EXHIBIT 10.1
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AGREEMENT CONCERNING VOTING
This Agreement Concerning Voting (as the same may be amended, modified
or supplemented from time to time in accordance with the terms hereof, this
"Agreement") is entered into by (i) ITC^DeltaCom, Inc. ("ITC^DeltaCom" or the
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"Company"), (ii) the undersigned holders (each a "Consenting Senior Noteholder")
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of any of the (a) 11% Senior Notes due 2007; (b) 8 7/8% Notes due 2008; (c) 9
3/4% Senior Notes due 2008 (collectively, the "Senior Notes"), and (iii) the
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undersigned holders (each a "Consenting Subordinated Noteholder" and together,
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with the Consenting Senior Noteholders, the "Consenting Securityholders") of the
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Company's 4 1/2% Convertible Subordinated Notes due 2006 (the "Subordinated
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Notes" and, together with the Senior Notes, the "Securities") regarding the
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basic terms and conditions of a restructuring of the Company to be accomplished
by means of a prenegotiated chapter 11 plan of reorganization of the Company
pursuant to chapter 11 of title 11 of the United States Code (the "Bankruptcy
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Code").
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In consideration of the premises and the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
Consenting Securityholder (collectively, the "Parties"), intending to be legally
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bound, agree as follows:
1. Restructuring.
The basic terms and conditions of the restructuring of the indebtedness
and equity of the Company (the "Restructuring") as agreed among the parties are
set forth in the term sheet attached hereto as Exhibit A (the "Term Sheet"),
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which is incorporated herein and made a part of this Agreement.
2. Representations and Warranties: Consenting Securityholder and
ITC^DeltaCom Agreements.
Each of the Consenting Senior Noteholders represents severally
and not jointly to ITC^DeltaCom that it is (i) the sole beneficial owner of the
principal amount of Senior Notes entered below next to its signature as of the
date hereof and/or the investment advisor or manager for the beneficial owners
of such Senior Notes, as indicated on the signature pages below, having the
power to vote and dispose of such Senior Notes on behalf of such beneficial
owners, and (ii) entitled (for its own account or for the account of other
persons claiming through it) to all of the rights and economic benefits of such
Senior Notes (any of such Senior Notes, the "Relevant Senior Notes"). Each of
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the Consenting Subordinated Noteholders represents severally and not jointly to
ITC^DeltaCom that it is (i) the sole beneficial owner of the principal amount of
Subordinated Notes entered below next to its signature as of the date hereof
and/or the investment advisor or manager for the beneficial owners of such
Subordinated Notes, as indicated on the signature pages below, having the power
to vote and dispose of such Subordinated Notes on behalf of such beneficial
owners, and (ii) entitled (for its own account or for the account of other
persons claiming through it) to all of the rights and economic benefits of
such Subordinated Notes (any of such Subordinated Notes, the "Relevant
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Subordinated Notes" and, together with the Relevant Senior Notes, the "Relevant
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Securities").
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In addition, each Consenting Securityholder hereby represents and
warrants that, as of the date of this Agreement: (i) it has made no prior
assignment, sale, participation, grant, conveyance or other transfer of, and has
not entered into any other agreement to assign, sell, participate, grant or
otherwise transfer, in whole or in part, any portion of its right, title or
interests in the Relevant Securities, and it has good title thereto, free and
clear of all liens, security interests and other encumbrances of any kind
(except to the extent that any of the Relevant Securities are pledged or
hypothecated as of the date hereof); (ii) if it is an entity, (a) it is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with all requisite power and authority to carry
on the business in which it is engaged, to own the properties it owns, to
execute this Agreement and to consummate the transactions contemplated hereby;
(b) it has full corporate power and authority to execute and deliver and to
perform its obligations under this Agreement, and (c) the execution, delivery
and performance hereof, and the instruments and documents required to be
executed by it in connection herewith have been duly and validly authorized by
it and are not in contravention of its organizational documents or any material
agreement specifically applicable to it; (iii) it is a sophisticated investor
with respect to the transaction described herein with sufficient knowledge and
experience in owning and investing in securities similar to the Relevant
Securities to evaluate properly the terms and conditions of this Agreement, and
it has made its own analysis and decision to enter in this Agreement in reliance
upon the representations, warranties and covenants of the other Parties hereto
set forth expressly herein; (iv) it is an "accredited investor" within the
meaning of Section 2(15) of the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder; and (v) no proceeding, litigation
or adversary proceeding before any court, arbitrator or administrative or
governmental body is pending against it which would adversely affect its ability
to enter into this Agreement or to perform its obligations hereunder.
ITC^DeltaCom hereby represents and warrants that (i) it is duly
organized, validly existing and in good standing under the laws of Delaware, the
jurisdiction of its organization with all requisite power and authority to carry
on the business in which it is engaged, to own the properties it owns, to
execute this Agreement and to consummate the transactions contemplated hereby;
(ii) it has full corporate power and authority to execute and deliver and to
perform its obligations under this Agreement, and the execution, delivery and
performance hereof, and the instruments and documents required to be executed by
it in connection herewith (a) have been duly and validly authorized by it and
(b) are not in contravention of its organizational documents or any material
agreement specifically applicable to it; and (iii) no proceeding, litigation or
adversary proceeding before any court, arbitrator or administrative or
governmental body is pending against it which would adversely affect its ability
to enter into this Agreement or to perform its obligations hereunder.
Each of the Consenting Securityholders agrees and covenants severally
and not jointly to ITC^DeltaCom that, subject to Sections 2 and 3 hereof and
subject to receipt by such Consenting Securityholder of, a disclosure statement
and other solicitation materials approved by the Bankruptcy Court in respect of
the Restructuring that are consistent with the terms of this Agreement and are
not inconsistent with any applicable law (it being recognized that this
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Agreement shall not constitute an agreement by such Consenting Securityholder to
take any step or action that would violate any provision of applicable federal
or state securities laws or any other applicable laws, and to the extent any
provision hereof shall be construed as constituting such a violation, such
provision shall be deemed stricken herefrom and of no force and effect without
liability to any of the Parties):
(a) in connection with the Company's solicitation of ballots
with respect to a plan of reorganization consistent with the terms and
conditions of the Term Sheet (the "Plan"), it will, as promptly as
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practicable following the Bankruptcy Court's approval of a disclosure
statement, vote (or, with respect to managed accounts, cause to be
voted) its claims (the "Claims") in respect of the Relevant Securities
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in favor of the Plan (including, without limitation, the releases
provided for therein) by delivering its duly executed and completed
ballot in favor of the Plan (and the releases provided for therein) and
will not change or withdraw (or cause to be changed or withdrawn) such
vote(s); provided, that the terms of the Plan are (i) consistent with
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the terms of the Term Sheet and (ii) otherwise reasonably satisfactory
to the beneficial holders or representatives of beneficial holders of
at least a majority in principal amount of the Securities held by those
members of the Unofficial Committee (as defined in Schedule 1) that
have, as of the date of determination, entered into an Agreement
Concerning Voting substantially identical to the terms of this
Agreement (the "Majority Consenting Securityholders") as to any other
material terms of the Plan (to the extent that, in the case of this
clause (ii), such terms relate to issues or matters not addressed in
the Term Sheet);
(b) so long as it is the beneficial owner of, and/or
investment advisor or manager with respect to, the Relevant Securities,
it will not at any time prior to the termination of this Agreement vote
(or cause to be voted) in favor of, or otherwise propose, file, support
or encourage, directly or indirectly, any workout, restructuring or
plan of reorganization concerning the Company other than the
Restructuring;
(c) it will not sell, transfer, pledge, hypothecate or assign
any of the Relevant Securities or any voting or participation or other
interest therein during the term of this Agreement except to a
purchaser or other entity who agrees prior to such transfer to be bound
by all of the terms of this Agreement with respect to the Relevant
Securities being transferred to such purchaser, which agreement shall
be confirmed in writing (which writing may include a trade confirmation
issued by a broker or dealer, acting as principal or as agent for the
purchaser, stating that such agreement is a term of such transfer), in
which event ITC^DeltaCom shall be deemed to have acknowledged that each
of its respective obligations to the Consenting Securityholders
hereunder shall be deemed to constitute obligations in favor of such
purchaser, and ITC^DeltaCom shall confirm promptly that acknowledgment
in writing if requested; provided, however, that the restrictions in
this clause (c) shall no longer be applicable on or after the
confirmation of the Plan; and
(d) it will not (i) object to, delay, impede or take any other
action to interfere, directly or indirectly, with the acceptance or
implementation of the Plan including commencing any action to oppose or
object to the Plan, or (ii) take any action, directly or indirectly, to
create an Agreement Termination Event hereunder.
