of or ---------------------------------- within a series are issuable in global form, as specified as contemplated by Section 301, then, notwithstanding clause (8) of Section 301 and the provisions of Section 302, any such Security shall represent such of the Outstanding Securities of such series as are specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities of such series from time to time endorsed thereon and that the aggregate amount of Outstanding Securities of such series represented thereby may from time to time be increased or decreased to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee in the manner and in accordance with instructions given by such Person or Persons specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 303 or 304. Subject to the provisions of Section 303 and, if applicable, Section 304, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and in accordance with instructions given by the Person or Persons specified therein or in the applicable Company Order. If a Company Order pursuant to Section 303 or 304 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 102 and need not be accompanied by an Opinion of Counsel. The provisions of the last sentence of Section 303 shall apply to any Security represented by a Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 303. 21 Notwithstanding the provisions of Section 307, unless otherwise specified as contemplated by Section 301, payment of principal of (and premium, if any, on) and interest and Additional Amounts, if any, on any Security in permanent global form shall be made to the Person or Persons specified therein. Notwithstanding the provisions of Section 308 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company or the Trustee shall treat as the Holder of such principal amount of Outstanding Securities represented by a permanent global Security (i) in the case of a permanent global Security in registered form, the Holder of such permanent global Security in registered form, or (ii) in the case of a permanent global Security in bearer form, Euroclear or CEDEL. ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal ------------------------------------ amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to one or more Board Resolutions, and/or indentures supplemental hereto, prior to the issuance of Securities of any series, any or all of the following, as applicable (each of which (except for the matters set forth in clauses (1), (2) and (15) below), if so provided, may be determined from time to time by the Company with respect to unissued Securities of or within the series when issued from time to time): (1) the title of the Securities of or within the series (which shall distinguish the Securities of such series from all other series of Securities); (2) any limit on the aggregate principal amount of the Securities of or within the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of or within the series pursuant to Section 304, 305, 306, 906, 1107 or 1305); (3) the date or dates, or the method by which such date or dates will be determined, on which the principal of the Securities of or within the series shall be payable and the amount of principal payable thereon; (4) the rate or rates at which the Securities of or within the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue or the method by which such date or dates shall be determined, the Interest Payment Dates on which such interest will be payable and the Regular Record Date, if any, for the interest payable on any Registered Security on any Interest Payment Date, or the method by which such date shall be determined, 22 and the basis on which interest shall be calculated if other than a 360-day year comprised of twelve 30-day months; (5) the place or places, if any, other than or in addition to the Corporate Trust Office where the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on Securities of or within the series shall be payable, any Registered Securities of or within the series may be surrendered for registration of transfer, exchange or conversion and notices or demands to or on the Company in respect of the Securities of or within the series and this Indenture may be served; (6) the period or periods within which, the price or prices (including the premium, if any) at which, the currency or currencies, currency unit or units or composite currency or currencies in which, and other terms and conditions upon which Securities of or within the series may be redeemed, in whole or in part, at the option of the Company, if the Company is to have the option; (7) the obligation, if any, of the Company to redeem, repay or purchase Securities of or within the series pursuant to any sinking fund or analogous provision or at the option of a Holder thereof, and the period or periods within which or the date or dates on which, the price or prices at which, the currency or currencies, currency unit or units or composite currency or currencies in which, and other terms and conditions upon which Securities of or within the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which any Registered Securities of or within the series shall be issuable and, if other than the denomination of $5,000, the denomination or denominations in which any Bearer Securities of or within the series shall be issuable; (9) if other than the Trustee, the identity of each Security Registrar and/or Paying Agent; (10) the percentage of the principal amount at which Securities will be issued and, if other than the principal amount thereof, the portion of the principal amount of Securities of or within the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502, or, if applicable, the portion of the principal amount of Securities which is convertible in accordance with the provisions of this Indenture, or the method by which such portion shall be determined; (11) if other than Dollars, the Foreign Currency or Currencies in which payment of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on the Securities of or within the series shall be payable or in which the Securities of or within the series shall be denominated; 23 (12) whether the amount of payments of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on the Securities of or within the series may be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on one or more currencies, currency units, composite currencies, commodities, equity indices or other indices), and the manner in which such amounts shall be determined; (13) whether the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on the Securities of or within the series are to be payable, at the election of the Company or a Holder thereof, in a currency or currencies, currency unit or units or composite currency or currencies other than that in which such Securities are denominated or stated to be payable, the period or periods within which (including the Election Date), and the terms and conditions upon which, such election may be made, and the time and manner of, and identity of the exchange rate agent with responsibility for, determining the exchange rate between the currency or currencies, currency unit or units or composite currency or currencies in which such Securities are denominated or stated to be payable and the currency or currencies, currency unit or units or composite currency or currencies in which such Securities are to be so payable; (14) provisions, if any, granting special rights to the Holders of Securities of or within the series on the occurrence of such events as may be specified; (15) any deletions from, modifications of or additions to the Events of Default or covenants of the Company with respect to Securities of or within the series, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein; (16) whether Securities of or within the series are to be issuable as Registered Securities, Bearer Securities (with or without coupons) or both, any restrictions applicable to the offer, sale or delivery of Bearer Securities and the terms upon which Bearer Securities of or within the series may be exchanged for Registered Securities of or within the series and vice versa (if permitted by applicable laws and regulations), whether any Securities of or within the series are to be issuable initially in temporary global form and whether any Securities of or within the series are to be issuable in permanent global form (with or without coupons) and, if so, whether beneficial owners of interests in any such permanent global Security may exchange such interests for Securities of such series and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in Section 305, and, if Registered Securities of or within the series are to be issuable as a global Security, the identity of the depositary for such series, and the date as of which any Bearer Securities of or within the series and any temporary global Security representing Outstanding Securities of or within the series shall be dated if other than the date of original issuance of the first Security of the series to be issued; 24 (17) the Person to whom any interest on any Registered Security of the series shall be payable, if other than the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the manner in which, or the Person to whom, any interest on any Bearer Security of the series shall be payable, if otherwise than upon presentation and surrender of the coupons appertaining thereto as they severally mature, and the extent to which, or the manner in which, any interest payable on a temporary global Security on an Interest Payment Date will be paid if other than in the manner provided in Section 304; (18) the applicability, if any, of Sections 1402 and/or 1403 to the Securities of or within the series and any provisions in modification of, in addition to or in lieu of any of the provisions of Article Fourteen; (19) if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, then the form and/or terms of such certificates, documents or conditions; (20) if the Securities of or within the series are to be issued upon the exercise of debt warrants, the time, manner and place for such Securities to be authenticated and delivered; (21) whether and under what circumstances the Company will pay Additional Amounts as contemplated by Section 1009 on the Securities of or within the series to any Holder who is not a United States person (including any modification to the definition of such term) in respect of any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Securities rather than pay such Additional Amounts (and the terms of any such option); (22) the obligation, if any, of the Company to permit the conversion of the Securities of such series into Class A Common Stock, preferred stock of the Company or other debt securities of the Company, and the terms and conditions on which such conversion shall be effected (including, without limitation, the initial conversion price or rate, the conversion period, any adjustment of the applicable conversion price and any requirements relative to the reservation of such shares for purposes of conversion; (23) whether and to what extent the Securities of the series are to be guaranteed by one or more of the Subsidiaries of the Company or by other Persons; and (24) any other terms of the series, including subordination provisions associated with the Securities of any series (which terms shall not be inconsistent with the provisions of this Indenture). 25 All Securities of any one series and the coupons appertaining to any Bearer Securities of such series, if any, shall be substantially identical except, in the case of Registered or Bearer Securities issued in global form, as to denomination and except as may otherwise be provided in or pursuant to such Board Resolution or in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the Holders, for issuances of additional Securities of such series. If any of the terms of the Securities of any series are established by action taken pursuant to one or more Board Resolutions or supplemental indentures, a copy of an appropriate record of such action(s) shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order for authentication and delivery of such Securities. SECTION 302. Denominations. The Securities of each series shall be issuable ------------- as Bearer Securities, as Registered Securities or in any combination thereof, and in such denominations and amounts as are specified as contemplated by Section 301. With respect to any series denominated in Dollars, in the absence of any such provisions with respect to the Securities of any series, the Registered Securities of such series, other than Registered Securities issued in global form (which may be of any denomination), shall be issuable in denominations of $1,000 and any integral multiple thereof and the Bearer Securities of such series, other than Bearer Securities issued in global form (which may be of any denomination), shall be issuable in denominations of $5,000. SECTION 303. Execution, Authentication, Delivery and Dating. The ---------------------------------------------- Securities and any coupons shall be executed on behalf of the Company by its Chief Executive Officer, its President or any Executive Vice President and shall be attested by the Company's Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities and any coupons may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Securities and such coupons. Any Securities or any coupons bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities or any coupons. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, together with any coupons, executed by the Company, to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee shall authenticate and deliver such Securities in accordance with the Company Order; provided, however, that, in connection with its original -------- ------- issuance, no Bearer Security shall be mailed or otherwise delivered to any location in the United States; and provided, further, that, unless otherwise -------- ------- specified with respect to any 26 series of Securities pursuant to Section 301, a Bearer Security may be delivered in connection with its original issuance only if the Person entitled to receive such Bearer Security has furnished a certificate to Euroclear or CEDEL, as the case may be, in the form set forth in Exhibit A-1 to this Indenture or such other certificate as may be specified with respect to any series of Securities pursuant to Section 301, dated no earlier than 15 days prior to the earlier of the date on which such Bearer Security is delivered and the date on which any temporary Security first becomes exchangeable for such Bearer Security in accordance with the terms of such temporary Security and this Indenture. Except as permitted by Section 306, the Trustee shall not authenticate and deliver any Bearer Security unless all appurtenant coupons for interest then matured have been detached and canceled. If all of the Securities of any series are not to be issued at one time and if the Board Resolution or supplemental indenture establishing such series so permits, such Company Order may set forth procedures acceptable to the Trustee for the issuance of such Securities and determining the terms of particular Securities of such series, such as the interest rate or formula, maturity date, date of issuance and date from which interest shall accrue. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities and any coupons appertaining thereto, the Trustee shall be entitled to receive, and (subject to Section 315(a) through 315(d) of the Trust Indenture Act) shall be fully protected in relying on: (1) an Opinion of Counsel complying with Section 102 and stating that: (A) the form or forms of such Securities and any coupons appertaining thereto have been, or will have been upon compliance with such procedures as may be specified therein, established in conformity with the provisions of this Indenture; (B) the terms of such Securities and any coupons appertaining thereto have been, or will have been upon compliance with such procedures as may be specified therein, established in conformity with the provisions of this Indenture; and (C) such Securities, together with any coupons appertaining thereto, when executed by the Company, completed pursuant to such procedures as may be specified therein and delivered by the Company to the Trustee for authentication in accordance with this Indenture, authenticated and delivered by the Trustee in accordance with this Indenture and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or 27 affecting the enforcement of creditors' rights generally and to general equitable principles and to such other matters as may be specified therein; and (2) a Company Certificate complying with Section 102 and stating that all conditions precedent provided for in this Indenture relating to the issuance of such Securities have been, or will have been upon compliance with such procedures as may be specified therein, complied with and that, to the best of the knowledge of the signers of such certificate, no Event of Default with respect to such Securities has occurred and is continuing. The Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties, obligations or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all the Securities of any series are not to be issued at one time, it shall not be necessary to deliver a Company Order, an Opinion of Counsel or a Company Certificate otherwise required pursuant to the preceding paragraph at the time of issuance of each Security of such series, but such order, opinion and certificate with appropriate modifications to cover such future issuances, shall be delivered at or before the time of issuance of the first Security of such series. Each Registered Security shall be dated the date of its authentication and each Bearer Security shall be dated as of the date specified as contemplated by Section 301. No Security or coupon shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security or the Security to which such coupon appertains a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized officer, and such certificate on any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security has been authenticated and delivered hereunder but never issued and sold by the Company, and the Company delivers such Security to the Trustee for cancellation as provided in Section 309 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued or sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 304. Temporary Securities. -------------------- (a) Pending the preparation of definitive Securities of any series, the Company may execute, and upon a Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or 28 otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form, or, if authorized, in bearer form (with or without coupons), and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in global form. Except in the case of temporary Securities in global form (which shall be exchanged in accordance with Section 304(b) or as otherwise provided in or pursuant to a Board Resolution), if temporary Securities of any series are issued, the Company shall cause definitive Securities of such series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for such series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, together with any non-matured coupons appertaining thereto, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations; provided, however, that no -------- ------- definitive Bearer Security shall be delivered in exchange for a temporary Registered Security; and provided, further, that a definitive Bearer -------- ------- Security shall be delivered in exchange for a temporary Bearer Security only in compliance with the conditions set forth in Section 303. Until so exchanged, the temporary Securities or coupons appertaining thereto of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities or coupons appertaining thereto of such series. (b) Unless otherwise provided as contemplated in Section 301, this Section 304(b) shall govern the exchange of temporary Securities issued in global form other than through the facilities of DTC. If any such temporary Security is issued in global form, then such temporary global Security shall, unless otherwise provided therein, be delivered to the London office of a depositary or common depositary (the "Common Depositary"), for the ----------------- benefit of Euroclear and CEDEL. Without unnecessary delay but in any event not later than the date specified in, or determined pursuant to the terms of, any such temporary global Security (the "Exchange Date"), the Company shall deliver to the ------------- Trustee definitive Securities, in an aggregate principal amount equal to the principal amount of such temporary global Security, executed by the Company. On or after the Exchange Date, such temporary global Security shall be surrendered by the Common Depositary to the Trustee, as the Company's agent for such purpose, to be exchanged, in whole or from time to time in part, for definitive Securities without charge, and the Trustee shall authenticate and deliver, in the name of Euroclear or CEDEL, as the case may be, in exchange for each 29 portion of such temporary global Security, an equal aggregate principal amount of definitive Securities of or within the same series of authorized denominations and of like tenor as the portion of such temporary global Security to be exchanged. The definitive Securities to be delivered in exchange for any such temporary global Security shall be in bearer form, registered form, permanent global bearer form or permanent global registered form, or any combination thereof, as specified as contemplated by Section 301, and, if any combination thereof is so specified, as requested by the Common Depositary; provided, however, that, unless otherwise specified in such temporary -------- ------- global Security, upon such presentation by the Common Depositary, such temporary global Security shall be accompanied by a certificate dated the Exchange Date or a subsequent date and signed by Euroclear as to the portion of such temporary global Security held for its account then to be exchanged and a certificate dated the Exchange Date or a subsequent date and signed by CEDEL as to the portion of such temporary global Security held for its account then to be exchanged, each in the form set forth in Exhibit A-2 to this Indenture or in such other form as may be established pursuant to Section 301; and provided, further, that definitive Bearer -------- ------- Securities shall be delivered in exchange for a portion of a temporary global Security only in compliance with the requirements of Section 303. Unless otherwise specified in such temporary global Security, the interest of a beneficial owner of Securities of a series in a temporary global Security shall be exchanged for definitive Securities of the same series and of like tenor following the Exchange Date when the account holder instructs Euroclear or CEDEL, as the case may be, to request such exchange on his behalf and delivers to Euroclear or CEDEL, as the case may be, a certificate in the form set forth in Exhibit A-1 to this Indenture (or in such other form as may be established pursuant to Section 301), dated no earlier than 15 days prior to the Exchange Date, copies of which certificate shall be available from the offices of Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed for such series of Securities and each Paying Agent. Unless otherwise specified in such temporary global Security, any such exchange shall be made free of charge to the beneficial owners of such temporary global Security, except that a Person receiving definitive Securities must bear the cost of insurance, postage, transportation and the like unless such Person takes delivery of such definitive Securities in person at the offices of Euroclear or CEDEL. Definitive Securities in bearer form to be delivered in exchange for any portion of a temporary global Security shall be delivered only outside the United States. Until exchanged in full as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder, except that, unless otherwise specified as contemplated by Section 301, interest payable on a temporary global Security on an Interest Payment Date for Securities of such series occurring prior to the applicable Exchange Date shall be payable to Euroclear and CEDEL on such Interest Payment Date upon delivery by Euroclear and 30 CEDEL to the Trustee of a certificate or certificates in the form set forth in Exhibit A-2 to this Indenture (or in such other forms as may be established pursuant to Section 301), for credit without further interest on or after such Interest Payment Date to the respective accounts of Persons who are the beneficial owners of such temporary global Security on such Interest Payment Date and who have each delivered to Euroclear or CEDEL, as the case may be, a certificate dated no earlier than 15 days prior to the Interest Payment Date occurring prior to such Exchange Date in the form set forth in Exhibit A-1 to this Indenture (or in such other forms as may be established pursuant to Section 301). Notwithstanding anything to the contrary herein contained, the certifications made pursuant to this paragraph shall satisfy the certification requirements of the preceding two paragraphs of this Section 304(b) and of the third paragraph of Section 303 of this Indenture and the interests of the Persons who are the beneficial owners of the temporary global Security with respect to which such certification was made will be exchanged for definitive Securities of the same series and of like tenor on the Exchange Date or the date of certification if such date occurs after the Exchange Date, without further act or deed by such beneficial owners. Except as otherwise provided in this paragraph, no payments of principal or interest owing with respect to a beneficial interest in a temporary global Security will be made unless and until such interest in such temporary global Security has been exchanged for an interest in a definitive Security. Any interest so received by Euroclear and CEDEL and not paid as herein provided shall be returned to the Trustee prior to the expiration of two years after such Interest Payment Date in order to be repaid to the Company. SECTION 305. Registration, Registration of Transfer and Exchange. The --------------------------------------------------- Company shall cause to be kept at the Corporate Trust Office of the Trustee or in any office or agency of the Company in a Place of Payment a register for each series of Securities (the registers maintained in such office or in any such office or agency of the Company in a Place of Payment being herein sometimes referred to collectively as the "Security Register") in which, subject to such ----------------- reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. The Trustee, at its Corporate Trust Office, is hereby initially appointed "Security Registrar" for ------------------ the purpose of registering Registered Securities and transfers of Registered Securities on such Security Register as herein provided. In the event that the Trustee ceases to be Security Registrar, it shall have the right to examine the Security Register at all reasonable times. Subject to the provisions of this Section 305, upon surrender for registration of transfer of any Registered Security of any series at any office or agency of the Company in a Place of Payment for such series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount, being a number not contemporaneously outstanding, and containing identical terms and provisions. 31 Subject to the provisions of this Section 305, at the option of the Holder, Registered Securities of any series may be exchanged for other Registered Securities of the same series, of any authorized denomination or denominations and of a like aggregate principal amount, containing identical terms and provisions, upon surrender of the Registered Securities to be exchanged at any such office or agency. Whenever any such Registered Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Registered Securities which the Holder making the exchange is entitled to receive. Unless otherwise specified with respect to any series of Securities as contemplated by Section 301, Bearer Securities may not be issued in exchange for Registered Securities. If (but only if) permitted as contemplated by Section 301, at the option of the Holder, Bearer Securities of any series may be exchanged for Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Bearer Securities to be exchanged at any such office or agency, with all unmatured coupons and all matured coupons in default appertaining thereto. If the Holder of a Bearer Security is unable to produce any such unmatured coupon or coupons or matured coupon or coupons in default, any such permitted exchange may be effected if the Bearer Securities are accompanied by payment in funds acceptable to the Company in an amount equal to the face amount of such missing coupon or coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Bearer Security surrenders to any Paying Agent any such missing coupon in respect of which such a payment has been made, such Holder shall be entitled to receive the amount of payment; provided, however, that, except as -------- ------- otherwise provided in Section 1002, interest represented by a coupon shall be payable only upon presentation and surrender of such coupons at an office or agency located outside the United States. Notwithstanding the foregoing, in case a Bearer Security of any series is surrendered at any such office or agency in a permitted exchange for a Registered Security of the same series and like tenor after the close of business at such office or agency on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date or proposed date for payment, as the case may be, and interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, any permanent global Security shall be exchangeable only as provided in this paragraph. If the depositary for any permanent global Security is DTC, then, unless the terms of such global Security expressly permit such global Security to be exchanged in whole or in part for 32 definitive Securities, a global Security may be transferred, in whole but not in part, only to a nominee of DTC, or by a nominee of DTC to DTC, or to a successor to DTC for such global Security selected and approved by the Company or to a nominee of such successor to DTC. If at any time DTC notifies the Company that it is unwilling or unable to continue as depositary for the applicable global Security or Securities or if at any time DTC ceases to be a clearing agency registered under the Exchange Act if so required by applicable law or regulation, the Company shall appoint a successor depositary with respect to such global Security or Securities. If (i) a successor depositary for such global Security or Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such unwillingness, inability or ineligibility, (ii) an Event of Default has occurred and is continuing and the beneficial owners representing a majority in principal amount of the applicable series of Securities represented by such global Security or Securities advise DTC to cease acting as depositary for such global Security or Securities or (iii) the Company, in its sole discretion, determines at any time that all Outstanding Securities (but not less than all) Securities of any series issued or issuable in the form of one or more global Securities shall no longer be represented by such global Security or Securities (provided, however, that -------- ------- the Company may not make such determination during the 40-day restricted period provided by Regulation S under the Securities Act or during any other similar period during which the Securities must be held in global form as may be required by the Securities Act), then, upon surrender of the global Security or Securities appropriately endorsed, the Company shall execute, and the Trustee shall authenticate and deliver definitive Securities of like series, rank, tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such global Security or Securities. If any beneficial owner of an interest in a permanent global Security is otherwise entitled to exchange such interest for Securities of such series and of like tenor and principal amount of another authorized form and denomination, as specified as contemplated by Section 301 and provided that any applicable notice provided in the permanent global Security has been given, then without unnecessary delay but in any event not earlier than the earliest date on which such interest may be so exchanged, upon surrender of the global Security or Securities appropriately endorsed, the Company shall execute, and the Trustee shall authenticate and deliver definitive Securities in aggregate principal amount equal to the principal amount of such beneficial owner's interest in such permanent global Security. On or after the earliest date on which such interests may be so exchanged, such permanent global Security shall be surrendered for exchange by DTC or such other depositary as is specified in the Company Order with respect thereto to the Trustee, as the Company's agent for such purpose; provided, however, that no such exchanges may ------- -------- occur during a period beginning at the opening of business 15 days before any selection of Securities to be redeemed and ending on the relevant Redemption Date if the Security for which exchange is requested may be among those selected for redemption; and provided, further, that no Bearer Security delivered in -------- ------- exchange for a portion of a permanent global Security shall be mailed or otherwise delivered to any location in the United States. If a Registered Security is issued in exchange for any portion of a permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, interest or Defaulted 33 Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such Registered Security, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom interest in respect of such portion of such permanent global Security is payable in accordance with the provisions of this Indenture. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Registered Security presented or surrendered for registration of transfer or for exchange or redemption shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge which may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any transfer. The Company or the Trustee, as applicable, shall not be required (i) to issue, register the transfer of or exchange any Security if such Security may be among those selected for redemption during a period beginning at the opening of business 15 days before selection of the Securities to be redeemed under Section 1103 and ending at the close of business on (A) if such Securities are issuable only as Registered Securities, the day of the mailing of the relevant notice of redemption and (B) if such Securities are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption or, if such Securities are also issuable as Registered Securities and there is no publication, the day of the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except, in the case of any Registered Security to be redeemed in part, the portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so selected for redemption except that such a Bearer Security may be exchanged for a Registered Security of such series and like tenor, provided that such Registered Security is simultaneously -------- surrendered for redemption, or (iv) to issue, register the transfer of or exchange any Security which has been surrendered for repayment at the option of the Holder, except the portion, if any, of such Security not to be so repaid. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any ------------------------------------------------ mutilated Security or a Security with a mutilated coupon appertaining thereto is surrendered to the Trustee or the Company, together with, in proper cases, such security or indemnity as may be required by the Company or the Trustee to save each of them or any of their agents harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new 34 Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to the surrendered Security. If there is delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security or coupon, and (ii) such security or indemnity as may be required by them to save each of them and any of their agents harmless, then, in the absence of notice to the Company or the Trustee that such Security or coupon has been acquired by a bona fide purchaser, the Company shall execute, and upon Company Request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security or in exchange for the Security to which a destroyed, lost or stolen coupon appertains (with all appurtenant coupons not destroyed, lost or stolen), a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains. Notwithstanding the provisions of the previous two paragraphs, in case any such mutilated, destroyed, lost or stolen Security or coupon has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains, pay such Security or coupon; provided, however, that payment of principal of (and premium, if any, -------- ------- on) and interest and Additional Amounts, if any, on any Bearer Securities shall, except as otherwise provided in Section 1002, be payable only at an office or agency located outside the United States and, unless otherwise specified as contemplated by Section 301, any interest on Bearer Securities shall be payable only upon presentation and surrender of the coupons appertaining thereto. