<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 2000.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
Form F-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------------------
<TABLE>
<S> <C> <C>
PTC INTERNATIONAL PTC INTERNATIONAL POLSKA TELEFONIA
FINANCE II S.A. FINANCE (HOLDING) B.V. CYFROWA SP. Z O.O.
(Exact name of Registrant as (Exact name of Registrant as (Exact name of Registrant as
specified specified specified
in its charter) in its charter) in its charter)
LUXEMBOURG THE NETHERLANDS POLAND
(State or other jurisdiction (State or other jurisdiction (State or other jurisdiction
of incorporation or of incorporation or of incorporation or
organization) organization) organization)
NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE
(I.R.S. Employer (I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.) Identification No.)
</TABLE>
<TABLE>
<S> <C> <C>
41 AVENUE DE LA GARE STRAWINSKYLAAN 3705 AL JEROZOLIMSKIE 181
L-1611 LUXEMBOURG 1077 ZX AMSTERDAM 02-222 WARSAW
011 353 485 0501 011 31 406 4444 011 48 22 573 6000
(Address, including zip (Address, including zip (Address, including zip
code, and telephone number, code, and code, and telephone number,
including area code, of telephone number, including including area code, of
registrant's principal area code, registrant's principal
executive offices) of registrant's principal executive offices)
executive offices)
</TABLE>
4813
(Primary Standard Industrial Classification Code Number)
CT CORPORATION SYSTEM
111 EIGHTH AVENUE, NEW YORK, NY 10011 (212) 894-8600
(Address, including zip code, and telephone number, including area code, of
agent for service of process)
------------------------------------
COPIES OF COMMUNICATIONS TO:
ROBERT TREFNY
CLIFFORD CHANCE
200 ALDERSGATE STREET
LONDON EC1A 4JJ
------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT (1) PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/4% Senior Subordinated
Guaranteed Notes Due
December 1, 2009........... $438,101,411.70 100% $438,101,411.70 $115,658.77
Guarantee relating to the
Notes...................... (3) (3) (3) (3)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee.
(2) In accordance with Rule 457(f)(1) under the Securities Act of 1933, as
amended, the filing fee has been calculated on the basis of the market value
of the Notes to be received by the Registrants in the exchange offer using
the noon buying rate for cable transfers of Euros as reported by the Federal
Reserve Bank of New York of US $1.00 = Euro 1.0413 as of March 6, 2000.
(3) No separate consideration will be received for the Guarantees.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
OFFER FOR ALL OUTSTANDING
11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE 2009
IN EXCHANGE FOR
11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE 2009
OF
PTC INTERNATIONAL FINANCE II S.A.
We are offering our 11 1/4% Senior Subordinated Guaranteed Notes due 2009
(the "Exchange Notes") in exchange for all of our outstanding 11 1/4% Senior
Subordinated Guaranteed Notes due 2009 (the "Old Notes"). An aggregate principal
amount of E300,000,000 and US$ 150,000,000 of the Old Notes are outstanding. The
terms of the Exchange Notes are substantially identical to those of the Old
Notes, except that you can freely trade the Exchange Notes, and we will issue
the Exchange Notes pursuant to the indentures that govern the Old Notes. We are
making this offer to satisfy contractual undertakings.
TERMS OF THE EXCHANGE OFFER:
- The exchange offers expires at 5:00 p.m., New York City time, on April
25, 2000, unless we extend it.
- You will receive an equal principal amount of Exchange Notes for all Old
Notes that you validly tender and do not validly withdraw.
- The exchange will not be a taxable exchange for U.S. federal income tax
purposes.
- When you accept the exchange offer you must make several representations,
including that you are not engaging in a distribution of the Exchange
Notes.
- You may withdraw a tender of the Old Notes at any time prior to the
expiration date.
TERMS OF THE NOTES:
- Maturity Date: December 1, 2009.
- Interest Payment Dates: June 1 and December 1 of each year, commencing on
June 1, 2000.
SECURITY AND RANKING:
- Approximately E117.0 million of cash, European government securities and
U.S. government securities, which will be sufficient to pay when due the
first five interest payments on the notes, has been deposited with
trustees in secured escrow accounts for the benefit of the noteholders.
These escrow accounts may be replaced, with the consent of the lenders
under our bank credit facility, by a letter of credit posted in favor of
the relevant trustee for the benefit of the holders of the relevant
notes.
- The notes will be junior to all of our existing and future indebtedness,
including guarantees of our bank credit facility.
- The notes will rank equally with all of our existing and future senior
subordinated indebtedness and will rank senior to all of our subordinated
indebtedness.
GUARANTEES:
- The notes are guaranteed on a senior subordinated basis by Polska
Telefonia Cyfrowa Sp. z o.o., our parent company.
- The guarantees will be subordinated to all of Polska Telefonia Cyfrowa
senior indebtedness and will rank equally with certain other guarantees
made by Polska Telefonia Cyfrowa.
REDEMPTION:
- We may redeem the notes, in whole or in part, at any time on or after
December 1, 2004.
- At any time prior to December 1, 2002, we may redeem up to 35% of the
initial aggregate principal amount of each series of notes, with the net
proceeds of a public equity offering, if at least 60% of the aggregate
principal amount of each series of notes remain outstanding after such
redemption.
- If we experience a change of control, each holder of notes may require
that we repurchase all or a portion of its notes.
LISTING:
- An application to list the Exchange Notes on the Luxembourg Stock
Exchange has been made.
THIS INVESTMENT INVOLVES RISKS. SEE THE RISK FACTORS SECTION BEGINNING ON PAGE
9.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is March 10, 2000
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 1
Risk Factors................................................ 9
The Issuer.................................................. 19
Holdings.................................................... 20
Proceeds from the Exchange Offer............................ 21
Capitalization.............................................. 22
Ratio of Earnings to Fixed Charges.......................... 23
Exchange Rates and Foreign Exchange Restrictions............ 24
Selected Financial Data..................................... 26
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 28
Our Business................................................ 40
Regulation of the Polish Telecommunications Industry........ 57
Management.................................................. 63
Shareholders................................................ 66
Certain Relationships and Related Transactions.............. 68
The Exchange Offer.......................................... 72
Description of Other Indebtedness........................... 78
Description of the Notes.................................... 82
Taxation.................................................... 133
Plan of Distribution........................................ 137
Selling Restrictions........................................ 137
Legal Matters............................................... 139
Independent Accountants..................................... 139
Financial Statements........................................ F-1
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS OFFERING
MEMORANDUM IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission on Form F-4 (No. 333- ) under the
Securities Act of 1933, as amended, with respect to the Exchange Notes. As
permitted by the rules and regulations of the Securities and Exchange
Commission, this prospectus omits some of the information, exhibits and
undertakings contained in the registration statement. For further information
with respect to us and the Exchange Notes, see the registration statement,
including its exhibits. The registration statement may be inspected and copied,
at prescribed rates, at the Public Reference Section of the Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. You may
contact the Securities and Exchange Commission at 1-800-SEC-0330 and at the
regional offices of the SEC located at Seven World Trade Center, Suite 1300, New
York, New York 10048 and the Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Statements contained in this prospectus as
to the contents of any contract or other document are for informational purposes
and should not substitute for your review of the copy of the contract or
document filed as an exhibit to the registration statement. Copies are also
available by mail from the Public Reference Section of the Securities and
Exchange Commission at its address in Washington, D.C. shown above. Any such
statements in the prospectus are qualified in all respects by reference to the
corresponding exhibit.
We are required to satisfy the information requirements of the Securities
Exchange Act of 1934, as amended, as they apply to foreign private issuers and,
accordingly, file all reports and other information required by the Securities
and Exchange Commission. We also have agreed pursuant to the indenture to file
ii
<PAGE> 4
with the Securities and Exchange Commission and to provide to the trustee and
the holders of the notes quarterly and annual financial information and related
disclosures for as long as the notes are outstanding. You may obtain a copy of
documents described herein, but not otherwise provided, without charge, by
writing to us at Al. Jerozolimskie 181, 02-222, Warsaw, Poland, Attn: Financial
Controller. You may contact us by telephone at +48-22-573-4205.
We are not making any representation regarding the legality of an
investment by any offeree of the Exchange Notes under applicable legal
investment or similar laws. You should consult with your own advisors as to any
legal, tax, business, financial or related aspects of participation in the
exchange offer.
For a period of 180 days after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to it to
any broker-dealer that requests such documents in the letter of transmittal.
Until September 8, 2000, all dealers effecting transactions in the Exchange
Notes, whether or not participating in the exchange offer, may be required to
deliver a prospectus.
We have made all reasonable enquiries and confirm, to the best of our
knowledge, that the information contained in this prospectus with regard to us,
the Exchange Notes and the exchange offer is true and accurate in all material
respects and is not misleading. We confirm that the opinions and intentions
expressed herein are honestly held and that there are no other facts, the
omission of which would make this prospectus as a whole or any of such
information or the expression of any such opinions or intentions misleading.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
We make "forward looking statements" throughout this prospectus. We have
based these forward looking statements on our current expectations and
projections about future events. These forward looking statements, which are
subject to risks, uncertainties, and assumptions about our business include,
among other things, statements regarding:
- Polish economic and business conditions,
- prospects for the Polish telecommunications industry,
- competition,
- our anticipated growth strategies,
- our intention to introduce new services and products,
- anticipated trends in the market for telecommunications services,
- future capital expenditures and investment needs,
- our ability to control costs and maintain service quality,
- changes in the regulatory environment affecting our businesses,
including changes in our licenses and the Polish government's policy
toward privatization,
- our ability to identify, select and implement effectively appropriate
technologies in the future, and
- our ability to hire and retain staff with requisite skills.
