Exhibit 10.3
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SUBSCRIPTION AGREEMENT
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THIS SUBSCRIPTION AGREEMENT (this "Agreement") is dated as of
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June 25, 2002, by and between ITC^DeltaCom, Inc., a Delaware corporation with
its principal place of business at 0000 X.X. Xxxxxxx Xxxxx, Xxxx Xxxxx, Xxxxxxx,
00000 (the "Company"), and SCANA Corporation, a South Carolina corporation with
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its principal place of business at 0000 Xxxx Xxxxxx, Xxxxxxxx, Xxxxx Xxxxxxxx
00000 (the "Purchaser" or "SCANA").
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Recitals
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A. The Company intends to consummate a financial
restructuring pursuant to a pre-negotiated plan of reorganization (the "Plan")
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that will be subject to confirmation pursuant to chapter 11 of title 11 of the
United States Code (the "Chapter 11 Case").
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B. The terms of the Plan as agreed to by the Company and
certain holders of the Company's 11% Senior Notes due 2007, 8[middot]% Senior
Notes due 2008, 9 3/4% Senior Notes due 2008 and 4 1/2% Convertible Subordinated
Notes due 2006 (collectively, the "Notes") are set forth in the term sheet
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attached to this Agreement as Appendix 1 (the "Plan Term Sheet") and made a part
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hereof.
C. The Plan requires the Company to raise gross proceeds
of at least $30,000,000 from the issuance and sale of Series A convertible
preferred stock of the reorganized Company (the "Series A Preferred Stock") upon
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the terms described in the Plan Term Sheet.
D. The Company wishes to sell to the Purchaser, and the
Purchaser wishes to purchase from the Company, Series A Preferred Stock for an
aggregate purchase price of $15,000,000 upon the terms and conditions set forth
in this Agreement (the "Investment").
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X. Xxxxxxxx X. Xxxxxx, III, who is currently a stockholder
of the Company, has agreed in a subscription agreement of even date herewith to
purchase Series A Preferred Stock for an aggregate purchase price of $15,000,000
upon the terms and conditions set forth in such agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
1. Subscription.
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(a) Subject to the terms and conditions of this Agreement,
the Company shall sell to the Purchaser and the Purchaser shall purchase from
the Company, for an aggregate purchase price of $15,000,000, 150,000 shares of
Series A Preferred Stock (the "Preferred Shares") at a stated price of $100 per
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share (such $15,000,000 amount, as adjusted pursuant to this paragraph (a), the
"Committed Amount"). The Committed Amount shall be reduced by $1.00 for every
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$2.00 of gross proceeds received by the Company from the sale of Series A
Preferred Stock in the rights offering described in the Plan Term Sheet. Upon
any adjustment of the Committed Amount, the number of Preferred Shares to be
purchased and sold at the Closing (as defined in paragraph (d) below) shall be
proportionately reduced.
(b) At the Closing, the Company shall issue to the
Purchaser, for no additional consideration, warrants (the "Warrants") to
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purchase shares of the common stock of the reorganized Company (the "New Common
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Stock") constituting 1% of the equity of the reorganized Company as set forth in
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the Plan Term Sheet, provided, however, that if the Committed Amount and the
number of Preferred Shares to be purchased and sold at the Closing shall be
reduced pursuant to paragraph (a) above, the number of Warrants issuable at the
Closing shall be proportionately reduced.
(c) At the Closing, the Company shall issue to the
Purchaser, in consideration for the purchase commitment set forth in this
Agreement, shares of New Common Stock constituting 1% of the equity of the
reorganized Company as set forth in the Plan Term Sheet (such shares of New
Common Stock, together with the Preferred Shares and the Warrants, the
"Securities").
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(d) The closing of the purchase and sale of the Securities
(the "Closing") shall take place substantially concurrently with the other
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transactions contemplated by the Plan to take place on the effective date of the
Plan (the "Plan Effective Date"), including the cancellation of the Notes and
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the Company's existing equity securities and the issuance of the New Common
Stock.
2. Representations and Warranties.
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(a) The Company represents and warrants to the Purchaser
that (i) the Company has the requisite corporate power and authority to enter
into this Agreement and, upon the satisfaction of the condition set forth in
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Section 3(a)(i), will have the requisite corporate power and authority to
consummate the transactions contemplated hereby to be consummated by the
Company, (ii) the execution and delivery of this Agreement by the Company have
been and, upon the satisfaction of the condition set forth in Section 3(a)(i),
the consummation by the Company of the transactions contemplated hereby will be,
duly authorized by all necessary corporate action of the Company, (iii) this
Agreement has been duly and validly executed and delivered by the Company and
(iv) this Agreement constitutes a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as such
enforcement is limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally and for limitations
imposed by general principles of equity.
