Term Sheet
Indicative Financing Terms, Principles and Conditions for Financing the Supply
of Italtel's Equipment
This Indicative term sheet sets forth some basic and general terms, conditions,
principles and understandings of the financing package which may form a first
basis of work and constitutes a general reference for further discussions to be
held soon. Due to the lack of necessary information such as audited balance
sheets, audited business plan and all typical documentation needed for financing
structures of this type (to be provided to the Lender by the Borrower) the
Guarantor is still intended to be a first class U.S. Bank. Italtel's aim is to
proceed to all necessary steps in order to diminish/eliminate the need of a bank
guarantee through a mutual agreement upon the security package, documentation,
covenants, representations and warranties and all other terms and conditions
typical for a project finance financing scheme.
Hence following attached term sheet should not he construed as a commitment of
finance at this stage but remains subject, among others, to the approval of
Italtel's board and Win-Gate's Equity Group board. The final financing terms
shall be determined in accordance with a detailed loan agreement to be executed
between the parties.
1) Structure Supplier's credit or buyer's credit Project financing
facility (the "Facility"), at suppliers option.
2) Purpose: To finance the supply of Italtel carrier switching
equipment for the operation of Globaltron in the 21
countries described in Exhibit C ("Tranche 1") and
the local access switching equipment for the
operation of Globaltron in the Andean Region
("Tranche 2") collectively "the Tranches".
3) Supplier: Italtel SPA and/or one of its subsidiaries or
affiliates ("Italtel").
4) The Buyer: Globaltron Communications Corporation.
("Globaltron").
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5) Lender: Italtel and/or one of its subsidiaries.
6) The Borrower: Globaltron and/or one of its subsidiaries
or affiliates.
7) The Guarantors for the Master Loan
Win-Gate Equity Group and/or a first Agreement: class
US commercial bank (the "Guarantors"). During
negotiation of the Master Loan Agreement the parties
will evaluate the possibility of complementing the
guarantees having Globaltron and/or its subsidiaries
or affiliates that receive the equipment supplied as
Guarantors. According to the Guarantor (Win-Gate
and/or a first class U.S. bank) Italtel will propose
to Globaltron the Master Loan Agreement. The Borrower
will do its best effort in order to obtain the above
mentioned first class U.S. bank guarantee. Subject to
the level of Guarantees available an advance payment
ranging between 15% and 25% of the equipment could be
necessary.
8) Facility Amount: Up to Sixty million US Dollars (USD 60,000,000)
through a supply contract to be executed between the
supplier and the buyer (the "Commercial Contract").
The facility amount will be split into the
tranches, in the following amounts:
(i) For tranche 1 Twenty million dollars (USD
20,000,000) to be applied as described in Exhibit E
(ii) For Tranche 2 Forty million dollars (USD
40,000,000) to be applied as described In Exhibit E
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9) Availability Period: The Facility for the tranches will be available for
utilization for a total period of up to 60 months
(the "Availability Period"). The availability period
begins on the date of entering into force of a Master
Loan Agreement to be executed between the Borrower
and the Lender (the "Master Loan Agreement").
10) Loan Currency: The Facility will be available for utilization in
United States Dollars.
11) Repayment Schedule: Outstanding principal amounts for loans made to the
Borrower under the Master Loan Agreement for the
Tranches will be repaid over a period oF 5 years from
the date of each drawdown in sixteen (16) consecutive
quarterly installments, the first such installment
falling due on the first anniversary of the date of
the beginning of the Tranche's Availability Period
and the remaining installments falling quarterly as
aforesaid.
12) Interest: Interest shall be calculated on the outstanding
principal balance of the total sum of the drawdowns
being made under the tranches and paid in consecutive
quarterly installments. The first installment is
payable after a period of 6 months from the beginning
of (he Availability Period. Interest shall be LIBOR
plus a spread that could range between twenty five
basis points (0.25%) and seventy five basis points
(0.75%) provided that a First Class US Commercial
Bank guarantees the loan. If such guarantee cannot be
provided by the Borrower the parties will negotiate
the spread. LIBOR shall be as announced by Reuters.
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13) Commitment Fee: Borrower shall pay the Lender commitment fee of fifty
basis points (0.5%) per annum at the end of each year
on the undrawn amounts of the purchase order
corresponding to such year.
14) Arrangement Fee: Borrower shall pay the Lender an Arrangement Fee in
one lump-sum payment of fifty basis points (0.5%)
calculated on the amount of the Facility, payable by
the Borrower to the Lender on the date of signature
of the Master Loan Agreement.