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ITC^DeltaCom hereby covenants and agrees to as soon as
reasonably practicable (a) commence a chapter 11 case, (b) negotiate in good
faith a plan consistent with the terms and conditions of the Term Sheet and
satisfactory to the Majority Consenting Securityholders and file such plan and
related disclosure statement with the Bankruptcy Court, (c) use its best efforts
to pursue confirmation of the plan by all available means under Bankruptcy Code
section 1129 and (d) subject to its fiduciary duties, not to propose, file,
support, encourage, vote for or engage in discussions with any person or entity
concerning any restructuring, workout or plan of reorganization other than the
Plan.
3. Termination of Agreement.
Each Consenting Securityholders' obligations hereunder shall
terminate upon the occurrence of any Agreement Termination Event (as defined
below), unless the occurrence of such Agreement Termination Event is waived in
writing by the Majority Consenting Securityholders. In the event a Consenting
Securityholder believes that an Agreement Termination Event has occurred such
Party shall inform the other Parties to this Agreement in writing within 3
Business Days (as defined in Schedule 1). The failure to provide such notice
shall not be deemed to waive an Agreement Termination Event. Notwithstanding the
occurrence of an Agreement Termination Event, the Company may seek a waiver of
such an event and, upon receipt of the requisite amount of waivers (as set forth
above), this Agreement shall be in full force and effect as though the waived
Agreement Termination Event never occurred. No waiver shall affect any
subsequent Agreement Termination Event or impair any right consequent thereon.
If any Agreement Termination Event occurs (and has not been waived) at a time
when court permission shall be required for a Consenting Securityholder to
change or withdraw (or cause to be changed or withdrawn) its vote(s) in favor of
the Plan, ITC^DeltaCom and the other Parties to this Agreement shall not,
subject to their fiduciary duties if any, in connection therewith, oppose any
attempt by such Consenting Securityholder to change or withdraw (or cause to be
changed or withdrawn) such vote(s) at such time.
For the purposes hereof an "Agreement Termination Event" shall
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mean any of the following:
(a) the filing of a petition under the Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware in respect
of ITC^DeltaCom shall not have occurred on or before June 28, 2002;
(b) the filing of the Plan and a disclosure statement each in
a form reasonably acceptable to the Majority Consenting Securityholders
in support of the Plan shall not have occurred on or before July 28,
2002;
(c) a disclosure statement in support of the Plan in a form
reasonably acceptable to the Majority Consenting Securityholders shall
not have been approved by the court on or before September 15, 2002;
(d) the Plan in a form reasonably acceptable to the Majority
Consenting Securityholders shall not have been confirmed by the
Bankruptcy Court on or before October 28, 2002;
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(e) the effective date of the Plan shall not have occurred on
or before November 28, 2002;
(f) ITC^DeltaCom files a plan or solicits votes on a chapter
11 plan of reorganization of the Company on terms that are not
consistent with the terms described on the Term Sheet;
(g) ITC^DeltaCom shall have disclaimed publicly in writing its
intention to pursue the Restructuring or otherwise breached this
Agreement or the Term Sheet;
(h) the chapter 11 bankruptcy case(s) of the Company is(are)
converted to chapter 7 case(s) and such conversion order is not stayed
or vacated within 10 days of entry;
(i) there occurs any material change in the terms or
feasibility of the Restructuring that materially and adversely affects
the holders of the Securities not previously consented to by the
Majority Consenting Securityholders (including, without limitation, the
equity investment of $30 million contemplated by the Term Sheet not
being committed in writing in a form satisfactory to the Majority
Consenting Securityholders);
(j) the entry of an order dismissing the Company's chapter 11
case(s) which order is not stayed or vacated within 10 days;
(k) ITC^DeltaCom shall have filed any motion or pleading, or
otherwise shall have brought any action or proceeding challenging or
objecting to the Relevant Securities or any claims of the Consenting
Securityholders with respect thereto, or otherwise seeking any recovery
from, or injunctive relief against, a Consenting Securityholder
relating to such holder's Relevant Securities (other than with respect
to actual or alleged breaches of this Agreement or any confidentiality
agreement with the Company by such Consenting Securityholder); or
(l) an examiner with enlarged powers relating to the operation
of the Company's business (powers beyond those set forth in Section
1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the
Bankruptcy Code, or a trustee under Section 1104 of the Bankruptcy
Code, shall have been appointed in the Company's Chapter 11 bankruptcy
case(s), and such order is not stayed or vacated within 10 days of
entry.
The Consenting Securityholders shall have no liability to
ITC^DeltaCom or each other in respect of any termination of this Agreement in
accordance with the terms hereof.
4. Conditions.
In addition to the provisions of paragraph 3 above with respect to the
Agreement Termination Events, the respective obligations of each Consenting
Securityholder and ITC^DeltaCom consummate each of the transactions contemplated
by the Restructuring are also subject to the satisfaction of each of the
following conditions:
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(a) negotiation, preparation and execution of mutually
satisfactory definitive transaction agreements and other documents
incorporating the terms and conditions of each of the transactions
contemplated by the Restructuring set forth herein and such other terms
and conditions as the Parties may reasonably require; and
(b) all authorizations, consents and regulatory approval
required, if any, in connection with the consummation of the
transactions contemplated by the Restructuring and the continuation of
ITC^DeltaCom businesses as currently constituted shall have been
obtained.
5. Several and Not Joint.
Notwithstanding anything herein to the contrary, or any document or
instrument executed and delivered in connection herewith, the Parties hereto
agree that the representations, warranties, obligations, liabilities and
indemnities of each Consenting Securityholder hereunder shall be several and not
joint, and no Consenting Securityholder shall have any liability hereunder for
any breach by any other Consenting Securityholder of any obligation of such set
forth herein.
6. Publicity.
This Agreement and each of the transactions contemplated by the
Restructuring shall be kept confidential until the Parties agree upon the
language and timing of a press release to be issued by ITC^DeltaCom.
7. Further Acquisition of Securities.
This Agreement shall in no way be construed to preclude the
Consenting Securityholders from acquiring additional Securities. However, any
such additional Securities so acquired shall automatically be deemed to be
Relevant Securities and to be subject to all of the terms of this Agreement.