We undertake no obligation to publicly update or revise any forward looking
statements, whether as a result of new information, future events or otherwise.
These forward looking statements may be materially affected by the factors
listed under "Risk Factors" beginning on page 9. In addition, the words
"believe," "expect," "anticipate" and similar expressions identify forward
looking statements. In light of these risks, uncertainties and assumptions, the
forward looking events discussed in this prospectus might not occur.
iii
<PAGE> 5
ENFORCEMENT OF LIABILITIES AND SERVICE OF PROCESS
PTC International Finance II S.A., the issuer of the Exchange Notes (the
"Issuer"), is a societe anonyme (limited liability company) under the laws of
Luxembourg. PTC International Finance (Holding) B.V., the holder of 100% of the
capital stock of the Issuer ("Holdings"), is a private company with limited
liability incorporated under the laws of The Netherlands. We, Polska Telefonia
Cyfrowa Sp. z o.o., are guarantor of the Exchange Notes, and are a limited
liability company organized under the laws of Poland, with our registered office
in the City of Warsaw, Poland. All of the directors and executive officers of
the Issuer and Holdings and a majority of our directors and executive officers
are not residents of the United States. A substantial portion of our assets and
the assets of such non-resident persons and of the Issuer and Holdings are
located outside the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon such
persons, the Issuer, Holdings or us or to enforce against any of them or us
judgments obtained in U.S. courts predicated upon civil liability provisions of
the federal securities laws of the United States. We have been advised by
Clifford Chance, our Dutch and Polish legal advisor, and by Faltz & Kremer, our
Luxembourg legal advisor, that there is doubt as to the enforceability in The
Netherlands, Poland and in Luxembourg, respectively, in original actions, or in
actions for the enforcement of judgments of U.S. courts, of civil liabilities
predicated solely upon the federal securities laws of the United States.
Holdings has been advised by Clifford Chance, its Dutch legal counsel, that
the United States and The Netherlands do not currently have a treaty providing
for reciprocal recognition and enforcement of judgments (other than arbitration
awards) in civil and commercial matters. Therefore, a final judgment for the
payment of money rendered by any federal or state court in the United States
based on civil liability, whether or not predicated solely upon U.S. federal
securities laws, would not be enforceable in The Netherlands. However, if the
party in whose favor such final judgment is rendered brings a new suit in a
competent court in The Netherlands, such party may submit to a Dutch court the
final judgment which has been rendered in the United States. To the extent that
the Dutch court finds that the jurisdiction of the federal or state court in the
United States has been based on grounds which are internationally acceptable and
that proper legal procedures have been observed, the Dutch court will, in
principle, give binding effect to the final judgment which has been rendered in
the United States unless such judgment contravenes principles of public policy
of The Netherlands.
The Issuer has been advised by Faltz & Kremer in Luxembourg that certain
remedies available under the U.S. federal or state laws may not be admitted or
enforced by Luxembourg courts on the basis of being contrary to Luxembourg's
public policy.
In addition, we have been advised by Clifford Chance that judgments of
foreign courts subject to enforcement (generally, judgments for payment of money
or specific performance) are enforceable in Poland if a relevant bilateral
treaty provides for such enforcement or on the basis of the rules of the Polish
Code of Civil Procedure. Such rules provide for enforcement of foreign judgments
concerning matters which may be settled by Polish civil courts on the basis of
reciprocity if the judgment is enforceable in the country where it has been
rendered and the following requirements (set forth in Article 1146 sec.1, Points
1 to 6 of the Polish Code of Civil Procedure) have been satisfied:
- the judgment is final in the jurisdiction in which it was issued;
- the case does not belong, according to Polish law or international
convention, to the exclusive jurisdiction of Polish courts or courts of
a third jurisdiction;
- the party has not been deprived of defense and, in case of lack of
capacity to be a party in a given civil case, due representation;
- the case has not yet become final or it had not been initiated before
the Polish court appointed to consider such case before the judgement of
a foreign court had become final;
- the judgment is not contrary to the basic principles of legal order of
the Republic of Poland; and
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<PAGE> 6
- in rendering the judgment, Polish law has been applied, when such
application is mandatory under Polish law, unless foreign law applied in
the case does not differ significantly from Polish law.
The requirement of reciprocity does not apply if the subject matter of the
judgment falls within the exclusive jurisdiction of the jurisdiction in which it
has been rendered (Art. 1146 sec.3 of the Polish Code of Civil Procedure).
Each of the Issuer, Holdings and we appointed CT Corporation System as its
authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to the notes that may be instituted in any U.S.
federal or state court in the Borough of Manhattan, the City of New York or
brought under U.S. federal or state securities laws and submits to the
jurisdiction of any such court in any such suit or proceeding.
MARKET SHARE AND INDUSTRY DATA
Certain market information or other statements presented in this prospectus
regarding our business' position relative to its competition largely reflect our
management's best estimates that are based upon information obtained from
customers or from trade or business organizations or associations or other
contacts within the industries in which we compete or upon published statistical
data or information from independent third-parties.
Certain amounts and percentages included in this prospectus have been
rounded and accordingly may not total.
FINANCIAL AND OTHER INFORMATION
In this prospectus, all references to "Zloty" and "PLN" are to the lawful
currency of the Republic of Poland, all references to "Euros" and "E" are to the
lawful currency of the countries of the European Monetary Union, all references
to "dollars," "U.S. dollars," "USD," "US$" and "$" are to the lawful currency of
the United States of America and all references to "Deutschmarks" and "DM" are
to the lawful currency of the Federal Republic of Germany. Except as otherwise
indicated in this prospectus, amounts in PLN have been translated into U.S.
dollars solely for the convenience of the reader at an exchange rate of US$1.00
= PLN 4.1141, the fixing rate of the National Bank of Poland on September 30,
1999, and amounts in Euro have been translated into U.S. dollars solely for the
convenience of the reader at an exchange rate of US$1.0689 = E1.00, the noon
buying rate for cable transfers of Euros as reported by the Federal Reserve Bank
of New York on September 30, 1999. On March 6, 2000 the fixing rate of the
National Bank of Poland was US$1.00 = PLN 4.1119 and the noon buying rate for
cable transfers of Euros as reported by the Federal Reserve Bank of New York was
US$1.00 = E1.0413.
Unless otherwise indicated, financial information in this prospectus has
been prepared in accordance with International Accounting Standards, commonly
referred to as "IAS," which differ in certain respects from U.S. generally
accepted accounting principles, commonly referred to as "GAAP." See Notes 24 and
26 to our consolidated Financial Statements, which are included in this
prospectus, as of and for the nine months ended September 30, 1999 and 1998, and
as of and for the three fiscal years ended December 31, 1998, 1997 and 1996,
respectively.
The financial information set forth in a number of tables in this
prospectus has been rounded to the nearest whole number. Accordingly, in certain
instances, the sum of the numbers in a column may not conform exactly to the
total figure given for that column.
v
<PAGE> 7
SUMMARY
The following summary contains basic information about the exchange offer.
It likely does not contain all the information that is important to you. For a
more complete understanding of the exchange offer, we encourage you to read this
entire document, including our Financial Statements which are included in this
prospectus, and Notes thereto. For information concerning investment
considerations that you should consider, see "Risk Factors." The terms "we,"
"our" and "us" as used in this prospectus refer to Polska Telefonia Cyfrowa Sp.
z o.o. and, as applicable, its subsidiaries. The term "DeTeMobil" refers to our
shareholder Deutsche Telekom MobilNet GmbH, "Elektrim" refers to our shareholder
Elektrim S.A., and "MediaOne" refers to our shareholder MediaOne International
B.V. (formerly U.S. West International B.V.). This section contains certain
forward looking statements. For more information, you should read "Forward
Looking Statements."
OVERVIEW
We are the largest GSM wireless telephony services provider in Poland with
1.8 million subscribers and a 44.7% share of the total Polish wireless market as
of December 31, 1999. We are the only wireless services provider in Poland with
both a national GSM 900 and a national GSM 1800 license. As of December 31,
1999, our GSM network covered approximately 84.4% of the geographic area of
Poland, representing approximately 95% of the total Polish population. We are
completing the initial roll-out of an SDH microwave backbone network that will
connect certain key portions of our network and will reduce our reliance on
leased lines, provide better transmission quality and reduce operating costs. We
expect to complete the initial phase of our synchronized digital hierarchy,
commonly known as SDH, microwave backbone network by the end of the second
quarter of 2000. We also plan to selectively roll-out GSM 1800 service, which
will allow us to increase capacity and to offer seamless nationwide dual-band
(GSM 900/1800) service. We market all of our products and services under our
brand "Era GSM," one of the most recognized brand names in Poland. In marketing
our products and services, we use a distribution network of 31 dealers with
approximately 844 points of sale, a direct sales force of 88 representatives and
a national network of 46 retail outlets.