(b) The Purchaser represents and warrants to the Company as
follows:
(i) The Purchaser has sufficient knowledge and experience
in financial and business matters and information relating to the
business, operations, financial condition and prospects of the Company
to evaluate the merits and risks of its investment in the Securities
and in the New Common Stock issuable upon conversion of the Series A
Preferred Stock and exercise of the Warrants (the Securities and such
New Common Stock together, the "Investment Securities"). The Purchaser
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is an "accredited investor" within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act of 1933, as amended
(the "Securities Act"). The Purchaser will acquire the Investment
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Securities solely for its own account and for investment and not with a
view to, or for sale in connection with, the distribution of the
Investment Securities. The Purchaser understands that the Investment
Securities have not been and will not be registered under the
Securities Act or any applicable state securities laws and that the
Securities may be resold, pledged, hypothecated, transferred or
otherwise disposed of only if registered under the Securities Act and
applicable state securities laws or if an exemption from such
registration requirements is available.
(ii) (I) The Purchaser has the requisite corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby to be consummated by the Purchaser,
(II) the execution and delivery of this Agreement by the Purchaser and
the consummation by the Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of
the Purchaser, (III) this Agreement has been duly
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and validly executed and delivered by the Purchaser, (IV) this
Agreement constitutes a valid and binding agreement of the Purchaser
enforceable against the Purchaser in accordance with its terms, except
as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally
and for limitations imposed by general principles of equity, and (V)
the Purchaser has, or will have as of the Closing, sufficient funds to
pay the purchase price for all of the Preferred Shares that it is
obligated to purchase pursuant to Section 2.
3. Conditions to Obligations of the Company and the
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Purchaser.
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(a) The obligations of the Company and the Purchaser to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver at or prior to the Closing Date of the following
conditions:
(i) the Plan shall have been confirmed by the
United States Bankruptcy Court for the District of Delaware on
substantially the terms set forth in the Plan Term Sheet, and
an unstayed order by such Bankruptcy Court approving the
transactions contemplated by the Plan shall have been entered,
on or before December 31, 2002;
(ii) the other transactions contemplated by the Plan
to occur on the Plan Effective Date (including, without
limitation, the cancellation of the Notes and the Company's
existing equity securities and the issuance of the New Common
Stock) shall have been consummated substantially concurrently
with the Investment on substantially the terms set forth in
the Plan Term Sheet;
(iii) on the Plan Effective Date, the holders of
Notes representing at least 51% of the principal amount of all
outstanding Notes (including Appaloosa Management L.P. and its
affiliates that beneficially own or control Notes) shall be
legally bound by a release in substantially the form attached
to this Agreement as Appendix 2;
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(iv) on the Plan Effective Date, the Company shall
be legally bound by a release in substantially the form
attached to this Agreement as Appendix 3;
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(v) the Series A Preferred Stock to be purchased
and sold at the Closing shall have substantially the same
terms, powers, preferences and rights as those set forth in
the Plan Term Sheet and such other terms, powers, preferences
and rights as are customary for similar securities;
(vi) the Warrants to be issued at the Closing shall
have substantially the same terms as those set forth in the
Plan Term Sheet and such other terms as are customary for
substantially similar securities;
(vii) the Company and the Purchaser shall have
executed and delivered such other documents as are customary
for transactions such as the Investment, including, without
limitation, a purchase agreement (the "Purchase Agreement")
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containing customary representations, warranties, covenants
(including, without limitation, covenants of the Company
providing for securities registration rights with respect to
the Investment Securities) and closing conditions (including,
without limitation, as a condition to the Purchaser's
obligation to close, the absence of a material adverse change
affecting the Company, with customary exceptions relating to
the filing and continuation of the Chapter 11 Case);
(viii) no preliminary or permanent injunction or
other order by any governmental entity which prevents the
consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect;
(ix) no statute, rule, regulation or other law shall
have been enacted by any governmental entity which would
prevent or make illegal the consummation of the transactions
contemplated by this Agreement; and
(x) all necessary or required consents, orders,
approvals or authorizations of, notifications or submissions
to, filings with, licenses or permits from, or exemptions or
waivers by, any governmental entity, stock exchange or other
person shall have been made or obtained, except where the
failure by a party to make or obtain any of the foregoing
would not have a material adverse effect on such party's
ability to perform its obligations under this Agreement;
provided that any failure by the Company to obtain any
necessary or required consents from any party to lawsuits or
other proceedings which challenge the Company's rights to use
its network easements, rights-of-way,
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franchises or licenses shall not be deemed a failure to
satisfy this condition with respect to the Company's
obligations.