This Agreement shall in no way be construed to preclude the Consenting
Securityholders from acquiring any other securities of ITC^DeltaCom. However,
the Consenting Securityholders agree that subject to their receipt of
solicitation materials in respect of the Plan that are consistent with the Term
Sheet and with the terms of this Agreement and are not inconsistent with any
applicable law, they will vote (or cause to be voted) any such additional
securities in favor of the Plan, and not change or withdraw (or cause to be
changed or withdrawn) such vote(s), for so long as this Agreement remains in
effect.
8. Amendments.
This Agreement may not be modified, amended or supplemented
except in writing signed by each of the Parties.
9. Impact of Appointment to Creditors' Committee.
Notwithstanding anything herein to the contrary, in the event
that any Consenting Securityholder is appointed to and serves on a committee of
creditors in the Company's chapter 11 cases, the terms of this Agreement shall
not be construed so as to limit such Consenting
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Securityholder's exercise in its sole discretion of its fiduciary duties to any
person arising from its serving on that committee of creditors, and any such
exercise in the sole discretion of such Consenting Securityholder of such
fiduciary duties arising from its serving on that committee of creditors shall
not be deemed to constitute a breach of the terms of this Agreement (but the
fact of such service on such committee shall not otherwise affect the continuing
validity or enforceability of this Agreement). The foregoing shall not modify or
limit the obligations of Consenting Securityholders to vote their individual
holdings of Securities and take the other actions required under this Agreement.
10. Governing Law; Jurisdiction; Service of Process.
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
any conflicts of law provision which would require the application of the law of
any other jurisdiction. By its execution and delivery of this Agreement, each of
the Parties hereby irrevocably and unconditionally agrees for itself that any
legal action, suit or proceeding against it with respect to any matter under or
arising out of or in connection with this Agreement or for recognition or
enforcement of any judgment rendered in any such action, suit or proceeding, may
be brought in any Federal or State court in the Borough of Manhattan, the City
of New York, for that purpose only, and, by execution and delivery of this
Agreement, each of the Parties hereby irrevocably accepts and submits itself to
the nonexclusive jurisdiction of each such court, generally and unconditionally,
with respect to any such action, suit or proceeding. Notwithstanding the
foregoing consent to New York jurisdiction, upon the commencement of the
Company's chapter 11 cases, the Parties agree that the United States Bankruptcy
Court for the District of Delaware shall have exclusive jurisdiction of all
matters arising out of or in connection with this Agreement, and that they shall
not seek to enforce any such agreements in any other court. In the event any
such action, suit or proceeding is commenced, the Parties hereby agree and
consent that service of process may be made, and personal jurisdiction over any
Party hereto in any such action, suit or proceeding may be obtained, by service
of a copy of the summons, complaint and other pleadings required to commence
such action, suit or proceeding upon the Party at the address of such Party set
forth in Section 18 hereof, unless another address has been designated by such
Party in a notice given to the other Parties in accordance with Section 18
hereof.
11. Specific Performance.
It is understood and agreed by the Parties that money damages
would not be a sufficient remedy for any breach of this Agreement by any Party
(other than a breach of Section 12 hereof) and each non-breaching Party shall be
entitled to specific performance and injunctive or other equitable relief as a
remedy of any such breach.
12. Fees and Expenses.
If any Party brings an action against any other Party based
upon a breach by the other Party of its obligations under this Agreement, the
prevailing Party shall be entitled to all reasonable expenses incurred,
including reasonable attorneys' fees and expenses.
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13. Survival.
Notwithstanding the sale of Relevant Securities in accordance
with Section 2(c) hereof or the termination of a Consenting Securityholder's
obligations hereunder in accordance with Section 3 hereof, the agreements and
obligations of ITC^Deltacom in Sections 10-13 hereof shall survive such
termination and shall continue in full force and effect for the benefit of the
Consenting Securityholders in accordance with the terms hereof.
14. Headings.
The headings of the Sections, paragraphs and subsections of
this Agreement are inserted for convenience only and shall not affect the
interpretation hereof.
15. Binding Agreement; Successors and Assigns.
This Agreement is intended to bind and inure to the benefit of
the Parties and their respective successors, assigns, heirs, executors,
administrators and representatives. The agreements, representations and
obligations of the Consenting Securityholders under this Agreement are several
and not joint in all respects.
16. Prior Negotiations.
This Agreement and the Term Sheet supersede all prior
negotiations with respect to the subject matter hereof.
17. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same Agreement.
18. Notices.
All demands, notices, requests, consents, and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered by courier service, messenger, or telecopy at, or on the
fifth day after deposited in the mails, by certified or registered mail, postage
prepaid - return receipt requested, to the following addresses, or such other
addresses as may be furnished hereafter by notice in writing, to the following
Parties:
(a) if to ITC^Deltacom, to:
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
8
New York, New York 10022
Attention: ▇▇▇▇▇▇ Flics, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to any Consenting Senior Noteholder, to:
such Consenting Senior Noteholder at the address
shown for such holder on the applicable signature
page hereto, to the attention of the person who has
signed this Agreement on behalf of such holder
with a copy to:
Fried ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. South, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to any Consenting Subordinated Noteholder, to:
such Consenting Subordinated Noteholder at the
address shown for such holder on the applicable
signature page hereto, to the attention of the person
who has signed this Agreement on behalf of such
holder.
with a copy to:
Fried ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. South, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
19. Further Assurances.
Each of the Parties hereto agrees to execute and deliver, or
to cause to be executed and delivered, all such instruments, and to take all
such action as the other Parties may
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reasonably request in order to effectuate the intent and purposes of, and to
carry out the terms of, this Agreement.
[Remainder of page is blank; next page is signature page]
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IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed as of the date set forth below.
Dated: June __, 2002
ITC^DELTACOM, INC.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
By: __________________________________
Name:
Title:
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CONSENTING SENIOR NOTEHOLDERS:
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[PARTY NAME]
Address:
City:
Telecopy:
11% Senior Notes Due 2007 By:__________________________________
Principal Amount $___________ Name:
8?% Senior Notes due 2008 Title:
Principal Amount $___________ [ ] beneficial owner
9 3/4% Senior Notes Due 2008 [ ] investment advisor or manager
Principal Amount $___________
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CONSENTING SUBORDINATED NOTEHOLDER
[PARTY NAME]
Address:
City:
Telecopy:
Principal amount: $_____________ By:__________________________________
Name:
Title:
[ ] beneficial owner
[ ] investment advisor or manager
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Exhibit 10.1 (Continued)
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Exhibit A
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abcd STRICTLY PRIVATE AND CONFIDENTIAL
Discussion Materials
ITC^DeltaCom, Inc. Term Sheet
For Discussion Purposes Only
6/25/02
This Proposed Summary of Terms and Conditions (this "Term Sheet") sets forth the
terms and conditions of the financial restructuring of ITC^DeltaCom, Inc.
("ITC"). This Term Sheet and the information contained herein is for discussion
purposes only, is non-binding, and is provided without prejudice to any and all
rights, claims, interests and defenses of the unofficial committee of
noteholders of ITC (the "Committee") and shall be governed in all respects by
Rule 408 of the Federal Rules of Evidence and any and all similar and applicable
rules and statutory provisions governing the non-admissibility of settlement
discussions.