15) Credit Risk In the event that a First class U.S. bank guarantee
Insurance Policy is not available the Lender will verify the
convenience of involving the Italian Export Credit
Agency for the issuance of a credit risk insurance
policy. In this case the relevant Insurance Premium
to cover political and commercial risk will be borne
by the Borrower up to an amount to be agreed.
16) Purchase Order Schedule
The purchase order schedule will be the following:
(i) Five million dollars (USD 5,000,000) by
December 31, 2000 as described in Exhibit F.
(ii)Fifteen million dollars (USD 15,000,000)
by Decernber 31, 2001 as described in
Exhibit G.
(iii) Forty million dollars (USD
10,000,000) by December 31, 2002 as
described in Exhibit H.
Unused portions of each year purchase order
scheduled, shall aggregate to the next year purchase
order.
The aggregate undrawn amounts after
December 31 2002 will be available until
December 31 2003. The purchase order
schedule provided herein can be modified
upon agreement of the parties.
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17) Technology As offered in the proposal, usual and customary
technological characteristics, including but not
limited to:
(i) For tranche 1 the iMSS equipments will
be Telephony over IP (ToIP) technology,
consisting of Media Gateway Controller Class
4 and Trunking Gateway (voice code will be
applied according to service required) and
meet interfaces of the country being
deployed including but not limited to, SS7,
CC7 and all other signaling protocols such
as STP and SCP functionally with ISUP.
(ii) For tranche 2 class 5 switching will he
initially deployed with minimized Investment
("LINEA UT"). As Italtel's iMSS equipment
for Telephony over IP (ToIP), consisting of
Media Galeway Controller Class 5 and Access
Gateway becomes mature the class 5 module
will move to the back of the network and
serve as a feature node, and the IP
switching will provide the access as
described in Exhibit D.
18) Pricing (i)Hardware and service prices will be as
described in Exhibit A. A mutually agreed
discount on such prices shall apply in
relation to the volumes.
(ii) software price will be as described in
Exhibit B. A mutually agreed discount on
such prices could apply subject to certain
terms and conditions
19) Manufacturer Warranty 12 months on all hardware and software from the date
of final acceptance Issued by the purchaser and no
more than 18 months after FOB delivery.
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20) Vendor's Incentive Italtel shall provide the Buyer its services in order
to help Globaltron finalize telecommunication service
agreements with Italtel's current customers described
in Exhibit C. In the event Globaltron achieves
success in this purpose Italtel shall receive 15% of
the net profits for the first 32 months of operation
under the respective telecommunications service
agreement
21) Documentation: The loans under the Facility shall be documented By:
One) A duly executed Master Loan Agreement to be
signed between the Lender, the Borrower and
the Guarantors (the "Master Loan Agreement)
incorporating without limitation: (i) the
terms and conditions set forth in this term
sheet; (ii) applicable loan covenants; (iii)
conditions precedent for drawdowns under the
Master Loan Agreement; (iv) detailed
description of the security package to be
enjoyed by the Lender; (v) representations
and warranties of the Borrower and Lender;
(vi) events of default clauses; (vii) other
clauses to be agreed between the parties;
and (viii) other provisions which are
customary in transactions of this nature.
Two) A series of International, freely negotiable
and irrevocable promissory notes issued by
the Borrower for principal and interest due
under the Facility.
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22) Conditions Precedent: A detailed list of conditions precedent to the
utilization of the Facility Amount and entering into
force of the Master Loan Agreement shall be
incorporated in the Master Loan Agreement. The
following is a non-exhaustive list of conditions
precedent to the utilization of the Facility Amount
by the Borrower. Other Conditions Precedent are to be
agreed
Conditions Precedent to entry into force of the
Master Loan Agreement:
a) Information and Due Diligence - Subject to
the prior execution of Confidentiality
Agreements acceptable to Borrower and the
Guarantors, the Borrower and the Guarantors
agree to provide to the Lender and the
Supplier and their advisors, information
about the Borrower, the Guarantors and the
Tranches to allow them to consider and
structure the proposed financing. Such
information will he comprehensive including
financial and other information, relevant
agreements technical information supporting
the Project costs, operating expenses and
other reasonable information in connection
with the Projects. This would be executed in
a form of due diligence carried out by an
external independent party elected by the
Lender and will be coordinated between the
parties. The results of the information and
Due Diligence review will need to be
satisfactory to the Supplier and the Lender.