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge which may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series and any coupons appertaining thereto issued pursuant to this Section in lieu of any destroyed, lost or stolen Security, or in exchange for a Security to which a destroyed, lost or stolen coupon appertains, shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security and any coupons appertaining thereto or the destroyed, lost or stolen coupon are at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of such series and any coupons appertaining thereto duly issued hereunder. 35 The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons. SECTION 307. Payment of Interest; Interest Rights Preserved. Except as ---------------------------------------------- otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, interest on any Registered Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; provided, however, that each -------- ------- installment of interest on any Registered Security may at the Company's option be paid by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears on the Security Register or (ii) transfer to an account maintained by the payee located inside the United States. Unless otherwise provided as contemplated by Section 301 with respect to the Securities of any series, payment of interest may be made, in the case of a Bearer Security, by transfer to an account maintained by the payee with a bank located outside the United States. Unless otherwise provided as contemplated by Section 301, every permanent global Security will provide that interest, if any, payable on any Interest Payment Date will be paid to DTC, Euroclear and/or CEDEL, as the case may be, with respect to that portion of such permanent global Security held for its account by Cede & Co. or the Common Depositary, as the case may be, for the purpose of permitting such party to credit the interest received by it in respect of such permanent global Security to the accounts of the beneficial owners thereof. In case a Bearer Security of any series is surrendered in exchange for a Registered Security of such series after the close of business (at an office or agency in a Place of Payment for such series) on any Regular Record Date and before the opening of business (at such office or agency) on the next succeeding Interest Payment Date, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date and interest will not be payable on such Interest Payment Date in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture. Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, any interest on any Registered Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date ("Defaulted Interest") shall ------------------ forthwith cease to be payable to the registered Holder thereof upon the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election, as provided in paragraph (1) or (2) below: 36 (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Registered Security of such series and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company shall deposit with the Trustee an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this paragraph. Thereupon, the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Registered Securities of such series at such Holder's address as it appears in the Security Register not less than 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Company cause a similar notice to be published at least once in an Authorized Newspaper in each place of payment, but such publications shall not be a condition precedent to the establishment of such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to paragraph (2) below. In case a Bearer Security of any series is surrendered at the office or agency in a Place of Payment for such series in exchange for a Registered Security of such series after the close of business at such office or agency on any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such proposed date of payment and Defaulted Interest will not be payable on such proposed date of payment in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture. (2) The Company may make payment of any Defaulted Interest on the Registered Securities of any series in any other lawful manner not inconsistent with the 37 requirements of any securities exchange on which such Securities may be listed, and on such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this paragraph, such manner of payment is deemed practicable by the Trustee. Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 308. Persons Deemed Owners. Prior to due presentment of a --------------------- Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Registered Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any, on) and (subject to Sections 305 and 307) interest and Additional Amounts, if any, on such Registered Security and for all other purposes whatsoever, whether or not such Registered Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Title to any Bearer Security and any coupons shall pass by delivery. The Company, the Trustee and any agent of the Company or the Trustee may treat the Holder of any Bearer Security and the Holder of any coupon as the absolute owner of such Security or coupon for the purpose of receiving payment thereof or on account thereof and for all other purposes whatsoever, whether or not such Security or coupon be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. None of the Company, the Trustee, any Paying Agent or the Security Registrar shall have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, with respect to any global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any depositary, as a Holder, with respect to such global Security or impair, as between such depositary and owners of beneficial interests in such global Security, the operation of customary practices governing the exercise of the rights of such depositary (or its nominee) as Holder of such global Security. SECTION 309. Cancellation. All Securities and coupons surrendered for ------------ payment, redemption, repayment at the option of the Holder, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and coupons and any Securities and coupons surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities 38 previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. If the Company so acquires any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. Canceled Securities and coupons held by the Trustee shall be destroyed by the Trustee and the Trustee shall deliver a certificate of such destruction to the Company unless the Company delivers a Company Order which directs their return to it. SECTION 310. Computation of Interest. Except as otherwise specified as ----------------------- contemplated by Section 301 with respect to Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months. SECTION 311. CUSIP Numbers. The Company in issuing the Securities may use ------------- "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall --------------------------------------- upon Company Request cease to be of further effect with respect to any series of Securities specified in such Company Request (except as to any surviving rights of registration of transfer or exchange of Securities of such series herein expressly provided for and any right to receive Additional Amounts, as provided in Section 1009), and the Trustee, upon receipt of a Company Order and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture as to such series when: (1) either: (A) all Securities of such series theretofore authenticated and delivered and any coupons appertaining thereto (other than (i) coupons appertaining to Bearer Securities surrendered for exchange for Registered Securities and maturing after such exchange, whose surrender is not required or has been waived as provided in Section 305, (ii) Securities of such series and coupons appertaining 39 thereto which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306, (iii) coupons appertaining to Securities called for redemption and maturing after the relevant Redemption Date, whose surrender has been waived as provided in Section 1106, and (iv) Securities of such series and coupons appertaining thereto for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all Securities of such series and, in the case of clauses (i) and (ii) below, any coupons appertaining thereto not theretofore delivered to the Trustee for cancellation: (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of clause (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee funds in trust for the purpose, in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable, and in an amount sufficient to pay and discharge the entire indebtedness on such Securities and such coupons not theretofore delivered to the Trustee for cancellation, for the principal (and premium, if any) and interest and Additional Amounts, if any, to the date of such deposit (in the case of Securities which have become due and payable) or the Stated Maturity or Redemption Date, as the case may be; (2) The Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) The Company has delivered to the Trustee a Company Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee and any predecessor Trustee under Section 606, the obligations of the Company 40 to any Authenticating Agent under Section 611 and, if money has been deposited with and held by the Trustee pursuant to subparagraph (B) of paragraph (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003, shall survive. SECTION 402. Application of Trust Funds. Subject to the provisions of the -------------------------- last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities, the coupons and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest and Additional Amounts, if any, for the payment of which such money has been deposited with or received by the Trustee, but such money need not be segregated from other funds except to the extent required by law. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. Subject to any modifications, additions or ----------------- deletions relating to any series of Securities as contemplated pursuant to Section 301, "Event of Default," whenever used herein with respect to any ---------------- particular series of Securities, means any one of the following events (whatever the reason for such Event of Default and whether or not it is voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest on or any Additional Amounts payable in respect of any Security of or within such series or of any coupon appertaining thereto, when such interest, Additional Amounts or coupon becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security of such series when the same becomes due and payable at its Maturity, or the failure to make an offer to purchase any Security of such series with respect to which a repurchase is required by the terms thereof; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of any Security of such series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture with respect to any Security of such series (other than a covenant or warranty a default in the performance of which or the breach of which is elsewhere specifically provided for in this Section), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of such series, a written 41 notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or ----------------- (5) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Company or any Restricted Subsidiary of the Company in an involuntary case or proceeding under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state, or foreign bankruptcy, insolvency, or other similar law or (ii) a decree or order adjudging the Company or any Restricted Subsidiary of the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of, or in respect of, the Company or any Restricted Subsidiary of the Company under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state or foreign bankruptcy, insolvency, or similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Restricted Subsidiary of the Company or of any substantial part of the Property or assets of the Company or any Restricted Subsidiary of the Company, or ordering the winding-up or liquidation of the affairs of the Company or any Restricted Subsidiary of the Company, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive calendar days; or (6) (i) the commencement by the Company or any Restricted Subsidiary of the Company of a voluntary case or proceeding under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state, or foreign bankruptcy, insolvency or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent; or (ii) the consent by the Company or any Restricted Subsidiary of the Company to the entry of a decree or order for relief in respect of the Company or any Restricted Subsidiary of the Company in an involuntary case or proceeding under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state, or foreign bankruptcy, insolvency, or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company or any Restricted Subsidiary of the Company; or (iii) the filing by the Company or any Restricted Subsidiary of the Company of a petition or answer or consent seeking reorganization or relief under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state or foreign bankruptcy, insolvency or other similar law; or (iv) the consent by the Company or any Restricted Subsidiary of the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary of the Company or of any substantial part of the Property or assets of the Company or any Restricted Subsidiary of the Company, or the making by the Company or any Restricted Subsidiary of the Company of an assignment for the benefit of creditors; or (v) the admission by the Company or any Restricted Subsidiary of the Company in writing of its inability to pay its debts generally 42 as they become due; or (vi) the taking of corporate action by the Company or any Restricted Subsidiary of the Company in furtherance of any such action. SECTION 502. Acceleration of Maturity; Rescission and Annulment. (1) If an -------------------------------------------------- Event of Default (other than an Event of Default set forth in Section 501(5) or (6)) with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case, unless the principal of all of the Outstanding Securities of such series already has become due and payable, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of such series may declare the principal (or, if any Securities are Original Issue Discount Securities or Indexed Securities, such portion of the principal as may be specified in the terms thereof) of all the Securities of such series and any accrued and unpaid interest thereon to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such declaration such principal or specified portion thereof and any accrued and unpaid interest thereon shall become immediately due and payable. If an Event of Default set forth in Section 501(5) or (6) occurs with respect to the Securities of any series, then in each such case, the principal of all the Securities of such series and any accrued and unpaid interest thereon shall be due and payable immediately, without notice to the Company and without any declaration or other act on the part of the Trustee or any Holder of any Securities of such series. (2) At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in principal amount of the Outstanding Securities of such series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (A) The Company has paid or deposited with the Trustee a sum sufficient to pay, in the currency, currency unit or composite currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series): (i) all overdue installments of interest on and any Additional Amounts payable in respect of all Outstanding Securities of such series and any coupons appertaining thereto; (ii) the principal of (and premium, if any, on) any Outstanding Securities of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates borne by or provided for in such Securities; (iii) to the extent that payment of such interest is lawful, interest on overdue installments of interest and any Additional Amounts at the rate or rates borne by or provided for in such Securities; and 43 (iv) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (B) all Events of Default with respect to Securities of such series, other than the nonpayment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on Securities of such series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right resulting therefrom. SECTION 503. Collection of Indebtedness and Suits for Enforcement by ------------------------------------------------------- Trustee. The Company covenants that if: - ------- (1) default is made in the payment of any installment of interest or Additional Amounts, if any, on any Security of any series or any coupon appertaining thereto when such interest or Additional Amount becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security of any series at its Maturity, then the Company shall, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of the Securities of such series and any such coupons, the whole amount then due and payable on such Securities and any such coupons for principal (and premium, if any) and interest and Additional Amounts, if any, with interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest is legally enforceable, on any overdue installments of interest or Additional Amounts, if any, at the rate or rates borne by or provided for in such Securities, and, in addition thereto, such further amount as is sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor on the Securities of such series and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor on the Securities of such series, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series and any coupons appertaining thereto by such appropriate judicial proceedings as the Trustee deems most effectual to protect and enforce any such rights, 44 whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of -------------------------------- any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor on the Securities of such series or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities of any series is then due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee has made any demand on the Company for the payment of overdue principal, premium, if any, or interest or Additional Amounts, if any) shall be entitled and empowered, by intervention in such proceeding or otherwise: (1) to file and prove a claim for the whole amount, or such lesser amount as may be provided for in the Securities of such series, of principal (and premium, if any) and interest and Additional Amounts, if any, owing and unpaid in respect of the Securities of such series and to file such other papers or documents and take such other action, including participating as a member of any official creditors committee appointed in the matter, as it may deem necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (2) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder of Securities of such series and any coupons appertaining thereto to make such payments to the Trustee, and in the event that the Trustee consents to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee and any predecessor Trustee, their agents and counsel, and any other amounts due the Trustee or any predecessor Trustee under Section 606. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security or coupon any plan of reorganization, arrangement, adjustment or composition affecting the Securities or coupons or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of a Security or coupon in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Securities or -------------------------------------------------------------- Coupons. All rights of action and claims under this Indenture or any of the - ------- Securities or any coupons may be prosecuted and enforced by the Trustee without the possession of any of the Securities or coupons or the production thereof in any proceeding relating thereto, and any such 45 proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities and coupons in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected by the ------------------------------ Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest or Additional Amounts, if any, on presentation of the Securities or coupons, or both, as the case may be, and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: (1) to the payment of all amounts due the Trustee and any predecessor Trustee under Section 606; (2) to the payment of the amounts then due and unpaid on the Securities and coupons for principal (and premium, if any) and interest and Additional Amounts, if any, payable, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the aggregate amounts due and payable on such Securities and coupons for principal (and premium, if any) and interest and Additional Amounts, if any, respectively; and (3) to the payment of the remainder, if any, to the Company. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 506. At least 15 calendar days before such record date, the Company shall mail to each Holder and the Trustee a notice that states such record date, the payment date and amount to be paid. The Trustee may mail such notice in the name and at the expense of the Company. SECTION 507. Limitation on Suits. No Holder of any Security of any series ------------------- or any coupon appertaining thereto shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of such series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of such series have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; 46 (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of such series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium, ------------------------------------------------------------- Interest and Additional Amounts. Notwithstanding any other provision in this - ------------------------------- Indenture, the Holder of any Security or coupon shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any, on ) and (subject to Sections 305 and 307) interest and Additional Amounts, if any, on such Security or payment of such coupon on or after the respective due dates expressed in such Security or coupon (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired or affected without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any ---------------------------------- Holder of a Security or coupon has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders of Securities and coupons shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided ------------------------------ with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons in the last paragraph of Section 306, no right or remedy herein conferred on or reserved to the Trustee or to the Holders of Securities or coupons is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 47 SECTION 511. Delay or Omission Not Waiver. No delay or omission of the ---------------------------- Trustee or of any Holder of any Security or coupon to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders of Securities or coupons, as the case may be. SECTION 512. Control by Holders of Securities. The Holders of not less -------------------------------- than a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Securities of such series, provided that: - -------- (1) such direction is not in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) the Trustee need not take any action which might involve it in personal liability or be unduly prejudicial to the Holders of Securities of such series not joining therein (but the Trustee shall have no obligation as to the determination of such undue prejudice). SECTION 513. Waiver of Past Defaults. The Holders of at least a majority ----------------------- in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series and any coupons appertaining thereto waive any past default hereunder with respect to such series and its consequences, except a default: (1) in the payment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on any Security of such series or any coupons appertaining thereto, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected thereby. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right resulting therefrom. SECTION 514. Waiver of Usury, Stay or Extension Laws. The Company covenants --------------------------------------- (to the extent which it may lawfully do so) that it shall not at any time insist on, or plead, or in any 48 manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent which it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 515. Undertaking for Costs. All parties to this Indenture agree, --------------------- and each Holder of any Security by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of any undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). ARTICLE SIX THE TRUSTEE SECTION 601. Notice of Defaults. Within 90 days after the occurrence of ------------------ any default hereunder known to a Responsible Officer with respect to the Securities of any series, the Trustee shall give to the Holders of the Securities of such series, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, notice of such default hereunder known to the Trustee, unless such default has been cured or waived; provided, however, that, -------- ------- except in the case of a default in the payment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on any Security of such series, or in the payment of any sinking fund installment with respect to the Securities of such series, the Trustee shall be protected in withholding such notice if and so long as Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of the Securities and coupons of such series; and provided, further, that in the -------- ------ case of any default or breach of the character specified in clause (4) of Section 501 with respect to the Securities of such series and any coupons appertaining thereto, no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purposes of this Section, the term "default" means any event which is, or after notice or lapse of time or both ------- would become, an Event of Default with respect to the Securities of such series. SECTION 602. Certain Rights of Trustee. Subject to the provisions of ------------------------- Section 315(a) through 315(d) of the Trust Indenture Act: 49 (1) the Trustee shall perform only such duties as are expressly undertaken by it to perform under this Indenture; (2) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (3) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order (other than delivery of any Security, together with any coupons appertaining thereto, to the Trustee for authentication and delivery pursuant to Section 303, which shall be sufficiently evidenced as provided therein) and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution; (4) whenever, in the administration of this Indenture, the Trustee deems it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence is specifically prescribed herein) may, in the absence of bad faith on its part, rely on a Company Certificate; (5) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (6) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities of any series or any coupons appertaining thereto pursuant to this Indenture, unless such Holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (7) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee determines to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (8) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee 50 shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (9) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred on it by this Indenture; (10) The Trustee shall not be deemed to have knowledge of any event or fact upon the occurrence of which it may be required to take action hereunder unless a Responsible Officer of the Trustee has actual knowledge of the occurrence of such event or fact; and (11) The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 603. Not Responsible for Recitals or Issuance of Securities. The ------------------------------------------------------ recitals contained herein and in the Securities, except the Trustee's certificate of authentication, and in any coupons shall be taken as the statements of the Company and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities or any coupons, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 604. May Hold Securities. The Trustee, any Paying Agent, Security ------------------- Registrar, Authenticating Agent or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and coupons and, subject to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such other agent. SECTION 605. Money Held in Trust; Trustee Permitted Investments. Money -------------------------------------------------- held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on, or investment of, any money received by it hereunder except as otherwise agreed with and for the sole benefit of the Company. Pending their use under this Indenture, moneys held by the Trustee hereunder may be invested in Trustee Permitted Investments maturing or redeemable at the option of the holder at or before the time when such moneys are expected to be needed by the Trustee and shall be 51 so invested pursuant to a Company Order if no Event of Default known to the Trustee then exists under this Indenture and otherwise at the discretion of the Trustee. Any investment pursuant to this Section 605 shall be held by the Trustee as a part of the moneys held by the Trustee hereunder, as applicable, and shall be sold or redeemed to the extent necessary to make payments or transfers or anticipated payments from such moneys. The Trustee shall be entitled to rely on all written investment instructions provided by the Company hereunder, and shall have no duty to monitor the compliance thereof with the restrictions set forth herein. The Trustee shall have no responsibility or liability for any depreciation in the value of any investment or for any loss, direct or indirect, resulting from any investment made in accordance with a Company Order. The Trustee shall be without liability to the Company or any Holder or any other person in the event that any investment made in accordance with a Company Order shall cause any person to incur any liability or rebates or other monies payable pursuant to the Internal Revenue Code of 1986, as amended. Any interest realized on investments and any profit realized upon the sale or other disposition thereof shall be credited to moneys held by the Trustee hereunder and any loss shall be charged thereto. SECTION 606. Compensation and Reimbursement. The Company agrees: ------------------------------ (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse each of the Trustee and any predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by it in connection with its administration of the trust hereunder (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except to the extent any such expense, disbursement or advance may be attributable to its negligence or bad faith; and (3) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any loss, liability or expense, arising out of or in connection with the acceptance or administration of the trust or trusts or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder except to the extent any such loss, liability or expense may be attributable to its own negligence or bad faith. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a lien prior to the Securities on all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (or premium, if any, on) or interest or Additional Amounts, if any, on particular Securities or any coupons. 52 The Company's payment obligations pursuant to this Section 606 shall survive the resignation or removal of the Trustee and discharge of this Indenture. Subject to any other rights available to the Trustee under applicable bankruptcy law, when the Trustee incurs expenses after the occurrence of a Default specified in Section 501(5) or Section 501(6) hereof, the expenses are intended to constitute expenses of administration under bankruptcy law. SECTION 607. Trustee Eligibility; Conflicting Interests. There shall at all ------------------------------------------ times be a Trustee hereunder which is eligible to act as Trustee under Section 310(a)(1) of the Trust Indenture Act and has a combined capital and surplus of at least $50,000,000. If such Trustee publishes reports of condition at least annually, pursuant to law or the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Trustee shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. No obligor on the Securities or Affiliate of any such obligor shall serve as Trustee on such Securities. If at any time the Trustee ceases to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 608. Resignation and Removal; Appointment of Successor. ------------------------------------------------- (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 609. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee has not been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Trustee and the Company. (d) If at any time: (1) the Trustee fails to comply with the provisions of Section 310(b) of the Trust Indenture Act after written request therefor by the Company or any Holder of a Security who has been a bona fide Holder of a Security for at least six months, unless the Trustee's duty to resign is stayed in accordance with the provisions of Section 310(b) of the Trust Indenture Act, or 53 (2) the Trustee ceases to be eligible under Section 607 and fails to resign after written request therefor by the Company or any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or (3) the Trustee shall become incapable of acting or a decree or order for relief by a court having jurisdiction in the premises shall have been entered in respect of the Trustee in an involuntary case under the United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or similar law; or a decree or order by a court having jurisdiction in the premises shall have been entered for the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Trustee or of its Property and assets or affairs, or any public officer shall take charge or control of the Trustee or of its Property and assets or affairs for the purpose of rehabilitation, conservation, winding up or liquidation, or (4) the Trustee shall commence a voluntary case under the United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or similar law or shall consent to the appointment of or taking possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Trustee or its Property and assets or affairs, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall take corporate action in furtherance of any such action, then, in any such case, (i) the Company, by or pursuant to a Board Resolution, may remove the Trustee and appoint a successor Trustee with respect to all Securities, or (ii) subject to Section 315(e) of the Trust Indenture Act, any Holder of a Security who has been a bona fide Holder of a Security for at least six months may, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee resigns, is removed or becomes incapable of acting, or if a vacancy occurs in the office of Trustee for any cause with respect to the Securities of one or more series, the Company, by or pursuant to a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of such series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series). If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series is appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed 54 shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series has been so appointed by the Company or the Holders of Securities and accepted appointment in the manner hereinafter provided, any Holder of a Security who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series in the manner provided for notices to the Holders of Securities in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 609. Acceptance of Appointment by Successor. -------------------------------------- (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall execute, acknowledge and deliver to the Company and the retiring Trustee an instrument accepting such appointment, and, thereupon, the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its claim, if any, provided for in Section 606. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto, pursuant to Article Nine, wherein each successor Trustee shall accept such appointment and which (i) shall contain such provisions as are necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of such series to which the appointment of such successor Trustee relates, (ii) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as are necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of such series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee and (iii) shall add to or change any of the provisions of this Indenture 55 as are necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co- trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and, upon the execution and delivery of such supplemental indenture, the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of such series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of such series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article and under the Trust Indenture Act. SECTION 610. Merger, Conversion, Consolidation or Succession to Business. ----------------------------------------------------------- Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such -------- corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities or coupons have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities or coupons so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities or coupons. In case any Securities or coupons have not been authenticated by such predecessor Trustee, any such successor Trustee may authenticate and deliver such Securities or coupons, in either its own name or that of its predecessor Trustee, with the full force and effect which this Indenture provides for the certificate of authentication of the Trustee. SECTION 611. Appointment of Authenticating Agent. At any time when any of ----------------------------------- the Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer 56 or partial redemption or repayment thereof, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, a copy of which instrument shall be promptly furnished to the Company. Whenever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and, except as may otherwise be provided pursuant to Section 301, shall at all times be a bank or trust company or corporation organized and doing business and in good standing under the laws of the United States of America or of any State or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State or District of Columbia authorities. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time an Authenticating Agent ceases to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent is a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation is otherwise eligible under this Section, without the execution or filing of any paper or further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent for any series of Securities may at any time resign by giving written notice of resignation to the Trustee for such series and the Company. The Trustee for any series of Securities may at any time terminate the agency of an Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent ceases to be eligible in accordance with the provisions of this Section, the Trustee for such series may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment to all Holders of Securities of or within the series with respect to which such Authenticating Agent will serve in the manner set forth in Section 106. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. 57 The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation including reimbursement of its reasonable expenses for its services under this Section. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to or in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication substantially in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By:_________________________________, as Authenticating Agent By:_________________________________ Authorized Officer ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Disclosure of Names and Addresses of Holders. Every Holder of -------------------------------------------- Securities or coupons, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any Authenticating Agent nor any Paying Agent nor any Security Registrar shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders of Securities in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act. SECTION 702. Reports by Trustee. Within 60 days after August 1 of each year ------------------ commencing with the first August 1 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in Section 313(c) of the Trust Indenture Act a brief report dated as of such August 1 if required by Section 313(a) of the Trust Indenture Act. SECTION 703. Reports by Company. The Company will: ------------------ 58 (1) deliver to the Trustee and each Holder, within 15 days after the same are filed with the Commission, copies of all reports and information (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe), if any, exclusive of exhibits, which the Company and any guarantors are required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act or pursuant to the immediately following sentence. So long as any Securities remain outstanding, the Company and any Subsidiary guarantors shall file with the Commission such reports as may be required pursuant to Section 13 of the Exchange Act in respect of a security registered pursuant to Section 12 of the Exchange Act. If the Company or any Subsidiary guarantors are not subject to the requirements of Section 13 or 15(d) of the Exchange Act (or otherwise required to file reports pursuant to the immediately preceding sentence), the Company shall deliver to the Trustee and to each Holder, within 15 days after the Company and any Subsidiary guarantors would have been required to file such information with the Commission were they required to do so, financial statements, including any notes thereto (and, in the case of a fiscal year end, an auditors' report by an independent certified public accounting firm of established national reputation), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," substantially equivalent to that which they would have been required to include in such quarterly or annual reports, information, documents or other reports if they had been subject to the requirements of Section 13 or 15(d) of the Exchange Act. Notwithstanding the foregoing, to the extent then permitted by federal securities laws or regulations or "no- action" letters interpreting such laws or regulations, separate financial statements and other information of any Subsidiary guarantors shall not be required. The Company and any Subsidiary guarantors shall also comply with the other provisions of Section 314(a) of the Trust Indenture Act; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (3) transmit by mail to the Holders of Securities, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission; and (4) delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants 59 hereunder (as to which the Trustee is entitled to rely exclusively on Company Certificates). SECTION 704. Company to Furnish Trustee Names and Addresses of Holders. The --------------------------------------------------------- Company shall furnish or cause to be furnished to the Trustee: (a) semi-annually, not later than 15 days after the Regular Record Date for interest for each series of Securities, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Registered Securities of such series as of such Regular Record Date, or if there is no Regular Record Date for interest for such series of Securities, semi-annually, on such dates as are set forth in the Board Resolution or indenture supplemental hereto authorizing such series, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that, so long as the Trustee is the Security Registrar, no - -------- ------- such list shall be required to be furnished. ARTICLE EIGHT CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE SECTION 801. Consolidations and Mergers of Company and Sales, Leases and ----------------------------------------------------------- Conveyances. Except as otherwise provided with respect to any series of - ----------- Securities, the Company may consolidate or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another Person, provided that in any such case (i) either the Company shall be the continuing corporation or the surviving Person or the Person formed by or surviving such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized and validly existing under the laws of the United States, any state thereof or the District of Columbia; (ii) such surviving Person assumes all the obligations, including the due and punctual payment of the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on all Securities, according to their tenor, and the due and punctual performance and observance of all covenants and conditions, of the Company under the Securities and the Indenture pursuant to a supplemental Indenture in form reasonably satisfactory to the Trustee; and (iii) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or any Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of the transaction, no Event of Default and no event which, after notice or the lapse of time or both, would become an Event of Default shall have occurred and be continuing. 60 SECTION 802. Rights and Duties of Successor Entity. In case of any such ------------------------------------- consolidation, merger, sale, lease or conveyance and upon any such assumption by the successor entity, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part, and the predecessor entity, except in the event of a lease, shall be relieved of any further obligation under this Indenture and the Securities. Such successor entity thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder which theretofore have not been signed by the Company and delivered to the Trustee; and, upon the order of such successor entity, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such successor entity thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, lease or conveyance, such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. SECTION 803. Company Certificate and Opinion of Counsel. Any consolidation, ------------------------------------------ merger, sale, lease or conveyance permitted under Section 801 is also subject to the condition that the Trustee receive a Company Certificate and an Opinion of Counsel to the effect that any such consolidation, merger, sale, lease or conveyance, and the assumption by any successor entity, complies with the provisions of this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without -------------------------------------------------- the consent of any Holders of Securities or coupons, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for 61 the benefit of such series) or to surrender any right or power herein conferred on the Company; or (3) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are expressly being included solely for the benefit of such series); provided, however, that, in respect of any such -------- ------- additional Events of Default, such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount of such series of Securities to which such additional Events of Default apply to waive such default; or (4) to add to or change any of the provisions of this Indenture to provide that Bearer Securities may be registrable as to principal, to change or eliminate any restrictions on the payment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on Bearer Securities, to permit Bearer Securities to be issued in exchange for Registered Securities, to permit Bearer Securities to be issued in exchange for Bearer Securities of other authorized denominations or to permit or facilitate the issuance of Securities in uncertificated form, provided that -------- any such action shall not adversely affect the interests of the Holders of Securities of any series or any coupons appertaining thereto in any material respect; or (5) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only -------- when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or (6) to secure the Securities; or (7) to establish the form or terms of Securities of any series and any coupons appertaining thereto as permitted by Sections 201 and 301; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as are necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; or (9) to cure any ambiguity, to correct or supplement any provision hereof which may be defective or inconsistent with any other provision hereof, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture or to make any other changes, provided -------- that, in each case, such provisions shall not adversely affect the 62 interests of the Holders of Securities of any series or any coupons appertaining thereto in any material respect; or (10) to supplement any of the provisions of this Indenture to such extent as are necessary to permit or facilitate the defeasance and discharge of any series of Securities pursuant to Sections 401, 1402 and 1403; provided that, in each case, any such action shall not adversely -------- affect the interests of the Holders of Securities of such series and any coupons appertaining thereto or any other series of Securities in any material respect; or (11) to make any change that does not adversely affect the legal rights under this Indenture of any Holder of Securities of any series; or (12) to add a guarantor of the Securities of any series; or (13) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act. SECTION 902. Supplemental Indentures with Consent of Holders. With the ----------------------------------------------- consent of the Holders of not less than a majority in principal amount of all Outstanding Securities affected by such supplemental indenture, by Act of such Holders delivered to the Company and the Trustee, the Company (when authorized by or pursuant to a Board Resolution) and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities and coupons under this Indenture; provided, however, that no such -------- ------- supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby: (1) change the Stated Maturity of the principal of (or premium, if any, on) or any installment of principal of or interest on, any Security; or reduce the principal amount thereof or the rate or amount of interest thereon or any Additional Amounts payable in respect thereof, or any premium payable upon the redemption thereof, or change any obligation of the Company to pay Additional Amounts pursuant to Section 1009 (except as contemplated by clause (1) of Section 801 and permitted by clause (1) of Section 901), or reduce the amount of the principal of an Original Issue Discount Security which would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502 or the amount thereof provable in bankruptcy pursuant to Section 504; or adversely affect any right of repayment at the option of the Holder of any Security, or change any Place of Payment where, or the currency or currencies, currency unit or units or composite currency or currencies in which, the principal of any Security or any premium or any Additional Amounts payable in respect thereof or the interest thereon is payable; or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment at the option of the Holder, on or after the Redemption Date or the Repayment Date, as the case may be); or 63 (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver with respect to such series (or compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or reduce the requirements of Section 1504 for quorum or voting; or (3) modify any of the provisions of this Section, Section 513 or Section 1010, except to increase the required percentage to effect such action or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; or (4) release any guarantors from their guarantees of the Securities, or, except as contemplated in any supplemental indenture, make any change in a guarantee of a Security that would adversely affect the interests of the Holders, or (5) modify the ranking or priority of the Securities. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act approves the substance thereof. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. SECTION 903. Execution of Supplemental Indentures. In executing, or ------------------------------------ accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying on, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any --------------------------------- supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder and of any coupon appertaining thereto shall be bound thereby. 64 SECTION 905. Conformity with Trust Indenture Act. Every supplemental ----------------------------------- indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. -------------------------------------------------- Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall, if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company so determines, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. SECTION 907. Notice of Supplemental Indentures. Promptly after the --------------------------------- execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Security affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, Interest and Additional ------------------------------------------------------ Amounts. The Company covenants and agrees for the benefit of the Holders of each - ------- series of Securities that it shall duly and punctually pay to the Trustee on the applicable date of payment the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on the Securities of such series in accordance with the terms of such series of Securities, any coupons appertaining thereto and this Indenture. Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, any interest and Additional Amounts, if any, on Bearer Securities on or before Maturity, other than Additional Amounts, if any, payable as provided in Section 1009 in respect of principal of (or premium, if any, on) such a Security, shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature. Unless otherwise specified with respect to Securities of any series pursuant to Section 301, at the option of the Company, all payments of principal may be paid by check to the registered Holder of the Registered Security or other person entitled thereto against surrender of such Security. SECTION 1002. Maintenance of Office or Agency. If Securities of a series ------------------------------- are issuable only as Registered Securities, the Company shall maintain in each Place of Payment for any series of Securities an office or agency where Securities of such series may be presented or surrendered for payment, where Securities of such series may be surrendered for registration of transfer or exchange and where notices and demands to or on the Company in respect of the Securities of such series and this Indenture may be served. If Securities of a series are issuable as Bearer Securities, the Company shall maintain: (i) in the Borough of Manhattan, The City of 65 New York, an office or agency where any Registered Securities of such series may be presented or surrendered for payment, where any Registered Securities of such series may be surrendered for exchange, where notices and demands to or on the Company in respect of the Securities of such series and this Indenture may be served and where Bearer Securities of such series and any coupons appertaining thereto may be presented or surrendered for payment in the circumstances described in the following paragraph (and not otherwise); (ii) subject to any laws or regulations applicable thereto, in a Place of Payment for such series which is located outside the United States, an office or agency where Securities of such series and any coupons appertaining thereto may be presented and surrendered for payment (including payment of any Additional Amounts payable on Securities of such series pursuant to Section 1009); provided, however, that if -------- ------- the Securities of such series are listed on the Luxembourg Stock Exchange, The International Stock Exchange or any other stock exchange located outside the United States and such stock exchange so requires, the Company shall maintain a Paying Agent for the Securities of such series in Luxembourg, London or any other required city located outside the United States, as the case may be, so long as the Securities of such series are listed on such exchange; and (iii) subject to any laws or regulations applicable thereto, in a Place of Payment for such series located outside the United States an office or agency where any Securities of such series may be surrendered for registration of transfer, where Securities of such series may be surrendered for exchange and where notices and demands to or on the Company in respect of the Securities of such series and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, except that Bearer Securities of such series and the related coupons may be presented and surrendered for payment (including payment of any Additional Amounts payable on Bearer Securities of such series pursuant to Section 1009) at the offices specified in the Security, in London, England, and the Company hereby appoints the same as its agent to receive all such presentations, surrenders, notices and demands, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. Unless otherwise specified with respect to any Securities pursuant to Section 301, no payment of the principal of (or premium, if any, on) or interest or Additional Amounts, if any, on Bearer Securities shall be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States; provided, however, that, if the Securities of a series are -------- ------- payable in Dollars, payment of the principal of (and premium, if any, on) and interest and Additional Amounts; if any, on any Bearer Security shall be made at the office of the Company's Paying Agent in the Borough of Manhattan, The City of New York, if (but only if) payment in Dollars of the full amount of such principal, premium, interest or Additional Amounts, as the case may be, at all offices or agencies outside the United States maintained for the purpose by the Company in accordance with this Indenture, is illegal or effectively precluded by exchange controls or other similar restrictions. 66 The Company may from time to time designate one or more other offices or agencies where the Securities of one or more series and any coupons appertaining thereto may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such -------- ------- designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities of any series for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless otherwise specified with respect to any Securities pursuant to Section 301, the Company hereby designates as a Place of Payment for each series of Securities the office or agency of the Company in The City of New York, and initially appoints the Trustee at its Corporate Trust Office as Paying Agent in such city and as its agent to receive all such presentations, surrenders, notices and demands. Unless otherwise specified with respect to any Securities pursuant to Section 301, if and so long as the Securities of any series (i) are denominated in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long as it is required under any other provision of the Indenture, then the Company shall maintain with respect to each such series of Securities, or as so required, at least one exchange rate agent. SECTION 1003. Money for Securities Payments to Be Held in Trust. If the ------------------------------------------------- Company at any time acts as its own Paying Agent with respect to any series of any Securities and any coupons appertaining thereto, it shall, on or before each due date of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on any of the Securities of such series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (and premium, if any) or interest or Additional Amounts, if any, so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure so to act. Whenever the Company has one or more Paying Agents for any series of Securities and any coupons appertaining thereto, it shall, on or before each due date of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on any Securities of such series, deposit with a Paying Agent a sum (in the currency or currencies, currency unit or units or composite currency or currencies described in the preceding paragraph) sufficient to pay the principal (and premium, if any) or interest or Additional Amounts, if any, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium, interest or Additional Amounts and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of its action or failure so to act. The Company shall cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent shall: 67 (1) hold all sums held by it for the payment of principal of (and premium, if any, on) or interest or Additional Amounts, if any, on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor on the Securities) in the making of any such payment of principal (and premium, if any) or interest or Additional Amounts, if any; and (3) at any time during the continuance of any such default, on the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee on the same trusts as those on which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Except as otherwise provided in the Securities of any series, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any, on) or interest or Additional Amounts, if any, on any Security of any series and remaining unclaimed for two years after such principal (and premium, if any) interest or Additional Amounts, if any, has become due and payable shall be paid to the Company upon Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment of the principal of (and premium, if any, on) and interest and any Additional Amounts, if any, on any Security of such series, without interest thereon, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required - -------- ------- to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. Existence. Subject to Article Eight, the Company shall do or --------- cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory) and franchises of the Company and each of its Restricted Subsidiaries; provided that the Company and any such Restricted Subsidiary shall not be required to preserve the corporate existence of any such Restricted Subsidiary or any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer 68 desirable in the conduct of the business of the Company and provided further that any Restricted Subsidiary may consolidate with, merge into, or sell, convey, lease or otherwise dispose of all of its property and assets to the Company or any wholly owned Restricted Subsidiary. SECTION 1005. Maintenance of Property. The Company shall cause all Property ----------------------- used or useful in the conduct of its business or the business of any of its Restricted Subsidiaries and material to the Company and its Restricted Subsidiaries taken as a whole to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as, in the judgment of the Company, may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided that nothing in this Section 1005 shall prevent the Company from discontinuing the operation or maintenance of any of such Property if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any of its Restricted Subsidiaries. SECTION 1006. [intentionally omitted] SECTION 1007. Payment of Taxes and Other Claims. The Company shall pay or --------------------------------- discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon the Company or any of its Restricted Subsidiaries or upon the income, profits or Property of the Company or any of its Restricted Subsidiaries and (b) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the Property of the Company or any of its Restricted Subsidiaries; provided that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings upon stay of execution or the enforcement thereof and for which adequate reserves in accordance with GAAP or other appropriate provision has been made. SECTION 1008. Statement as to Compliance. The Company shall deliver to the -------------------------- Trustee within 120 calendar days after the end of each fiscal year of the Company ending after the date hereof, a brief certificate from its principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture and, in the event of any noncompliance, specifying such noncompliance and the nature and status thereof. For purposes of this Section 1008, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. The Company shall deliver written notice to the Trustee within 30 calendar days after any executive officer of the Company becomes aware of the occurrence of any event which constitutes, or with the giving of notice or the lapse of time or both would constitute, a Default or Event of Default, describing such Default or Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. 69 SECTION 1009. Additional Amounts. If any Securities of a series provide for ------------------ the payment of Additional Amounts, the Company covenants and agrees for the benefit of the Holders of Securities of such series that it shall pay to the Holder of any Security of such series or any coupon appertaining thereto Additional Amounts as may be specified as contemplated by Section 301. Whenever in this Indenture there is mentioned, in any context except in the case of clause (1) of Section 502, the payment of the principal of or of any premium or interest on, or in respect of, any Security of any series or payment of any coupon or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of Additional Amounts provided by the terms of such series established pursuant to Section 301 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to such terms and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof in which such express mention is not made. Except as otherwise specified as contemplated by Section 301, if the Securities of a series provide for the payment of Additional Amounts, at least 10 days prior to the first Interest Payment Date with respect to Securities of such series (or if the Securities of such series will not bear interest prior to Maturity, the first day on which a payment of principal and any premium is made), and at least 10 days prior to each date of payment of principal and any premium or interest, if there has been any change with respect to the matters set forth in the below-mentioned Company Certificate, the Company shall furnish the Trustee and the principal Paying Agent or Paying Agents, if other than the Trustee, with a Company Certificate instructing the Trustee and such Paying Agent or Paying Agents whether such payment of principal of and any premium or interest on the Securities of such series shall be made to Holders of Securities of such series or any coupons appertaining thereto who are not United States persons without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of or within the series. If any such withholding is required, then such Company Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities of such series or any coupons appertaining thereto and the Company shall pay to the Trustee or such Paying Agent the Additional Amounts required by the terms of such Securities. In the event that the Trustee or any Paying Agent, as the case may be, shall not so receive the above-mentioned certificate, then the Trustee or such Paying Agent shall be entitled (i) to assume that no such withholding or deduction is required with respect to any payment of principal or interest with respect to any Securities of such series or any coupons appertaining thereto until it has received a certificate advising otherwise and (ii) to make all payments of principal and interest with respect to the Securities of such series or any coupons appertaining thereto without withholding or deductions until otherwise advised. The Company covenants to indemnify the Trustee and any Paying Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them or in reliance on any Company Certificate furnished pursuant to this Section or in reliance on the Company's not furnishing such a Company Certificate. 70 SECTION 1010. Waiver of Certain Covenants. The Company may omit in any --------------------------- particular instance to comply with any term, provision or condition set forth in Sections 1004 to 1008, inclusive, and with any other term, provision or condition with respect to the Securities of any series specified in accordance with Section 301 (except any such term, provision or condition which could not be amended without the consent of all Holders of Securities of such series pursuant to Section 902), if before or after the time for such compliance the Holders of at least a majority in principal amount of all outstanding Securities of such series, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. Securities of any series which are ------------------------ redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 1102. Election to Redeem; Notice to Trustee. The election of the ------------------------------------- Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company of less than all of the Securities of any series, the Company shall, at least 30 days prior to the giving of the notice of redemption in Section 1104 (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with a Company Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If less ------------------------------------------------- than all the Securities of any series issued on the same day with the same terms are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series issued on such date with the same terms not previously called for redemption, by lot, on a pro rata basis or such method as the Trustee deems fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of such series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of such series. The Trustee shall promptly notify the Company and the Security Registrar (if other than itself) in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. 71 For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Notice of redemption shall be given in -------------------- the manner provided in Section 106, not less than 30 days nor more than 60 days prior to the Redemption Date, unless a shorter period is specified by the terms of such series established pursuant to Section 301, to each Holder of Securities to be redeemed, but failure to give such notice in the manner herein provided to the Holder of any Security designated for redemption as a whole or in part, or any defect in the notice to any such Holder, shall not affect the validity of the proceedings for the redemption of any other such Security or portion thereof. Any notice which is mailed to the Holders of Registered Securities in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. All notices of redemption shall state: (1) the Redemption Date; (2) the Redemption Price, accrued interest to the Redemption Date payable as provided in Section 1106, if any, and Additional Amounts, if any; (3) if less than all Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amount) of the particular Security or Securities to be redeemed; (4) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, on surrender of such Security, the holder will receive, without a charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed; (5) that on the Redemption Date, the Redemption Price and accrued interest to the Redemption Date payable as provided in Section 1106, if any, will become due and payable on each such Security, or the portion thereof, to be redeemed and, if applicable, that interest thereon shall cease to accrue on and after such date; (6) the Place or Places of Payment where such Securities, together in the case of Bearer Securities with all coupons appertaining thereto, if any, maturing after the Redemption Date, are to be surrendered for payment of the Redemption Price and accrued interest, if any; (7) that the redemption is for a sinking fund, if such is the case; 72 (8) that, unless otherwise specified in such notice, Bearer Securities of any series, if any, surrendered for redemption must be accompanied by all coupons appertaining thereto maturing subsequent to the date fixed for redemption or the amount of any such missing coupon or coupons will be deducted from the Redemption Price, unless security or indemnity satisfactory to the Company, the Trustee for such series and any Paying Agent is furnished; (9) if Bearer Securities of any series are to be redeemed and any Registered Securities of such series are not to be redeemed, and if such Bearer Securities may be exchanged for Registered Securities not subject to the redemption on this Redemption Date pursuant to Section 305 or otherwise, the last date, as determined by the Company, on which such exchanges may be made; and (10) the CUSIP number of such Security, if any, provided that neither -------- the Company nor the Trustee shall have any responsibility for any such CUSIP number. Notice of redemption of Securities to be redeemed shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1105. Deposit of Redemption Price. At least one Business Day prior --------------------------- to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, which it may not do in the case of a sinking fund payment under Article Twelve, segregate and hold in trust as provided in Section 1003) an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay on the Redemption Date the Redemption Price of, and (except if the Redemption Date is an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be redeemed on such date. SECTION 1106. Securities Payable on Redemption Date. Notice of redemption ------------------------------------- having been given as provided above, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company defaults in the payment of the Redemption Price and accrued interest) such Securities shall, if the same were interest-bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be redeemed, except to the extent provided below, shall be void. Upon surrender of any such Security for redemption in accordance with such notice, together with any coupons appertaining thereto maturing after the Redemption Date, such Security shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest on -------- ------- Bearer Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable only at an office or agency located outside the United States (except as otherwise 73 provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of coupons for such interest; and provided, further, that, installments of interest on Registered Securities -------- ------- whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Bearer Security surrendered for redemption is not accompanied by all coupons appertaining thereto maturing after the Redemption Date, such Security may be paid after deducting from the Redemption Price an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security surrenders to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction has been made from the Redemption Price, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented -------- ------- by a coupon shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of such coupon. If any Security called for redemption is not so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. SECTION 1107. Securities Redeemed in Part. Any Security which is to be --------------------------- redeemed only in part (pursuant to the provisions of this Article or of Article Twelve) shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing and accompanied by appropriate evidence of genuineness and authority) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Security or Securities of the same series, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article. The provisions of this Article ------------------------ shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund ---------------------- payment," and any - ------- 74 payment in excess of such minimum amount provided for by the terms of such Securities of any series is herein referred to as an "optional sinking fund --------------------- payment." If provided for by the terms of any Securities of any series, the cash - ------- amount of any mandatory sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. The ----------------------------------------------------- Company may, in satisfaction of all or any part of any mandatory sinking fund with respect to the Securities of a series, (i) deliver Outstanding Securities of such series (other than any previously called for redemption), together in the case of any Bearer Securities of such series with all unmatured coupons appertaining thereto, and (ii) apply as a credit Securities of such series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, as provided for by the terms of such Securities, or which have otherwise been acquired by the Company, provided that such Securities so delivered or applied as a credit have not been - -------- previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the applicable Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly. SECTION 1203. Redemption of Securities for Sinking Fund. Not less than 60 ----------------------------------------- days prior to each sinking fund payment date for Securities of any series, the Company shall deliver to the Trustee a Company Certificate specifying the amount of the next ensuing mandatory sinking fund payment for such series pursuant to the terms of such series, the portion thereof, if any, which is to be satisfied by payment of cash in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of such series pursuant to Section 1202, and the optional amount, if any, to be added in cash to the next ensuing mandatory sinking fund payment, and shall also deliver to the Trustee any Securities to be so delivered and credited. If such Company Certificate specifies an optional amount to be added in cash to the next ensuing mandatory sinking fund payment, the Company shall thereupon be obligated to pay the amount therein specified. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed on such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. 75 ARTICLE THIRTEEN REPAYMENT AT THE OPTION OF HOLDERS SECTION 1301. Applicability of Article. Repayment of Securities of any ------------------------ series before their Stated Maturity at the option of Holders thereof shall be made in accordance with the terms of such Securities, if any, and (except as otherwise specified by the terms of such series established pursuant to Section 301) in accordance with this Article. SECTION 1302. Repayment of Securities. Securities of any series subject to ----------------------- repayment in whole or in part at the option of the Holders thereof will, unless otherwise provided in the terms of such Securities, be repaid at a price equal to the principal amount thereof, together with interest, if any, thereon accrued to the Repayment Date specified in or pursuant to the terms of such Securities. The Company covenants that at least one Business Day prior to the Repayment Date it shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as it own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (or, if so provided by the terms of the Securities of any series, a percentage of the principal) of, and (except if the Repayment Date is an Interest Payment Date) accrued interest on, all the Securities or portions thereof, as the case may be, to be repaid on such date. SECTION 1303. Exercise of Option. Securities of any series subject to ------------------ repayment at the option of the Holders thereof will contain an "Option to Elect Repayment" form on the reverse of such Securities. In order for any Security to be repaid at the option of the Holder, the Trustee must receive at the Place of Payment therefor specified in the terms of such Security (or at such other place or places of which the Company shall from time to time notify the Holders of such Securities), not earlier than 60 days nor later than 30 days prior to the Repayment Date, (i) the Security so providing for such repayment together with the "Option to Elect Repayment" form on the reverse thereof duly completed by the Holder (or by the Holder's attorney duly authorized in writing) or (ii) a telegram, telex, facsimile transmission or a letter from a member of a national securities exchange, or the National Association of Securities Dealers, Inc., or a commercial bank or trust company in the United States setting forth the name of the Holder of the Security, the principal amount of the Security, the principal amount of the Security to be repaid, the CUSIP number, if any, or a description of the tenor and terms of the Security, a statement that the option to elect repayment is being exercised thereby and a guarantee that the Security to be repaid, together with the duly completed form entitled "Option to Elect Repayment" on the reverse of the Security, will be received by the Trustee not later than the fifth Business Day after the date of such telegram, telex, facsimile transmission or letter; provided, however, that such telegram, telex, -------- ------- facsimile transmission or letter shall only be effective if such Security and form duly completed are received by the Trustee by such fifth Business Day. If less than the entire principal amount of such Security is to be repaid in accordance with the terms of such Security, the principal amount of such Security to be repaid, in increments of the minimum denomination for Securities of such series, and the denomination 76 or denominations of the Security or Securities to be issued to the Holder for the portion of the principal amount of such Security surrendered which is not to be repaid, must be specified. The principal amount of any Security providing for prepayment at the option of the Holder thereof may not be repaid in part if, following such repayment, the unpaid principal amount of such Security would be less than the minimum authorized denomination of Securities of or within the series of which such Security to be repaid is a part. Except as otherwise may be provided by the terms of any Security providing for repayment at the option of the Holder thereof, exercise of the repayment option by the Holder shall be irrevocable unless waived by the Company. SECTION 1304. When Securities Presented for Repayment Become Due and ------------------------------------------------------ Payable. If Securities of any series providing for repayment at the option of the Holders thereof have been surrendered as provided in this Article and as provided by or pursuant to the terms of such Securities, such Securities or the portions thereof, as the case may be, to be repaid shall become due and payable and shall be paid by the Company on the Repayment Date therein specified, and on and after such Repayment Date (unless the Company defaults in the payment of such Securities on such Repayment Date) such Securities shall, if the same were interest-bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be repaid, except to the extent provided below, shall be void. Upon surrender of any such Security for repayment in accordance with such provisions, together with any coupons appertaining thereto maturing after the Repayment Date, the principal amount of such security so to be repaid shall be paid by the Company, together with accrued interest, if any, to the Repayment Date; provided, however, that coupons whose Stated -------- ------- Maturity is on or prior to the Repayment Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified pursuant to Section 301, only upon presentation and surrender of such coupons; and provided, further, that, in the -------- ------- case of Registered Securities, installments of interest, if any, whose Stated Maturity is on or prior to the Repayment Date shall be payable (but without interest thereon, unless the Company defaults in the payment thereof) to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Bearer Security surrendered for repayment is not accompanied by all coupons appertaining thereto maturing after the Repayment Date, such Security may be paid after deducting from the amount payable therefor as provided in Section 1302 an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security surrenders to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction has been made as provided in the preceding sentence, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by a coupon shall be -------- ------- payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of such coupon. 77 If the principal amount of any Security surrendered for repayment shall not be so repaid upon surrender thereof, such principal amount (together with interest, if any, thereon accrued to such Repayment Date) shall, until paid, bear interest from the Repayment Date at the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) set forth in such Security. SECTION 1305. Securities Repaid in Part. Upon surrender of any Registered ------------------------- Security which is to be repaid in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge and at the expense of the Company, a new Registered Security or Securities of the same series, of any authorized denomination specified by the Holder, in an aggregate principal amount equal to and in exchange for the portion of the principal of such Security so surrendered which is not to be repaid. ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1401. Applicability of Article; Company's Option to Effect ---------------------------------------------------- Defeasance or Covenant Defeasance. If, pursuant to Section 301, provision is - --------------------------------- made for either or both of (i) defeasance of the Securities of or within a series under Section 1402 or (ii) covenant defeasance of the Securities of or within a series under Section 1403 to be applicable to the Securities of any series, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article (with such modifications thereto as may be specified pursuant to Section 301 with respect to any Securities), shall be applicable to such Securities and any coupons appertaining thereto, and the Company may at its option by Board Resolution, at any time, with respect to such Securities and any coupons appertaining thereto, elect to defease such Outstanding Securities and any coupons appertaining thereto pursuant to Section 1402 (if applicable) or Section 1403 (if applicable) upon compliance with the conditions set forth below in this Article. SECTION 1402. Defeasance and Discharge. Upon the Company's exercise of the ------------------------ above option applicable to this Section with respect to any Securities of or within a series, the Company shall be deemed to have been discharged from its obligations with respect to such Outstanding Securities and any coupons appertaining thereto on the date the conditions set forth in Section 1404 are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means ---------- that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Outstanding Securities and any coupons appertaining thereto, which shall thereafter be deemed "Outstanding" only for the purposes of Section 1405 and the other Sections of this Indenture referred to in clauses (i) and (ii) below, and to have satisfied all of its other obligations under such Securities and any coupons appertaining thereto and this Indenture insofar as such Securities and any coupons appertaining thereto are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of such Outstanding Securities and any coupons appertaining thereto to receive, solely from the trust fund described in Section 1404 and as more fully set forth in such Section, 78 payments in respect of the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on such Securities and any coupons appertaining thereto when such payments are due; (ii) the Company's obligations with respect to such Securities under Sections 305, 306, 1002 and 1003 and with respect to the payment of Additional Amounts, if any, on such Securities as contemplated by Section 1010; (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder; and (iv) this Article. Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section notwithstanding the prior exercise of its option under Section 1403 with respect to such Securities and any coupons appertaining thereto. SECTION 1403. Covenant Defeasance. Upon the Company's exercise of the above ------------------- option applicable to this Section with respect to any Securities of or within a series, the Company shall be released from its obligations under Sections 1004 to 1008, inclusive, and, if specified pursuant to Section 301, its obligations under any other covenant, with respect to such Outstanding Securities and any coupons appertaining thereto on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter, "covenant defeasance"), and such ------------------- Securities and any coupons appertaining thereto shall thereafter be deemed not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with Sections 1005 to 1008, inclusive, or such other covenant, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Outstanding Securities and any coupons appertaining thereto, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or such other covenant or by reason of reference in any such Section or such other covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under clause (4) of Section 501 or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities and any coupons appertaining thereto shall be unaffected thereby. SECTION 1404. Conditions to Defeasance or Covenant Defeasance. The ----------------------------------------------- following shall be the conditions to application of Section 1402 or Section 1403 to any Outstanding Securities of or within a series and any coupons appertaining thereto: (a) The Company has irrevocably deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 607 who shall agree to comply with the provisions of this Article Fourteen applicable to it) funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities and any coupons appertaining thereto: (i) an amount in such currency or currencies, currency unit or units or composite currency or currencies in which such Securities and any coupons appertaining thereto are then specified as payable at Stated Maturity, or (ii) Government Obligations applicable to such Securities and any coupons appertaining thereto (determined on the basis of the currency or currencies, currency unit or units or composite currency or currencies in which such Securities and any coupons appertaining 79 thereto are then specified as payable at Stated Maturity) which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment of principal of (and premium, if any, on) and interest and Additional Amounts, if any, on such Securities and any coupons appertaining thereto, money in an amount, or (iii) a combination thereof in an amount, sufficient, without consideration of any reinvestment of such principal and interest, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, (A) the principal of (and premium, if any, on) and interest and Additional Amounts, if any, on such Outstanding Securities and any coupons appertaining thereto on the Stated Maturity of such principal or installment of principal or interest and (B) any mandatory sinking fund payments or analogous payments applicable to such Outstanding Securities and any coupons appertaining thereto on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities and any coupons appertaining thereto, provided that the Trustee has been irrevocably -------- instructed to apply such money or the proceeds of such Government Obligations to such payments with respect to such Securities. Before such a deposit, the Company may give to the Trustee, in accordance with Section 1102, a notice of its election to redeem all or any portion of such Outstanding Securities at a future date in accordance with the terms of the Securities of such series and Article Eleven, which notice shall be irrevocable. Such irrevocable redemption notice, if given, shall be given effect in applying the foregoing. (b) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound (and shall not cause the Trustee to have a conflicting interest pursuant to Section 310(b) of the Trust Indenture Act with respect to any Security of the Company). (c) No Event of Default or event which with notice or lapse of time or both would become an Event of Default with respect to such Securities and any coupons appertaining thereto has occurred and is continuing on the date of such deposit or, insofar as clauses (5) and (6) of Section 501 are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (d) In the case of an election under Section 1402, the Company has delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of 80 such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. (e) In the case of an election under Section 1403, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (f) The Company has delivered to the Trustee a Company Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance under Section 1402 or the covenant defeasance under Section 1403 (as the case may be) have been complied with and an Opinion of Counsel to the effect that either (i) as a result of a deposit pursuant to paragraph (a) above and the related exercise of the Company's option under Section 1402 or Section 1403 (as the case may be), registration is not required under the Investment Company Act of 1940, as amended, by the Company with respect to the trust funds representing such deposit or by the Trustee for such trust funds or (ii) all necessary registrations under such Act have been effected. (g) After the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally. (h) Notwithstanding any other provisions of this Section, such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations which may be imposed on the Company in connection therewith pursuant to Section 301. SECTION 1405. Deposited Money and Government Obligations to Be Held in -------------------------------------------------------- Trust; Other Miscellaneous Provisions. Subject to the provisions of the last - ------------------------------------- paragraph of Section 1003, all money and Government Obligations (or other property as may be provided pursuant to Section 301) (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee) pursuant to Section 1404 in respect of any Outstanding Securities of any series and any coupons appertaining thereto shall be held in trust and applied by the Trustee or such other qualifying trustee, in accordance with the provisions of such Securities and any coupons appertaining thereto and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee or such other qualifying trustee may determine, to the Holders of such Securities and any coupons appertaining thereto of all sums due and to become due thereon in respect of principal (and premium, if any) and interest and Additional Amounts, if any, but such money need not be segregated from other funds except to the extent required by law. 81 Unless otherwise specified with respect to any Security pursuant to Section 301, if, after a deposit referred to in Section 1404(a) has been made, (i) the Holder of a Security in respect of which such deposit was made is entitled to, and does, elect pursuant to Section 301 or the terms of such Security to receive payment in a currency, currency unit or composite currency other than that in which the deposit pursuant to Section 1404(a) has been made in respect of such Security or (ii) a Conversion Event occurs in respect of the currency, currency unit or composite currency in which the deposit pursuant to Section 1404(a) has been made, the indebtedness represented by such Security and any coupons appertaining thereto shall be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any, on), and interest and Additional Amounts, if any, on such Security as the same become due out of the proceeds yielded by converting (from time to time as specified below in the case of any such election) the amount or other property deposited in respect of such Security into the currency, currency unit or composite currency in which such Security becomes payable as a result of such election or Conversion Event based on the applicable market exchange rate for such currency, currency unit or composite currency in effect on the second Business Day prior to each payment date, except, with respect to a Conversion Event, for such currency, currency unit or composite currency in effect (as nearly as feasible) at the time of the Conversion Event. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of such Outstanding Securities and any coupons appertaining thereto. Anything in this Article to the contrary notwithstanding, the Trustee or such other qualifying trustee shall deliver or pay to the Company, from time to time upon Company Request, any money or Government Obligations (or other property and any proceeds therefrom) held by it as provided in Section 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee or such other qualifying trustee, are in excess of the amount thereof which would then be required to be deposited to effect a defeasance or covenant defeasance, as applicable, in accordance with this Article. SECTION 1406. Reinstatement. If the Trustee or Paying Agent is unable to ------------- apply any money in accordance with this Article Fourteen with respect to any Securities by reason of any order or judgement of any court or governmental authority enjoining, restraining or otherwise prohibiting such application then the obligations under this Indenture and such Securities from which the Company has been discharged or released pursuant to Sections 1402 or 1403 hereof shall be revived and reinstated as though no deposit had occurred pursuant to this Article Fourteen with respect to such Securities, until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 1405 hereof with respect to such Notes in accordance with this Article Fourteen; provided that if the Company makes any payment of principal of or any premium or interest or Additional Amounts on any such Security following such reinstatement of its obligations, the Company shall be subrogated to the rights 82 (if any) of the Holders of such Securities to receive such payment from the money so held in trust. ARTICLE FIFTEEN MEETINGS OF HOLDERS OF SECURITIES SECTION 1501. Purposes for Which Meetings May Be Called. A meeting of ----------------------------------------- Holders of Securities of any series may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series. SECTION 1502. Call, Notice and Place of Meetings. ---------------------------------- (a) The Trustee may at any time call a meeting of Holders of Securities of any series for any purpose specified in Section 1501, to be held at such time and at such place in The City of New York, as the Trustee determines. Notice of every meeting of Holders of Securities of any series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 106, not less than 21 nor more than 180 days prior to the date fixed for the meeting. (b) In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities of any series have requested the Trustee to call a meeting of the Holders of Securities of such series for any purpose specified in Section 1501, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee has not made the first publication of the notice of such meeting within 21 days after receipt of such request or does not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in The City of New York, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in paragraph (a) above. SECTION 1503. Persons Entitled to Vote at Meetings. To be entitled to vote ------------------------------------ at any meeting of Holders of Securities of any series, a Person shall be (i) a Holder of one or more Outstanding Securities of such series or (ii) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Securities of any series are the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel, and any representatives of the Company and its counsel. 83 SECTION 1504. Quorum; Action. The Persons entitled to vote a majority in -------------- principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of Securities of such series; provided, however, -------- ------- that if any action is to be taken at such meeting with respect to a consent or waiver which this Indenture expressly provides may be given by the Holders of not less than a specified percentage in principal amount of the Outstanding Securities of a series, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series shall constitute a quorum. In the absence of a quorum within 30 minutes after the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 1502(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of any adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum. Except as limited by the proviso to Section 902, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Securities of such series; provided, -------- however, that, except as limited by the proviso to Section 902, any resolution - ------- with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of such series. Any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series and any coupons appertaining thereto, whether or not present or represented at the meeting. Notwithstanding the foregoing provisions of this Section 1504, if any action is to be taken at a meeting of Holders of Securities of any series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal amount of all Outstanding Securities affected thereby, or of the Holders of such series and one or more additional series; 84 (1) there shall be no minimum quorum requirement for such meeting; and (2) the principal amount of the Outstanding Securities of such series which vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under this Indenture. SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of ---------------------------------------------------------- Meetings. - -------- (a) Notwithstanding any provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities of a series in regard to proof of the holding of Securities of such series and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it deems appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 104 and the appointment of any proxy shall be proved in the manner specified in Section 104 or by having the signature of the Person executing the proxy witnessed or guaranteed by any trust company, bank or banker authorized by Section 104 to certify to the holding of Bearer Securities. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 104 or other proof. (b) The Trustee shall, by an instrument in writing appoint a temporary chairman of the meeting, unless the meeting has been called by the Company or by Holders of Securities as provided in Section 1502(b), in which case the Company or the Holders of Securities of or within the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting. (c) At any meeting each Holder of a Security of such series or proxy shall be entitled to one vote for each $1,000 principal amount of the Outstanding Securities of such series held or represented by such Holder; provided, however, that no vote shall be cast or counted at any meeting in -------- ------- respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or proxy. (d) Any meeting of Holders of Securities of any series duly called pursuant to Section 1502 at which a quorum is present may be adjourned from time to time by 85 Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting, and the meeting may be held as so adjourned without further notice. SECTION 1506. Counting Votes and Recording Action of Meetings. The vote on ----------------------------------------------- any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and series numbers of the Outstanding Securities of such series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities of any series shall be prepared by the secretary of the meeting and there shall be attached to such record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the fact, setting forth a copy of the notice of the meeting and showing that such notice was given as provided in Section 1502 and, if applicable, Section 1504. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 1507. Evidence of Action Taken by Holders. Any request, demand, ----------------------------------- authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage in principal amount of the Holders of any or all series may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Holders in person or by agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Article Six) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Article. SECTION 1508. Proof of Execution of Instruments. Subject to Article Six, --------------------------------- the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. 86 ARTICLE SIXTEEN SUBORDINATION OF SECURITIES SECTION 1601. Securities Subordinated to Senior Indebtedness. The Company ---------------------------------------------- covenants and agrees, and each Holder of Securities, by its acceptance thereof, likewise covenants and agrees, that the indebtedness represented by the Securities and the payment of any and all amounts payable in respect of each and all of the Securities is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of Senior Indebtedness, whether outstanding on the date of this Indenture or thereafter incurred, assumed or guaranteed. In the event (a) of any distribution of assets of the Company upon any dissolution, winding up, liquidation or reorganization of the Company whether in a bankruptcy, insolvency, reorganization or receivership proceeding or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Company or otherwise, except a distribution in connection with a merger or consolidation or a conveyance or transfer of all or substantially all of the properties of the Company which complies with the requirements of Article Eight, or (b) that a default shall have occurred and be ------------- continuing with respect to the payment of any amount payable in respect of any Senior Indebtedness, or (c) that the principal of the Securities of any Series shall have been declared due and payable pursuant to Section 502 and such ----------- declaration shall not have been rescinded and annulled as provided in Section ------- 502, then: - --- (1) in a circumstance described in the foregoing clause (a) or (b) the Holders of all Senior Indebtedness, and in the circumstance described in the foregoing clause (c) the Holders of all Senior Indebtedness outstanding at the time the principal of such Securities (or in the case of Original Issue Discount Securities, such portion of the principal amount) shall have been so declared due and payable, shall first be entitled to receive payment of the full amount due thereon, or provision shall be made for such payment in money or money's worth, before the Holders of any of the Securities are entitled to receive any payment in respect of the indebtedness evidenced by the Securities; (2) any payment by, or distribution of assets of, the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article with respect to the Securities, to the payment of all Senior Indebtedness, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment), to which the Holders of any of the Securities would be entitled except for the provisions of this Article shall be paid or delivered by the person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of such Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instrument evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of such Senior Indebtedness held or represented by each, to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid after giving effect to any concurrent 87 payment or distribution (or provision therefor) to the holders of such Senior Indebtedness, before any payment or distribution is made to the Holders of the indebtedness evidenced by the Securities under this Indenture; and (3) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article with respect to the Securities, to the payment of all Senior Indebtedness, provided that the rights of the holders of Senior Indebtedness are not altered by such reorganization or readjustment), shall be received by the Holders of any of the Securities before all Senior Indebtedness is paid in full, such payment or distribution shall be paid over to the holders of such Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably as aforesaid, for application to the payment of all Senior Indebtedness remaining unpaid until all such Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution (or provision therefor) to the holders of such Senior Indebtedness. SECTION 1602. Subrogation. Subject to the payment in full of all Senior ----------- Indebtedness to which the indebtedness evidenced by the Securities is in the circumstances subordinated as provided in Section 1601, the Holders of the ------------ Securities shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to such Senior Indebtedness until all amounts owing on the Securities shall be paid in full, and, as between the Company, its creditors other than holders of such Senior Indebtedness, and the Holders of the Securities, no such payment or distribution made to the holders of such Senior Indebtedness by virtue of this Article which otherwise would have been made to the Holders of the Securities shall be deemed to be a payment by the Company on account of such Senior Indebtedness, it being understood that the provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of Senior Indebtedness. SECTION 1603. Obligation of the Company Unconditional. Nothing contained in --------------------------------------- this Article or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of and interest on and any additional amounts owing in respect of the Securities 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 of the Securities and creditors of the Company other than the holders of Senior Indebtedness nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. 88 Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any such dissolution, winding up, liquidation or reorganization proceeding affecting the affairs of the Company is pending or upon a certificate of the trustee in bankruptcy, receiver, assignee for the benefit of creditors, liquidating trustee or agent or other person making any payment or distribution, delivered to the Trustee or to the Holders of the Securities, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount paid or distributed thereon and all other facts pertinent thereto or to this Article. SECTION 1604. Payments on Securities Permitted. Nothing contained in this -------------------------------- Article or elsewhere in this Indenture, or in any of the Securities, shall affect the obligation of the Company to make, or prevent the Company from making, payment of the principal of or interest on or any additional amounts owing in respect of the Securities in accordance with the provisions hereof and thereof, except as otherwise provided in this Article. SECTION 1605. Effectuation of Subordination by Trustee. Each Holder of ---------------------------------------- Securities, by its acceptance thereof, authorizes and directs the Trustee in his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in- fact for any and all such purposes. SECTION 1606. Knowledge of Trustee. Notwithstanding the provisions of this -------------------- Article or any other provisions of this Indenture, the Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of moneys to or by the Trustee, or the taking of any other action by the Trustee, unless and until the Trustee shall have received written notice thereof from the Company, any Holder of Securities, any paying or conversion agent of the Company or the holder or representative of any class of Senior Indebtedness; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which, by the terms hereof, any money may become payable for any purpose (including, without limitation, the payment of the principal of or interest on, or additional amounts owing in respect of, any Security) then, anything herein contained to the contrary notwithstanding, the Trustee shall have all power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it during or after such three Business Day period. SECTION 1607. Trustee May Hold Senior Indebtedness. The Trustee in its ------------------------------------ individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness at the time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in Section 313 of the Trust Indenture Act or elsewhere in this Indenture shall deprive the Trustee of any of its rights as such holder. 89 Nothing in this Article shall subordinate any claims of, or payments to, the Trustee (under or pursuant to Section 606) to Senior Indebtedness. ----------- SECTION 1608. Rights of Holders of Senior Indebtedness Not Impaired. No ----------------------------------------------------- right of any present or future holder of any Senior Indebtedness to enforce the subordination herein shall at any time or in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. 