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Contents
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section 1 New Convertible Preferred Investment Term Sheet_______________________________1
section 2 Transaction Overview__________________________________________________________5
section 3 Pro Forma Capitalization and Recovery Analysis_______________________________11
abcd
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New Convertible Preferred Investment Term Sheet
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SECTION 1
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Proposed Term Sheet--New Convertible Preferred Term Sheet
For Discussion Purposes Only
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Issuer: Reorganized ITC^DeltaCom, Inc. ("Reorganized ITC"), the successor to ITC
Issue: Series A Convertible Preferred Stock (the "Convertible Preferred Stock")
Purchasers: SCANA Corporation, certain stockholders of ITC Holding Company, Inc. and other qualified
investors (collectively, the "New Investors")
Gross Proceeds: $30.0 million
Liquidation Preference: $30.0 million
Number of shares: 300,000 shares/1/
Liquidation Preference per
share: $100
Ranking: Junior to all Bank Indebtedness and other obligations of the Company and its subsidiaries.
Senior in liquidation preference and dividends to common stock.
Mandatory Redemption: 10 years
Dividend: 8.0%, payable quarterly. Dividends shall accrue and be cumulative from the date of issuance of
the shares. Payable in-kind (PIK) for the entire period or in cash at the Company's option.
Optional Redemption: Non-redeemable by Reorganized ITC
for 3 years, except in connection with a merger
or sale transaction at a redemption price of
110% of liquidation preference. Redeemable
thereafter at the option of Reorganized ITC at
any time with 30 days notice at a redemption
price of 100% of liquidation preference.
Conversion: Pre-money equity value of $255.7 million. As of
the effective date of the transaction (the
"Effective Date"), $30.0 million liquidation
preference of Convertible Preferred Stock, on
an as converted basis, will represent 10.5% of
primary equity or 10,500,000 shares.
Voting Rights: One vote per common share into which preferred could convert.
Board Representation: Two board of director seats out of seven on the New Board of Directors (as defined below).
Warrants: Warrants, which collectively represent 2.0%/2/ of the fully diluted equity of Reorganized ITC (as
defined on the attached Warrant Term Sheet).
Rights Offering: Prior to the Effective Date, ITC Common and Preferred Stockholders will have the ability to
purchase the Convertible Preferred Stock, together with the Warrants, on a pro rata basis,
thereby reducing the amounts purchased by the New Investors on a dollar for dollar basis.
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/1/ The actual number of total shares of New Common Stock to be issued by the
Reorganized ITC may need to be adjusted downward in consideration of
NASDAQ's minimum listing requirements.
/2/ Before the exercise of Warrants given to ITC Preferred and Common
Stockholders and warrants to be given to management.
================================================================================
2
Backstop Consideration: In consideration for providing the Convertible Preferred Stock commitment, the New Investors
will receive shares of New Common Stock which represent 2.0% of the reorganized primary equity of
Reorganized ITC.
Releases: It shall be a condition to the obligation to purchase the Convertible Preferred Stock that at
least 51% of the Noteholders (as defined below) (by aggregate principal amount of Senior Notes
and Convertible Notes (collectively, the "Notes") outstanding) are bound by the terms of the
release set forth on page 7 hereof.
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3
Proposed Term Sheet -- Warrants
For Discussion Purposes Only
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Issuer: Reorganized ITC^DeltaCom, Inc. ("Reorganized ITC"), the successor to ITC.
Description: Warrants to purchase common stock of Reorganized ITC. (the "Warrants")
Amount: Warrants, which collectively represent 2.0%/3/ of the fully diluted equity of Reorganized ITC.
Warrant Strike Price: Post money equity value of $255.7 million (Pre money TEV of $420 million).
Duration of Warrants: Five years from the Effective Date.
Dilution Protection: Typical for these circumstances.
Use of Proceeds: General Corporate Purposes.
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/3/ Before the exercise of Warrants given to ITC Preferred and Common
Stockholders and warrants to be given to management.
================================================================================
4
Transaction Overview
--------------------------------------------------------------------------------
SECTION 2
--------------------------------------------------------------------------------
5
Transaction Overview
Reorganization Plan (For Discussion Purposes Only)
Bank Debt: Remain unimpaired, subject to further discussion. Any modification to the terms of the
Bank Debt will be reasonably acceptable to the Unofficial Committee of Noteholders.
Capital Leases: Unimpaired, subject to mutually agreeable reductions.
In contemplation of and in association with raising $30.0 million of new Convertible
Preferred Stock (the following equity ownership percentages of Reorganized ITC reflect the
conversion of the Convertible Preferred Stock into New Common Stock):
Senior Notes / Convertible
Notes: (i) Existing Senior Notes: Holders ("Senior Noteholders") of the ITC 11% Senior Notes due
2007; 87/8% Senior Notes due 2008; and 9 3/4% Senior Notes due 2008 will collectively
receive 81.5% of the reorganized primary equity (81.5 million pro forma primary shares);
(ii) Existing Convertible Notes: Holders ("Convertible Noteholders", and together with the
Senior Noteholders, the "Noteholders") of ITC's 4 1/2% Convertible Subordinated Notes, due
2006 will collectively receive 5% of the reorganized primary equity (5 million pro forma
primary shares).
Preferred Stock/Common (i) existing holders of ITC's preferred stock and common stock will collectively
Stock: receive 1.0% of the reorganized primary equity (1 million pro forma primary shares);
New Investors: (ii) the New Investors of the Convertible Preferred Stock will collectively receive 10.5%
of the fully diluted reorganized equity upon conversion into New Common Stock but before
the exercise of warrants and management options (10.5 million pro forma primary shares). In
addition, the New Investors will receive warrants representing 2.0% of the fully diluted
reorganized equity (subject to further dilution for management stock grants and options)
(the "Warrants" - See attached term sheet);
(iii) in consideration for providing the Convertible Preferred Stock commitment, the New
Investors will collectively receive 2.0% of the primary equity (2 million pro forma primary
shares).
Minimum Consent Condition: Upon consent by Noteholders representing at least 50.0% of the aggregate accreted principal
amount of ITC's outstanding Notes of this term sheet prior to June 25, 2002, the Company
will accept this
================================================================================
6
proposal in lieu of any outstanding plan and embody this proposal in a
plan of reorganization (it being expressly agreed and understood among the parties that,
for purposes of calculating the 50.0% threshold, any and all Senior Notes held by the
Company, or any of its subsidiaries or affiliates, will be deemed to have consented to this
term sheet). All parties obligations pursuant to this term sheet are conditioned upon
confirmation of the plan outlined herein.
Release Upon the Effective Date, in consideration for the Convertible Preferred Stock commitment
and their performance thereunder, ITC Holding Company, Inc., SCANA Corporation and their
respective officers, directors, employees and affiliates will be released by the holders
of not less than 51% in principal amount of the Notes, ITC and Reorganized ITC from any and
all liabilities or claims, including, without limitation, claims arising under or in
connection with the Investment Agreement dated as of February 27, 2001 by and between ITC
and ITC Holding Company, Inc. as amended. The Plan will also provide for customary releases
by ITC, Reorganized ITC and the Noteholders of the current and former officers and
directors of ITC, ITC's representatives (including any attorney, financial advisors,
investment banks or other professional), members of the Unofficial Committee of Noteholders
and their representatives (including any attorney, financial advisors, investment banker or
other professional).
Registration Rights The Plan will provide that:
- (i) the holders of the Reorganized ITC Common Stock will be entitled to three (3)
demand rights and unlimited piggyback rights for the resale thereof, subject to
customary limitations;
- (ii) on the Effective Date, the holders of the Reorganized ITC Common Stock will
enter into registration rights agreements with Reorganized ITC on terms and
conditions satisfactory to the Committee;
- (iii) as of the Effective Date, Reorganized ITC will be registered under the
Securities Exchange Act of 1934, as amended;
- (iv) Within 30 days after the Effective Date, Reorganized ITC will file a "shelf"
registration statement with respect to the Reorganized ITC Common Stock and will
use its reasonable best efforts to have the shelf registration declared effective
as soon as practicable thereafter;;
- (v) Reorganized ITC will supplement or amend such shelf registration statements to
keep it effective for a period of three years (plus any suspension periods); and
- (vi) as of the Effective Date, Reorganized ITC will use its reasonable best
efforts to cause Reorganized ITC's New Common Stock to be listed on a registered
securities exchange or include them for quotation on the NASDAQ National Market
System.