We have achieved rapid growth in our subscriber base through internal
growth since we launched our service in September 1996. For the year ended
December 31, 1999, we generated an average of approximately 81,000 net
subscriber additions per month. Since July 1999, we have experienced monthly
churn of approximately 2.2%, which is at a level comparable with that achieved
by Western European and U.S. wireless providers. As of December 31, 1999, we
provided wireless service to approximately 1.4 million post-paid subscribers and
365,000 pre-paid subscribers. For the nine months ended September 30, 1999, we
had revenue and EBITDA of PLN 1,813.9 million (US$ 440.9 million) and PLN 383.2
million (US$ 93.1 million), respectively. Our historical revenues and EBITDA for
the nine months ended September 30, 1999 increased by 64% and 49%, respectively,
as compared to the same period in 1998.
We provide a broad range of high-quality wireless telephone services,
including call forwarding, call waiting, voicemail, account information, short
messaging services, information services and wireless internet access. We offer
a range of differentiated tariff plans to attract and retain subscribers having
varying service needs. In particular, we focus on acquiring and retaining high
volume users, converting select pre-paid customers to our post-paid plans and
minimizing churn to increase recurring cash flow from each subscriber.
Additionally, we provide roaming capabilities to our subscribers through 141
international roaming agreements with GSM operators in 74 countries, including
all European countries with GSM services.
Historically, we have benefited from the experience, expertise and support
of DeTeMobil, Elektrim and MediaOne, our major shareholders. Employees seconded
from our major shareholders have trained and supervised a number of our local
managers, who now hold key positions in our company. For example, our Director
General and our Deputy Director of Strategy, Marketing & Sales, are among our
local managers who have been trained by our shareholders and have advanced to
key positions. As of December 31, 1999, the number of seconded employees was 11,
representing less than 1% of our work force. For a discussion of our
shareholders and their relations with us and among themselves, you should read
"-- Recent
1
<PAGE> 8
Developments," "Risk Factors -- Risks Related to Shareholder Relationships,"
"Shareholders" and "Certain Relationships and Related Transactions."
RECENT DEVELOPMENTS
In August 1999, Elektrim announced that it had acquired an additional 15.8%
of our shares for a purchase price of US$ 679.4 million. Prior to August 1999,
Elektrim owned 34.1% of our shares. Elektrim also holds a 45.0% interest in
Elektrim Autoinvest, which holds an additional 1.1% of our shares and is
believed to be controlled by Elektrim. DeTeMobil is disputing the transfer on
our share registry books of a portion (representing approximately 3.0% of our
total outstanding shares) of Elektrim's announced acquisition. DeTeMobil sought
an injunction to prevent such transfer on our registry books in the Warsaw
Regional Court, but the Court denied the injunction. DeTeMobil has announced
that it will appeal this decision. DeTeMobil also announced in October the
commencement of an arbitration claim (at the International Arbitration Court in
Vienna) against Elektrim and certain smaller shareholders. DeTeMobil further
announced that its claim seeks the declaration that a portion of shares involved
in Elektrim's announced acquisition should have been sold to DeTeMobil in August
in recognition of its first refusal rights under the shareholders agreement
among our major shareholders. The timing of the resolution of this arbitration
is uncertain.
On December 9, 1999, Elektrim S.A. registered with the Warsaw Regional
Court the transfer of 226,079 of our shares to Elektrim Telekomunikacja Sp. z
o.o. Elektrim S.A. retained one share of direct ownership. At the request of
Elektrim S.A., our Management Board also filed these changes in our share
registry book with the Warsaw Regional Court. However, two of our five
Management Board members did not sign the request to change our share registry
book, as they had reservations given DeTeMobil's dispute over the right of first
refusal to purchase 3% of the shares earlier acquired by Elektrim S.A. A formal
statement of the members' reservations was filed with the Warsaw Regional Court
together with the changes in our registry book. The Warsaw Regional Court has
not responded to the situation, and it should be noted, the Court's response is
typically not required.
DeTeMobil currently owns 22.5% of our shares. On October 22, 1999, Deutsche
Telekom announced that it had entered into an agreement with MediaOne Group,
Inc., to acquire its wholly-owned subsidiary, MediaOne International B.V. (the
owner of 22.5% of our shares). Assuming that Deutsche Telekom consummates this
acquisition, it will hold, directly or indirectly, 45.0% of our shares.
FINANCING PLAN
In order to implement our current business plan, we will need to raise
approximately PLN 2,200 million (US$ 534.7 million) to fund our anticipated
working capital requirements, capital expenditures and other operating needs. We
believe that the proceeds from the offering of the Old Notes, which we completed
in November 1999, together with our DM 132 million undrawn capacity under our
existing bank credit facility and anticipated cash from operations, will provide
the financing required to implement our business plan through the end of 2000.
In order to provide for the balance of our funding requirements, we have entered
into discussions with, and received preliminary indications of interest from
various financial institutions to replace our current DM 672 million equivalent
bank credit facility with a larger bank credit facility. If we replace our
existing bank credit facility with the larger bank credit facility, we believe
we will have sufficient financing to implement our current business plan. There
can be no assurance that any or all of the elements of our financing plan will
be achieved and, if not so achieved, that alternative financing arrangements
will be available on acceptable terms or at all. Further, as our capital
expenditures and operating expenses are linked directly to our subscriber
additions, our actual capital expenditure requirements and other cash operating
needs may increase if we are more successful than expected in adding new
subscribers. If our capital expenditure requirements and other cash operating
needs were to increase, there can be no assurance that additional financing
would be available on acceptable terms or at all. For more information you
should read "Risk Factors -- Need for Additional Financing" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
2
<PAGE> 9
THE EXCHANGE OFFER
The exchange offer applies to the E300,000,000 and US$ 150,000,000
aggregate principal amount at maturity of the Old Notes. The form and terms of
the Exchange Notes are the same as the form and terms of the Old Notes except
that the Exchange Notes have been registered under the Securities Act of 1933
and, therefore, will not bear legends restricting their transfer. The Exchange
Notes will be entitled to the benefits of the indentures pursuant to which the
Old Notes were issued. The Old Notes and the Exchange Notes are sometimes
referred to collectively herein as the "notes." See "Description of the Notes."
THE EXCHANGE OFFER......... E1,000 and $1,000 principal amounts of Exchange
Notes in exchange for each E1,000 and $1,000
principal amounts of Old Notes, respectively. As of
the date hereof, Old Notes representing
E300,000,000 and US$ 150,000,000 aggregate
principal amount at maturity are outstanding. The
terms of the Exchange Notes and the Old Notes are
substantially identical, except that the Exchange
Notes have been registered under the Securities Act
of 1933 and, therefore, will not bear legends
restricting their transfer.
RESALE OF THE EXCHANGE
NOTES...................... Based on an interpretation by the staff of the
Securities and Exchange Commission set forth in
interpretive letters issued to third-parties
unrelated to us, we believe that the Exchange Notes
may be offered for resale, resold and otherwise
transferred by you without compliance with the
registration and prospectus delivery provisions of
the Securities Act of 1933, if you are not our
affiliate and the Exchange Notes issued in the
exchange offer are being acquired by you in the
normal course of business.
Each broker-dealer that receives Exchange Notes for
its own account in exchange for Old Notes, where
those Old Notes were acquired by that broker-dealer
as a result of its market-making activities or
other trading activities, must acknowledge that it
will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of
Distribution."
REGISTRATION RIGHTS
AGREEMENTS................. The Old Notes were sold by us on November 23, 1999,
in a private placement. In connection with the
sale, we executed registration rights agreements
for the benefit of the purchasers under which we
agreed to effect the exchange offer. See "The
Exchange Offer -- Purpose and Effect."
EXPIRATION DATE............ The exchange offer will expire at 5:00 p.m., New
York City time, April 25, 2000 or such later date
and time to which it is extended. Any Old Notes not
accepted for exchange for any reason will be
returned without expense to you as promptly as
practicable after the expiration or termination of
the exchange offer.
WITHDRAWAL................. You may withdraw your tender of Old Notes pursuant
to the exchange offer at any time prior to 5:00
p.m., New York City time, on the expiration date.
CONDITIONS TO THE EXCHANGE
OFFER.................... The exchange offer is subject to certain customary
conditions, certain of which may be waived by us.
See "The Exchange Offer -- Conditions."
3
<PAGE> 10
PROCEDURES FOR TENDERING
OLD NOTES.................. If you wish to accept the exchange offer, you must
complete, sign and date the letter of transmittal,
or a copy thereof, in accordance with its
instructions, and mail or otherwise deliver the
letter of transmittal, or the copy, together with
the Old Notes and any other required documentation,
to State Street Bank and Trust, the exchange agent,
at the address contained in this prospectus. If you
hold Old Notes through the Depository Trust Company
and wish to accept the exchange offer you must do
so pursuant to the Depositary Trust Company's
Automated Tender Offer Program, by which each
tendering participant will agree to be bound by the
letter of transmittal. By executing or agreeing to
be bound by the letter of transmittal, you will
represent to us that, among other things:
- the Exchange Notes acquired pursuant to the
exchange offer are being obtained by you in the
ordinary course of your business, whether or not
you are the holder of the Old Notes;
- neither you nor anyone else receiving the notes
from you intend to engage in a distribution of
such Exchange Notes;
- neither you nor anyone else receiving the notes
from you has an arrangement or understanding with
any person to participate in the distribution of
such Exchange Notes;
- neither you nor anyone else receiving the notes
from you is an affiliate of us; and
- if you are a broker-dealer, you acquired the Old
Notes as a result of market-making or other
trading activities and will deliver a copy of
this prospectus in connection with any resale of
Exchange Notes.