(b) The obligations of the Company to consummate the
transactions contemplated by this Agreement are subject to the satisfaction or
waiver at or prior to the Closing Date of the additional condition that SCANA
shall have executed and delivered to the Company a release, reasonably
satisfactory to the Company in form, scope and substance, pursuant to which the
Company and its officers, directors, employees and affiliates will be released
from any and all claims or liabilities, including, without limitation, any and
all claims or liabilities arising under or in connection with actions taken or
omitted to be taken by the Company under the Investment Agreement dated as of
February 27, 2001, as amended as of May 29, 2001, among the Company, ITC Holding
Company, Inc., SCANA and HBK Master Fund L.P. (the "Investment Agreement").
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(c) The obligations of SCANA to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or waiver at or
prior to the Closing Date of the additional condition that the Company shall
have executed and delivered to SCANA a release, reasonably satisfactory to SCANA
in form, scope and substance, pursuant to which SCANA and its officers,
directors, employees and affiliates will be released from any and all claims or
liabilities, including, without limitation, any and all claims or liabilities
arising under or in connection with actions taken or omitted to be taken by
SCANA under the Investment Agreement.
4. Covenants.
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(a) At any time or from time to time after the date of this
Agreement, each party agrees to execute and deliver any further instruments or
documents and to take, or cause to be taken, and to do, or cause to be done, and
to assist and cooperate with the other party in doing, all things necessary,
proper, desirable or advisable to evidence or effectuate the consummation of the
transactions contemplated by this Agreement and otherwise to carry out the
intent of the parties hereunder.
(b) If the Purchaser obtains from the Company or any of its
authorized representatives any confidential information, the Purchaser (i) shall
treat all such confidential information as confidential, (ii) shall use such
confidential information only for the purposes contemplated in this Agreement
and (iii) shall not disclose such confidential information to any third party
except to its officers, employees, counsel, accountants and other authorized
representatives who need to know such confidential information for the purpose
of effectuating the transactions contemplated by this Agreement and who have
been informed of and have agreed to protect the
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confidential nature of such confidential information. For purposes of this
Section 4(b), "confidential information" means information relating to the
Company's business, intellectual property and processes, operations, strategies,
liquidity and financial condition, reorganization terms, pricing policies,
markets, customers, distribution, sales, marketing and production and future
business plans and any other information of a "confidential" nature,
specifically including any information that is identified orally or in writing
by the Company to be confidential, or that the Purchaser should reasonably
understand under the circumstances to be confidential, provided that
confidential information shall not include any such information which (i) was in
the public domain on the date hereof or subsequently comes into the public
domain other than through the fault or negligence of the Purchaser, (ii) was
lawfully obtained by the Purchaser from a third party without breach of this
Agreement and otherwise not in violation of the Company's rights, (iii) was
known to the Purchaser at the time of disclosure of such confidential
information to the Purchaser by the Company, provided that the Purchaser was
not, at such time, subject to any confidentiality obligation with respect
thereto, or (iv) was independently developed by the Purchaser without making use
of any confidential information.
(c) SCANA hereby acknowledges to the Company that it
supports the terms of the Plan as set forth in the Plan Term Sheet. SCANA agrees
that, for so long as it is the beneficial owner of Notes, common stock of the
Company or Series B-1 or Series B-2 Cumulative Convertible Preferred Stock of
the Company (collectively, the "SCANA Securities"), it (i) shall vote, or shall
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cause its subsidiaries that own SCANA Securities of record to vote, its claims
in respect of the SCANA Securities in favor of the Plan (provided that the terms
of the Plan are substantially the same as the terms of the Plan Term Sheet) and
(ii) shall not 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. The provisions
of this Section 4(c) shall not in any way limit or condition the right of SCANA
or any of its subsidiaries to sell, transfer or otherwise dispose of (a
"transfer") any or all of the SCANA Securities at any time or to any person (a
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"Transferee") in the sole and absolute discretion of SCANA or any such
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subsidiary; provided, however, that, if and to the extent that SCANA or any such
subsidiary transfers any of the SCANA Securities before the date of confirmation
of the Plan, SCANA shall use its reasonable best efforts to obtain, or to cause
such subsidiary to obtain, the agreement of the Transferee prior to the
effectiveness of such transfer to be bound by the terms of this Section 6(c)
with respect to the SCANA Securities being transferred to the Transferee. Such
agreement of the Transferee shall be confirmed in a writing, which may include a
trade
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confirmation issued by a broker or dealer, acting as principal or as agent
for the Transferee, stating that such agreement is a term of such transfer.