----------------------------------------------------------------------------------------------------------------------------------
================================================================================
7
Transaction Overview (continued)
----------------------------------------------------------------------------------------------------------------------------------
Reduction of Capital Lease The Company will use its reasonable best efforts to reduce its capital lease obligations
Obligations: arising prior to December 31, 2004; negotiations are currently under discussion, but no
assurance can be provided that these reductions will occur.
Board of Directors: On the Effective Date of the Plan, the terms of the board of directors for ITC will cease.
The Plan and the certificate of incorporation of Reorganized ITC will provide for a new board
of directors consisting of seven (7) members (the "New Board of Directors"). Noteholders will
select two independent Directors, as well as two additional Directors, the New Investors will
select two Directors and the Chairman and CEO of Reorganized ITC will also serve as a
Director.
Management Incentive Plan: The new Board of Directors will develop and implement a suitable Management Incentive Plan.
The Management Incentive Plan will include (i) a restricted stock plan of 2.0 million shares
(2%) of New Common Stock (the "Restricted Stock Plan"), which shall be awarded by the board
of the Reorganized ITC on the Effective Date or as soon as practicable thereafter, and (ii)
an employee option allocation plan of 7.0 million shares (7%) of New Common Stock (the
"Employee Option Plan"). Under the Employee Option Plan, options will be granted as follows:
- Options for 4.0 million shares will be awarded by the new Board of Directors on the
Effective Date or as soon as practicable thereafter, with the exercise prices set as
follows:
- 1/3 based upon 100% of post-money equity value of $285.7 million (the "Post-Money
Value");
- 1/3 based upon 115% of Post-Money Value; and
- 1/3 based upon 130% of Post-Money Value
- Options for 3.0 million shares will be reserved and granted in the new Board of
Directors' discretion, following the Effective Date.
- Options and Restricted Stock initially issued under the Plan will vest 1/3 on grant
date; 1/3 on the 1st anniversary of grant date and 1/3 on the 2nd anniversary of
grant date.
Management Retention Plan: The old Board of Directors will approve a Management Retention Plan that will provide for
Termination
Without Cause protection to the top executives of the Company on agreed upon terms as listed
below:
- President and CEO - See attached agreement
================================================================================
8
- Senior Vice Presidents (5 in number) - See attached agreement
- Vice Presidents (22 in number) - Agreed upon severance policy
The agreements for the CEO, President and Senior Vice-Presidents will contain change of
control provisions providing for a "double trigger"- with full vesting of equity awards upon
termination without cause or for good reason within 12 months after a change in control.
Professional Fees Pursuant to the respective engagement letters of the Committee's legal advisors Fried, Frank,
Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇ ▇▇▇▇▇"), and financial advisors, ▇▇▇▇▇▇ Capital Partners,
LLC ("▇▇▇▇▇▇"), ITC shall pay any and all accrued pre-petition fees and expenses incurred by
such professionals prior to the commencement of any Chapter 11 filing by ITC. The plan of
reorganization shall provide, as part of the distributions to the bondholders, for the
payment of the fees and expenses of ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ incurred during the chapter 11
case on the Effective Date of the Plan.
General Provisions The certificate of incorporation and the by-laws of Reorganized ITC will contain those
terms and conditions that are reasonably satisfactory to the Committee. Under the
certificate of incorporation of Reorganized ITC, there will be no less than one hundred
(100) million shares of New Common Stock authorized, and all shares of New Common Stock
will have equal rights on voting and distributions. Other matters with respect to corporate
governance, representations, warranties and covenants by Reorganized ITC and rights of, and
obligations of Reorganized ITC to, the holders of New Common Stock will be determined by, and
shall be on terms reasonably satisfactory to, the Committee.
----------------------------------------------------------------------------------------------------------------------------------
================================================================================
9
Transaction Overview (Chapter 11 Plan)
For Discussion Purposes Only
--------------------------------------------------------------------------------
Implementation: All of the documentation relating to the
restructuring or the transactions described
herein, including, without limitation, the Plan
and related Disclosure Statement, shall be
acceptable to the Committee in all respects.
Administrative Expenses All allowed administrative expenses of ITC will
of ITC: be paid in full in cash on the Effective
Date, except for those administrative expenses
which are due following the Effective Date and
which shall be paid on the due date or dates
thereof in accordance with their stated terms.
Priority Tax Claims Holders of allowed priority tax claims against
Against ITC: ITC will receive, on account of such claims,
deferred cash payments, over a period not
exceeding six years after the date of
assessment of such claims, having a value, as
of the Effective Date, equal to the allowed
amount of such claims or receive such other
treatment as may be agreed upon among ITC, the
Committee and the holders of such allowed
priority tax claims.
Priority Non-Tax Claims Allowed priority non-tax claims against ITC
Against ITC: will be paid in full in cash on the Effective
Date or otherwise treated in accordance with
section 1129(a)(9)(B) of the Bankruptcy Code.
Claims of ITC: The Plan will provide that, on the Effective
Date, any and all claims of ITC (other than
those claims expressly released under the Plan
and approved by final order of the bankruptcy
court) against any person or entity of every
kind and nature will vest in Reorganized ITC
for the benefit of the holders of the New
Common Stock and will be prosecuted and
administered by the officers and other
management of Reorganized ITC, at the direction
of the New Board of Directors of Reorganized
ITC.
General Conditions: The Plan will contain usual and customary
conditions precedent to confirmation of the
Plan and the Effective Date, including the
receipt of all necessary regulatory and other
governmental approvals.
Other Unsecured Creditors: Unimpaired.
--------------------------------------------------------------------------------
================================================================================
10
Pro Forma Capitalization and Recovery Analysis
--------------------------------------------------------------------------------
SECTION 3
================================================================================
11
Pro Forma Capitalization -- US$30 Million Investment
=======================================================================================================
($ in millions) Estimated
Book Cum. Net Debt /
value Net Pro Forma LTM EBITDA
9/30/02 Adjustments 9/30/02 of $63.9
---------- ------------- ----------- -----------
Cash $ 11.5/1/ $ 3.5/2/ $ 15.0
========== ===========
Senior Secured Credit Facility $155.6 0.0 $155.6 2.2x
Capital Lease Obligation 49.4 (10.7) 38.7 2.8x
11.0% Senior Notes due 2007 130.0 (130.0) 0.0 2.8x
8.875% Senior Notes due 2008 160.0 (160.0) 0.0 2.8x
9.75% Senior Notes due 2008 125.0 (125.0) 0.0 2.8x
4.5% Convertible Sub. Notes due 2006 100.0 (100.0) 0.0 2.8x
---------- -----------
Total Debt 720.0 194.3 2.8x
Series B Preferred Equity 73.3 (73.3) 0.0
New Convertible Preferred Equity 0.0 30.0 30.0
Common Equity (112.2) 351.6/3/ 239.3
---------- -----------
Total Capitalization $681.1 $463.7
========== ===========
Annual Interest Expense $ 56.0 $ 10.9
LTM EBITDA/Interest Expense 1.1x 5.9x
================================================================================
NOTE:
/1/ Assumes 2002 interest payment on Senior Notes is not paid
/2/ Assumes $30.0 million new convertible preferred investment, $9.5 million
restructuring expenses, and capital lease payments
/3/ Adjusted to reflect fresh-start accounting
================================================================================
12
Recovery Analysis - US$30 Million Investment
--------------------------------------------------------------------------------
-------------------------------- --------------------------------------------
Recovery Components Equity%
-------------------------------- --------------------------------------------
Claim Cash Debt Equity /(1)/ Common /(1)/ Warrants Fully-Diluted
--------- -------- -------- --------- -------- ----------- --------------
Senior Secured Credit Facility 155.6 - 155.6 - - - -
Capital Leases 49.4 17.0 38.7 - - - -
Senior/Convertible Note Holders 515.0 - - 247.1 86.5% - 84.4%
Existing Preferred and Common 73.3 2.9 1.0% 0.0% 1.0%
New Investor 0.0 - - 30.0/(2)/ 10.5%/(3)/ 2.0%/(2)/ 12.3%
Allocable Equity 0.0 - - 5.7 2.0%/(2)/ 0.0% 2.0%
Management 0.0 - - - - - -
--------- -------- -------- --------- -------- ----------- --------------
Total 793.3 17.0 194.3 285.7 100.0% 2.0% 100.0%
========= ======== ======== ========= ======== =========== ==============
NOTE:
/(1)/ Represents full equity value before the exercise of warrants.