Pursuant to the registration rights agreements, we
are required to file a registration statement for a
continuous offering in respect of the Old Notes if
existing interpretations of the Securities and
Exchange Commission are changed such that the
Exchange Notes received by you in the exchange
offer are not or would not be, upon receipt,
transferable by you (unless you are our affiliate)
without restriction under the Securities Act of
1933. See "The Exchange Offer -- Purpose and
Effect."
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF EXCHANGE
NOTES.................... We will accept for exchange any and all Old Notes
which you properly tender prior to 5:00 p.m., New
York City time, on the expiration date. We will
issue the Exchange Notes promptly following the
expiration date. See "The Exchange Offer -- Terms
of the Exchange Offer."
EXCHANGE AGENT............. State Street Bank and Trust Company is serving as
exchange agent for the exchange offer. They can be
reached by telephone at +1-617-662-1523, attention
Kellie Mullen for more information.
UNITED STATES TAX
CONSIDERATIONS........... The exchange pursuant to the exchange offer will
not be a taxable event for U.S. federal income tax
purposes. See "Taxation -- United States --
Exchange Offer."
EFFECT OF NOT TENDERING.... If you choose not to tender your Old Notes or they
are not accepted, the existing transfer
restrictions will continue to apply. We do not have
any
4
<PAGE> 11
further obligation to provide for the registration
of the Old Notes under the Securities Act of 1933.
Old Notes will, following consummation of the
exchange offer, bear interest at the same rate as
the Exchange Notes.
TERMS OF EXCHANGE NOTES
The Exchange Notes will be registered under the Securities Act of 1933, and
accordingly will not be subject to several restrictions on transfer applicable
to the Old Notes. Except as provided in the previous sentence, the Exchange
Notes have terms and conditions identical in all material respects to those of
the Old Notes. Accordingly, the following description of the notes applies
equally to the Old Notes and the Exchange Notes.
THE ISSUER................. PTC International Finance II S.A.
NOTES OFFERED.............. E300,000,000 aggregate principal amount of 11 1/4%
Senior Subordinated Guaranteed Notes due 2009 (the
"Euro Notes") and US$ 150,000,000 aggregate
principal amount of 11 1/4% Senior Subordinated
Guaranteed Notes due 2009 (the "Dollar Notes").
MATURITY................... December 1, 2009.
INTEREST PAYMENT DATES..... June 1, and December 1, beginning June 1, 2000.
GUARANTEES................. We, Polska Telefonia Cyfrowa Sp. z o.o., are a
Polish company that indirectly owns 100% of the
capital stock of the Issuer. We will irrevocably
and unconditionally guarantee the notes on a senior
subordinated basis. The notes will also be
guaranteed by PTC International Finance (Holding)
B.V. ("Holdings"), another of our wholly-owned
finance subsidiaries. Recourse to Holdings in
respect of its obligations under its guarantees
will be limited to the amounts deposited in the
escrow accounts. See "Holdings."
RANKING.................... The notes will be senior subordinated obligations
of the Issuer, which is another of our wholly-owned
finance subsidiaries, and will be junior to all
existing and future senior indebtedness of the
Issuer, which will include its guarantee of our
bank credit facility. The notes will rank equally
with all existing and future senior subordinated
indebtedness of the Issuer, and will rank senior to
all subordinated indebtedness of the Issuer. Each
note will rank equally with the other notes. We
will guarantee the notes on a senior subordinated
basis. Our guarantees will be subordinated to all
of our senior indebtedness, senior to all of our
subordinated indebtedness and will rank equally
with our guarantee of PTC International Finance
B.V.'s, another of our wholly-owned finance
subsidiaries, 10 3/4% Senior Subordinated
Guaranteed Discount Notes due 2007 (the "2007
Notes").
ESCROW PROCEEDS............ Concurrently with the closing of the offering of
the Old Notes, which was completed in November
1999, we deposited in escrow accounts with the
trustees under the indentures for the notes an
amount of cash, European government securities and
U.S. government securities that, together with the
interest received thereon, will be sufficient to
pay when due the first five interest payments on
the notes. The trustees hold this amount (estimated
at approximately E117.0 million) for the benefit of
the noteholders in the escrow accounts, which are
secured. We may replace an escrow account with a
letter of credit posted in favor of the relevant
trustee for the benefit of the holders of the
relevant notes in an
5
<PAGE> 12
amount equal to any remaining interest payments to
be made on such notes up to and including the fifth
interest payment. Currently, the consent of the
lenders under our bank credit facility is required
to replace the security in an escrow account with
the relevant letter of credit.
We have pledged most of our assets to secure our
senior debt. As of November 12, 1999, we would have
had outstanding on a consolidated basis PLN 1,111.1
million (US$ 270.1 million) of senior debt.
OPTIONAL REDEMPTION........ On or after December 1, 2004, the Issuer may redeem
the notes, in whole or in part, at any time at the
redemption prices listed under "Description of the
Notes -- Optional Redemption."
PUBLIC EQUITY OFFERING
OPTIONAL REDEMPTION........ At any time prior to December 1, 2002, the Issuer
may redeem up to 35% of the initial aggregate
principal amount of each series of notes, as the
case may be, with the net proceeds of a public
equity offering at the price listed under the
section "Description of the Notes -- Optional
Redemption upon Public Equity Offerings," provided
that at least 60% of each series of notes remains
outstanding after such redemption.
CHANGE OF CONTROL.......... Upon certain change of control events, each holder
of notes may require the Issuer to repurchase all
or a portion of its notes at a purchase price equal
to 101% of the principal amount thereof, plus
accrued interest. See "Description of the Notes --
Purchase of Notes Upon a Change of Control."
CERTAIN COVENANTS.......... The indentures relating to the notes will, among
other things, restrict our ability to:
- borrow money;
- pay dividends;
- repurchase or redeem capital stock;
- make investments or other restricted payments;
- use assets as security in other transactions;
- enter into transactions with our stockholders and
affiliates; and
- sell certain assets or merge with or into other
companies.
For more details, see "Description of the Notes --
Certain Covenants."
CURRENCY OF PAYMENT........ The Dollar Notes are denominated in United States
dollars. Holders of Dollar Notes will receive
principal, interest and all other payments in
respect of Dollar Notes in United States dollars.
The Euro Notes are denominated in Euros. Holders of
Euro Notes will receive principal, interest and all
other payments in respect of Euro Notes in Euros.
6
<PAGE> 13
SUMMARY FINANCIAL DATA
The following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements (including the Notes thereto) included elsewhere in
this prospectus. The Financial Statements have been prepared in accordance with
International Accounting Standards, which differ in certain respects from U.S.
GAAP. See Notes 24 and 26 to the Financial Statements as of and for the nine
months ended September 30, 1999 and 1998, and as of and for the fiscal year
ended December 31, 1998, 1997 and 1996, respectively. The financial data set
forth below, as of and for the three fiscal years ended December 31, 1998, have
been derived from our Financial Statements included elsewhere in this
prospectus, which have been audited by Arthur Andersen Sp. z o.o., independent
auditors. The financial data included below as of and for the nine months ended
September 30, 1999 and September 30, 1998, have been derived from our unaudited
Financial Statements included elsewhere in this prospectus and, in the opinion
of management, include all adjustments (consisting of normal recurring accruals)
necessary for the fair presentation of the financial data for such period. The
results for these interim periods are not necessarily indicative of results for
the full fiscal year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------------------- --------------------------------------------
1999 1998 1998 1997 1996
--------------------- --------- --------------------- --------- --------
PLN US$(1) PLN PLN US$(1) PLN PLN
---------- -------- --------- --------- --------- --------- --------
(IN THOUSANDS, EXCEPT SUBSCRIBER AND CHURN RATE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
International Accounting Standards
Net Sales:
Service revenues and fees............ 1,647,637 400,485 980,143 1,445,340 351,314 534,439 38,900
Sales of telephones and
accessories........................ 166,256 40,411 127,411 165,471 40,220 112,623 32,338
---------- -------- --------- --------- --------- --------- --------
Total net sales.................... 1,813,893 440,896 1,107,554 1,610,811 391,534 647,062 71,238
========== ======== ========= ========= ========= ========= ========
Cost of sales:
Cost of services sold................ (642,345) (156,133) (425,867) (614,824) (149,443) (336,274) (36,583)
Cost of sales of telephones and
accessories........................ (528,494) (128,459) (254,181) (334,516) (81,310) (181,037) (42,190)
---------- -------- --------- --------- --------- --------- --------
Total cost of sales................ (1,170,839) (284,592) (680,048) (949,340) (230,753) (517,311) (78,773)
========== ======== ========= ========= ========= ========= ========
Gross margin (loss).................. 643,054 156,304 427,506 661,471 160,781 129,751 (7,535)
Operating expenses:
Selling and distribution costs....... (330,013) (80,215) (193,626) (279,092) (67,838) (139,685) (36,554)
Administration and other operating
costs.............................. (113,035) (27,475) (81,951) (107,581) (26,149) (47,984) (40,697)
---------- -------- --------- --------- --------- --------- --------
Total operating expenses........... (443,048) (107,690) (275,577) (386,673) (93,987) (187,669) (77,251)
========== ======== ========= ========= ========= ========= ========
Operating profit (loss)............ 200,006 48,614 151,929 274,798 66,794 (57,918) (84,786)
Interest and other financial income