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b) The Borrower and Guarantors will advise the
Lender on a real time basis and from time to
time of all fund raising activities of every
kind and nature including without limitation
by way of private placement and public
offering of equity and/or debt securities.
c) Other conditions precedent to be determined
prior to finalizing the Master Loan
Agreement.
23) Security Package and The Lender will be entitled to, without
rights of the the limitation, the following security package and
Lender rights. In addition to these, others rights to be
included in the Security Package will be agreed
during further negotiations.
a) The loan under the Master Loan Agreement
shall constitute senior secured indebtedness
of the Borrower at the same level as any
other bank or vendor financer.
b) The indebtedness shall be guaranteed by duly
executed guarantees of the Guarantors (the
"Guarantees").
c) The Lender shall have in accordance with
applicable law, an enforceable first
priority security interest registered lien
on 100% of the equipment supplied by the
Supplier.
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(d) The Lender shall have a right to assign all
or part of its rights and obligations under
the Master Loan Agreement and the Guarantees
to a bank or a financial institution or a
Credit Insurance Company without the prior
consent of the Borrowers or the Guarantor.
The Lender will give the Borrower a notice
of such assignment 7 days prior to its
occurrence.
(e) The Lender will have the right to designate
a bank or a financial advisor (its identity
will be informed to the borrower) to
administer and collect the loan on its
behalf and inter alia, will be entitled four
times a year during the Availability Period,
on prior ten (10) days written notice to the
Companies to examine books and records of
the Companies
(f) The Lender will be furnished with the
unaudited quarterly financial statements of
the Companies each quarter and the audited
financial statements of the Companies at the
end of each year.
(g) The Lender will be entitled for the purpose
of clause 20 to monitor the
telecommunication service agreement referred
in such clause.
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24) Loan Covenants: The loan covenants are to be agreed between the
parties and will be incorporated in the Master Loan
Agreement. Usual and customary, including but not
limited to: provision of financial statements;
notice of certain events; preservation of corporate
existence; changes in the nature of business; merges
andd other fundamental changes; sale or transfer of
assets, maintenance of debt to equity ratios of the
Borrower/Guarantor. During negotiations of the Master
Loan Agreement, the parties will provide a clause
that will warrant that in the event the Borrower or
the Guarantor pledge its shares or telecommunications
licenses to another equipment supplier, the same
rights will be granted to Italtel on a pari passu pro
rata basis.
25) Governing Law New York law will govern the Master Loan Agreement.
26) Prepayment Borrower will have a right of prepayment in whole or
in part at any time upon prior written notice. The
loans so prepaid will be paid on a first-in first-out
basis.
27) Validity: The parties agree to cooperate to try to execute a
definitive Master Loan Agreement for a period of 60
days from the date this Term Sheet is executed
depending on the availability of all necessary
documentation. The parties also agree to finalize
Exhibits (except Exhibit C) of this Term Sheet within
the next 20 days from the date herein.
18) Non binding effect: This Term Sheet is intended to outline basic points
of business understanding around which the legal
documentation may be structured. Non binding effect
is created hereby. The final binding principles and
conditions will be agreed upon in the Master Loan
Agreement and in the Commercial Contract.
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29) Conditions Precedent Standard for this type of transaction, including but
for Execution of the not limited to:
Master Loan Agreement
(i) Completion of Italtel due diligence on the
Companies and their business plan and the
positive outcome of the due diligence
performed from a third independent external
party in confirming, amongst other things
the assumptions, forecasts and viability of
the business plans.
(ii) Execution of the financing documents in form
and substance satisfactory to the Lender and
the Borrower
iii) Execution of the security documents in form
and substance satisfactory to the Lender
and the Borrower;
(iv) Approval by the Lender of the form and text
of the Guarantee to be issued by the
Guarantor.
(v) Others to be agreed
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By ITALTEL SPA
/s/ ANDREA GUISEPPE GARAVELLI
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ANDREA GUISEPPE GARAVELLI
Chief of Architecture Service & Network
/s/ GUISEPPE PETROCCHI
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GUISEPPE PETROCCHI
Sales Area Manager
/s/ JULIAN CARDONA
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JULIAN CARDONA
Colombian General Manager
By GLOBALTRON COMMUNICATIONS CORPORATION
/s/ GARY D. MORGAN
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GARY D. MORGAN
CEO and Chairman
By WINGATE EQUITY GROUP
/s/ GARY D. MORGAN
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GARY D. MORGAN
CEO and Chairman