/(2)/ In addition to the $30.0 million convertible preferred the new Investor
will receive 2.0% of warrants struck at on enterprise value of $420.0
million and 2.0% common equity.
/(3)/ Assumes new convertible preferred is converted to common.
--------------------------------------------------------------------------------
================================================================================
13
Exhibit 10.1 (Continued)
------------------------
FORM OF
-------
EXECUTIVE EMPLOYMENT AND RETENTION AGREEMENT
--------------------------------------------
THIS EXECUTIVE EMPLOYMENT AND RETENTION AGREEMENT (this
"Agreement") is dated as of __, 2002 [date of court order approving Agreement],
by and between ITC/\DeltaCom, Inc., a Delaware corporation with its principal
place of business at ▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ (the
"Company"), and __________________________________ (the "Executive"), with a
residence at ___________________________________________________.
Recitals
A. The Executive is currently employed as [title] of the Company.
B. The Company intends to file a petition with the United States
District Court for the District of Delaware (the "Bankruptcy Court") on June __,
2002 (the "Filing Date") for reorganization under Chapter 11 of title 11 of the
United States Code (the "Bankruptcy Code").
C. The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will benefit from the continued services of the Executive
during the pendency of the proceedings under the Bankruptcy Code to which the
Company will be subject (the "Reorganization Proceedings") and following the
Bankruptcy Court's confirmation of a plan of reorganization (the "Plan of
Reorganization") with respect to the Company.
D. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by the Reorganization Proceedings and to encourage the Executive's full
attention and dedication to the Company during the Reorganization Proceedings
and following confirmation of the Plan of Reorganization, and to provide the
Executive with compensation and benefits arrangements which ensure that the
compensation and benefits expectations of the Executive will be satisfied and
which are competitive with those of other corporations.
E. In order to accomplish the foregoing objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto agree as follows:
1. Employment Period. The Company hereby agrees to continue
-----------------
the Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company subject to the terms and conditions of this Agreement,
commencing on the date of this Agreement (the "Effective Date") and ending on
the third anniversary of the Effective Date, unless sooner terminated in
--------------
accordance with the provisions of Section 4. The three-year period described in
the immediately preceding sentence shall hereinafter be referred to as the
"Initial Term." On the first anniversary of the Effective Date, and on each
------------
subsequent anniversary of the Effective Date (each anniversary of the Effective
Date, a "Renewal Date"), the term of this Agreement shall automatically be
------------
extended for successive one-year periods (each such one-year period, an
"Extension Period") unless either the Company or the Executive provides written
----------------
notice to the other party not later than 60 days before the applicable Renewal
Date of the notifying party's intention to terminate this Agreement at the end
of the Initial Term or the current Extension Period, as the case may be. The
Initial Term and any applicable Extension Periods are hereinafter referred to
collectively as the "Employment Period."
-----------------
2. Position and Duties.
-------------------
2.1 Position. During the Employment Period, (i) the
--------
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the period commencing on January 1,
2002 and ending on the date immediately preceding the Filing Date (the
"Pre-Filing Period") and (ii) the Executive's services shall be performed at the
location where the Executive was employed immediately preceding the Filing Date
or any office or location less than 35 miles from such location.
2.2 Duties. During the Employment Period, and excluding any
------
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote all attention and time during normal business hours
to the business and affairs of the Company necessary and appropriate to
discharge the responsibilities assigned to the Executive hereunder and, to the
extent necessary and appropriate to discharge such responsibilities, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions and
2
(iii) manage personal investments, so long as such activities do not interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. To the extent that any such
activities have been conducted by the Executive and disclosed to the Board prior
to the date of this Agreement, the continued conduct of such activities, or the
conduct of activities similar in nature and scope thereto, thereafter shall not
be deemed to interfere with the performance of the Executive's responsibilities
to the Company.
3. Compensation.
------------
3.1 Base Salary. During the Employment Period, the Company
-----------
shall pay the Executive a minimum base salary per annum equal to the Executive's
annual base salary in effect for fiscal 2002 immediately before the Filing Date
(the "Base Salary"), which shall be payable in accordance with the Company's
-----------
payroll procedure in effect or as hereinafter amended from time to time, but not
less frequently than monthly. During the Employment Period, the Base Salary
shall be reviewed at least annually and, except as expressly provided in Section
4.5, shall not be decreased. Any increase in the Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this Agreement. The
Base Salary shall not be reduced after any such increase, and the term "Base
Salary" as used in this Agreement shall refer to the Base Salary as so
increased.
3.2 Annual Bonus. In addition to the Base Salary, the
------------
Executive shall be provided, for each fiscal year ending during the Employment
Period, a bonus opportunity in cash and stock-based incentives at least equal to
the Executive's maximum bonus opportunity in effect for fiscal 2002 immediately
before the Filing Date (the "Annual Bonus"). Unless the Executive shall elect to
------------
defer the receipt of such Annual Bonus, each such Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, or on such other basis as the
Company and the Executive may agree.
3.3 Benefits.
--------
(a) Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company and its subsidiaries, but in no event shall such
plans, practices, policies and programs provide the Executive with savings
opportunities and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than the most favorable of those provided by the
Company and its subsidiaries for the Executive under such plans, practices,
policies and programs as in effect at any time during the Pre-Filing Period or,
if more favorable to the Executive, those provided
3
generally at any time after the Filing Date to other peer executives of the
Company and its subsidiaries.
(b) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
to participate in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, medical, prescription, dental, disability,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of the
Company and its subsidiaries, but in no event shall such plans, practices,
policies and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time during the
Pre-Filing Period or, if more favorable to the Executive, those provided
generally at any time after the Filing Date to other peer executives of the
Company and its subsidiaries.
(c) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the policies, practices and
procedures of the Company.
(d) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, expenses of
attendance by the Executive and his spouse at industry conferences, use of an
automobile, and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
subsidiaries in effect for the Executive at any time during the Pre-Filing
Period or, if more favorable to the Executive, as in effect generally at any
time after the Filing Date with respect to other peer executives of the Company
and its subsidiaries.
(e) Vacation. During the Employment Period, the Executive
shall be entitled to [vacation in accordance with the Company's policy in effect
from time to time] [for the Chief Executive Officer only: at least four weeks of
paid vacation per calendar year]. The Executive shall have the right to accrue
and carry forward unused vacation.