(d) On the Plan Effective Date, the Company shall pay, in a
total amount not to exceed $75,000, the reasonable fees and expenses of the
Purchaser's counsel and all other costs and expenses incurred by the Purchaser
hereunder and in connection with the negotiation, preparation, execution,
delivery and performance of the Purchase Agreement.
5. Miscellaneous Provisions.
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(a) The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
without the written consent thereto of the Company and the Purchaser.
(b) Except as set forth in the next succeeding sentence,
neither this Agreement nor any rights which may accrue to either party hereunder
may be transferred or assigned without the prior written consent of the other
party. From and after the date of this Agreement, SCANA shall have the right,
without the prior written consent of the Company, to assign all of its rights,
obligations and liabilities under this Agreement to a single direct or indirect
wholly owned subsidiary of SCANA, provided that the consummation of the
Investment by such subsidiary shall not subject the Company to more extensive or
burdensome regulation under the Public Utility Holding Company Act of 1935, as
amended, than the consummation of the Investment by SCANA, and provided further
no such assignment shall relieve SCANA of its obligations or liabilities under
this Agreement. As a condition of any such assignment, such assignee subsidiary
shall be deemed to have made all of the representations and warranties of SCANA
set forth in this Agreement. From and after the effective date of any such
assignment, all references in this Agreement to the Purchaser shall be to such
assignee subsidiary unless the context requires otherwise.
(c) All notices, demands, requests, consents or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
(i) delivered personally to the recipient, (ii) telecopied to the recipient
(with hard copy sent to the recipient by reputable overnight courier service
(charges prepaid) that same day) if telecopied before 5:00 p.m. New York City
time on a business day, and otherwise on the next business day, or (iii) one
business day after being sent to the recipient by reputable overnight courier
service (charges prepaid). Such notices, demands, requests, consents and other
communications shall be sent to the parties at the following addresses:
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(i) if to the Company:
ITC^DeltaCom, Inc.
0000 X.X. Xxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxx, 00000
Attention: General Counsel
Telecopy no.: (000) 000-0000
(ii) if to the Purchaser:
SCANA Corporation
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: General Counsel
Telecopy no.: (000) 000-0000
or to such other address or to the attention of such other person as the
receiving party has specified by prior written notice to the sending party.
(d) This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware applicable to contracts executed and to be performed wholly within such
state.
(e) Any process against either party in, or in connection
with, any suit, action or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby may be served personally or by
certified mail pursuant to the notice provision set forth in Section 5(c) with
the same effect as though served on it personally. Each party hereby irrevocably
submits in any suit, action or proceeding arising out of or relating to this
Agreement or any of the transactions contemplated hereby to the exclusive
jurisdiction and venue of the federal and state courts of the State of Delaware
and irrevocably waives any and all objections to exclusive jurisdiction and
review of venue that any such party may have under the laws of the State of
Delaware or the United States. Without limiting the other remedies, this
Agreement shall be enforceable by specific performance. Each party hereby
irrevocably designates RL&F Service Corp. (the "Process Agent"), with offices at
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the date hereof at One Xxxxxx Square, 000 Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx,
00000, as its designee, appointee and agent to receive, for and on its behalf,
service of process in the State of Delaware in any legal action or proceedings
by the parties hereto with respect to this Agreement and the transactions
contemplated hereby, and such service shall be deemed complete upon delivery
thereof to the Process Agent, provided that in the case of any such service upon
the Process Agent, the party effecting
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such service shall also deliver a copy thereof to the other party in accordance
with the notice provision set forth in Section 5(c). Each party shall take all
such action as may be necessary to continue such appointment in full force and
effect or to appoint another agent, who will thereafter be referred to herein as
the "Process Agent," so that each such party shall at all times have an agent
for service for the foregoing purposes in the State of Delaware.