(expenses), net...................... (360,486) (87,621) (143,319) (165,799) (40,300) (74,001) 10,441
---------- -------- --------- --------- --------- --------- --------
Profit (loss) before taxation...... (160,480) (39,007) 8,610 108,999 26,494 (131,919) (74,345)
Taxation............................... (35,331) (8,588) (36,425) (107,530) (26,137) 6,997 23,637
---------- -------- --------- --------- --------- --------- --------
Net income (loss)...................... (195,811) (47,595) (27,815) 1,469 357 (124,922) (50,708)
========== ======== ========= ========= ========= ========= ========
U.S. GAAP
Revenues............................... 1,813,893 440,897 1,107,554 1,610,811 391,534 647,062 71,238
Cost of sales.......................... (1,166,380) (283,508) (677,300) (948,957) (230,660) (510,814) (78,268)
Operating expenses..................... (449,827) (109,338) (272,838) (383,935) (93,322) (190,407) (77,251)
Interest and other financial income
(expenses), net...................... (400,861) (97,436) (174,114) (188,564) (45,834) (104,698) (21,113)
Taxation............................... (35,331) (8,588) (36,425) (107,530) (26,137) 6,997 23,637
---------- -------- --------- --------- --------- --------- --------
Net income (loss)...................... (238,506) (57,973) (53,123) (18,175) (4,419) (151,860) (81,757)
========== ======== ========= ========= ========= ========= ========
OTHER FINANCIAL AND OPERATING DATA
EBITDA (International Accounting
Standards)(2)........................ 383,206 93,145 257,849 439,413 106,807 25,690 (69,781)
EBITDA (U.S. GAAP)(2).................. 383,206 93,145 257,849 435,865 105,945 29,238 (69,781)
Subscribers at end of period........... 1,499,989 -- 646,821 780,740 -- 295,179 36,743
Monthly churn rate(3).................. 2.6 -- 2.0 2.2 -- 2.2 0.0
</TABLE>
7
<PAGE> 14
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
--------------------- --------------------------------
1999 1998 1997 1996
--------------------- --------- --------- --------
PLN US$(1) PLN PLN PLN
---------- -------- --------- --------- --------
(IN THOUSANDS, EXCEPT SUBSCRIBER AND CHURN RATE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
International Accounting Standards
Long-term assets and deferred taxes......................... 3,435,838 835,137 2,340,813 1,484,179 859,806
Total assets................................................ 4,091,888 994,601 2,761,103 1,939,219 976,052
========== ======== ========= ========= ========
Long-term liabilities, deferred tax liabilities and
provisions................................................ 2,751,339 668,758 1,892,501 1,500,020 432,557
Total liabilities........................................... 3,990,860 970,044 2,464,264 1,643,842 555,760
========== ======== ========= ========= ========
Shareholders' equity........................................ 101,028 24,557 296,839 295,377 420,292
U.S. GAAP
Long-term assets............................................ 3,315,512 805,890 2,263,182 1,391,896 805,120
Total assets................................................ 3,971,562 965,354 2,683,472 1,881,232 945,003
========== ======== ========= ========= ========
Shareholders' equity........................................ (19,298) (4,691) 219,208 237,390 389,243
</TABLE>
- ---------------
(1) Solely for the convenience of the reader, Zloty amounts have been translated
into U.S. dollars at the rate of PLN 4.1141 per $1.00, the Fixing Rate
announced by the National Bank of Poland on September 30, 1999. The Fixing
Rate announced by the National Bank of Poland on December 31, 1998 was PLN
3.504 per $1.00. Using this exchange rate, Net Sales and EBITDA for the
fiscal year ended December 31, 1998, would have been $459.7 million and
$125.4 million, respectively. The translated amounts should not be construed
as representations that the Zloty has been, could have been, or could in the
future be converted into U.S. dollars at this or any other rate of exchange.
(2) EBITDA represents operating profit (loss) before depreciation and
amortization. EBITDA is included as supplemental disclosure because it is
generally accepted as providing useful information regarding a company's
ability to service and incur debt. EBITDA should not, however, be considered
in isolation as a substitute for net income, cash flow provided from
operating activities or other income or cash flow data or as a measure of a
company's profitability or liquidity.
(3) The churn rate is calculated as the average of the monthly churn rates in
the relevant period. The monthly churn rate is calculated as the total
number of voluntary and involuntary deactivations and suspensions during the
relevant month expressed as a percentage of the average number of
subscribers for the month (calculated as the average of the month end total
number of subscribers and the total number of subscribers at the end of the
previous month).
8
<PAGE> 15
RISK FACTORS
You should carefully consider the risks described below and other
information in this prospectus before making a decision to invest in the notes.
If any of these risks materialize, our business, financial condition or
operating results could be materially adversely affected and the trading price
of the notes could decline.
RISKS RELATED TO FINANCIAL LEVERAGE -- OUR ABILITY TO SERVICE DEBT AND INCUR
ADDITIONAL INDEBTEDNESS WILL AFFECT OUR BUSINESS.
We are a highly leveraged company. As of September 30, 1999, on a pro forma
consolidated basis after giving effect to the issuance of the notes and our
guarantee of the notes, we would have had PLN 4,310.6 million (US$ 1,047.8
million) aggregate principal amount of long-term indebtedness outstanding. The
indentures limit, but do not prohibit us from incurring additional indebtedness.
In light of the amount of our existing indebtedness and the potential need to
incur additional indebtedness to expand our operations, we anticipate that we
will have substantial leverage for the foreseeable future. This leverage poses
the risks that:
- a significant portion of our cash flow will be required to service our
indebtedness, which may adversely affect our ability to adequately fund
our planned capital expenditures and operations;
- we could be more vulnerable to changes in general economic conditions,
which may limit our ability to compete effectively against better
capitalized competitors;
- our ability to obtain additional financing for working capital, capital
expenditures, repayment of indebtedness or other general corporate
purposes may be limited; and
- our ability to pursue future business opportunities may be impaired.
NEED FOR ADDITIONAL FINANCING -- OUR CURRENT BUSINESS PLAN REQUIRES SIGNIFICANT
ADDITIONAL FINANCING.
In order for us to implement our current business plan, we will need to
raise PLN 2,200 million (US$ 534.7 million) to fund our anticipated working
capital requirements, capital expenditures and other operating needs. We believe
that the proceeds from the offering of the Old Notes, which was completed in
November 1999, together with our DM 132 million undrawn capacity under our
existing bank credit facility and anticipated cash from operations, will provide
the financing required to implement our business plan through the end of 2000.
In order to provide for the balance of our funding requirements, we have entered
into discussions with, and received preliminary indications of interest from,
various financial institutions to replace our current DM 672 million equivalent
bank credit facility with a larger bank credit facility. If we replace our
existing bank credit facility with the larger bank credit facility, we believe
we will have sufficient financing to implement our current business plan. There
can be no assurance that any or all of the elements of our financing plan will
be achieved and, if not so achieved, that alternative financing arrangements
will be available on acceptable terms or at all.
Our revenues, the capital expenditures required to build-out our network
and the expenses involved in our operations will depend on a number of elements,
including:
- our ability to meet build-out schedules;
- growth in our markets, our penetration of such markets and the
effectiveness of our competitors in such markets;
- costs of new network equipment and maintenance of our networks;
- regulatory changes; and
- changes in technology.
Further, as our capital expenditures and operating expenses are linked
directly to our subscriber additions, our actual capital expenditure
requirements and other cash operating needs may increase if we are more
successful than expected in adding new subscribers. If our capital expenditure
requirements and other
9
<PAGE> 16
cash operating needs were to increase, there can be no assurance that additional
financing would be available on acceptable terms or at all.
RISKS RELATED TO THE SUBORDINATION OF THE NOTES AND OUR GUARANTEES AND
RESTRICTIVE COVENANTS -- YOU WILL BE LIMITED IN YOUR RECOURSE IF WE FAIL TO PAY
THE NOTES.
The notes will be senior subordinated obligations of the Issuer and we will
guarantee the notes on a senior subordinated basis. Therefore, the notes will
rank junior in right of payment to the Issuer's senior indebtedness, which
includes its obligations under its guarantee of our bank credit facility. Our
guarantees of the notes will be unsecured and subordinated in right of payment
to all of our existing and future senior indebtedness, including indebtedness
under the bank credit facility. The ability of the Issuer to make payments on
the notes will be dependent upon its receipt of funds from us as a result of
payment of intercompany loans or otherwise. In addition, substantially all of
our assets and the assets of our subsidiaries are pledged to secure indebtedness
under our bank credit facility. By reason of such subordination and security
interests, in the event of our insolvency, bankruptcy, liquidation,
reorganization, dissolution or other winding-up, our senior indebtedness would
be required to be paid in full before the holders of the notes may be paid. See
"Description of Other Indebtedness," "Description of the Notes -- Subordination
of the Notes" and " -- Subordination of Our Guarantees." In addition, we are
negotiating to replace our existing bank credit facility (under which the
equivalent of DM 672 million may be borrowed) with a larger bank credit
facility. The notes would also rank junior in payment to all borrowings under
the larger bank credit facility if we enter into such larger bank credit
facility.