4. Termination of Employment.
-------------------------
4.1 Termination Upon Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If by virtue of ill health or other
4
disability, the Executive is unable during the Employment Period to perform
substantially and continuously the duties assigned to him for a period in excess
of six consecutive months or six non-consecutive months out of any consecutive
twelve-month period ("Disability"), the Company shall have the right, on not
less than 30 days notice, to terminate the employment of the Executive upon
notice in writing to the Executive, provided that, within 30 days after his
receipt of such notice, the Executive shall not have resumed full-time
performance of the Executive's duties.
4.2 Termination by the Company for Cause. At any time during
the Employment Period after the occurrence of an event constituting Cause (as
defined below in this Section 4.2), the Company may terminate the Executive's
employment hereunder in accordance with the procedures described below in this
Section 4.2. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the
Company or one of its subsidiaries (other than any such failure
resulting from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the
Executive by the Board which specifically identifies the manner in
which the Board believes that the Executive has not substantially
performed the Executive's duties;
(ii) conviction of the Executive of, or a plea
by the Executive of nolo contendere to, a felony or to
---------------
any criminal violation involving dishonesty, fraud or breach of trust;
or
(iii) willful misconduct by the Executive which
is injurious to the Company or any of its subsidiaries.
For purposes of this Section 4.2, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
based upon the advice of counsel for the Company shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company. The cessation of employment of the Executive
shall not be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the entire membership of the
Board (not including the Chief Executive Officer of the Company) at a meeting of
the Board called and held for such purpose (after reasonable notice of such
5
purpose is provided to the Executive and the Executive is given an opportunity,
together with counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive has engaged in the conduct described
in subparagraph (i) (ii) or (iii) above, and specifying the particulars thereof
in detail. If the Executive is a member of the Board, the Executive shall recuse
himself or herself from the deliberations and vote of the Board with respect to
such matter.
4.3 Other Termination by the Company. Notwithstanding anything
contained herein to the contrary (including, without limitation, the provisions
of Section 1), the Company may terminate the Executive's employment for any
reason, or for no reason, at any time during the Employment Period upon written
notice of termination. In the event of such termination, the Company shall
notify the Executive of the date of termination, which date may be at any time
up to and including six months following the date of written notice of
termination. The Executive shall continue to perform his duties hereunder
through the date of termination determined by the Company.
4.4 Other Termination by the Executive. Notwithstanding
anything contained herein to the contrary (including, without limitation, the
provisions of Section 1), the Executive may terminate the Executive's employment
hereunder for any reason, or for no reason, at any time during the Employment
Period upon written notice given not less than 90 days prior to the date of
termination of employment.
4.5 Termination for Good Reason. At any time during the
Employment Period, the Executive's employment may be terminated by the Executive
for, and within 60 days following the occurrence of an event that constitutes,
Good Reason (as defined below in this Section 4.5). For purposes of this
Agreement, "Good Reason" shall mean any of the following:
(i) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 2, or
any other action by the Company which results in a material diminution
in such position, authority, duties or responsibilities; provided,
however, that if the Board determines in good faith that some such
material inconsistency or diminution in position, authority, duties or
responsibilities of the Executive is in the best interest of the
Company, the Executive agrees to negotiate in good faith with the
Company the terms of any related modification of the Executive's duties
or other action by the Company;
6
(ii) any failure by the Company to comply with any of
the provisions of this Agreement (including, without limitation,
Section 3), other than (I) an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive or (II)
a failure in connection with action by the Company that reduces the
then-current compensation or employee benefits of the Company's senior
management generally in connection with a financial restructuring or
other Company-wide plan to materially reduce the costs of operations of
the Company and its subsidiaries or materially improve the financial
condition of the Company and its subsidiaries; provided that the
Executive's Base Salary and Annual Bonus may not be reduced by more
than 10% in the aggregate during the Employment Period; or
(iii) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement.
5. Obligations of the Company Upon Termination.
-------------------------------------------
5.1 Termination Without Cause or With Good Reason. If (i) the
Company shall terminate the Executive's employment other than pursuant to
Section 4.1 (upon death or Disability) or Section 4.2 (for Cause) or (ii) the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the
Executive in a lump sum in cash within 30 days after the date of
termination the aggregate of the following amounts:
(A) the sum of (1) the
Executive's annual Base Salary through the date of
termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the highest Annual Bonus
(annualized in the case of any partial year) paid to the
Executive with respect to any of the three fiscal years
preceding the fiscal year in which the date of termination
occurs (excluding therefrom the value of stock-based
incentives) and (II) the Executive's annual target bonus
opportunity in cash in effect for fiscal 2002 immediately
before the Filing Date (such higher amount of (I) and (II)
being referred to as the "Highest Annual Bonus"), and (y) a
fraction, the numerator of which is the number of days in
the current fiscal year through the date of termination, and
the denominator of which is 365 and (3) any compensation
previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2)
and (3) are hereinafter referred to as the "Accrued
Obligations"); and
7
(B) the amount equal to the
product of (1) [three, for the Chief Executive Officer and
President][two, for Senior Vice Presidents and (2) the sum
of (x) the Executive's annual Base Salary as in effect at the
date of termination and (y) the Highest Annual Bonus;
(ii) [until the Executive's 65th
birthday, for the Chief Executive Officer and President] [for three
years after the Executive's date of termination, for Senior Vice
Presidents], or such longer period as may be provided by the terms of
the appropriate plan, program, practice or policy, the Company shall
continue medical, prescription, dental and life insurance benefits to
the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 3.3(b) (but
excluding disability benefits) if the Executive's employment had not
been terminated or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives
of the Company and its affiliates and their families, provided,
however, that if the Executive becomes reemployed with another employer
and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other
plan during such applicable period of eligibility. If the participation
by the Executive or the Executive's family in any such plan, program,
practice or policy is not permissible or practicable, the Company shall
arrange to provide the Executive or the Executive's family with
substantially similar benefits, or, where the provision of such
substantially similar benefits is not permissible or practicable, with
a lump sum cash payment of equal value in lieu thereof. For purposes of
determining eligibility (but not the time of commencement of benefits)
of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to
have remained employed until three years after the date of termination
and to have retired on the last day of such period;
(iii) to the extent not theretofore paid
or provided, the Company shall timely pay or provide to the Executive
any other amounts or benefits required to be paid or provided or which
the Executive is eligible to receive under any plan, program, policy
or practice or contract or agreement of the Company and its
subsidiaries (such other amounts and benefits are hereinafter
referred to as the "Other Benefits"); and
8
(iv) a percentage of each "Tranche"
(as defined below) of all stock options, stock appreciation rights,
awards of restricted stock and restricted stock units, and other
equity-based awards (each, an "Award") granted to the Executive and
then outstanding under stock option, stock incentive, deferred
compensation and other equity-based plans, programs, contracts or
arrangements of the Company and its subsidiaries which is unvested and
unexercisable shall vest and, if applicable, become exercisable, with
such percentage to be determined by multiplying the number of shares
of stock subject to such Tranche by a fraction, the numerator of which
shall be the number of days that have elapsed since the commencement
of the vesting period applicable to such Tranche and the denominator
of which shall be the total number of days in the vesting period
applicable to such Tranche; provided, however, that, if the numerator
of such fraction is 182 or less, the numerator of such fraction shall
be deemed to be zero. For purposes of this Section 5.1(iv), "Tranche"
shall mean, as applicable, (i) any Award with a single-year,
time-based vesting schedule or (ii) any portion of an Award with an
annual time-based vesting schedule applicable to such portion.