90 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. MCLEODUSA INCORPORATED By:_____________________________ Name: Title: Attest: ____________________ Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK, As Trustee By:_____________________________ Name: Title: Attest: ____________________ Name: Title: 91 STATE OF IOWA ) ) SS.: COUNTY OF LINN ) On the _______ day of _______, 1999, before me personally came __________, to me known, who, being by me duly sworn, did depose and say that he is ________________________________________ of McLeodUSA Incorporated, one of the corporations described in and which executed the foregoing instrument and that he signed his name thereto by authority of the Board of Directors of said corporation. _______________________________________ Notary Public State of My commission expires / / [Seal] 92 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On the _____ day of ________, 1999, before me personally came ___________, to me known, who, being by me duly sworn, did depose and say that he is ____________________ of United States Trust Company of New York, one of the corporations described in and which executed the foregoing instrument and that he signed his name thereto by authority of the Board of Directors of said corporation. ______________________________________ Notary Public State of My commission expires / / [Seal] 93 EXHIBIT A FORMS OF CERTIFICATION EXHIBIT A-1 FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE CERTIFICATE [Insert title or sufficient description of Securities to be delivered] This is to certify that, as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by person(s) which are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States federal income taxation regardless of its source ("United States person(s)"), (ii) are owned by United States person(s) which are (a) foreign branches of United States financial institutions (financial institutions, as defined in United States Treasury Regulations Section 1.165- 12(c)(1)(v) are herein referred to as "financial institutions") purchasing for their own account or for resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise McLeodUSA Incorporated or its agent that such financial institution will provide a certificate within a reasonable time stating that it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by a financial institution for purposes of resale during the restricted period (as defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, such financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)), certifies that it has not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the above-captioned Securities held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certificate excepts and does not relate to [U.S.$] _______________ of such interest in the above-captioned Securities in respect of which we are not able to certify and as to which we understand an exchange for an interest in a Permanent Global Security or an exchange for and delivery of definitive Securities (or, if relevant, collection of any interest) cannot be made until we do so certify. We understand that this certificate may be required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings. Dated: __________ ___, 19___ [To be dated no earlier than the 15th day prior to the earlier of (i) the Exchange Date or (ii) the relevant Interest Payment Date occurring prior to the Exchange Date, as applicable] [Name of Person Making Certification] _______________________________ (Authorized Signatory) Name: Title: EXHIBIT A-2 FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR AND CEDEL S.A. IN CONNECTION WITH THE EXCHANGE OF A PORTION OF A TEMPORARY GLOBAL SECURITY OR TO OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE CERTIFICATE [Insert title or sufficient description of Securities to be delivered] This is to certify that, based solely on written certifications that we have received in writing, by tested telex or by electronic transmission from each of the persons appearing in our records as persons entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially in the form attached hereto, as of the date hereof, [U.S.$] _______________ principal amount of the above-captioned Securities (i) is owned by person(s) which are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States person(s)"), (ii) is owned by United States persons(s) which are (a) foreign branches of United States financial institutions (financial institutions, as defined in United States Treasury Regulations Section 1.165-12(c)(1)(v) are herein referred to as "financial institutions") purchasing for their own account or for resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such financial institution has agreed, on its own behalf or through its agent, that we may advise McLeodUSA Incorporated or its agent that such financial institution will provide a certificate within a reasonable time stating that it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by a financial institution for purposes of resale during the restricted period (as defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and that such financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We further certify that (i) we are not making available herewith for exchange (or, if relevant, collection of any interest) any portion of the temporary global Security representing the above-captioned Securities excepted in the above-referenced certificates of Member Organizations and (ii) as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith for exchange (or, if relevant, collection of any interest) are no longer true and cannot be relied on as of the date hereof. We understand that this certification is required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings. Dated: __________ ___, 19___ [To be dated no earlier than the earlier of the Exchange Date or the relevant Interest Payment Date occurring prior to the Exchange Date, as applicable] [Morgan Guaranty Trust Company of New York, Brussels Office,] as Operator of the Euroclear System [Cedel S.A.] By:____________________________________ ____________________________________ ____________________________________ EX-4.24 5 EXHIBIT 4.24 Exhibit 4.24 McLEODUSA INCORPORATED CERTIFICATE OF DESIGNATIONS OF THE POWERS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF __% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF - -------------------------------------------------------------------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware - -------------------------------------------------------------------------------- McLeodUSA Incorporated (the "Company"), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that, pursuant to authority conferred upon the board of directors of the Company (the "Board of Directors") by the Company's Amended and Restated Certificate of Incorporation, as amended (the "Restated Certificate of Incorporation") and pursuant to authority conferred upon the Pricing Committee (the "Pricing Committee") of the Board of Directors by the Company's Amended and Restated Bylaws, as amended (the "Bylaws"), and pursuant to the provisions of Sections 141(c)(1) and 151 of the General Corporation Law of the State of Delaware, said Board of Directors is authorized to issue Preferred Stock of the Company in one or more series and the Pricing Committee has approved and adopted the following resolution on [________] (the "Resolution"): RESOLVED that, the Board of Directors and, pursuant to the authority vested in the Pricing Committee by the Board of Directors and the Bylaws, the Pricing Committee, hereby create, authorize and provide for the issuance of __% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $[____] per share, consisting of [________] shares having the designations, preferences, relative, participating, optional and other special rights and the qualifications, limitations and restrictions thereof that are set forth in the Restated Certificate of Incorporation and in this Resolution as follows: (a) Designation. There is hereby created out of the authorized and ----------- unissued shares of Preferred Stock of the Company a series of Preferred Stock designated as the __% Series A Cumulative Convertible Preferred Stock (the "Series A Preferred Stock"). The number of shares constituting the Series A Preferred Stock shall be [________]. The liquidation preference of the Series A Preferred Stock shall be $[____] per share (the "Liquidation Preference"). Capital terms used herein but not defined shall have the meanings assigned to them in paragraph (l). (b) Rank. The Series A Preferred Stock will, with respect to dividend ---- rights and rights on liquidation, winding-up and dissolution, rank (i) senior to all classes of Common Stock and to each other class of Capital Stock of the Company or series of Preferred Stock of the Company established hereafter by the Board of Directors of the Company, the terms of which do not expressly provide that such class or series ranks senior to, or on a parity with, the Series A Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company (collectively referred to, together with all classes of Common Stock of the Company, as "Junior Stock"); (ii) on a parity with each class of Capital Stock of the Company or series of Preferred Stock of the Company established hereafter by the Board of Directors of the Company, the terms of which expressly provide that such class or series will rank on a parity with the Series A Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution (collectively referred to as "Parity Stock"); and (iii) junior to each class of Capital Stock of the Company or series of Preferred Stock of the Company established hereafter by the Board of Directors of the Company, the terms of which expressly provide that such class or series will rank senior to the Series A Preferred Stock as to dividend rights or rights on liquidation, winding-up and dissolution of the Company (collectively referred to as "Senior Stock"). (c) Dividends. --------- (i) Subject to the rights of any holders of Senior Stock or Parity Stock, Holders of the outstanding shares of Series A Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors of the Company, out of funds legally available therefor, dividends on each share of the Series A Preferred Stock at a rate per annum equal to [____]% of the Liquidation Preference of such share payable quarterly (each such quarterly period being herein called a "Dividend Period"). All dividends on the Series A Preferred Stock, to the extent accrued, shall be cumulative, whether or not earned or declared, on a daily basis from the last date through which dividends have been paid or, if no dividends have been paid, from the Issue Date, and shall be payable quarterly in arrears on [________ __, ________ __, ________ __ and ________ __] of each year (each a "Dividend Payment Date"), commencing on [________ __], 1999 to Holders of record as they appear on the stock register of the Company at the close of business on the Record Date (as defined hereinafter) immediately preceding the relevant Dividend Payment Date. No interest or sum of money or other property or securities in lieu of interest will be payable in respect of any accumulated and unpaid dividends. "Record Date" means, with respect to a Dividend Payment Date, the date established by the Board of Directors as the record date therefor, which date shall, in any event, be a date that is not more than 60 calendar days nor less than 15 calendar days before such Dividend Payment Date. Any dividend on the Series A Preferred Stock shall be, at the option of the Company, payable (A) in cash or (B) through the delivery of a number of shares of the Company's Class A Common Stock (dividends paid or payable in Class A Common Stock are hereinafter referred to as "Dividend Common Stock") equal to the total dividend amount divided by the applicable Discounted Current Market Value (as defined below) of the Class A Common Stock. No fractional shares of Class A Common Stock 2 shall be issued as a dividend on the Series A Preferred Stock. The Transfer Agent shall have the authority to aggregate any fractional shares of Class A Common Stock that are issued as dividends, and to sell them at the best available price and distribute the proceeds to the Holders thereof in proportion to their respective interests. The Company shall reimburse the Transfer Agent for any expenses incurred with respect to such sale, including brokerage commissions. If the Company is not entitled to pay cash for fractional shares, it shall pay cash to the Holder for the fractional shares when it becomes legally and contractually able to pay such cash. The "Discounted Current Market Value" of the Class A Common Stock with respect to a Dividend Payment Date means the product of (x) 97% and (y) the "Market Average Value" relating to such Dividend Payment Date. The "Market Average Value" shall equal the average of the daily closing prices of the Class A Common Stock for the five consecutive Trading Days ending on (and including) the fourth Trading Day preceding such Dividend Payment Date. The closing price for each Trading Day will be the last sales price on the Nasdaq National Market (or the principal securities exchange or other securities market on which the Class A Common Stock is then being traded.). "Trading Day" means any day on which the Class A Common Stock is traded for any period on the Nasdaq National Market (or on the principal securities exchange or other securities market on which the Class A Common Stock is then being traded). (ii) All dividends paid with respect to shares of the Series A Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the Holders entitled thereto. (ii) Dividends shall accrue whether or not the Company has earnings or profits, whether or not there are funds legally available for the payment of such dividends and whether or not dividends are declared. Dividends shall accumulate to the extent that such dividends are not paid on the Dividend Payment Date to which they relate. No dividend whatsoever shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any outstanding share of the Series A Preferred Stock with respect to any Dividend Period unless all dividends for all preceding Dividend Periods have been declared and paid or declared and a sufficient sum set apart for the payment of such dividend, upon all outstanding shares of Series A Preferred Stock. No dividend will be declared or paid on any Parity Stock unless full cumulative dividends have been paid on the Series A Preferred Stock for all prior Dividend Periods; provided, however, that -------- ------- if accrued dividends on the Series A Preferred Stock for all prior Dividend Periods have not been paid in full, then any dividend declared for any Dividend Period on the Series A Preferred Stock and on any Parity Stock will be declared ratably in proportion to accrued and unpaid dividends on the Series A Preferred Stock and such Parity Stock. (iv) The Company will not (A) declare, pay or set apart funds for the payment of any dividend or other distribution with respect to any Junior Stock or (B) redeem, purchase or otherwise acquire for consideration any Junior Stock through a sinking fund or otherwise, unless (1) all accrued and unpaid dividends with respect to the Series A 3 Preferred Stock and any Parity Stock at the time such dividends are payable have been paid or funds have been set apart for payment of such dividends and (2) sufficient funds have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series A Preferred Stock and any Parity Stock. Notwithstanding anything in this Certificate of Designations to the contrary, the Company may declare and pay dividends on Parity Stock which are payable solely in additional shares of or by the increase in the liquidation value of Parity Stock or Junior Stock or on Junior Stock which are payable in additional shares of or by the increase in the liquidation value of Junior Stock, as applicable, or repurchase, redeem or otherwise acquire Junior Stock in exchange for Junior Stock and Parity Stock in exchange for Parity Stock or Junior Stock. (v) Dividends on account of arrears for any past Dividend Period and dividends in connection with any optional redemption may be declared and paid at any time, without reference to any regular Dividend Payment Date, to Holders of record on the Business Day immediately prior to the payment thereof, as may be fixed by the Board of Directors of the Company. (vi) Dividends payable on the Series A Preferred Stock for any period other than a Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. If a Dividend Payment Date is not a Business Day, payment of dividends shall be made on the next succeeding Business Day and dividends accruing for the intervening period shall be paid on the next succeeding Dividend Payment Date. (d) Liquidation Preference. ---------------------- (i) Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, and subject to the rights of holders of Senior Stock and Parity Stock, each Holder of Series A Preferred Stock shall be entitled to be paid, out of the assets of the Company available for distribution to its stockholders, an amount equal to the Liquidation Preference for each share of Series A Preferred Stock held by such Holder, plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends (whether or not earned or declared) 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 that would have been payable had the Series A Preferred Stock been the subject of a redemption on such date pursuant to paragraph (e)(i)) before any distribution is made on any Junior Stock. If, upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the amounts payable with respect to the Series A Preferred Stock and all Parity Stock are not paid in full, the Holders of Series A Preferred Stock and the holders of Parity Stock will share equally and ratably (in proportion to the respective amounts that would be payable on such shares of Series A Preferred Stock and the Parity Stock, respectively, if all amounts payable thereon had been paid in full) in any distribution of assets of the Company to which each is entitled. 4 After payment of the full amount of the Liquidation Preference of the outstanding shares of Series A Preferred Stock (and, if applicable, an amount equal to a prorated dividend), the Holders of shares of Series A Preferred Stock will not be entitled to any further participation in any distribution of assets of the Company. (ii) For the purposes of this paragraph (d), neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company nor the consolidation or merger of the Company with or into one or more other entities shall be deemed to be a liquidation, dissolution or winding-up of the Company. (e) Redemption. ---------- (i) (A) Provisional Redemption. The Series A Preferred Stock may be ---------------------- redeemed, in whole or in part, at the option of the Company at a redemption price of __% of the Liquidation Preference, plus accumulated and unpaid dividends, if any, whether declared or undeclared, to the date fixed for such redemption (the "Provisional Redemption Date") (the foregoing amounts, together with the Additional Payment, as hereinafter defined, being the "Provisional Redemption Price"), on or after [________], 2001, but prior to [________], 2002, if the closing price of the Class A Common Stock equals or exceeds 150% of the Conversion Price for at least 20 Trading Days within any 30 Trading Day period (such redemption, a "Provisional Redemption"). In the event that the Company undertakes a Provisional Redemption, the Holders of shares of Series A Preferred Stock that are called for Provisional Redemption will also receive a payment (the "Additional Payment") in an amount equal to the present value (calculated using the bond equivalent yield on U.S. Treasury notes or bills having a term nearest in length to that of the Additional Period (as hereinafter defined) as of the day immediately preceding the date on which a notice of Provisional Redemption is mailed to the Holders) of the aggregate amount of the dividends that would thereafter have been payable on the Series A Preferred Stock (whether or not such dividends have been declared) for the period from the Provisional Redemption Date to [________ __], 2002 (such period being referred to as the "Additional Period"). The Provisional Redemption Price shall be, at the option of the Company, payable (v) in cash, (w) through the delivery of a number of shares of Class A Common Stock equal to the Provisional Redemption Price divided by the Provisional Redemption Value (as defined below) of the Class A Common Stock or (x) any combination of (v) and (w). The "Provisional Redemption Value" of the Class A Common Stock with respect to a Provisional Redemption Date means the product of (y) 97% and (z) the average of the daily closing prices of the Class A Common Stock for the five consecutive Trading Days ending on (and including) the fourth Trading Day preceding such Provisional Redemption Date. The closing price for each Trading Day will be the last sales price on the Nasdaq National Market (or the principal securities exchange or other securities market on which the Class A Common Stock is then being traded). 5 No fractional shares of Class A Common Stock shall be issued in connection with the payment of the Provisional Redemption Price. The Transfer Agent shall have the authority to aggregate any fractional shares of Class A Common Stock that would otherwise be issued in connection with the payment of the Provisional Redemption Price, and to sell them at the best available price and distribute the proceeds to the Holders thereof in proportion to their respective interests. The Company shall reimburse the Transfer Agent for any expenses incurred with respect to such sale, including brokerage commissions. If the Company is not entitled to pay cash for fractional shares, it shall pay cash to the Holder for the fractional shares when it becomes legally and contractually able to pay such cash. (B) Optional Redemption. Except under the foregoing circumstances ------------------- with respect to a Provisional Redemption, and except under the circumstances set forth in Section 4.5 of the Restated Certificate of Incorporation (in which case the terms, conditions and procedures set forth therein for redemption of any Capital Stock of the Company under such circumstances shall apply to any redemption of shares of Series A Preferred Stock pursuant thereto), the Series A Preferred Stock shall not be redeemable at the option of the Company prior to [________ __], 2002. On or after [________ __], 2002, each share of the Series A Preferred Stock may be redeemed (subject to the legal availability of funds therefor) at any time, in whole or in part, at the option of the Company (such redemption, an "Optional Redemption"), at the redemption prices set forth below, payable in cash, plus, without duplication, an amount in cash equal to all accrued and unpaid dividends to the date fixed for redemption (the "Optional Redemption Date") (including a cash amount equal to a prorated dividend for the period from the Dividend Payment Date immediately preceding the Optional Redemption Date) (the "Optional Redemption Price"). If redeemed during the 12-month period commencing on [________] (or, if such date is not a day on which the Nasdaq National Market is open for business, then the next day the Nasdaq National Market is open for business) of the years set forth below, the redemption prices shall be:
Period Redemption Price ------ ---------------- 2002...................... $[________] 2003...................... [________] 2004...................... [________] 2005 and thereafter....... $[____]
(C) In the case of any partial Optional Redemption or Provisional Redemption, selection of the Series A Preferred Stock for redemption will be made by the Company in compliance with the requirements of the principal national securities exchange, if any, on 6 which the Series A Preferred Stock is listed, or if the Series A Preferred Stock is not listed on a national securities exchange, on a pro rata basis, by lot or such other method as the Company, in its sole discretion, shall deem fair and appropriate; provided, however, that the Company may redeem all -------- ------- the shares held by Holders of fewer than 5 shares (or all of the shares held by the Holders who would hold less than 5 shares as a result of such redemption) as may be determined by the Company. (D) In the case of an Optional Redemption Date or Provisional Redemption Date falling after a Record Date and prior to the related Dividend Payment Date, the Holders of the Series A Preferred Stock at the close of business on such Record Date will be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date, notwithstanding the redemption of such shares following such Record Date. Except as provided for in the preceding sentence, no payment or allowance will be made for accrued dividends on any shares of Series A Preferred Stock called for redemption. (ii) Procedure for Redemption. (A) On and after the Optional ------------------------ Redemption Date or Provisional Redemption Date, as the case may be, unless the Company defaults in the payment of the applicable redemption price, dividends will cease to accumulate on shares of Series A Preferred Stock called for redemption and all rights of Holders of such shares will terminate except for the right to receive the Optional Redemption Price or Provisional Redemption Price, as the case may be, without interest; provided, however, -------- ------- that if a notice of redemption shall have been given as provided in subparagraph (ii)(B) and the funds and/or shares of Class A Common Stock, as the case may be, necessary for redemption (including an amount in respect of all dividends that will accrue to the Optional Redemption Date or Provisional Redemption Date, as the case may be) shall have been segregated and irrevocably set apart by the Company, in trust for the benefit of the Holders of the shares of Series A Preferred Stock called for redemption, then dividends shall cease to accumulate on the Optional Redemption Date or Provisional Redemption Date, as the case may be, on the shares of Series A Preferred Stock to be redeemed and, at the close of business on the day on which such funds and/or shares of Class A Common Stock, as the case may be, are segregated and set apart, the Holders of the shares of Series A Preferred Stock to be redeemed shall, with respect to such shares to be redeemed, cease to be stockholders of the Company and shall be entitled only to receive the Optional Redemption Price or Provisional Redemption Price, as the case may be, for such shares without interest from the Optional Redemption Date or Provisional Redemption Date, as applicable. (B) With respect to a redemption pursuant to paragraph (e)(i), the Company will send a written notice of redemption by first class mail to each Holder of record of shares of Series A Preferred Stock, not fewer than 30 days nor more than 60 days prior to the Optional Redemption Date or Provisional Redemption Date, as applicable, at its registered address (the "Redemption Notice"); provided, however, that no failure to give such notice -------- ------- nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of Series A Preferred Stock to be redeemed except as to the 7 Holder or Holders to whom the Company has failed to give said notice or except as to the Holder or Holders whose notice was defective. The Redemption Notice shall state: (1) that the redemption is pursuant to paragraph (e)(i) hereof; (2) the Optional Redemption Price or Provisional Redemption Price, as applicable and, in the case of a Provisional Redemption, whether the Provisional Redemption Price will be paid in cash, through the delivery of shares of Class A Common Stock, or a combination thereof (and, if a combination thereof, stating the percentages of the total Provisional Redemption Price that will be paid in cash and in shares of Class A Common Stock); (3) in the case of a Provisional Redemption as to which all or a portion of the Provisional Redemption Price is to be paid through the delivery of shares of Class A Common Stock, that the determination of the number of shares of Class A Common Stock to be delivered shall be calculated as set forth in paragraph (e)(i)(A); (4) whether all or less than all the outstanding shares of the Series A Preferred Stock are to be redeemed and the total number of shares of the Series A Preferred Stock being redeemed; (5) the Optional Redemption Date or Provisional Redemption Date, as applicable; (6) 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 shares of Series A Preferred Stock to be redeemed; and (7) that dividends on the shares of the Series A Preferred Stock to be redeemed shall cease to accumulate on such Optional Redemption Date or Provisional Redemption Date, as the case may be, unless the Company defaults in the payment of the Optional Redemption Price or Provisional Redemption Price, as the case may be. (C) Each Holder of Series A Preferred Stock shall surrender the certificate or certificates representing such shares of Series A Preferred Stock 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 Optional Redemption Date or Provisional Redemption Date the full Optional Redemption Price or Provisional Redemption Price, respectively, for such shares shall be payable in cash and/or shares of Class A Common Stock, as the case may be, 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 8 certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (f) Voting Rights. ------------- (A) The Holders of Series A Preferred Stock, except as otherwise required under Delaware law or as set forth in paragraphs (B) and (C) below, shall not be entitled to vote on any matter required or permitted to be voted upon by the stockholders of the Company. (B) (1) If dividends on the Series A Preferred Stock are in arrears and unpaid for six or more Dividend Periods (whether or not consecutive) (a "Voting Rights Triggering Event"), then the Holders of the then outstanding shares of Series A Preferred Stock (together with the holders of Parity Stock upon which like rights have been conferred and are exercisable), voting separately and as a class, shall have the right and power to elect to serve on the Board of Directors the lesser of (x) two additional members to the Board of Directors or (y) that number of directors constituting at least 25% of the members of the Board of Directors, and the number of members of the Board of Directors shall, subject to paragraph (f)(B)(5), be immediately and automatically increased by such number. (2) The voting rights set forth in paragraph (f)(B)(1) above will continue until such time as all dividends in arrears on the Series A Preferred Stock are paid in full, at which time the term of any directors elected pursuant to the provisions of paragraph (f)(B)(1) above (subject to the right of holders of any other Preferred Stock to elect directors pursuant to the terms of the instruments governing such Preferred Stock) shall terminate forthwith and the number of directors constituting the Board of Directors shall be decreased by such number (until the occurrence of any subsequent Voting Rights Triggering Event). At any time after voting power to elect directors shall have become vested and be continuing in the Holders of Series A Preferred Stock (together with the holders of Parity Stock upon which like rights have been conferred and are exercisable) pursuant to paragraph (f)(B)(1) hereof, or if vacancies shall exist in the offices of directors elected by such holders, a proper officer of the Company may, and upon the written request of the Holders of record of at least 25% of the shares of Series A Preferred Stock then outstanding or the holders of 25% of the shares of Parity Stock then outstanding upon which like rights have been conferred and are exercisable addressed to the secretary of the Company shall, call a special meeting of the Holders of Series A Preferred Stock and the holders of such Parity Stock for the purpose of electing the directors which such holders are entitled to elect pursuant to the terms hereof; provided, however, that no such special -------- ------- meeting shall be called if the next annual meeting of stockholders of the Company is to be held within 60 days after the voting power to elect directors shall have become vested, in which case such meeting shall be deemed to have been called for such next annual meeting. If such meeting shall not be called by a proper officer of the Company within 20 days after personal service to the secretary of the Company at its principal executive offices, then the Holders of record 9 of at least 25% of the outstanding shares of Series A Preferred Stock or the holders of 25% of the shares of Parity Stock upon which like rights have been conferred and are exercisable may designate in writing one of their members to call such meeting at the 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 Series A Preferred Stock or such Parity Stock so designated shall have, and the Company shall provide, access to the lists of Holders of Series A Preferred Stock and the holders of such Parity Stock to be called pursuant to the provisions hereof. If no special meeting of the Holders of Series A Preferred Stock and the holders of such Parity Stock is called as provided in this paragraph (f)(B), then such meeting shall be deemed to have been called for the next annual meeting of stockholders of the Company or special meeting of the holders of any other Capital Stock of the Company. (3) At any meeting held for the purposes of electing directors at which the Holders of Series A Preferred Stock (together with the holders of Parity Stock upon which like rights have been conferred and are exercisable) 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 in voting power of the outstanding shares of Series A Preferred Stock (and such Parity Stock) shall be required to constitute a quorum thereof. (4) Any vacancy occurring in the office of a director elected by the Holders of Series A Preferred Stock (and such Parity Stock) may be filled by the remaining director elected by the Holders of Series A Preferred Stock (and such Parity Stock) unless and until such vacancy shall be filled by the Holders of Series A Preferred Stock (and such Parity Stock). (5) If an event occurs at any time that results in the holders of any Parity Stock having voting rights to elect directors to the Board of Directors, then Holders of Series A Preferred Stock shall, whether or not such event otherwise constitutes a Voting Rights Triggering Event pursuant to paragraph (f)(B)(1), have the voting rights set forth in paragraphs (f)(B)(1) and (f)(B)(2), and such event shall be deemed (for purposes of this paragraph (f) only) to constitute a Voting Rights Triggering Event. In addition, in the event that during a time in which directors elected by the Holders of Series A Preferred Stock pursuant to this paragraph (f)(B) are serving on the Board of Directors ("Previously-Elected Directors") an event occurs that results in holders of Parity Stock having voting rights to elect (voting together with the Holders of Series A Preferred Stock) at least two directors to the Board of Directors, the Holders of Series A Preferred Stock shall vote together with the holders of such Parity Stock to elect such new directors, and upon the election of the new directors the Previously-Elected Directors shall (unless such Previously-Elected Directors are elected as new directors) cease to serve on the Board of Directors. (C) (1) So long as any shares of the Series A Preferred Stock are outstanding, the Company will not authorize, create or increase the authorized amount of any class or 10 series of Senior Stock without the affirmative vote or consent of Holders of at least two-thirds of the shares of Series A Preferred Stock then outstanding, 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. However, without the consent of any Holder of Series A Preferred Stock, the Company may create additional classes of stock, increase the authorized number of shares of Preferred Stock or issue a series of Parity Stock or Junior Stock. (2) So long as any shares of the Series A Preferred Stock are outstanding, the Company will not amend this Certificate of Designations so as to affect adversely the specified rights, preferences, privileges or voting rights of Holders of shares of Series A Preferred Stock or to increase or decrease the aggregate number of authorized shares of Series A Preferred Stock without the affirmative vote or consent of Holders of at least a majority of the issued and outstanding shares of Series A Preferred Stock, voting or consenting, as the case may be, as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting. Notwithstanding the foregoing, the Company when authorized by resolutions of its Board of Directors may amend or supplement this Certificate of Designations without the consent of any Holder to cure any ambiguity, defect or inconsistency or make any other change provided that such amendments or supplements shall not adversely affect the interests of the Holders. (3) Except as set forth in paragraph (f)(C)(1) or (2) above, (x) the creation, authorization or issuance of any shares of any Junior Stock or Parity Stock, including the designation of a series of Series A Preferred Stock, or (y) the increase or decrease in the amount of authorized Capital Stock or any class, including Preferred Stock, shall not require the consent of Holders of Series A Preferred Stock and shall not be deemed to affect adversely the rights, preferences, privileges or voting rights of shares of Series A Preferred Stock. (D) In any case in which the Holders of Series A Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law, each Holder of Series A Preferred Stock entitled to vote with respect to such matters shall be entitled to one vote for each share of Series A Preferred Stock held; provided that any shares of Series A Preferred Stock that are held by the Company or by any Person controlled by the Company shall not entitle the Holders thereof to any votes with respect thereto. For purposes of this provision, "controlled by," as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting equity securities, by agreement or otherwise. (E) Except as required by law, the Holders of the Series A Preferred Stock will not be entitled to vote on any merger or consolidation involving the Company or a sale of all or substantially all the assets of the Company. 