The indentures under which the notes are issued, the indenture for the 2007
Notes and our bank credit facility impose financial and other restrictions on
us, including limitations on the incurrence of indebtedness and on our ability
to dispose of assets. See "Description of Other Indebtedness" and "Description
of the Notes -- Certain Covenants." Our bank credit facility also requires us to
make periodic payments in respect of interest and outstanding principal and to
maintain compliance with certain financial ratios. Although we expect that we
will be able to comply with these requirements, our ability to do so will depend
on our future performance, which will in part be subject to prevailing economic,
financial, business and other factors beyond our control. A failure by us to
comply with the covenants and other provisions of our financing documents,
including the notes, the 2007 Notes and the bank credit facility, and any other
debt instrument to which we may become a party in the future could permit
acceleration of the indebtedness under such instruments and, in some cases,
acceleration of indebtedness under other instruments that contain cross-default
or cross-acceleration provisions. Moreover, under our bank credit facility, the
insolvency of our major shareholders or their inability to pay their debts as
they fall due and certain other insolvency-related events relating to our major
shareholders (the occurrence of which will be beyond our control) are events of
default under such facility. See "Description of Other Indebtedness." In the
event of an acceleration of our indebtedness, there is no assurance that we
would be able to refinance or otherwise repay such indebtedness.
RECENT LOSSES -- WE MAY NOT BE ABLE TO MEET OUR OBLIGATIONS UNDER THE NOTES.
Although we had a net income of approximately PLN 1.5 million for the year
ended December 31, 1998 (US$ 0.4 million), we incurred a net loss in every other
year since our founding in 1996, and a net loss of approximately PLN 195.8
million (US$ 47.6 million) for the nine month period ended September 30, 1999.
The further development of our business will require significant additional
expenditures. We cannot assure you that our future operations will be
profitable.
Until we achieve and sustain profitability, we expect that we will fund the
development of our business and losses through additional financing. However, we
cannot assure you that we will obtain any additional funding on satisfactory
terms or at all. As a result, we cannot assure you that we will have sufficient
resources to make principal and interest payments with respect to our
indebtedness, including our obligations under the notes and the guarantees. In
addition, if we do not achieve and sustain profitability, the value of the notes
will be adversely affected.
10
<PAGE> 17
DEPENDENCE ON KEY PERSONNEL -- OUR ABILITY TO RETAIN OUR KEY MANAGEMENT
PERSONNEL AND ATTRACT ADDITIONAL QUALIFIED PERSONNEL WILL BE ESSENTIAL TO OUR
FUTURE SUCCESS.
We believe that success in our business and in executing our financial
goals depends on the continued employment of certain of our executive officers.
If any of them are unable or unwilling to continue their employment with us, our
business, financial condition and operating results could be materially
adversely affected.
Although our utilization of employees seconded from our major shareholders
has diminished significantly, as of December 31, 1999, 11 of these employees
remain with us. Of the 11, four are from DeTeMobil and seven are from MediaOne.
Upon the completion of the acquisition of MediaOne by DeTeMobil, the secondment
contracts of the eight MediaOne secondees will terminate. It is anticipated that
the acquisition of MediaOne by DeTeMobil will close before the end of the first
quarter of 2000. Included among these MediaOne secondees are Mr. Karim Khoja,
our Director of Strategy, Marketing & Sales, and Mr. Brent Muckridge, our
Financial Controller. Following the acquisition, Deutsche Telekom will have the
right to appoint persons for these positions. We have entered into discussions
with these secondees to remain with us for certain periods. No assurance can be
given that these secondees will remain with us following the completion of
Deutsche Telekom's acquisition of MediaOne, or that their departure would not
have a disruptive effect on our management efficiency.
Further, we believe that our growth and success will depend in large part
on attracting talent for our telecommunications team and our ability to train,
retain and motivate additional highly skilled and qualified personnel. This is
important to us in light of the intense competition for qualified personnel in
the telecommunications industry in Europe and the limited availability of
persons with the requisite knowledge and experience to operate in Poland. Our
financial condition and our ability to pay interest and principal on the notes
depends, in part, on a successful business plan being implemented by qualified
personnel. The loss of key personnel, or the inability to find additional
qualified personnel, could adversely affect our business.
RISKS RELATED TO SHAREHOLDER RELATIONSHIPS -- A FAILURE BY OUR SHAREHOLDERS TO
MAINTAIN A COOPERATIVE RELATIONSHIP MAY HARM OUR BUSINESS.
We were established and operate in cooperation with DeTeMobil, Elektrim and
MediaOne. Each of these major shareholders is party to a shareholders agreement
that governs the management and operation of our company. Under certain
circumstances, the shareholders agreement requires the unanimous consent of
DeTeMobil, Elektrim and MediaOne before we can take certain actions. Any failure
by them to maintain cooperative relationships could have a material adverse
effect on our business, results of operations and financial condition. In
addition, under our bank credit facility, which is secured by liens upon all of
our outstanding shares, the insolvency of our major shareholders or their
inability to pay their debts as they become due and certain other
insolvency-related events relating to our principal shareholders constitute
events of default under such facility. See "Description of Other Indebtedness."
In August 1999, Elektrim announced that it had acquired an additional 15.8%
of our shares for a purchase price of US$ 679.4 million. Prior to August 1999,
Elektrim owned 34.1% of our shares. Elektrim also holds a 45.0% interest in
Elektrim Autoinvest, which holds an additional 1.1% of our shares and is
believed to be controlled by Elektrim. DeTeMobil is disputing the transfer on
our share registry books of a portion (representing approximately 3.0% of our
shares) of Elektrim's announced acquisition. DeTeMobil sought an injunction to
prevent such transfer on our registry books in the Warsaw Regional Court, but
the Court denied the injunction. DeTeMobil has announced that it will appeal
this decision. DeTeMobil also announced in October the commencement of an
arbitration claim (at the International Arbitration Court in Vienna) against
Elektrim and certain smaller shareholders. DeTeMobil further announced that its
claim seeks the declaration that a portion of shares involved in Elektrim's
announced acquisition should have been sold to DeTeMobil in recognition of its
first refusal rights under the shareholders agreement in August 1999. The timing
of the resolution of this arbitration is uncertain.
DeTeMobil currently owns 22.5% of our shares. On October 22, 1999, Deutsche
Telekom announced that it had entered an agreement with MediaOne Group, Inc. to
acquire its wholly-owned subsidiary,
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<PAGE> 18
MediaOne International B.V. (the owner of 22.5% of our shares). The acquisition
is subject to certain conditions, including approval by the board of directors
of Deutsche Telekom and receipt of applicable regulatory approvals. Assuming
that Deutsche Telekom consummates this acquisition it will hold, directly or
indirectly, 45.0% of our shares.
The need for agreement by all of our major shareholders on many important
decisions means that the failure by them to reach timely unanimous agreement
concerning our operations or otherwise may result in impasses and consequent
adverse effects on our ability to conduct our business. Should the disputes
described above continue, the ability of them to cooperate may be diminished.
WE ARE CONTROLLED BY TWO MAJOR SHAREHOLDERS -- OUR SHAREHOLDERS HAVE NO
OBLIGATION TO ACT IN THE BEST INTERESTS OF THE HOLDERS OF NOTES.
Assuming Deutsche Telekom consummates its acquisition of MediaOne
International B.V., it will hold, directly or indirectly, 45.0% of our shares.
If the issues relating to Elektrim's announced acquisition of 15.8% of our
shares are resolved in Elektrim's favor (see "-- Risks Related to Shareholder
Relationships"), Elektrim will continue to own or control 51.0% of our shares.
Accordingly, DeTeMobil and Elektrim play an important role in our company,
in particular:
- as noted elsewhere, they control our Supervisory Board;
- they influence business strategy;
- they have historically provided financial support; and
- DeTeMobil and Elektrim provide technical support and assistance.
DeTeMobil and Elektrim are not obligated to provide any financing under
their current shareholders' arrangements with us. Furthermore, DeTeMobil and
Elektrim have no obligation to exercise their rights as shareholders in the best
interests of holders of the notes and may engage in activities (including
competing with us in the telecommunications market in Poland) that conflict with
such interests. In addition, there can be no assurance that either DeTeMobil,
Elektrim or any of our other shareholders will remain a shareholder in the
future. See "-- Risk of Competition."
YEAR 2000 COMPLIANCE -- THE FAILURE BY CERTAIN THIRD PARTY BUSINESSES TO ADDRESS
POTENTIAL YEAR 2000 PROBLEMS COULD HARM OUR BUSINESS.
The year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Because of this programming
convention, software, hardware or firmware may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failure,
miscalculations or errors causing disruptions of operations or other business
problems, including a temporary inability to process transactions, send invoices
or engage in similar normal business activities. We have taken steps to
safeguard our business from this potential problem. To date, we have not
experienced material year 2000 problems.
We rely on third-parties, including banks, roaming partners and other
service providers, suppliers and vendors, however, whose failure to address
potential year 2000 issues could adversely affect our operations, and we can
provide no assurance that such third-parties will not experience year 2000
problems. Of these third-parties, Telekomsunikaeja Polska S.A., which is
commonly referred to as TPSA, poses the most significant risk to our operations.
We rely on TPSA for network interconnection and as an international gateway and,
consequently, their inability to perform these services could have a material
adverse effect on our financial condition and results of operations. TPSA has
announced that it has, and its suppliers have conducted tests (including date
roll-over tests) on the majority of TPSA's critical systems and, where
appropriate, implemented remedies to make those systems year 2000 compliant.
TPSA also stated, however, that no assurance can be given that its systems will
be year 2000 compliant or that TPSA's service providers, suppliers and vendors
will be year 2000 compliant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000 Compliance."
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<PAGE> 19
NEED TO MEET REQUIREMENTS OF OUR GSM LICENSES -- IF WE DO NOT MEET OUR
REQUIREMENTS UNDER OUR GSM LICENSES, THESE LICENSES MAY BE LIMITED OR REVOKED.