(f) The Company and the Purchaser hereby waive any right
they may have to a trial by jury in respect of any suit, action or proceeding
directly or indirectly arising out of, under or in connection with this
Agreement.
(g) The descriptive headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision of this Agreement. The parties to
this Agreement have participated jointly in the negotiation and drafting of this
Agreement. If an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
(h) Whenever required by the context, any pronoun used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns, pronouns and verbs shall include the
plural, and vice versa.
(i) This Agreement, including Xxxxxxxx 0, Xxxxxxxx 2 and
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Appendix 3 hereto, contains the entire agreement of the parties with respect to
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the subject matter of this Agreement, and neither party shall be liable or bound
to the other party in any manner by any representations, warranties, covenants
and agreements except as specifically set forth herein.
(j) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
(k) Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
render invalid or unenforceable any other provision of this Agreement.
(l) This Agreement, the agreements referred to herein, and
each other agreement or instrument entered into in connection herewith or
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therewith or contemplated hereby or thereby, and any amendments hereto or
thereto, to the extent signed and delivered by means of a facsimile machine,
shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of either party hereto or to any such agreement or instrument, the other party
hereto or thereto shall reexecute original forms thereof and deliver them to the
other party. Neither party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or communicated through the
use of a facsimile machine as a defense to the formation or enforceability of a
contract, and each party forever waives any such defense.
(m) This Agreement shall be binding upon each party hereto
and such party's successors and permitted assigns.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
Company:
ITC^DELTACOM, INC.
By: /s/ J. Xxxxxx Xxxxxx
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Name: J. Xxxxxx Xxxxxx
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Title: Senior Vice President-Legal and
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Regulatory
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Purchaser:
SCANA CORPORATION
By: /s/ Xxxxx X. Xxxx, XX
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Name: Xxxxx X. Xxxx, XX
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Title: Controller
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APPENDIX 1
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[ITC^DeltaCom, Inc. Term Sheet is filed as part of Exhibit 10.1 to this Current
Report on Form 8-K]
A-1
APPENDIX 2
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(b) Releases by Holders of Claims. On the Effective
Date, each holder of Notes that [has consented or has been otherwise determined
to be bound] [manner of binding Noteholders to be determined] in consideration
for the obligations of ITC Holding Company, Inc. and SCANA Corporation under the
Subscription Agreements will be deemed to release, waive and discharge all
claims, causes of action and liabilities (other than the rights of such holder
of Notes to enforce the Subscription Agreements), whether liquidated or
unliquidated, fixed or contingent, matured or unmatured, known or unknown,
foreseen or unforeseen, then existing or thereafter arising, in law, equity or
otherwise that are based on any act or omission, transaction, event or other
occurrence taking place on or prior to the Effective Date in any way relating to
the Debtor (including, without limitation, any claims or causes or action
arising under or in connection with actions taken or omitted to be taken by ITC
Holding Company, Inc. or SCANA Corporation under the Investment Agreement),
against the current and former officers and directors of the Debtor and against
ITC Holding Company, Inc., SCANA Corporation and their respective officers,
directors, employees and affiliates.
A-2
APPENDIX 3
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(a) Releases by the Debtor. As of the Effective Date, for
good and valuable consideration, the Debtor, in its individual capacity and as
debtor in possession, and the Reorganized Debtor will be deemed to release,
waive and discharge all claims and causes of action and liabilities (other than
the rights of the Debtor or the Reorganized Debtor to enforce the Subscription
Agreements, the Plan and the contracts, instruments, releases, indentures and
other agreements or documents delivered thereunder) whether liquidated or
unliquidated, fixed or contingent, matured or unmatured, known or unknown,
foreseen or unforeseen, then existing or thereafter arising, in law, equity or
otherwise that are based on any act, omission, transaction, event or other
occurrence taking place on or prior to the Effective Date in any way relating to
the Debtor (including, without limitation, any claims or causes or action
arising under or in connection with actions taken or omitted to be taken by ITC
Holding Company, Inc. or SCANA Corporation under the Investment Agreement) that
could have been asserted by or on behalf of the Debtor or its Estate or the
Reorganized Debtor against ITC Holding Company, Inc., SCANA Corporation or their
respective officers, directors, employees and affiliates.
The foregoing release will also be given to the current and
former officers and directors of the Debtor.
A-3