11 (g) Conversion. ---------- (A) (1) At any time after the Issue Date, at the option of the Holder thereof, any share of Series A Preferred Stock may be converted into such number of fully paid and nonassessable shares of Class A Common Stock (calculated as to each conversion to the nearest 1/10 of a share), as equals the Liquidation Preference divided by the Conversion Price, determined as hereinafter provided, in effect at the time of conversion. In case a share of Series A Preferred Stock is called for Provisional Redemption or Optional Redemption, such conversion right in respect of the share of Series A Preferred Stock so called shall expire at the close of business on the applicable Provisional Redemption Date or Optional Redemption Date, as the case may be, unless the Company defaults in making the payment due upon redemption. (2) If on any date after [________ __], 2002, the closing price (as defined in this paragraph (g)(A)(2)) of the Class A Common Stock has equaled or exceeded 135% of the then current Conversion Price, as hereinafter provided, for at least 20 out of 30 consecutive Market Days (as defined below), then the Company shall have the right, for up to five Market Days after any such date, to cause all the Series A Preferred Stock to convert into such number of fully paid and nonassessable shares of Class A Common Stock (calculated as to each conversion to the nearest 1/10 of a share) as equals the Liquidation Preference divided by the Conversion Price determined as hereinafter provided, in effect at the time of conversion. The Company may exercise such right by sending written notice of such exercise to the Transfer Agent whenever the conversion will automatically occur. The Series A Preferred Stock shall convert on the date such notice is received by the Transfer Agent, and the Conversion Price shall be the Conversion Price in effect on such date. For the purposes of this paragraph (g)(A)(2), (x)"Market Day" means a day on which the Nasdaq National Market (or the principal national securities market or exchange on which the Class A Common Stock is then listed or admitted for trading) is open for the transaction of business and (y) the "closing price" with respect to the Class A Common Stock on any Market Day means the last sale price on such Market Day or, if no such sale takes pace on such Market Day, the average of the reported high bid and low ask prices on such Market Day, in each case on the Nasdaq National Market (or the principal national securities market or exchange on which the Class A Common Stock is then listed or admitted for trading). (3) The price at which Class A Common Stock shall be delivered upon conversion (herein called the "Conversion Price") shall be initially $[________] per share of Class A Common Stock. The Conversion Price shall be adjusted in certain instances as provided in paragraph (g)(D) or paragraph (g)(H). (B) In order to exercise the conversion privilege provided for in paragraph (g)(A)(1), the Holder of any share of Series A Preferred Stock to be converted shall surrender the certificate for such share of Series A Preferred Stock, duly endorsed or assigned to the Company or in blank, at the office of the Transfer Agent or at any office or 12 agency of the Company maintained for that purpose, accompanied by written notice to the Company in the form of Exhibit B that the Holder elects to convert such share of Series A Preferred Stock or, if fewer than all the shares of Series A Preferred Stock represented by a single share certificate are to be converted, the number of shares represented thereby to be converted. Such notice shall also contain the office or the address to which the Company should deliver shares of Class A Common Stock issuable upon conversion (and any other payments or certificates related thereto). Upon any conversion of Series A Preferred Stock pursuant to paragraph (g)(A)(2), the Company will promptly notify the Holders thereof and will deliver shares of Class A Common Stock issuable upon such conversion to the office or address specified by such Holders. Holders of shares of Series A Preferred Stock at the close of business on a Record Date will be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion of such shares following such Record Date and prior to such Dividend Payment Date. However, shares of Series A Preferred Stock surrendered for conversion during the period between the close of business on any Record Date and the opening of business on the corresponding Dividend Payment Date (except shares converted after the issuance of a notice of redemption with respect to a redemption date during such period, which will be entitled to such dividend) must be accompanied by payment of an amount equal to the dividend payable on such shares on such Dividend Payment Date. A Holder of shares of Series A Preferred Stock on a Record Date who (or whose transferee) tenders any such shares for conversion into shares of Class A Common Stock on such Dividend Payment Date (or where shares of Series A Preferred Stock are automatically converted during such period) will receive the dividend payable by the Company on such shares of Series A Preferred Stock on such date, and the converting Holder need not include payment of the amount of such dividend upon surrender of shares of Series A Preferred Stock for conversion. Except as provided above, the Company will make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or the dividends on the shares of Class A Common Stock issued upon such conversion. Shares of Series A Preferred Stock shall be deemed to have been converted immediately prior to the close of business on the day (x) of surrender of such shares of Series A Preferred Stock for conversion in accordance with the foregoing provisions or (y) in the case of an automatic conversion, the Transfer Agent receives the appropriate notice from the Company, and at such time the rights of the Holders of such shares of Series A Preferred Stock as Holders shall cease, and the person or persons entitled to receive the Class A Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Class A Common Stock at such time. As promptly as practicable on or after the conversion date, the Company shall issue and shall deliver to such office or agency as the converting Holder shall have designated in its written notice to the Company a certificate or certificates for the number of full shares of Class A Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share, as provided in paragraph (g)(C) hereof. 13 In the case of any conversion of fewer than all the shares of Series A Preferred Stock evidenced by a certificate, upon such conversion the Company shall execute and the Transfer Agent shall authenticate and deliver to the Holder thereof (at the address designated by such Holder), at the expense of the Company, a new certificate or certificates representing the number of unconverted shares of Series A Preferred Stock. (C) No fractional shares of Class A Common Stock shall be issued upon the conversion of a share of Series A Preferred Stock. If more than one share of Series A Preferred Stock shall be surrendered for conversion at one time by the same Holder, the number of full shares of Class A Common Stock which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate shares of Series A Preferred Stock so surrendered. Instead of any fractional share of Class A Common Stock which would otherwise be issuable upon conversion of any share of Series A Preferred Stock, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the last sales price of a share of Class A Common Stock on the Nasdaq National Market (or the principal national securities exchange or other securities market on which the Class A Common Stock is then being traded) on the last Trading Day immediately preceding the day of conversion. (D) The Conversion Price shall be adjusted from time to time by the Company as follows, each a "Conversion Price Adjustment Event" (the variables have the definitions set forth in paragraph (g)(D)(7) below): (1) If the Company shall make any redemption payment or payment of a dividend or other distribution payable in shares of Class A Common Stock to all holders of any class of Capital Stock of the Company, other than the issuance of shares of Class A Common Stock in connection with the payment (1) in redemption for, of dividends on, or the conversion of, the Series A Preferred Stock or (2) to all Holders of the Series A Preferred Stock based upon the number of shares of Class A Common Stock into which the Series A Preferred Stock is then convertible. The Conversion Price in effect immediately prior to such event shall be adjusted pursuant to the formula: X/Y multiplied by CP=ACP. (2) If the Company shall make any issuance to all holders of shares of Class A Common Stock of rights, options or warrants entitling them to subscribe for or purchase shares of Class A Common Stock or securities convertible into or exchangeable for shares of Class A Common Stock at an exercise price that is less than the closing price of a share of Class A Common Stock on the Nasdaq National Market (or the principal national securities exchange or other securities market on which the Class A Common Stock is then being traded) on the last Trading Day immediately preceding the date of issuance of such rights, options or warrants; provided, however, that no adjustment will be made with respect to such a distribution if the Holder of shares of the Series A Preferred Stock would be entitled to receive such rights, options or warrants upon conversion at any time of shares of the Series A Preferred Stock into Class A Common Stock and provided, further, that if such rights, options or warrants are only exercisable upon the occurrence of certain triggering 14 events, then the Conversion Price will not be adjusted until such triggering events occur. The Conversion Price in effect immediately prior to such event shall be adjusted pursuant to the formula: X/(X+U((ClosePrice- EP)/ClosePrice)) multiplied by CP=ACP. If any options, warrants or other rights of the nature described in this paragraph (g)(D)(2) ("Rights") expire without exercise or conversion, the Conversion Price will be readjusted to the Conversion Price which would otherwise be in effect had the adjustment made upon the issuance of such Rights been made on the basis of delivery of only the number of shares of Class A Common Stock actually delivered upon the exercise or conversion of such Rights. (3) In the case of any subdivision, combination or reclassification of the Class A Common Stock. The Conversion Price in effect immediately prior to such event shall be adjusted pursuant to the formula: X/Y multiplied by CP=ACP. (4) If the Company shall make any distribution consisting exclusively of cash excluding any cash distributed in a transaction for which paragraph (g)(D)(12) below is applicable (which specifies that no anti-dilution adjustment shall be made) to all holders of shares of Class A Common Stock (which distribution is not also being made to the Holders of Series A Preferred Stock based on the number of shares of Class A Common Stock into which the Series A Preferred Stock is then convertible) in an aggregate amount that, combined together with (1) all other such cash distributions made within the then-preceding 12 months in respect of which no adjustment has been made and (2) any cash and the fair market value of other consideration paid or payable in respect of any tender offer by the Company or any of its subsidiaries for shares of Class A Common Stock concluded within the then-preceding 12 months in respect of which no adjustment has been made, exceeds 15% of the Company's Pre-Distribution Market Capitalization (as defined in paragraph (g)(D)(7) below). The Conversion Price in effect immediately prior to such event shall be adjusted pursuant to the formula: CP- (CP multiplied by ((Cash-15% PDMC)/PDMC))=ACP. There will be no adjustment to the Conversion Price if (Cash-15% PDMC) is less than or equal to zero. (5) In the case of the completion of a tender or exchange offer made by the Company or any of its subsidiaries for shares of Class A Common Stock that involves an aggregate consideration that, together with (1) any cash and other consideration payable in a tender or exchange offer by the Company or any of its subsidiaries for shares of Class A Common Stock expiring within the then-preceding 12 months in respect of which no adjustment has been made and (2) the aggregate amount of any such cash distributions referred to in paragraph (g)(D)(4) above to all holders of shares of Class A Common Stock within the then-preceding 12 months in respect of which no adjustments have been made, exceeds 15% of the Company's Post-Tender Market Capitalization (as defined in paragraph (g)(D)(7) below). If the foregoing event occurs and if the tender offer price or exchange offer price per share of Class A Common Stock is greater than the closing price of the Class A Common Stock on the Trading Day immediately succeeding the Expiration Time, the Conversion Price in effect immediately prior to such event shall be adjusted pursuant to the formula: CP multiplied by ((EX multiplied by TotSh)/(TPur + (NetSh 15 multiplied by EX))) = ACP. There will be no adjustment to the Conversion Price if the tender offer price or exchange offer price per share of Class A Common Stock is less than or equal to EX or if TOff is not greater than 15% of PTMC. (6) If the Company shall make a distribution to all holders of Class A Common Stock (which distribution is not also being made to the Holders of the Series A Preferred Stock based on the number of shares of Class A Common Stock into which the Series A Preferred Stock is then convertible) consisting of evidences of indebtedness, shares of Capital Stock of the Company other than Class A Common Stock or assets, including securities, but excluding those dividends and those issuances of rights, options, warrants and other distributions for which an adjustment to the Conversion Price as referred to above is applicable (other than in connection with a merger effected solely to reflect a change in the jurisdiction of incorporation of the Company). The Conversion Price in effect immediately prior to such event shall be adjusted pursuant to the formula: CP-(Value/#Sh)=ACP. (7) Variables. In the preceding descriptions, the variables have the --------- following definitions: "U" equals the number of shares of Class A Common Stock underlying all rights, options or warrants issued to holders of Class A Common Stock pursuant to paragraph (g)(D)(2) above entitling such holders to subscribe for or purchase shares of Class A Common Stock or securities convertible into or exchangeable for shares of Class A Common Stock issued in the Conversion Price Adjustment Event; "X" equals the total number of shares of Class A Common Stock outstanding immediately prior to the Conversion Price Adjustment Event (excluding unexercised options, warrants or rights); "Y" equals the total number of shares of Class A Common Stock outstanding immediately after the Conversion Price Adjustment Event (excluding unexercised options, warrants or rights); "Cash" equals the sum of (a) any distribution consisting exclusively of cash (excluding any cash distributed upon a merger or consolidation to which paragraph (g)(D)(12) below applies) to all holders of shares of Class A Common Stock (which distribution is not also being made to the Holders of Series A Preferred Stock based upon the number of shares of Class A Common Stock into which the Series A Preferred Stock is then convertible) and (b) all other such all-cash distributions made within the then-preceding 12 months in respect of which no adjustment has been made and (c) any cash and the fair market value of other consideration (as determined by the Board of Directors in good faith an pursuant to a resolution) paid or payable in respect of any tender offer by the Company or any of its subsidiaries for shares of any class of Common Stock concluded 16 within the then-preceding 12 months in respect of which no adjustment has been made pursuant to paragraph (g)(D)(4); "ClosePrice" means, with respect to any date, the last sales price of a share of Class A Common Stock on the Nasdaq National Market (or the principal national securities exchange or other securities market on which the Class A Common Stock is then being traded) on the last Trading Day immediately preceding such date; "EP" equals the exercise price or other consideration to be paid by the holder upon the conversion or exchange of "U"; "EX" equals the closing price of the Class A Common Stock on the Trading Day immediately succeeding the Expiration Time; "Expiration Time" means, with respect to a tender or exchange offer giving rise to a Conversion Price Adjustment Event pursuant to paragraph (g)(D)(5), the last time that tenders of shares of Class A Common Stock could have been made pursuant to the terms of such tender or exchange offer (as the same may be amended); "Market Value" means, as of any date, the average of the daily closing prices of the Class A Common Stock for the five consecutive Trading Days ending on the last Trading Day immediately prior to such date. The closing price for each Trading Day shall be the last sales price on the Nasdaq National Market (or the principal national securities exchange or other securities market on which the Class A Common Stock is then being traded); "NetSh" means a number of shares of Class A Common Stock equal to (a) TotSh minus (b) Purchased Shares; "PDMC" or "Pre-Distribution Market Capitalization" means, with respect to a Conversion Price Adjustment Event pursuant to paragraph (g)(D)(4), an amount equal to the product of (a) the ClosePrice of the Class A Common Stock as of the record date with respect to the distribution constituting such Conversion Price Adjustment Event multiplied by (b) the number of shares of Class A Common Stock outstanding at the close of business on the record date for such distribution; "PTMC" or "Post-Tender Market Capitalization" means, with respect to a Conversion Price Adjustment Event pursuant to paragraph (g)(D)(5), an amount equal to the product of (a) EX multiplied by (b) TotSh; "Purchased Shares" means, in connection with a tender or exchange offer giving rise to a Conversion Price Adjustment Event pursuant to paragraph (g)(D)(5), the number of shares of Class A Common Stock accepted (up to any maximum number of such shares 17 specified in the terms of such tender or exchange offer) and validly tendered and not withdrawn as of the Expiration Time; "#Sh" equals the number of shares of Class A Common Stock receiving the distribution contemplated in paragraph (g)(D)(6); "TOff" equals the sum of (a) the aggregate consideration paid by the Company or any of its subsidiaries for shares of Class A Common Stock in a tender or exchange offer made by the Company or any of its subsidiaries for shares of Class A Common Stock and (b) any cash or other consideration payable in a tender or exchange offer by the Company or any of its subsidiaries for shares of Class A Common Stock expiring within the then- preceding 12 months in respect of which no adjustment has been made and (c) the aggregate amount of any such all-cash distributions referred to in paragraph (g)(D)(4) to all holders of shares of Class A Common Stock within the then-preceding 12 months in respect of which no adjustments have been made; "TotSh" equals the total number of shares of Class A Common Stock outstanding (including any shares tendered in the tender or exchange offer) at the Expiration Time; "TPur" equals the product of (a) the fair market value (as determined by the Board of Directors in good faith pursuant to a resolution) of the consideration payable for one share of Class A Common Stock under the terms of the tender or exchange offer giving rise to a Conversion Price Adjustment Event pursuant to paragraph (g)(D)(5) multiplied by (b) the number of Purchased Shares; "Value" equals the aggregate fair market value of the distribution described in paragraph (g)(D)(6), as determined in good faith by the Board of Directors of the Company; "CP" equals the Conversion Price immediately prior to the Conversion Price Adjustment Event; "ACP" equals the Conversion Price immediately after the Conversion Price Adjustment Event. An adjustment made pursuant to paragraph (g)(D) shall become effective: (A) in the case of a Conversion Price Adjustment Event described in paragraph (g)(D)(1), (2), (4) or (6), immediately following the close of business on the record date for the determination of holders of Class A Common Stock entitled to participate in such event; or (B) in the case of a Conversion Price Adjustment Event described in paragraph (g)(D)(3), the close of business on the day upon which such corporate action becomes effective; or (C) in the case of a Conversion Price Adjustment Event described in paragraph (g)(D)(5), the close of business on the Trading Day immediately succeeding the Expiration Time of such tender offer or exchange offer. 18 (8) De Minimis Adjustments. No adjustment in the Conversion Price ---------------------- shall be required (a) unless such adjustment would require an increase or decrease of at least 1% in such price or (b) with respect to rights, options or warrants issued pursuant to the Company's employee benefit plans; provided, however, that any adjustments which by reason of paragraph (g)(D)(8)(a) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this paragraph (g)(D)(8) shall be made by the Company and shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment need be made for a change in the par value or no par value of the Class A Common Stock. (9) Reductions in Conversion Price. The Company shall be entitled to ------------------------------ make such reductions in the Conversion Price, in addition to those required by this paragraph (g)(D), as the Company in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, distribution of rights to purchase stock or securities or distribution of securities convertible into or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable to the recipients. In the event the Company elects to make such a reduction in the Conversion Price, the Company will comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder if and to the extent that such laws and regulations are applicable in connection with the reduction of the Conversion Price. Whenever the Conversion Price is so decreased, the Company shall mail to Holders of record of shares of Series A Preferred Stock a notice of the decrease at least 15 days before the date the decreased Conversion Price takes effect, and such notice shall state the decreased Conversion Price. (10) Decreases in Conversion Price. The Company from time to time may ----------------------------- decrease the Conversion Price by an amount determined by the Board of Directors and described in a notice as hereinafter provided for any period of time if the period is at least 20 days and if the decrease is irrevocable during such period. Whenever the Conversion Price is so decreased, the Company shall mail to Holders of record of shares of Series A Preferred Stock a notice of the decrease at least 15 days before the date the decreased Conversion Price takes effect, and such notice shall state the decreased Conversion Price and the period it will be in effect. (11) Distribution of Rights, Options or Warrants. In the event that, ------------------------------------------- after the issuance of the Series A Preferred Stock, the Company distributes rights, options or warrants (other than those referred to in paragraph (g)(D)(2) above) pro rata to all holders of shares of Class A Common Stock, so long as any such rights, options or warrants have not expired or been redeemed by the Company, the Holder of any shares of Series A Preferred Stock surrendered for conversion will be entitled to receive upon such conversion, in addition to the shares of Class A Common Stock then issuable upon such conversion (the "Conversion Shares"), a number of rights, options or warrants to be determined as follows: 19 (a) if such conversion occurs on or prior to the date (a "Distribution Date") for the distribution to the holders of rights, options or warrants of separate certificates evidencing such rights, options or warrants, the same number of rights, options or warrants to which a holder of a number of shares of Class A Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions applicable to the rights, options or warrants; and (b) if such conversion occurs after such Distribution Date, the same number of rights, options or warrants to which a holder of the number of shares of Class A Common Stock into which such Series A Preferred Stock was convertible immediately prior to such Distribution Date would have been entitled on such Distribution Date in accordance with the terms and provisions of and applicable to the rights, options or warrants. (12) Merger or Consolidation. (a) In case of: ----------------------- (i) any merger or consolidation of the Company with or into another Person (other than a consolidation or merger in which the Company is the resulting or continuing Person and which does not result in any reclassification or exchange of Class A Common Stock outstanding immediately prior to the merger or consolidation for cash, securities or other property of another Person); or (ii) any sale, transfer or other disposition to another Person of all or substantially all of the assets of the Company (other than the sale, transfer, assignment or distribution of shares of Capital Stock or assets to a subsidiary of the Company) computed on a consolidated basis; or (iii) any statutory exchange of securities with another Person, other than in connection with a merger or acquisition, (any of the events described in this paragraph (g)(D)(12)(a) being referred to as a "Transaction"), there will be no adjustment to the Conversion Price and each share of Series A Preferred Stock then outstanding shall, without the consent of any Holder of Series A Preferred Stock (except as expressly required by applicable law), become convertible only into the kind and amount of shares of stock or other securities (of the Company or another issuer), cash or other property receivable upon such Transaction by a holder of the number of shares of Class A Common Stock into which such share of Series A Preferred Stock could have been converted immediately prior to the effective date of such Transaction, assuming such holder of Class A Common Stock failed to exercise his rights of election, if any, as to the kind of amount of securities, cash or other property receivable upon such Transaction. (b) The provisions of this paragraph (g)(D)(12) similarly shall apply to successive Transactions. The provisions of this paragraph (g)(D)(12) shall be the sole right of Holders of Series A Preferred Stock in connection with any Transaction (and the 20 provisions of paragraph (g)(H) to the extent applicable) and, except as expressly provided by applicable law and paragraph (f), such Holders shall have no separate vote thereon. (13) Notice of Adjustment. Whenever the Conversion Price is adjusted -------------------- as provided in this paragraph (g)(D) or paragraph (g)(H), the Company shall promptly file with the Transfer Agent an Officers' Certificate setting of the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to each Holder of Series A Preferred Stock as such Holder's last address appearing on the register of holders maintained for that purpose within 20 days of the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment. (14) Deferred Issuance. In any case in which this paragraph (g)(D) ----------------- provides that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event issuing to the Holder of any share of Series A Preferred Stock converted after such record date and before the occurrence of such event the additional Class A Common Stock issuable upon such conversion by reason of the adjustment required by such event over and about the Class A Common Stock issuable upon such conversion before giving effect to such adjustment. (15) Treasury Stock. For purposes of this paragraph (g)(D), the -------------- number of share of Class A Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of Class A Common Stock. The Company shall not pay any dividend or make any distribution on Class A Common Stock held in the treasury of the Company. (E) In case: (1) the Company shall declare a dividend (or any other distribution) on its Class A Common Stock payable otherwise than in cash out of its earned surplus; or (2) the Company shall authorize the granting to all holders of its Class A Common Stock of rights or warrants to subscribe for or purchase any shares of Capital Stock of any class or of any other rights; or (3) of any reclassification of the Class A Common Stock of the Company (other than a subdivision or combination of its outstanding Class A Common Stock), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or the sale or transfer of all or substantially all the assets of the Company; or 21 (4) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be filed with the Transfer Agent and at each office or agency maintained for the purpose of conversion of the Series A Preferred Stock, and shall cause to be mailed to all Holders at their last addresses as they shall appear in the Series A Preferred Stock Register, at least 20 days (or 10 days in any case specified in clause (1) or (2) above) prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Class A Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Class A Common Stock of record shall be entitled to exchange their Class A Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. Failure to give the notice required by this paragraph (g)(E) or any defect therein shall not affect the legality or validity of any dividend, distribution, right, warrant, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up, or the vote upon any such action. (F) The company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued shares of Class A Common Stock (or out of its authorized shares of Class A Common Stock held in the treasury of the Company), for the purpose of effecting the conversion of the Series A Preferred Stock, the full number of shares of Class A Common Stock then issuable upon the conversion of all outstanding shares of Series A Preferred Stock. (G) The Company will pay any and all document, stamp or similar issue or transfer taxes that may be payable in respect of the issue or delivery of Class A Common Stock on conversion of the Series A Preferred Stock pursuant hereto. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Class A Common Stock in a name other than that of the Holder of the share of Series A Preferred Stock or the shares of Series A Preferred Stock to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid. (H) (1) Notwithstanding any other provision in the preceding paragraphs to the contrary, if any Change in Control occurs then the Conversion Price in effect shall be adjusted immediately after such Change in Control as described below. In addition, in the event of a Common Stock Change in Control (as defined in this paragraph (g)(H)), each share of the Series A Preferred Stock shall be convertible solely into common stock of the kind received by holders of Class A Common Stock as the result of such Common Stock 22 Change in Control. For purposes of calculating any adjustment to be made pursuant to this paragraph in the event of a Change in Control, immediately after such Change in Control: (A) in the case of a Non-Stock Change in Control (as defined in this paragraph (g)(H)), the Conversion Price, subject to the provisions of paragraph (g)(I), shall thereupon become the lower of (x) the Conversion Price in effect immediately prior to such Non-Stock Change in Control, but after giving effect to any other prior adjustments, and (y) the result obtained by multiplying the greater of the Applicable Price (as defined in this paragraph (g)(H)) or the then applicable Reference Market Price (as defined in this paragraph (g)(H)) by a fraction of which the numerator shall be $[____] and the denominator shall be the then current Optional Redemption Price per share; or, prior to [________ __], 2002, an amount per share determined by the Company in its sole discretion, after consultation with an investment banking firm, to be the equivalent of the hypothetical Optional Redemption Price that would have been applicable if the Series A Preferred Stock had been redeemable during such period; and (B) in the case of a Common Stock Change in Control, the Conversion Price in effect immediately prior to such Common Stock Change in Control, but after giving effect to any prior adjustments, shall thereupon be adjusted by multiplying such Conversion Price by a fraction, of which the numerator shall be the Purchaser Stock Price (as defined in this paragraph (g)(H)) and the denominator shall be the Applicable Price; provided, however, that in the -------- ------- event of a Common Stock Change in Control in which (x) 100% of the value of the consideration received by a holder of Class A Common Stock is common stock of the successor, acquiror, or other third party (and cash, if any, is paid with respect to any fractional interest in such common stock resulting from such Common Stock Change in Control) and (y) all of the Class A Common Stock will have been exchanged for, converted into, or acquired for, common stock (and cash with respect to fractional interests) of the successor, acquiror or other third party, the Conversion Price in effect immediately prior to such Common Stock Change in Control shall thereupon be adjusted by multiplying such Conversion Price by a fraction, of which the numerator shall be one (1) and the denominator shall be the number of shares of common stock of the successor, acquiror, or other third party received by a holder of one share of Class A Common Stock as a result of such Common Stock Change in Control. (2) For purposes of this paragraph (H), the following terms shall have the meanings indicated: "Applicable Price" means (i) in the event of a Non-Stock Change in Control in which the holders of the Class A Common Stock receive only cash, the amount of cash received by the holder of one share of Class A Common Stock and (ii) in the event of any other Non-Stock Change in Control or any Common Stock Change in Control, the average of the closing bid prices for the Class A Common Stock during the ten Trading Days prior to and including the Record Date for the determination of the holders of Class A Common Stock entitled to receive cash, securities, property or other assets in connection with such 23 Non-Stock Change in Control or Common Stock Change in Control or, if there is no such Record Date, the date upon which the holders of the Class A Common Stock shall have the right to receive such cash, securities, property or other assets, in each case, as adjusted in good faith by the Board of Directors to appropriately reflect any of the events referred to in paragraph (g)(D)(1) through (6). "Common Stock Change in Control" means any Change in Control in which more than 50% of the value (as determined in good faith by the Board of Directors of the Company) of the consideration received by holders of Class A Common Stock consists of common stock that for each of the ten consecutive Trading Days referred to in the definition of "Applicable Price" has been admitted for listing or admitted for listing subject to notice of issuance on a national securities exchange or quoted on the Nasdaq National Market; provided, however, that a Change in Control shall not be a Common Stock -------- ------- Change in Control unless either (i) the Company continues to exist after the occurrence of such Change in Control and the outstanding shares of Series A Preferred Stock continue to exist as outstanding shares of Series A Preferred Stock, or (ii) not later than the occurrence of such Change in Control, the outstanding shares of Series A Preferred Stock are converted into or exchanged for shares of convertible preferred stock of a corporation succeeding to the business of the Company, which convertible preferred stock has powers, preferences and relative, participating, optional or other rights, and qualifications, limitations and restrictions, substantially similar to those of the Series A Preferred Stock. "Non-Stock Change in Control" means any Change in Control other than a Common Stock Change in Control. "Purchaser Stock Price" means, with respect to any Common Stock Change in Control, the product of (i) the number of shares of common stock received in such Common Stock Change of Control for each share of Class A Common Stock, and (ii) the average of the per share closing bid prices for the common stock received in such Common Stock Change in Control for the ten consecutive Trading Days prior to and including the Record Date for the determination of the holders of Class A Common Stock entitled to receive such common stock, or if there is no such Record Date, the date upon which the holders of the Class A Common Stock shall have the right to receive such common stock, in each case, as adjusted in good faith by the Board of Directors to