The GSM licenses granted to us by the Polish government contain a number of
requirements, including requirements regarding the build-out, operation, quality
and coverage of our network, prohibitions on certain forms of anti-competitive
behavior and compliance with international and national GSM standards. Failure
to meet any requirement could result in revocation of our licenses or limitation
of our rights thereunder or could otherwise adversely affect our regulatory
status. In particular, under the terms of our GSM 900 license, we are required
to ensure that our GSM 900 wireless network provides coverage of 84.2% of the
territory and 94.8% of the population of Poland by the end of 1999, and 84.9% of
the territory and 95.6% of the population by the end of 2000. As of December 31,
1999, our GSM network covered approximately 84.4% of the territory and 95% of
the population of Poland. We have met our build-out requirements under our GSM
900 license for each year since it was awarded in 1996, and intend to meet our
build-out requirements under our GSM 900 license in future years. In addition,
under the terms of our GSM 1800 license, we are required to ensure that our
combined GSM 900 and GSM 1800 wireless network provides coverage of 90% of the
territory of Poland by July 2004. We intend to meet this requirement as well.
However, we cannot guarantee that we will be able to meet our build-out
requirements. Although we believe that sanctions for minor violations of our
build-out requirements are unlikely, if we fail to meet our build-out
requirements, our GSM licenses may be suspended, limited or revoked, which would
have a material adverse effect on our business. See "Our Business -- The
Licenses," "-- Suppliers,"" -- Network Construction" and "Regulation of the
Polish Telecommunications Industry."
RISK OF COMPETITION -- WE FACE COMPETITION IN POLAND'S TELECOMMUNICATIONS
INDUSTRY.
The wireless telecommunications market is highly competitive. The existing
level of competition continues to increase in all areas of the
telecommunications market and we anticipate that it will continue to increase
over the next few years, particularly in light of anticipated liberalization of
the Polish domestic and international long-distance markets. Increased
competition, in the form of both new entrants and existing operators that widen
the scope of their telecommunication activities, could force us and our
competitors to take measures that could raise subscriber acquisition costs or
reduce our share of net subscriber additions. See "Regulation of the Polish
Telecommunications Industry -- Regulation of Telecommunications Industry in the
European Union" and "-- International Regulation of Telecommunications."
We face competition primarily from Polkomtel (a joint venture between Tele
Danmark A.S., Vodafone AirTouch and certain Polish companies), Centertel (a
joint venture between TPSA and France Telecom Mobiles International) and
wireline telephone services. Competition between us, Polkomtel and Centertel,
and to a lesser extent wireline telephone service providers, is based on
promotional discounts, services offered, quality of service and coverage area.
Competitive pressures may result in reductions in tariffs. As a result of some
or all of these factors, our average revenue per subscriber has declined over
time. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Our Business -- Competition." TPSA is currently in
the process of being privatized. See "Our Business -- Competition." As TPSA
continues to privatize, it may devote more of its resources to, or otherwise
favor, its own joint venture, Centertel. As Centertel is one of our main
competitors, such action by TPSA would be to our competitive disadvantage.
The telecommunications industry is subject to rapid and significant
changes. We may face competition in the future both from the introduction of
existing rival telecommunications technologies into Poland and from the
development of new wireless technologies. Further, if the liberalization of the
Polish telecommunications market continues or accelerates, new competitors may
emerge and competition may otherwise increase. See "Our Business -- Competition"
and "Risk Factors -- We are Controlled by Two Major Shareholders."
DEPENDENCE ON TPSA -- WE RELY ON LINES LEASED FROM TPSA FOR A VITAL PORTION OF
OUR BUSINESS.
Under our GSM 900 license, we were obligated to lease lines from TPSA in
order to connect the elements of our network. We successfully petitioned to
amend our GSM 900 license in May 1997 and
13
<PAGE> 20
April 1998, so that we were no longer required to utilize lines leased from TPSA
to conduct GSM 900 operations. Although we entered into a framework agreement
with TPSA relating to interconnect arrangements in December 1998, we would
prefer to reduce our dependence on TPSA leased lines and have begun construction
of an SDH microwave backbone network. The SDH microwave backbone network will
reduce but not eliminate the need for leased lines and related fees. Our GSM
1800 license, however, requires us to utilize lines leased from TPSA for our GSM
1800 operations. We have petitioned for an amendment to our GSM 1800 license
similar to the amendment obtained for our GSM 900 license. Although we believe
our chances to obtain such an amendment are good, no assurance can be given that
such an amendment will be obtained. Failure to obtain such an amendment would
significantly decrease the value of our GSM 1800 network. We will have to
continue to interconnect with TPSA to provide international coverage and to
access the TPSA network.
RISKS ASSOCIATED WITH MANAGING OUR GROWTH -- OUR FUTURE RESULTS DEPEND ON OUR
ABILITY TO MANAGE THE INCREASING COMPLEXITY AND RAPID EXPANSION OF OUR BUSINESS.
We have achieved rapid growth in our subscriber base through internal
growth since our service was launched in September 1996. For the year ended
December 31, 1999, we generated an average of approximately 81,000 net
subscriber additions per month. This growth, as well as the related development
of our network, has placed, and is likely to continue to place, significant
strain on our management and operational resources and may require us to seek
additional financing. See "-- Need for Additional Financing." As we continue to
grow, the successful operation of our business will require more skilled
management personnel, as well as more personnel trained in the technical aspects
of operating and maintaining our systems. If we fail to obtain appropriate
levels of financing and to hire and train management and technical personnel at
a pace consistent with the growth of our business, such failure could have an
adverse effect on our financial condition, our operating results, the expansion
of our customer base and service offerings or other aspects of our business.
This adverse effect could affect our ability to meet our obligations under the
notes.
RISKS ASSOCIATED WITH INVESTMENTS IN POLAND AND EMERGING MARKETS -- LEGAL,
POLITICAL, SOCIAL AND ECONOMIC CHANGE IN POLAND MAY HARM OUR BUSINESS.
In recent years, Poland has undergone significant political and economic
change. Legal, political, economic, social and other developments in Poland may
in the future hurt our business. In particular, changes in laws or regulations,
whether caused by change in the government of Poland or otherwise, could
materially adversely affect us.
Poland has been one of the fastest growing economies in Europe over the
years that we have been in operation. Real gross domestic product growth, or
GDP, in Poland was 6.9% in 1997 and 4.8% in 1998, and per capita gross domestic
product has risen 17% from $3,274 in 1997 to $3,839 in 1998. There is no
guarantee that this growth will continue. Any significant slowdown in Poland's
economic growth could hurt us by slowing the rate of increase in the number of
our subscribers or causing a decline in average usage or revenue per subscriber.
Currently, there are no foreign exchange controls on the repatriation of
capital and dividends from Poland that would be applicable to the payment of
interest or principal on the notes or under our guarantees. However, there can
be no assurance that such foreign exchange control restrictions, taxes or
limitations will not be imposed or increased in the future.
Poland is generally considered by international investors to be an emerging
market. In general, investing in the securities of issuers with substantial
operations in markets such as Poland involves a higher degree of risk than
investing in the securities of issuers with substantial operations in the United
States, the countries of the European Union or other similar jurisdictions.
There can be no assurance that legal, political, economic, social or other
developments in other emerging markets will not have an adverse effect on the
market value and liquidity of the notes.
14
<PAGE> 21
RISKS RELATED TO INFLATION AND FOREIGN CURRENCY -- DEVALUATION OF THE ZLOTY MAY
REDUCE OUR ABILITY TO SERVICE OUR HARD CURRENCY DEBT INCLUDING THE NOTES.
During its transition from a state-controlled country to a free-market
economy, Poland has experienced high levels of inflation and significant
fluctuation in the exchange rate for the Zloty. Consumer price inflation has
fallen from 33.3% in 1994 to 11.7% in 1998. For the year ended December 31,
1999, annualized consumer price inflation in Poland was 9.8% according to the
Polish Office of Statistics. In addition, the Polish government has adopted a
policy of devaluation of the Zloty against a basket of currencies, resulting in
a decrease in the rate of devaluation of the Zloty. The exchange rate has
changed from PLN 2.87 per US$ 1.00 as of December 31, 1996, to PLN 3.52 per US$
1.00 as of December 31, 1997, and PLN 3.50 per US$ 1.00 as of December 31, 1998.
At December 31, 1999, the exchange rate had declined to PLN 4.1360 per US$ 1.00.
However, inflation and currency exchange fluctuations have had, and may continue
to have, an adverse effect on our financial results.
A large portion of our debt obligations and expenses are, and are expected
to continue to be, denominated in Euro, Deutschmarks or U.S. dollars. By
contrast, substantially all of our revenues are denominated in Zloty. Therefore,
we are exposed to currency exchange rate risks that could significantly impact
the our ability to meet our obligations and finance our business. If the Zloty
is devalued, we may not be able to offset the loss through price adjustments. We
will then have to use a larger portion of our revenues to pay our non-Zloty
obligations. We intend to enter into transactions to hedge the risk of exchange
rate fluctuation to the extent we can obtain hedging arrangements on
commercially satisfactory terms. There is no assurance that we will be able to
obtain hedging arrangements on commercially satisfactory terms. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Inflation and Currency Exchange Fluctuations."
FUTURE DEVELOPMENT OF THE POLISH WIRELESS MARKET -- OUR BUSINESS DEPENDS ON
FUTURE GROWTH OF THE WIRELESS PHONE MARKET IN POLAND.