5.2 Termination Upon Death. If the Executive's employment is
terminated by reason of the Executive's death during the Employment Period, as
provided in Section 4.1, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement, other
than for payment of the Accrued Obligations and the timely payment or provision
of the Other Benefits. The Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within 30 days after
the date of termination. With respect to the provision of the Other Benefits,
the term "Other Benefits" as used in this Section 5.2 shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and its subsidiaries to the estates and beneficiaries of peer executives
of the Company and its subsidiaries under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the Pre-Filing Period
or, if more favorable to the Executive's estate and/or the Executive's
beneficiaries, as in effect on the date of the Executive's death with respect
to other peer executives of the Company and its subsidiaries and their
beneficiaries.
9
5.3 Termination Upon Disability. If the Executive's employment
is terminated by reason of the Executive's Disability during the Employment
Period, as provided in Section 4.1, this Agreement shall terminate without
further obligations to the Executive, other than for payment of the Accrued
Obligations and the timely payment or provision of the Other Benefits. The
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days after the date of termination. With respect to the provision of Other
Benefits, the term "Other Benefits" as used in this Section 5.3 shall include,
and the Executive shall be entitled after the occurrence of any condition
constituting a Disability to receive, disability and other benefits at least
equal to the most favorable of those benefits generally provided by the Company
and its subsidiaries to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the Pre-Filing Period or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
subsidiaries and their families.
5.4 Termination for Cause. If the Executive's employment shall
be terminated for Cause during the Employment Period, as provided in Section
4.2, this Agreement shall terminate without further obligations to the
Executive, other than the obligation to pay to the Executive (i) his Base Salary
through the date of termination, (ii) the amount of any compensation previously
deferred by the Executive and (iii) the Other Benefits, in each case to the
extent theretofore unpaid.
5.5 Termination Other Than for Good Reason. If the Executive
voluntarily terminates employment during the Employment Period (other than for
Good Reason), as provided in Section 4.4, this Agreement shall terminate without
further obligations to the Executive, other than the obligation to pay to the
Executive (i) his Base Salary through the date of termination, (ii) the amount
of any compensation previously deferred by the Executive and (iii) the Other
Benefits, in each case to the extent theretofore unpaid. The foregoing amounts
shall be paid to the Executive in a lump sum in cash within 30 days after the
date of termination.
5.6 Other Plans, Agreements or Arrangements.
---------------------------------------
The severance pay and severance benefits provided for in this Section 5 shall
not duplicate, and shall be offset by, any other severance pay or severance
benefits to which the Executive may be entitled under any plan, agreement or
arrangement of the Company or any of its subsidiaries and, to the extent
permitted by applicable law, shall be offset by any severance benefits to which
the Executive may be entitled under applicable law.
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6. Non-Exclusivity of Rights. Subject to Section 5.6, nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its subsidiaries and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its subsidiaries.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of, or any contract or
agreement with, the Company or any of its subsidiaries at or subsequent to the
date of termination of employment shall be payable in accordance with such plan,
policy, practice or program or contract or agreement, except as expressly
modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company shall pay as incurred, to the fullest extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive concerning the amount of any payment pursuant to
this Agreement), plus in each case interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended.
8. Execution of Release. As a condition to the Company's obligation to
pay any form of severance to the Executive upon the termination of the
Executive's employment with the Company, the Executive shall, at the time of
such termination, execute and deliver to the Company (and shall fail to revoke
within such time periods as may be established by law) a full and unconditional
release in favor of the Company and its affiliates of all obligations other than
those set forth in this Agreement, in form and substance reasonably satisfactory
to the Company.
9. Other Provisions.
----------------
9.1 Severability. If it is determined that any of the
provisions of this Agreement are invalid or unenforceable, the remainder of the
provisions of this Agreement shall not thereby be affected and shall be given
full effect, without regard to the invalid portions.
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9.2 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission or sent by certified, registered or express mail,
postage prepaid, as follows:
(i) If to the Company, to:
ITC/\DeltaCom, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Corporate Counsel
Telecopy no.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to the Executive, to the
address of the Executive first above
written and to such facsimile
transmission number as the Executive
shall designate in writing to the
Company.
Either party may by notice in accordance with this Section 9.2 to the other
party designate another address or person for receipt by such person of notices
and communications hereunder. Notice and communications shall be effective when
actually received by the addressee.
9.3 Entire Agreement. This Agreement contains the entire
agreement between the parties (including all affiliates of the Company) with
respect to the subject matter hereof and supersedes all prior agreements,
written or oral, with respect thereto.
9.4 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance. No delay on the part of either party in
exercising any right, power or privilege hereunder (including, without
limitation, the right of the Executive to terminate employment for Good Reason)
shall operate as a waiver thereof, nor shall any waiver on the part of either
party of such right, power or privilege or any single or partial exercise of any
such right, power or privilege preclude any other further exercise thereof or
the exercise of any other such right, power or privilege.
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9.5 Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made to be performed entirely within the State of Delaware, without
giving effect to the principles of conflicts of law thereunder.
9.6 Jurisdiction. The Company and the Executive each
irrevocably (i) consent and submit to the jurisdiction of any Delaware state
court or federal court located in the State of Delaware with respect to any
suit, action or proceeding relating to this Agreement; (ii) waive, to the
fullest extent permitted by law, any objection which such party may now or
hereafter have to the laying of venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum; (iii) waive
the right to object that any such court does not have jurisdiction over such
party; (iv) consent to the service of process in any such suit, action or
proceeding by the mailing of copies of such process to such party by certified
mail, return receipt requested, at such party's address indicated in this
Agreement or at such other address of which the other party shall have received
notice; and (v) agree not to bring any action relating to this Agreement in any
court other than a Delaware state court or federal court located in the State of
Delaware. Nothing in this Section 9.6 shall affect the right of either party to
serve process in any other manner permitted by law.
9.7 Assignment. This Agreement, and the Executive's
----------
rights and obligations hereunder, may not be assigned by the Executive other
than by will or the laws of descent and distribution.
9.8 Tax Withholding. The Company may withhold from any
amounts payable under this Agreement such federal, state, local or foreign
taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
9.9 Binding Effect; Successors. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors, permitted assigns, heirs, executors and legal representatives. If
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company and its subsidiaries may be deemed not to have assumed this Agreement by
operation of law, the Company shall require such successor to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. As used in this Agreement, the term "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
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9.10 Counterparts; Delivery by Facsimile. This Agreement may
be executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all of which counterparts
together shall constitute one and the same instrument. Each counterpart may
consist of two copies hereof, each signed by one of the parties hereto. The
transmission of an executed counterpart of this Agreement by facsimile
transmission shall constitute due and sufficient delivery thereof for all
purposes.
9.11 Headings. The headings in this Agreement are for
--------
reference only and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive has heretofore set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
ITC/\DELTACOM, INC.
By
---------------------------------
EXECUTIVE
---------------------------------
Acknowledgement and Agreement
ITC/\DeltaCom Communications, Inc., a wholly owned subsidiary of the
Company, hereby acknowledges that prior to the date hereof it has made payment
to the Executive of compensation and benefits in connection with the Executive's
employment by the Company and hereby agrees that, to the extent not made by the
Company, it shall make all payments of compensation and benefits to the
Executive provided in this Agreement from and after the date hereof.
ITC/\DELTACOM
COMMUNICATIONS, INC.
By
---------------------------------
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