appropriately reflect any of the events referred to in paragraph (g)(D)(1) through (6); provided, however, that if no such closing bid prices -------- ------- exist, then the Purchaser Stock Price shall be set at a price determined in good faith by the Board of Directors of the Company. "Reference Market Price" shall initially mean $[________] (which is an amount equal to 66-2/3% of the reported last sale price of the Class A Common Stock on the Nasdaq National Market on [________ __], 1999), and in the event of any adjustment to the Conversion Price other than as a result of a Change in Control, the Reference Market Price shall also be adjusted so that the ratio of the Reference Market Price to the Conversion 24 Price after giving effect to any such adjustment shall always be the same as the ratio of $[________] to the initial Conversion Price set forth in paragraph (g)(A)(3). (I) If, as a result of the operation of paragraph (g)(H)(1)(A), the cumulative number of shares of Class A Common Stock issued or issuable upon conversion of the Series A Preferred Stock, after giving effect to the adjustments described in paragraph (g)(H)(1)(A) and all prior conversions of Series A Preferred Stock, would exceed a number (the "Threshold Number") equal to 20% of the outstanding shares of Class A Common Stock as of the Issue Date, then until and unless the Company obtains the approval of its common stockholders for the issuance of any shares of Class A Common Stock in excess of the Threshold Number, the Conversion Price shall be adjusted pursuant to paragraph (g)(H)(1)(A) to that price that would entitle the Holders of Series A Preferred Stock to receive in the aggregate, upon conversion of all the Series A Preferred Stock (including all prior conversions of Series A Preferred Stock), no more than the Threshold Number of shares of Class A Common Stock. If, as a result of the operation of the preceding sentence, the adjustments required by operation of paragraph (g)(H)(1)(A) in the Conversion Price is limited because appropriate stockholder approval has not been obtained, the Company agrees for the benefit of the Holders of Series A Preferred Stock to seek, as promptly as reasonably practicable, the requisite approval of its common stockholders for the full adjustment of the Conversion Price as required by operation of paragraph (g)(H)(1)(A) (without giving effect to the preceding sentence). (h) Reissuance of Series A Preferred Stock. Shares of Series A Preferred -------------------------------------- Stock that have been issued and reacquired in any manner, including shares purchased, redeemed, converted or exchanged, shall not be reissued as shares of Series A Preferred Stock and shall (upon compliance with any applicable provisions of the laws of Delaware) have the status of authorized and unissued shares of Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of Preferred Stock; provided, however, that so -------- ------- long as any shares of Series A Preferred Stock are outstanding, any issuance of such shares may be in compliance with the terms hereof. Upon any such reacquisitions, the number of shares of Series A Preferred Stock authorized pursuant to this Certificate of Designations shall be reduced by the number of shares so acquired. (i) Business Day. If any payment, redemption or exchange shall be required ------------ by the terms hereof to be made on a day that is not a Business Day, such payment, redemption or exchange shall be made on the immediately succeeding Business Day. (j) Limitation on Mergers and Asset Sales. The Company may, without the ------------------------------------- consent of any Holder of Series A Preferred Stock, consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets as an entirety to, any Person, provided that: (1) the successor, transferee or lessee (if not the Company) is organized and existing under the laws of the United States of America or any State thereof or the District of Columbia and the Series A Preferred Stock shall be converted into or exchanged for and shall become shares of such successor, transferee or lessee, having in respect of such successor, transferee, or lessee 25 substantially the same powers, preference and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereon, that the Series A Preferred Stock had immediately prior to such transaction; and (2) the Company delivers to the Transfer Agent an Officers' Certificate and an Opinion of Counsel stating that such consolidation, merger or transfer complies with this Certificate of Designations. In the event of any consolidation or merger or conveyance, transfer or lease of all or substantially all of the assets of the Company that is permitted pursuant to this paragraph (j), the successor resulting from such consolidation or into which the Company is merged or the transferee or lessee to which such conveyance, transfer or lease is made, will succeed to, and be substituted for, and may exercise every right and power of, the Company with respect to the Series A Preferred Stock, and thereafter, except in the case of a lease, the predecessor (if still in existence) shall be released from its obligations and covenants with respect to the Series A Preferred Stock. (k) Certificates. ------------ (i) Form and Dating. The Series A Preferred Stock and the Transfer --------------- Agent's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series A Preferred Stock certificate may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Series A Preferred Stock certificate shall be dated the date of its authentication. The terms of the Series A Preferred Stock certificate set forth in Exhibit A are part of the terms of this Certificate of Designations. (ii) Execution and Authentication. Two Officers shall sign the ---------------------------- Series A Preferred Stock certificates for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Series A Preferred Stock certificates and may be in facsimile form. If an Officer whose signature is on Series A Preferred Stock certificate no longer holds that office at the time the Transfer Agent authenticates the Series A Preferred Stock certificate, the Series A Preferred Stock certificates shall be valid nevertheless. A Series A Preferred Stock certificate shall not be valid until an authorized signatory of the Transfer Agent manually signs the certificate of authentication on the Series A Preferred Stock certificate. The signature shall be conclusive evidence that the Series A Preferred Stock certificate has been authenticated under this Certificate of Designations. The Transfer Agent shall authenticate and deliver certificates for [________] shares of Series A Preferred Stock for original issue upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the number of shares of Series A 26 Preferred Stock to be authenticated and the date on which the original issue of Series A Preferred Stock is to be authenticated. The Transfer Agent may appoint an authenticating agent reasonably acceptable to the Company to authenticate the certificates for Series A Preferred Stock. Unless limited by the terms of such appointment, an authenticating agent may authenticate certificates for Series A Preferred Stock whenever the Transfer Agent may do so. Each reference in this Certificate of Designations to authentication by the Transfer Agent includes authentication by such agent. An authenticating agent has the same rights as the Transfer Agent or agent for service of notices and demands. (iii) Transfer and Exchange of Shares of Series A Preferred Stock. ----------------------------------------------------------- (A) When shares of Series A Preferred Stock are presented to the Transfer Agent with a request to register the transfer of such shares of Series A Preferred Stock or to exchange such shares of Series A Preferred Stock for an equal number of shares of Series A Preferred Stock of other authorized denominations, the Transfer Agent shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the certificate representing -------- ------- such shares of Series A Preferred Stock surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Transfer Agent, duly executed by the Holder thereof or its attorney duly authorized in writing. (B) Obligations with Respect to Transfers and Exchanges of Series A --------------------------------------------------------------- Preferred Stock. (1) To permit registrations of transfers and exchanges, --------------- the Company shall execute and the Transfer Agent shall authenticate certificates representing shares of Series A Preferred Stock as required pursuant to the provisions of this paragraph (k)(iii). (2) All shares of Series A Preferred Stock issued upon any registration of transfer or exchange of shares of Series A Preferred Stock shall be the valid obligations of the Company, entitled to the same benefits under this Certificate of Designations as the shares of Series A Preferred Stock surrendered upon such registration of transfer or exchange. (3) Prior to due presentment for registration of transfer of any shares of Series A Preferred Stock, the Transfer Agent and the Company may deem and treat the person in whose name such shares of Series A Preferred Stock are registered as the absolute owner of such Series A Preferred Stock and neither the Transfer Agent nor the Company shall be affected by notice to the contrary. (4) No service charge shall be made to a Holder for any registration of transfer or exchange upon surrender of any certificate representing shares of Series A Preferred Stock or shares of Class A Common Stock at the office of the Transfer Agent maintained 27 for that purpose. However, the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Series A Preferred Stock certificates or Class A Common Stock certificates. (C) No Obligation of the Transfer Agent. The Transfer Agent shall ----------------------------------- have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Certificate of Designations or under applicable law with respect to any transfer of any interest in any Series A Preferred Stock other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Certificate of Designations, and to examine the same to determine substantial compliance as to form with the express requirements hereof. (iv) Replacement Certificates. If a modified Series A Preferred ------------------------ Stock certificate is surrendered to the Transfer Agent or if the Holder of a Series A Preferred Stock certificate claims that the Series A Preferred Stock certificate has been lost, destroyed or wrongfully taken, the Company shall issue and the Transfer Agent shall countersign a replacement Series A Preferred Stock certificate if the reasonable requirements of the Transfer Agent and of Section 8-405 of the Uniform Commercial Code as in effect in the State of New York are met. If required by the Transfer Agent or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Transfer Agent to protect the Company and the Transfer Agent from any loss which either of them may suffer if a Series A Preferred Stock certificate is replaced. The Company and the Transfer Agent may charge the Holder for their expenses in replacing a Series A Preferred Stock certificate. (v) Temporary Certificates. Until definitive Series A Preferred Stock ---------------------- certificates are ready for delivery, the Company may prepare and the Transfer Agent shall countersign temporary Series A Preferred Stock certificates. Temporary Series A Preferred Stock certificates shall be substantially in the form of definitive Series A Preferred Stock certificates but may have variations that the Company considers appropriate for temporary Series A Preferred Stock certificates. Without unreasonable delay, the Company shall prepare and the Transfer Agent shall countersign definitive Series A Preferred Stock certificates and deliver them in exchange for temporary Series A Preferred Stock certificates. (vi) Cancellation. In the event the Company shall purchase or ------------ otherwise acquire shares of Series A Preferred Stock, the certificate(s) representing the same shall thereupon be delivered to the Transfer Agent for cancellation. (A) The Transfer Agent and no one else shall cancel and destroy all Series A Preferred Stock certificates surrendered for transfer, exchange, replacement or cancellation and deliver a certificate of such destruction to the Company unless the Company directs the 28 Transfer Agent to deliver canceled Series A Preferred Stock certificates to the Company. The Company may not issue new Series A Preferred Stock certificates to replace Series A Preferred Stock certificates to the extent they evidence Series A Preferred Stock which the Company has purchased or otherwise acquired. (l) Certain Definitions. As used in this Certificate of Designations, the ------------------- following terms shall have the following meanings (and (1) terms defined in the singular have comparable meanings when used in the plural and vice versa, (2) "including" means including without limitation, (3) "or" is not exclusive and (4) an accounting term not otherwise defined has the meaning assigned to it in accordance with United States generally accepted accounting principles as in effect on the Issue Date and all accounting calculations will be determined in accordance with such principles), unless the content otherwise requires: "Business Day" means each day which is not a Legal Holiday. ------------ "Capital Stock" means, with respect to any Person, any and all shares, ------------- interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether now outstanding or issued after the Issue Date, including all Common Stock and Preferred Stock. "Change in Control" or "Change of Control" means: (i) the sale, lease, ----------------- ----------------- transfer, conveyance other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan relating to the liquidation, dissolution or winding-up of the Company, (iii) the consummation of any transaction (including any merger or consolidation) the result of which is that any "person" (as defined above) other than any Permitted Holder (as defined below), becomes the beneficial owner (as determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will be deemed to have beneficial ownership of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the Voting Stock of the Company or (iv) the first day on which a majority of the members of the Board of Directors (excluding the directors elected pursuant to paragraph (f)) are not Continuing Directors. "Permitted Holders" means IES Industries, Inc. and its successors and assigns, Clark E. McLeod, Mary E. McLeod and Richard Lumpkin, and foundations and trusts controlled by any of the foregoing individuals and entities and their affiliates (other than the Company and its subsidiaries) of each of the foregoing. "Class A Common Stock" means the Company's Class A common stock, par -------------------- value $0.01 per share. "Common Stock" means the Company's common stock, including but not ------------ limited to, the Class A Common Stock. 29 "Continuing Directors" means, as of any date of determination, -------------------- individuals who on the Issue Date constituted the Board of Directors (together with any new directors whose election by the Board of Directors or whose nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the members of the Board of Directors then in office who either were members of the Board of Directors on the Issue Date or whose election or nomination for election was previously so approved). "Dividend Period" means such period between two consecutive Dividend --------------- Payment Dates and the period from the Issue Date to the first Dividend Payment Date. "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "Holders" means the registered holders from time to time of the Series ------- A Preferred Stock. "Issue Date" means the date on which the Series A Preferred Stock is ---------- initially issued. "Legal Holiday" means a Saturday, a Sunday or a day on which banking ------------- institutions are not required to be open in the State of New York. "Officer" means the Chairman of the Board of Directors, the President, ------- any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. --------------------- "Opinion of Counsel" means a written opinion from legal counsel who is ------------------ acceptable to the Transfer Agent. The counsel may be an employee of or counsel to the Company or the Transfer Agent. "person" or "Person" means any individual, corporation, partnership, ------ ------ joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization, governmental or any agency or political subdivision thereof or any other entity. "Preferred Stock" means, with respect to any Person, any and all --------------- shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's preferred or preference stock, whether now outstanding or issued after the Issue Date, including all series and classes of such preferred or preference stock. "SEC" or "Commission" means the Securities and Exchange Commission. --- ---------- "Securities Act" means the Securities Act of 1933. -------------- 30 "Subsidiary" means with respect to any Person, any corporation, ---------- association or other business entity of which Voting Stock representing more than 50% of the voting power of shares of outstanding Voting Stock is owned, directly or indirectly, by such Person, or one or more other Subsidiaries of such Person. "Transfer Agent" means the transfer agent for the Series A Preferred -------------- Stock appointed by the Company, which initially shall be Norwest Bank Minnesota, N.A. "Voting Stock" of a corporation means all classes of Capital Stock of ------------ such corporation then outstanding and normally entitled to vote in the election of directors. (m) SEC Reports and Reports to Holders. So long as any shares of Series A ---------------------------------- Preferred Stock remain outstanding, the Company will file with the SEC (whether or not the Company is required to do so) all such reports and other information as the Company would be required to file with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act. Upon the written request of a Holder of Series A Preferred Stock, the Company will supply to such Holder, at no cost to such Holder, copies of such reports or other information. 31 IN WITNESS WHEREOF, said McLeodUSA Incorporated has caused this Certificate of Designations to be signed by [________], its [________], this [____] day of [_______], 1999. McLEODUSA INCORPORATED by --------------------------- Name: Title: 32 EXHIBIT A FORM OF SERIES A PREFERRED STOCK FACE OF SECURITY Certificate Number Number of Shares of Series A Preferred Stock [ ] [ ] CUSIP NO.: 582266201 __% Series A Cumulative Convertible Preferred Stock (par value $0.01 per share) (liquidation preference $[____] per share) of McLeodUSA Incorporated McLeodUSA Incorporated, a Delaware corporation (the "Company"), hereby certifies that [ ] (the "Holder") is the registered owner of fully paid and non-assessable preferred securities of the Company designated the __% Series A Cumulative Convertible Preferred Stock (par value $0.01 per share) (liquidation preference $[____] per share) (the "Series A Preferred Stock"). The shares of Series A Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series A Preferred Stock represented hereby are issued and shall in all respects be subject to the provisions of the Certificate of Designations of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of ___% Series A Cumulative Convertible Preferred Stock and Qualifications, Limitations and Restrictions Thereof dated August [__], 1999, as the same may be amended from time to time (the "Certificate of Designations"). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business. A-1 Reference is hereby made to select provisions of the Series A Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place. Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder. This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. A-2 IN WITNESS WHEREOF, the Company has executed this certificate this [ ] day of [ ], [ ]. McLEODUSA INCORPORATED By ---------------------------- Name: Title: [Seal] By ---------------------------- Name: Title: A-3 REVERSE OF SECURITY Dividends on each share of Series A Preferred Stock shall be payable at a rate per annum set forth in the face hereof or as provided in the Certificate of Designations. Dividends may be paid in cash or in shares of Class A Common Stock of the Company, at the option of the Company. The shares of Series A Preferred Stock shall be redeemable as provided in the Certificate of Designations and in the Restated Certificate of Incorporation. The shares of Series A Preferred Stock shall be convertible into the Company's Class A Common Stock in the manner and according to the terms set forth in the Certificate of Designations. As required under Delaware law, the Company shall furnish to any Holder upon request and without charge, a full summary statement of the designations, voting rights preferences, limitations and special rights of the shares of each class or series authorized to be issued by the Company so far as they have been fixed and determined and the authority of the Board of Directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the class and series of shares of the Company. A-4 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series A Preferred Stock evidenced hereby to: ------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (Insert assignee's social security or tax identification number) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (Insert address and zip code of assignee) and irrevocably appoints: - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ agent to transfer the shares of Series A Preferred Stock evidenced hereby on the books of the Transfer Agent and Registrar. The agent may substitute another to act for him or her. Date:_______________________ Signature:____________________________ (Sign exactly as your name appears on the other side of this Series A Preferred Stock Certificate) Signature Guarantee:/1/ ________________________________________________________________ _______________________ /1/(Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A-5 EXHIBIT B NOTICE OF CONVERSION (To be Executed by the Registered Holder in order to Convert the Series A Preferred Stock) The undersigned hereby irrevocably elects to convert (the "Conversion") shares of __% Series A Cumulative Convertible Preferred Stock (the "Series A Preferred Stock"), represented by stock certificate No(s). _____ (the "Series A Preferred Stock Certificates") into shares of Class A common stock ("Class A Common Stock") of McLeodUSA Incorporated (the "Company") according to the conditions of the Certificate of Designations, Preferences and Rights of the Series A Preferred Stock (the "Certificate of Designations"), as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates. No fee will be charged to the holder for any conversion, except for transfer taxes, if any. A copy of each Series A Preferred Stock Certificate is attached hereto (or evidence of loss, theft or destruction thereof). The undersigned represents and warrants that all offers and sales by the undersigned of the shares of Class A Common Stock issuable to the undersigned upon conversion of the Series A Preferred Stock shall be made pursuant to registration of the Class A Common Stock under the Securities Act of 1933 (the "Act"), or pursuant to any exemption from registration under the Act. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in or pursuant to the Certificate of Designations. B-1 Date of Conversion: ___________ Applicable Conversion Price: ________ Number of shares of Convertible Preferred Stock to be Converted: ______ Number of shares of Class A Common Stock to be Issued: _________ Signature: ________________ Name: ___________________ Address:** _______________ Fax No.: _________________ *The Company is not required to issue shares of Class A Common Stock until the original Series A Preferred Stock Certificate(s) (or evidence of loss, theft or destruction thereof) to be converted are received by the Company or its Transfer Agent. The Company shall issue and deliver shares of Class A Common Stock to an overnight courier not later than three business days following receipt of the original Series A Preferred Stock Certificate(s) to be converted. **Address where shares of Class A Common Stock and any other payments or certificates shall be sent by the Company. B-2 EX-5.1 6 EXHIBIT 5.1 Exhibit 5.1 [HOGAN AND HARTSON LETTERHEAD] August 4, 1999 Board of Directors McLeodUSA Incorporated McLeodUSA Technology Park 6400 C Street SW, P.O. Box 3177 Cedar Rapids, IA 52406-3177 Ladies and Gentlemen: We are acting as special counsel to McLeodUSA Incorporated, a Delaware corporation (the "Company"), in connection with its registration statement on Form S-3, as amended (File No. 333-82851) (the "Registration Statement"), filed with the Securities and Exchange Commission relating to the proposed public offering of up to $1,750,000,000 in aggregate amount of one or more classes or series of the Company's securities, which securities may include any or all of the Corporation's: (i) shares of Class A common stock, par value $.01 per share (the "Class A Common Stock"); (ii) shares of preferred stock (the "Preferred Stock"); (iii) Preferred Stock represented by depositary shares (the "Depositary Shares"); (iv) debt securities (the "Debt Securities"); (v) warrants to purchase Debt Securities, Class A Common Stock, Preferred Stock or Depositary Shares (the "Warrants"); (vi) subscription rights to purchase any of the above securities (the "Subscription Rights"); (vii) stock purchase contracts to purchase Class A Common Stock or Preferred Stock (the "Stock Purchase Contracts"); and (viii) stock purchase units (the "Stock Purchase Units" and, together with the Class A Common Stock, Preferred Stock, Depositary Shares, Debt Securities, Warrants, Subscription Rights and Stock Purchase Contracts, the "Securities"), all of which Securities may be offered and sold by the Company from time to time as set forth in the prospectus which forms a part of the Registration Statement (the "Prospectus"), and as set forth in one or more supplements to the Prospectus (each, a "Prospectus Supplement"). This opinion letter is furnished to you at your request to enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. Section 229.601(b)(5), in connection with the Registration Statement. For purposes of this opinion letter, we have examined copies of the following documents: 1. An executed copy of the Registration Statement. 2. The Amended and Restated Certificate of Incorporation of the Company, as certified by the Secretary of State of the State of Delaware on May 13, 1999 (the "Amended and Restated Certificate"), the Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company, as certified by the Secretary of State of the State of Delaware on May 13, 1999 (the "Certificate of Amendment"), the Certificate of Change of Registered Agent and Registered Office of the Company, as certified by the Secretary of State of the State of Delaware on May 13, 1999 (together with the Amended and Restated Certificate and the Certificate of Amendment, the "Certificate of Incorporation") as certified by the Secretary of the Company on the date hereof as being complete, accurate and in effect. 3. The Amended and Restated Bylaws of the Company, as certified by the Secretary of the Company on the date hereof as being complete, accurate and in effect (the "Bylaws"). 4. The proposed forms of Senior Debt Securities Indenture and Subordinated Debt Securities Indenture, each between the Company and United States Trust Company of New York, as Trustee, filed as Exhibits 4.21 and 4.22 to the Registration Statement (each an "Indenture" and collectively, the "Indentures"). 5. Resolutions of the Board of Directors of the Company adopted by unanimous written consent on August 3, 1999, as certified by the Secretary of the Company on the date hereof as being complete, accurate, and in effect, relating to the issuance and sale of the Securities and arrangements in connection therewith. In our examination of the aforesaid documents, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the accuracy and completeness of all documents submitted to us, the authenticity of all original documents, and the conformity to authentic original documents of all documents submitted to us as copies (including telecopies). This opinion letter is given, and all statements herein are made, in the context of the foregoing. This opinion letter is based as to matters of law solely on Delaware corporate law. We express no opinion herein as to any other laws, statutes, ordinances, rules or regulations. For purposes of this opinion letter, we have assumed that: (i) the issuance, sale, amount and terms of the Securities to be offered from time to time will be duly authorized and established by proper action of the Board of Directors of the Company (each, a "Board Action") and in accordance with the Certificate of Incorporation, Bylaws and applicable Delaware law; (ii) prior to any issuance of shares of Preferred Stock or Depositary Shares, an appropriate Certificate of Designation relating to a class or series of the Preferred Stock or Depositary Shares to be sold under the Registration Statement will have been duly authorized and adopted and filed with the Secretary of State of the State of Delaware (the "Certificate of Designation"); (iii) any Depositary Shares will be issued by the Depositary (as defined below) under one or more deposit agreements (each, a "Deposit Agreement"), each to be between the Company and a financial institution identified therein as the depositary (each, a "Depositary"); (iv) any Debt Securities will be issued pursuant to an Indenture; and (v) any Warrants will be issued under one or more warrant agreements (each, a "Warrant Agreement"), each to be between the Company and a financial institution identified therein as a warrant agent (each, a "Warrant Agent"). Based upon, subject to and limited by the foregoing, we are of the opinion that: (a) following (i) final action of the Board of Directors of the Company authorizing an issuance of Class A Common Stock, (ii) effectiveness of the Registration Statement, (iii) issuance and delivery of certificates for Class A Common Stock against payment therefor in accordance with the terms of such Board Action and any applicable underwriting agreement or purchase agreement, and as contemplated by the Registration Statement and/or the applicable Prospectus Supplement or upon the exercise of any Warrants for Class A Common Stock in accordance with the terms thereof, or conversion or exchange of Preferred Stock that, by their terms, are convertible into or exchangeable for Class A Common Stock, the Class A Common Stock will be validly issued, fully paid, and nonassessable; (b) following (i) final action of the Board of Directors of the Company authorizing and establishing a series of the Preferred Stock, in accordance with the terms of the Certificate of Incorporation, the Bylaws and applicable law, (ii) filing of an appropriate Certificate of Designation with respect to such Preferred Stock, (iii) effectiveness of the Registration Statement, (iv) final action of the Board of Directors authorizing issuance of such shares of Preferred Stock, and (v) receipt by the Company of the consideration for the Preferred Stock specified in the resolutions of the Board of Directors, the Preferred Stock will be validly issued, fully paid, and nonassessable. (c) following (i) final action of the Board of Directors classifying a series of Preferred Stock underlying a series of Depositary Shares, in accordance with the terms of the Certificate of Incorporation, Bylaws and applicable law, (ii) filing of an appropriate Certificate of Designation with respect to such Preferred Stock, (iii) effectiveness of the Registration Statement, (iv) final action of the Board of Directors authorizing issuance of such shares of Preferred Stock, (v) final action of the Board of Directors authorizing execution and delivery of a Deposit Agreement, and (vi) receipt by the Company of the consideration for the Depositary Shares specified in the resolutions of the Board of Directors, the Depositary Shares will be validly issued, fully paid, and nonassessable. (d) following (i) effectiveness of the Registration Statement, (ii) due execution and delivery of an applicable Indenture by the Company and the Trustee named therein, (iii) final action of the Board of Directors duly authorizing the issuance of any series of Debt Securities, the terms of which have been duly established in accordance with the provisions of the Indenture, (iv) due authentication by the Trustee, and (v) due execution and delivery of such Debt Securities on behalf of the Company against payment therefor in accordance with the terms of such Board Action, any applicable underwriting agreement or purchase agreement, the Indenture and any applicable supplemental indenture, and as contemplated by the Registration Statement and/or the applicable Prospectus Supplement, the Debt Securities will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights (including, without limitation, the effect of statutory and other law regarding fraudulent conveyances, fraudulent transfers and preferential transfers) and as may be limited by the exercise of judicial discretion and the application of principles of equity, including, without limitation, requirements of good faith, fair dealing, conscionability and materiality (regardless of whether enforcement is considered in a proceeding in equity or at law). (e) following (i) effectiveness of the Registration Statement, (ii) due authorization by the Board of Directors of the Company of a Warrant Agreement and the specific terms of the underlying Warrants conforming to the description thereof in the Registration Statement and/or the applicable Prospectus Supplement and delivery of such Warrant Agreement by the Company and the Warrant Agent named therein, (iii) authentication by the Warrant Agent of Warrants conforming to the requirements of the related Warrant Agreement, and (iv) due execution and delivery on behalf of the Company of such Warrants against payment therefor in accordance with the terms of such Board Action, any applicable underwriting agreement or purchase agreement and the applicable Warrant Agreement and as contemplated by the Registration Statement and/or the applicable Prospectus Supplement, and assuming that the terms of the Warrants as set forth in the Warrant Agreement do not violate any law applicable to the Company or result in a default under or breach of any agreement or instrument binding upon the Company, the Warrants will constitute valid and binding obligations of the Company, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights (including, without limitation, the effect of statutory and other law regarding fraudulent conveyances, fraudulent transfers and preferential transfers) and as may be limited by the exercise of judicial discretion and the application of principles of equity, including, without limitation, requirements of good faith, fair dealing, conscionability and materiality (regardless of whether enforcement is considered in a proceeding in equity or at law). (f) following (i) effectiveness of the Registration Statement, (ii) due establishment of the specific terms of Subscription Rights, and (iii) due execution and delivery of a certificate bearing such terms (the "Subscription Right Certificate") by or on behalf of the Company as contemplated in the Registration Statement and/or the related Prospectus Supplement, and assuming (A) that the terms of the Subscription Rights as set forth in the Subscription Right Certificate are as described in the Registration Statement and/or the applicable Prospectus Supplement, (B) that the terms of the Subscription Rights as set forth in the Subscription Right Certificate do not violate any law applicable to the Company or result in a default under or breach of any agreement or instrument binding upon the Company, and (C) that the Subscription Rights are then issued as contemplated in the Registration Statement and/or the applicable Prospectus Supplement, the Subscription Rights will constitute valid and binding obligations of the Company, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights (including, without limitation, the effect of statutory and other law regarding fraudulent conveyances, fraudulent transfers and preferential transfers) and as may be limited by the exercise of judicial discretion and the application of principles of equity, including, without limitation, requirements of good faith, fair dealing, conscionability and materiality (regardless of whether enforcement is considered in a proceeding in equity or at law). (g) following (i) effectiveness of the Registration Statement, (ii) due authorization, execution and delivery of the Purchase Contract Agreement relating to the Stock Purchase Contracts, (iii) due establishment of the terms of the Stock Purchase Contracts and of their issuance and sale in conformity with the Purchase Contract Agreement, assuming such terms, issuance and sale do not violate any applicable law or result in a default under or breach of any agreement or instrument binding upon the Company and comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company, (iv) due execution and countersigning of the Stock Purchase Contracts in accordance with the Purchase Contract Agreement, and (v) issuance and sale of the Stock Purchase Contracts as contemplated by the Registration Statement, the Stock Purchase Contracts will constitute valid and binding obligations of the Company, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights (including, without limitation, the effect of statutory and other law regarding fraudulent conveyances, fraudulent transfers and preferential transfers) and as may be limited by the exercise of judicial discretion and the application of principles of equity, including, without limitation, requirements of good faith, fair dealing, conscionability and materiality (regardless of whether enforcement is considered in a proceeding in equity or at law). To the extent that the obligations of the Company under any Warrant Agreement may be dependent upon such matters, we assume for purposes of this opinion that the applicable Warrant Agent is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Warrant Agent is duly qualified to engage in the activities contemplated by the Warrant Agreement; that the Warrant Agreement has been duly authorized, executed and delivered by the Warrant Agent and constitutes the valid and binding obligation of the Warrant Agent enforceable against the Warrant Agent in accordance with its terms; that the Warrant Agent is in compliance, with respect to acting as a Warrant Agent under the Warrant Agreement, with all applicable laws and regulations; and that the Warrant Agent has the requisite organizational and legal power and authority to perform its obligations under the Warrant Agreement. To the extent that the obligations of the Company and the rights of any holder of Depositary Shares under any Deposit Agreement may be dependent upon such matters, we assume for purposes of this opinion that the applicable Depositary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Depositary is duly qualified to engage in the activities contemplated by the Deposit Agreement; that the Deposit Agreement has been duly authorized, executed and delivered by the Depositary and constitutes a valid and binding obligation of the Depositary enforceable against the Depositary and the Company in accordance with its terms; that the Depositary is in compliance, with respect to acting as a Depositary under the Deposit Agreement, with all applicable laws and regulations; and that the Depositary has the requisite organizational and legal power and authority to perform its obligations under the Deposit Agreement. To the extent that the obligations of the Company under any Indenture may be dependent upon such matters, we assume for purposes of this opinion that the Trustee is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Trustee is duly qualified to engage in the activities contemplated by the Indenture; that the Indenture has been duly authorized, executed and delivered by the Trustee and constitutes the valid and binding obligation of the Trustee enforceable against the Trustee in accordance with its terms; that the Trustee is in compliance, with respect to acting as a trustee under the Indenture, with all applicable laws and regulations; and that the Trustee has the requisite organizational and legal power and authority to perform its obligations under the Indenture. The opinions expressed in Paragraphs (d), (e), (f) and (g) above shall be understood to mean only that if there is a default in performance of an obligation, (i) if a failure to pay or other damage can be shown and (ii) if the defaulting party can be brought into a court which will hear the case and apply the governing law, then, subject to the availability of defenses, and to the exceptions set forth in Paragraphs (d), (e), (f) and (g) the court will provide a money damage (or perhaps injunctive or specific performance) remedy. This opinion letter has been prepared for your use in connection with the Registration Statement and speaks as of the date hereof. We assume no obligation to advise you of any changes in the foregoing subsequent to the delivery of this opinion letter. We hereby consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the prospectus constituting a part of the Registration Statement. In giving this consent, we do not thereby admit that we are an "expert" within the meaning of the Securities Act of 1933, as amended. Very truly yours, /s/ HOGAN & HARTSON L.L.P. HOGAN & HARTSON L.L.P. EX-5.2 7 EXHIBIT 5.2 Exhibit 5.2 [HOGAN AND HARTSON LETTERHEAD] August 4, 1999 Board of Directors McLeodUSA Incorporated McLeodUSA Technology Park 6400 C Street SW, P.O. Box 3177 Cedar Rapids, IA 52406-3177 Ladies and Gentlemen: We are acting as special counsel to McLeodUSA Incorporated, a Delaware corporation (the "Company"), in connection with its registration statement on Form S-3, as amended (File No. 333-82851) (the "Registration Statement"), filed with the Securities and Exchange Commission relating to the proposed public offering of up to $1,750,000,000 in aggregate amount of one or more classes or series of the Company's securities, which securities may be offered and sold by the Company from time to time as set forth in a prospectus and one or more supplements thereto, all of which form a part of the Registration Statement. This opinion letter is rendered in connection with the proposed public offering of up to 400,000 shares (the "Shares") of the Company's Series A cumulative convertible preferred stock, par value $.01 (the "Series A Preferred Stock"), as described in the Registration Statement. This opinion letter is furnished to you at your request to enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. Section 229.601(b)(5), in connection with the Registration Statement. For purposes of this opinion letter, we have examined copies of the following documents: 1. An executed copy of the Registration Statement. 2. The Amended and Restated Certificate of Incorporation of the Company, as certified by the Secretary of State of the State of Delaware on May 13, 1999 (the "Amended and Restated Certificate"), the Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company, as certified by the Secretary of State of the State of Delaware on May 13, 1999 (the "Certificate of Amendment"), the Certificate of Change of Registered Agent and Registered Office of the Company, as certified by the Secretary of State of the State of Delaware on May 13, 1999 (together with the Amended and Restated Certificate and the Certificate of Amendment, the "Certificate of Incorporation") as certified by the Secretary of the Company on the date hereof as being complete, accurate and in effect). 3. The Amended and Restated Bylaws of the Company, as certified by the Secretary of the Company on the date hereof as being complete, accurate and in effect (the "Bylaws"). 4. The proposed form of the Certificate of Designation relating to the Series A Preferred Stock (the "Certificate of Designation"), filed as Exhibit 4.24 to the Registration Statement. 6. The proposed form of Underwriting Agreement among the Company and the several Underwriters to be named therein, for whom Salomon Smith Barney Inc., Goldman, Sachs & Co., and Morgan Stanley & Co. Incorporated will act as representatives, filed as Exhibit 1.8 to the Registration Statement (the "Underwriting Agreement"). 7. Resolutions of the Board of Directors of the Company adopted by unanimous written consent on August 3, 1999, as certified by the Secretary of the Company on the date hereof as being complete, accurate, and in effect, relating to the issuance and sale of the Shares and arrangements in connection therewith. In our examination of the aforesaid documents, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the accuracy and completeness of all documents submitted to us, the authenticity of all original documents, and the conformity to authentic original documents of all documents submitted to us as copies (including telecopies). This opinion letter is given, and all statements herein are made, in the context of the foregoing. This opinion letter is based as to matters of law solely on Delaware corporate law. We express no opinion herein as to any other laws, statutes, regulations or ordinances. Based upon, subject to and limited by the foregoing, we are of the opinion that following (i) final action of the Board of Directors of the Company approving the Underwriting Agreement and authorizing and establishing the Series A Preferred Stock (including any action of the a duly appointed pricing committee of the Board of Directors approving the pricing terms of the Series A Preferred Stock), in accordance with the terms of the Certificate of Incorporation, the Bylaws, the Certificate of Designation and applicable law, (ii) execution and delivery by the Company of the Underwriting Agreement, (iii) filing of the Certificate of Designation, (iv) effectiveness of the Registration Statement, and (v) receipt by the Company of the consideration for the Shares specified in the resolutions of the Board of Directors of the Company and the Underwriting Agreement, the Shares will be validly issued, fully paid, and nonassessable. This opinion letter has been prepared for your use in connection with the Registration Statement and speaks as of the date hereof. We assume no obligation to advise you of any changes in the foregoing subsequent to the delivery of this opinion letter. We hereby consent to the filing of this opinion letter as Exhibit 5.2 to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the prospectus constituting a part of the Registration Statement. In giving this consent, we do not thereby admit that we are an "expert" within the meaning of the Securities Act of 1933, as amended. Very truly yours, /s/ HOGAN & HARTSON L.L.P. HOGAN & HARTSON L.L.P. EX-12.1 8 EXHIBIT 12.1 Exhibit 12.1 RATIO OF EARNING TO FIXED CHARGES (dollars in thousands)
1994 1995 1996 1997 1998 -------------------------------------------------------------------------------- Fixed charges: Interest expense on indebtedness (including amortization of debt expense and capitalized interest) 218 972 869 40,304 91,626 -------------------------------------------------------------------------------- Interest on portion of rent expense representative of interest 205 514 1,201 2,660 6,542 -------------------------------------------------------------------------------- Total fixed charges 423 1,486 2,070 42,964 98,168 ================================================================================ Earnings (Loss): Net loss before income taxes $ (11,416) $ (11,329) $ (22,346) $ (79,910) $ (124,912) Fixed charges per above 423 1,486 2,070 42,964 98,168 Less Interest Capitalized - (62) (204) (4,440) (10,616) -------------------------------------------------------------------------------- Total Earnings (Loss) $ (10,993) $ (9,905) $ (20,480) $ (41,386) $ (37,360) ================================================================================ Ratio of Earnings to Fixed Charge - - - - - ================================================================================ Coverage deficiency $ (11,416) $ (11,391) $ (22,550) $ (84,350) $ (135,528) ================================================================================ Three Months Ended March 31, ----------------------------------------------- Pro Forma Pro Forma 1998 1998 1999 1999 ----------------- ----------------------------------------------- Fixed charges: Interest expense on indebtedness (including amortization of debt expense and capitalized interest) 125,772 16,966 34,778 37,373 ----------------- ----------------------------------------------- Interest on portion of rent expense representative of interest 6,542 665 1,635 1,635 ----------------- ----------------------------------------------- Total fixed charges 132,314 17,631 36,413 39,008 ================= =============================================== Earnings (Loss): Net loss before income taxes $ (177,962) $ (30,267) $ (47,476) $ (57,438) Fixed charges per above 132,314 17,631 36,413 39,008 Less Interest Capitalized (10,616) (1,690) (4,247) (4,247) ----------------- ----------------------------------------------- Total Earnings (Loss) $ (56,264) $ (14,326) $ (15,310) $ (22,677) ================= =============================================== Ratio of Earnings to Fixed Charge - - - - ================= =============================================== Coverage deficiency $ (188,578) $ (31,957) $ (51,723) $ (61,685) ================= ===============================================
EX-12.2 9 EXHIBIT 12.2 EXHIBIT 12.2 RATIO OF EARNINGS TO COMBINED CHARGES AND PREFERENCE DIVIDENDS (dollars in thousands)
1994 1995 1996 1997 1998 -------------------------------------------------------------------------------- Fixed charges: Interest expense on indebtedness (including amortization of debt expense and capitalized interest) 218 972 869 40,304 91,626 Interest on portion of rent expense representative of interest 205 514 1,201 2,660 6,542 Preference Dividends - - - - - ================================================================================ Total fixed charges 423 1,486 2,070 42,964 98,168 ================================================================================ Earnings (Loss): Net loss before income taxes $ (11,416) $ (11,329) $ (22,346) $ (79,910) $ (124,912) Fixed charges per above 423 1,486 2,070 42,964 98,168 Less Capitalized Interest - (62) (204) (4,440) (10,616) -------------------------------------------------------------------------------- Total Earnings (Loss) $ (10,993) $ (9,905) $ (20,480) $ (41,386) $ (37,360) ================================================================================ Ratio of Earnings to Fixed Charge - - - - - ================================================================================ Coverage deficiency $ (11,416) $ (11,391) $ (22,550) $ (84,350) $ (135,528) ================================================================================ Three Months Ended March 31, --------------------------------------------- Pro Forma Pro Forma 1998 1998 1999 1999 ----------------- --------------------------------------------- Fixed charges: Interest expense on indebtedness (including amortization of debt expense and capitalized interest) 125,772 16,966 34,778 37,373 Interest on portion of rent expense representative of interest 6,542 665 1,635 1,635 Preference Dividends - - - - ================= ============================================= Total fixed charges 132,314 17,631 36,413 39,008 ================= ============================================= Earnings (Loss): Net loss before income taxes $ (177,962) $ (30,267) $ (47,476) $ (57,438) Fixed charges per above 132,314 17,631 36,413 39,008 Less Capitalized Interest (10,616) (1,690) (4,247) (4,247) ----------------- --------------------------------------------- Total Earnings (Loss) $ (56,264) $ (14,326) $ (15,310) $ (22,677) ================= ============================================= Ratio of Earnings to Fixed Charge - - - - ================= ============================================= Coverage deficiency $ (188,578) $ (31,957) $ (51,723) $ (61,685) ================= =============================================
EX-23.2 10 EXHIBIT 23.2 Exhibit 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Amendment No. 2 to the Form S-3 Registration Statement of our McLeodUSA Incorporated reports dated January 27, 1999 (except with respect to the matter discussed in Note 16, as to which the date is March 5, 1999) and to all references to our Firm included in or made a part of this Registration Statement. /s/ Arthur Andersen LLP Chicago, Illinois August 3, 1999 EX-23.3 11 EXHIBIT 23.3 Exhibit 23.3 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" included in Amendment No. 2 to Registration Statement (Form S-3) and related Prospectus of McLeodUSA Incorporated and to the incorporation by reference therein of our report dated February 26, 1999, with respect to the consolidated financial statements of Ovation Communications, Inc. as of December 31, 1998 and 1997 and for the period from March 27, 1997 (inception) to December 31, 1997 and the year ended December 31, 1998, included in the Registration Statement on Form S-4 (No. 333-71811) of McLeodUSA Incorporated filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP ------------------------- Minneapolis, Minnesota August 4, 1999 EX-25.1 12 EXHIBIT 25.1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 __________________________ FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE __________________________ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _______ __________________________ UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-3818954 (Jurisdiction of incorporation (I. R. S. Employer if not a U. S. national bank) Identification No.) 114 West 47th Street 10036-1532 New York, New York (Zip Code) (Address of principal executive offices) __________________________ McLeodUSA Incorporated (Exact name of obligor as specified in its charter) Delaware 42-1407240 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) McLeodUSA Technology Park 52406-3177 6400 C Street, SW. P. O. Box 3177 (Zip code) Cedar Rapids, IA (Address of principal executive offices) __________________________ Senior Debt Securities Due ______________ (Title of the indenture securities) ================================================================================ - 2 - GENERAL 1. General Information ------------------- Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System) Federal Deposit Insurance Corporation, Washington, D.C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. Affiliations with the Obligor ----------------------------- If the obligor is an affiliate of the trustee, describe each such affiliation. None 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15: The obligor currently is not in default under any of its outstanding securities for which United States Trust Company of New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General Instruction B. 16. List of Exhibits ---------------- T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33- 97056). T-1.2 -- Included in Exhibit T-1.1. T-1.3 -- Included in Exhibit T-1.1. - 3 - 16. List of Exhibits ---------------- (cont'd) T-1.4 -- The By-Laws of United States Trust Company of New York, as amended, is incorporated by reference to Exhibit T-1.4 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990. T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law or the requirements of its supervising or examining authority. NOTE ==== As of August 31, 1999, the trustee had 2,999,020 shares of Common Stock outstanding, all of which are owned by its parent company, U.S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U. S. Trust Corporation. In answering Item 2 in this statement of eligibility as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. __________________ Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 3rd day of August 1999. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: /s/ James E. Logan ------------------ James E. Logan Vice President JEL/pg Exhibit T-1.6 ------------- The consent of the trustee required by Section 321(b) of the Act. United States Trust Company of New York 114 West 47th Street New York, NY 10036 September 1, 1995 Securities and Exchange Commission 450 5th Street, N.W. Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the limitations set forth therein, United States Trust Company of New York ("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK By: /S/Gerard F. Ganey Senior Vice President EXHIBIT T-1.7 UNITED STATES TRUST COMPANY OF NEW YORK CONSOLIDATED STATEMENT OF CONDITION MARCH 31, 1999 ----------------- ($ IN THOUSANDS)
ASSETS - ------ Cash and Due from Banks $ 139,755 Short-Term Investments 85,326 Securities, Available for Sale 528,160 Loans 2,081,103 Less: Allowance for Credit Losses 17,114 ---------- Net Loans 2,063,989 Premises and Equipment 57,765 Other Assets 125,780 ---------- Total Assets $3,000,775 ========== LIABILITIES - ----------- Deposits: Non-Interest Bearing $ 623,046 Interest Bearing 1,875,364 ---------- Total Deposits 2,498,410 Short-Term Credit Facilities 184,281 Accounts Payable and Accrued Liabilities 126,652 ---------- Total Liabilities $2,809,343 ========== STOCKHOLDER'S EQUITY - -------------------- Common Stock 14,995 Capital Surplus 53,041 Retained Earnings 121,759 Unrealized Gains on Securities Available for Sale (Net of Taxes) 1,637 ---------- Total Stockholder's Equity 191,432 ---------- Total Liabilities and Stockholder's Equity $3,000,775 ==========
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do hereby declare that this Statement of Condition has been prepared in conformance with the instructions issued by the appropriate regulatory authority and is true to the best of my knowledge and belief. Richard E. Brinkmann, Managing Director & Controller May 18, 1999 EX-25.2 13 EXHIBIT 25.2 Exhibit 25.2 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________ FORM T-1 STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _______________ U.S. TRUST COMPANY OF TEXAS, N.A. (Exact name of trustee as specified in its charter) 75-2353745 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 2001 Ross Ave, Suite 2700 75201 Dallas, Texas (Zip Code) (Address of trustee's principal executive offices) Compliance Officer U.S. Trust Company of Texas, N.A. 2001 Ross Ave, Suite 2700 Dallas, Texas 75201 (214) 754-1200 (Name, address and telephone number of agent for service) _______________ McLeodUSA Incorporated (Exact name of obligor as specified in its charter) Delaware 42-1407240 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) McLeodUSA Technology Park 52406-3177 6400 C Street, S.W. P.O. Box 3177 (Zip Code) Cedar Rapids, IA (Address of principal executive offices) _______________ Subordinated Debt Securities due (Title of the indenture securities) GENERAL 1. General Information. -------------------- Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of Dallas (11th District), Dallas, Texas (Board of Governors of the Federal Reserve System) Federal Deposit Insurance Corporation, Dallas, Texas The Office of the Comptroller of the Currency, Dallas, Texas (b) Whether it is authorized to exercise corporate trust powers. The Trustee is authorized to exercise corporate trust powers. 2. Affiliations with Obligor and Underwriters. ------------------------------------------- If the obligor or any underwriter for the obligor is an affiliate of the Trustee, describe each such affiliation. None. 3. Voting Securities of the Trustee. --------------------------------- Furnish the following information as to each class of voting securities of the Trustee: As of April 28, 1999 - ------------------------------------------------------------------------------ Col A. Col B. - ------------------------------------------------------------------------------ Title of Class Amount Outstanding - ------------------------------------------------------------------------------ Capital Stock - par value $100 per share 5,000 shares 4. Trusteeships under Other Indentures. ------------------------------------ Not Applicable 5. Interlocking Directorates and Similar Relationships with the Obligor or ----------------------------------------------------------------------- Underwriters. ------------- Not Applicable 6. Voting Securities of the Trustee Owned by the Obligor or its Officials. ----------------------------------------------------------------------- Not Applicable 7. Voting Securities of the Trustee Owned by Underwriters or their Officials. -------------------------------------------------------------------------- Not Applicable 8. Securities of the Obligor Owned or Held by the Trustee. ------------------------------------------------------- Not Applicable 9. Securities of Underwriters Owned or Held by the Trustee. -------------------------------------------------------- Not Applicable 10. Ownership or Holdings by the Trustee of Voting Securities of Certain -------------------------------------------------------------------- Affiliates or Security Holders of the Obligor. ---------------------------------------------- Not Applicable 11. Ownership or Holdings by the Trustee of any Securities of a Person Owning ------------------------------------------------------------------------- 50 Percent or More of the Voting Securities of the Obligor. ----------------------------------------------------------- Not Applicable 12. Indebtedness of the Obligor to the Trustee. ------------------------------------------- Not Applicable 13. Defaults by the Obligor. ------------------------ Not Applicable 14. Affiliations with the Underwriters. ----------------------------------- Not Applicable 15. Foreign Trustee. ---------------- Not Applicable 16. List of Exhibits. ----------------- T-1.1 - A copy of the Articles of Association of U.S. Trust Company of Texas, N.A.; incorporated herein by reference to Exhibit T-1.1 filed with Form T-1 Statement, Registration No. 22-21897. 16. (con't.) T-1.2 - A copy of the certificate of authority of the Trustee to commence business; incorporated herein by reference to Exhibit T-1.2 filed with Form T-1 Statement, Registration No. 22-21897. T-1.3 - A copy of the authorization of the Trustee to exercise corporate trust powers; incorporated herein by reference to Exhibit T-1.3 filed with Form T-1 Statement, Registration No. 22-21897. T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas, N.A., as amended to date; incorporated herein by reference to Exhibit T-1.4 filed with Form T-1 Statement, Registration No. 22-21897. T-1.6 - The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. T-1.7 - A copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority. NOTE As of August 3, 1999, the Trustee had 5,000 shares of Capital Stock outstanding, all of which are owned by U.S. T.L.P.O. Corp. As of August 3, 1999, U.S. T.L.P.O. Corp. had 35 shares of Capital Stock outstanding, all of which are owned by U.S. Trust Corporation. U.S. Trust Corporation had outstanding 18,413,853 shares of $1 par value Common Stock as of August 3, 1999. The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation. In as much as this Form T-1 is filed prior to the ascertainment by the Trustee of all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10 and 11, the answers to said Items are based upon incomplete information. Items 2, 5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by an amendment to this Form T-1. In answering any items in this Statement of Eligibility and Qualification which relates to matters peculiarly within the knowledge of the obligors or their directors or officers, or an underwriter for the obligors, the Trustee has relied upon information furnished to it by the obligors and will rely on information to be furnished by the obligors or such underwriter, and the Trustee disclaims responsibility for the accuracy or completeness of such information. _______________ SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, U.S Trust Company of Texas, N.A., a national banking association organized under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Dallas, and State of Texas on the 3rd day of August, 1999. U.S. Trust Company of Texas, N.A., Trustee By: /s/ James E. Logan ------------------ James E. Logan Authorized Officer Exhibit T-1.6 CONSENT OF TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939 as amended in connection with the proposed issue of McLeodUSA Incorporated Subordinated Debt Securities due ____, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefore. U.S. Trust Company of Texas, N.A. By: /s/ ------------------------------ Gerard F. Ganey Authorized Officer Board of Governors of the Federal Reserve SystemCarrie OatesFinancial Printing Group Federal Financial Institutions Examination Council Board of Governors of the Federal Reserve System OMB Number: 7100-0036 Federal Deposit Insurance Corporation OMB Number: 3064-005 Office of the Comptroller of the Currency OMB Number: 1557-0081 Expires March 31, 2001 - ------------------------------------------------------------------------------- (1) Please Refer to Page I, (LOGO) Table of Contents, for the required disclosure of estimated burden. - ------------------------------------------------------------------------------- CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC OFFICES ONLY AND TOTAL ASSETS OF LESS THAN $100 MILLION OR MORE BUT LESS THAN $300 MILLION -- FFIEC 033 REPORT AT THE CLOSE OF BUSINESS March 31, 1999 This report is required by law: 12 U.S.C. Section (S) 324 (State member banks); 12 U.S.C. Section (S) 1817 (State nonmember banks); and 12 U.S.C. Section (S) 161 (National banks). (19990331) - --------- (RCRI 9999) This report form is to be filed by banks with domestic offices only. Banks with branches and consolidated subsidiaries in U.S. territories and possessions, Edge or Agreement subsidiaries, foreign branches, consolidated foreign subsidiaries, or International Banking Facilities must file FFIEC 031. - ------------------------------------------------------------------------------- NOTE: The Reports of Condition and Income must be signed by an authorized officer and the Report of Condition must be attested to by not less than two directors (trustees) for State nonmember banks and three directors for State member and National Banks. I, Alfred B. Childs, Managing Director ------------------------------------------------------- Name and Title of Officer Authorized to Sign Report of the named bank do hereby declare that these Reports of Condition and Income (including the supporting schedules) have been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and are true to the best of my knowledge and belief. /s/ Alfred B. Childs - ---------------------------------------------- Signature of Officer Authorized to Sign Report April 21, 1999 - ---------------------------------------------- Date of Signature The Reports of Condition and Income are to be prepared in accordance with Federal regulatory authority instructions. NOTE: these instructions may in some cases differ from generally accepted accounting principles. We, the undersigned directors (trustees), attest to the correctness of this Report of Condition (including the supporting schedules) and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /s/ Stuart M. Pearman - ---------------------------------------------- Director (Trustee) /s/. J. T. More, Jr. - ---------------------------------------------- Director (Trustee) /s/. Arthur White - ---------------------------------------------- Director (Trustee) - ------------------------------------------------------------------------------- Submission of Reports Each bank must prepare its Reports of Condition and Income either: (a) in electronic form and then file the computer data file directly with the banking agencies' collection agent, Electronic Data Systems Corporation (EDS), by modem or on computer diskette; or (b) in hard-copy (paper) form and arrange for another party to convert the paper report to electronic form. That party (if other than EDS) must transmit the bank's computer data file to EDS. For electronic filing assistance, contact EDS Call Report Services, 2150 North Prospect Avenue, Milwaukee, WI 53202, telephone (800) 255-1571. To fulfill the signature and attestation requirement for the Reports of Condition and Income for this report date, attach this signature page to the hard-copy record of the completed report that the bank places in its files. - ------------------------------------------------------------------------------- FDIC Certificate Number 33217 ------- (RCRI 9050) US Trust Company of Texas, National Association - -------------------------------------------------- Legal Title of Bank (TEXT 9010) Dallas - ------------------------------------------------- City (TEXT 9130) TX 75201 - ------------------------------------------------- State Abbrev. (TEXT 9200) Zip Code. (TEXT 9220) Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency U.S. Trust Company of Texas, N.A. 2001 Ross Avenue, Suite 2700 Dallas, TX 75201 Call Date: 3/31/1999 State #: 48-6797 FFIEC 033 Vendor ID: D Cert #: 33217 RC-1 Transit #: 11101765 -------- 9 -------- CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR March 31, 1999 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. Schedule RC - Balance Sheet
Dollar Amounts in Thousands - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS 1. Cash and balances due from depository institutions: RCON ---- _______ a. Noninterest-bearing balances and currency and coin (1,2)__________________ ______ _______ 0081 1,297 1.a _______ b. Interest bearing balances (3)_____________________________________________ ______ _______ 0071 696 1.b _______ 2. Securities: _______ a. Held-to-maturity securities (from Schedule RC-B, column A)________________ ______ _______ 1754 0 2.a _______ b. Available-for-sale securities (from Schedule RC-B, column D)______________ ______ _______ 1773 131,683 2.b _______ 3. Federal funds sold (4) and securities purchased under agreements to resell: 1350 6,000 3 _______ 4. Loans and lease financing receivables: RCON ---- _______ a. Loans and leases, net of unearned income (from Schedule RC-C)____________ 2122 22,709 4.a _______ b. LESS: Allowance for loan and lease losses_______________________________ 3123 260 4.b _______ c. LESS: Allocated transfer risk reserve___________________________________ 3128 0 4.c _______ d. Loans and leases, net of unearned income, allowance, and reserve RCON ____ _______ (item 4.a minus 4.b and 4.c)______________________________________________ ______ _______ 2125 22,249 4.d _______ 5. Trading assets_______________________________________________________________ ______ _______ 3545 0 5. _______ 6. Premises and fixed assets (including capitalized leases)_____________________ ______ _______ 2145 917 6. _______ 7. Other real estate owned (from Schedule RC-M)_________________________________ ______ _______ 2150 0 7. _______ 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)______________________________________________________ ______ _______ 2130 0 8. _______ 9. Customers' liability to this bank on acceptances outstanding_________________ ______ _______ 2155 0 9. _______ 10. Intangible assets (from Schedule RC-M)______________________________________ ______ _______ 2143 1,950 10. _______ 11. Other assets (from Schedule RC-F)___________________________________________ ______ _______ 2160 2,527 11. _______ 12. Total assets (sum of items 1 through 11)____________________________________ ______ _______ 2170 167,519 12. _______
(1) Includes cash items in process of collection and unposted debits. (2) Included time certificates of deposit not held for trading. U.S. Trust Company of Texas, N.A. 2001 Ross Avenue, Suite 2700 Dallas, TX 75201 Call Date: 03/31/1999 State #: 48-6797 FFIEC 033 Vendor ID: D Cert #: 33217 RC-2 Transit #: 11101765 --------- 10 --------- Schedule RC - Continued
Dollar Amounts in Thousands - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES 13. Deposits: RCON a. In domestic offices (sum of totals of ---- ________ columns A and C from Schedule RC-E)______________________________________ RCON 2200 141,618 13.a ---- ________ ________ (1) Noninterest-bearing (1)_____________________________________________ 6631 8,794 13.a.1 ________ (2) Interest-bearing ___________________________________________________ 6636 132,824 13.a.2 ________ b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (1) Noninterest-bearing________________________________________________ (2) Interest-bearing___________________________________________________ ________ RCON 0 14 14. Federal funds purchased(2) and securities sold under agreements to repurchase: ---- 2800 ________ 15. a. Demand notes issued to the U.S. Treasury____________________________ ______ _______ 2840 0 15.a ________ b. Trading liabilities_________________________________________________ ______ ______ 3548 0 15.b ________ 16. Other borrowed money: a. With a remaining maturity of one year or less________________________ ______ ______ 2332 0 16.a ________ b. With a remaining maturity of more than one year through three years___ ______ ______ A547 2,000 16.b ________ c. With a remaining maturity of more than three years____________________ ______ ______ A548 1,000 16.c ________ 17. Not applicable 18. Bank's liability on acceptances executed and outstanding_________________ ______ ______ 2920 0 18. ________ 19. Subordinated notes and debentures________________________________________ ______ ______ 3200 0 19. ________ 20. Other liabilities (from Schedule RC-G)___________________________________ ______ ______ 2930 2,317 20. ________ 21. Total liabilities (sum of items 13 through 20)___________________________ ______ ______ 2948 146,935 21. ________ 22. Not applicable EQUITY CAPITAL RCON ---- ________ 23. Perpetual preferred stock and related surplus______________________________ ______ ______ 3838 7,000 23. ________ 24. Common stock_______________________________________________________________ ______ ______ 3230 500 24. ________ 25. Surplus (exclude all surplus related to preferred stock)___________________ ______ ______ 3839 8,384 25. ________ 26. a. Undivided profits and capital reserves_________________________________ ______ ______ 3632 4,406 26.a ________ b. Net unrealized holding gains (losses) on available-for-sale securities_ ______ ______ 8434 294 26.b ________ 27. Cumulative foreign currency translation adjustments________________________ 28. Total equity capital (sum of items 23 through 27)__________________________ ______ ______ 3210 20,584 28. ________ 29. Total liabilities and equity capital (sum of items 21 and 28)______________ ______ ______ 2257 167,519 29. ________ Memorandum To be reported only with the March Report of Condition. Number 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external auditors as of any date during 1998_________________________________________________________________________ 6724 1 M.1 ________
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work (1) Includes total demand deposits and noninterest-bearing time and savings deposits. (2) Includes limited-life preferred stock and related surplus. -----END PRIVACY-ENHANCED MESSAGE-----