The development of our business continues to depend, in large part, on the
level of wireless penetration in Poland. We expect continued growth in the
number of wireless subscribers in Poland; however, the size of our future
subscriber base will be affected by a number of factors. Many of these factors
are beyond our control, such as general economic conditions, the gross domestic
product per capita of Poland, the relative development of the GSM market and any
rival market for the provision of wireless services, the price of handsets, the
price of services, dealer commissions and the availability, quality and cost to
the subscriber of competing services. Any significant slowdown in economic
growth in Poland could hurt us by slowing the rate of increase in the number of
our subscribers or causing a decline in average usage or revenue generated by
these subscribers. Given these factors, as well as the relatively short history
of the wireless telecommunications industry, it is difficult to predict with any
degree of certainty the growth of wireless services in Poland or of the number
of our subscribers. In addition, as the penetration of wireless phones into
Poland increases, an increasing proportion of subscribers have come from
segments of the population with lower usage rates, such as non-business
subscribers. Accordingly, average use and revenue per subscriber have declined.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Factors Affecting Revenues."
REGULATION OF THE POLISH WIRELESS TELECOMMUNICATIONS INDUSTRY -- CHANGES IN THE
REGULATORY ENVIRONMENT COULD HURT OUR BUSINESS.
Our business is subject to extensive governmental regulation. Changes in
laws, regulations or governmental policy, or the interpretation thereof,
affecting our business activities, including the imposition of price controls,
may adversely affect our results of operations. Decisions by regulators,
including granting of additional mobile telephony licenses to competitors or new
entrants, or limitation of licenses necessary for our operations, could
adversely affect our business. The imposition of significant additional charges
and the denial of governmental concessions that we may seek in expanding our
network, including denial of the allocation of additional channels in the 900 or
1800 GSM bands or denial of the permission to use leased lines from suppliers
other than TPSA under our GSM 1800 license, could have a material adverse impact
on
15
<PAGE> 22
the future development of our operations. See "Our Business -- The Licenses" and
"Regulation of the Polish Telecommunications Industry."
LIMITATIONS ON THE TRANSFERABILITY OF OUR ASSETS AND SHARES -- YOU WILL BE
LIMITED IN YOUR ABILITY TO EFFECTIVELY USE ASSET SALES OR RECEIPT OF OUR SHARES
AS A MEANS OF SATISFYING YOUR CLAIMS ON THE NOTES BECAUSE TRANSFER OF OUR
TELECOMMUNICATIONS LICENSES IS PROHIBITED AND TRANSFER OF OUR SHARES IS
RESTRICTED.
Our primary asset, the GSM licenses, are not transferable. As a result, any
transfer by us of our business would require the revocation and reissuance of
the GSM licenses. In addition, certain changes in our ownership would
effectively require the prior approval of the Polish Ministry of Communications.
In the event of a default by us under our credit facilities and an attempted
realization by the holders of our senior indebtedness on the collateral securing
such senior indebtedness (which collateral includes all of our outstanding
capital stock), these creditors would likely seek to sell our company as a going
concern in order to maximize the proceeds realized. Such a sale would require
the approval of the Polish Ministry of Communications. The price obtained upon
any such sale could be adversely affected by the application of the foregoing
and other regulatory restrictions applicable to us and our business (including
limitations on foreign ownership), as well as other applicable governmental
regulations and laws and foreign exchange controls. The amounts (and the timing
of the receipt of any amounts) available to satisfy the claims of the holders of
the notes after any such sale could be further adversely affected by U.S.,
Luxembourg and Polish insolvency, bankruptcy and administrative laws favoring
secured creditors and limiting the rights of unsecured creditors. See "Our
Business -- The Licenses."
NETWORK DEVELOPMENT IMPLEMENTATION RISKS -- OUR ABILITY TO DEVELOP OUR NETWORK
IS DEPENDENT ON LEASING OR ACQUIRING SITES.
The successful development of our GSM network will be dependent, to a
significant degree, upon our ability to continue to lease or acquire sites and
rights of way for the location of equipment. The site selection process requires
the negotiation of lease, acquisition or other agreements and requires certain
approvals or permits from official agencies.
FOREIGN OWNERSHIP RESTRICTIONS -- THE POLISH COMMUNICATIONS ACT IMPOSES
RESTRICTIONS ON ACTIVITIES OF FOREIGN-CONTROLLED ENTITIES.
The Polish Communications Act provides that wireless, domestic
long-distance and dedicated data transmission services may be provided in Poland
only by an operator:
- in which foreign or foreign-controlled entities do not own equity
interests exceeding 49%;
- whose charter requires that Polish citizens residing in Poland
constitute a majority of the members of the management and supervisory
boards; and
- whose charter requires that at the shareholders' meetings the percentage
of votes of foreign and foreign-controlled entities does not exceed 49%
of the equity interests in our company.
The Polish Ministry of Communications may impose a range of penalties for
violations of the Polish Communications Act, including withdrawal or curtailment
of an operator's license. Any failure to comply with the Polish Communications
Act could have a material adverse effect on our business, financial condition or
operating results.
Under the Polish Communications Act, if any combination of entities that
are foreign or foreign-controlled own more than 49% of the equity interests in
our company the law will be contravened.
Currently, DeTeMobil and MediaOne each own 22.5% of our shares. On October
22, 1999, Deutsche Telekom announced that it had entered into an agreement with
MediaOne Group, Inc., to acquire its wholly-owned subsidiary, MediaOne
International B.V. (the owner of 22.5% of our shares). Assuming that Deutsche
Telekom consummates this acquisition, it will hold, directly or indirectly,
45.0% of our shares. If any other
16
<PAGE> 23
foreign company or companies, or company or companies controlled by one or more
foreign companies owns or acquires more than 4.0% of our shares, a violation of
the Polish Communications Act will have occurred.
In addition, if the issues relating to Elektrim's announced acquisition of
15.8% of our shares are resolved in Elektrim's favor, Elektrim will continue to
own or control 51.0% of our shares. Elektrim's shares are publicly traded in
bearer form, and there are no prohibitions as to who can own Elektrim's shares.
A violation of the Polish Communications Act's requirements could occur if more
than 50% of Elektrim's shares were held by foreign entities or
foreign-controlled entities. Accordingly, any such violation could occur without
our knowledge and would be beyond our control.
RISKS RELATED TO POLISH INSOLVENCY LAWS -- THE POLISH BANKRUPTCY LAWS MAY DIFFER
IN CERTAIN RESPECTS FROM COMPARABLE PROVISIONS OF U.S. LAW.
As a Polish company, any insolvency proceedings by or against us would be
based on Polish bankruptcy law, which differs in several significant respects
from, and is in certain aspects more favorable to secured creditors (and less
favorable to, unsecured creditors, such as the holders of the notes), than the
comparable provisions of U.S. law.
Under Polish bankruptcy law, our liability in respect of the notes would be
paid only after certain of our debts which are entitled to priority under Polish
law have been satisfied. Such preferential debts include, among other things,
money owed to the State Treasury of Poland in respect of taxes, social security
contributions, remuneration owed to employees and claims of the secured
creditors. Also, Polish law does not require a bankruptcy administrator to give
effect to intercreditor arrangements such as subordination agreements (although
the law does not preclude creditors from attempting to enforce such rights in
separate proceedings outside of the bankruptcy). Therefore, the claims of all
unsecured creditors would be paid on a pari passu basis in the bankruptcy
proceeding.
Under Polish law, the administrator does not have any right to apply to a
court to rescind certain transactions, such as the making of a guarantee, if
such transactions were validly entered prior to a company's bankruptcy. Also,
under Polish insolvency law, the debtor may seek to commence a conciliation
procedure. Such conciliation procedures may result in an agreement to
restructure a debtor's obligations, which will be binding on all creditors if
approved by creditors holding at least two-thirds of the aggregate amount of the
indebtedness and the bankruptcy court.
It is not clear whether Polish courts would have jurisdiction over a
debtor's property located outside Poland. Such jurisdiction would not exist in
respect of real estate or other property rights located abroad. Furthermore,
courts outside Poland may not recognize Polish bankruptcy court jurisdiction.
Under Polish bankruptcy law, any debt payable in a currency other than
Zloty (such as DM in the case of our existing bank credit facility and U.S.
dollars in respect of the 2007 Notes) must be converted into Polish Zloty at the
National Bank of Poland average exchange rate prevailing on the dates the
bankruptcy court issues a decision on the debtor's bankruptcy. Accordingly, in
the event of our bankruptcy, holders of the notes may be subject to exchange
rate risk between the date of bankruptcy and receipt of any amounts which the
holders of the notes ultimately receive in the proceeding.
ENFORCEABILITY OF LEGAL JUDGMENTS -- YOU MAY NOT BE ABLE TO ENFORCE JUDGMENTS
AGAINST US OR OUR FINANCING SUBSIDIARIES.
Our financing subsidiaries are organized under the laws of Luxembourg and
The Netherlands, and we are organized under the laws of Poland. The majority of
our, and all of and our finance subsidiaries' directors and officers, are
non-residents of the United States. In addition, all or a substantial portion of
the assets of such persons and of our subsidiaries, including our financing
subsidiaries, are located outside of the United States. As a result, it may not
be possible for investors to effect service of process within the United States
upon such persons or companies, or to enforce against them or us judgments
obtained in U.S. courts predicated upon civil liability provisions of the
Federal securities laws of the United States or otherwise. We believe there is
doubt as to the enforceability in Poland, Luxembourg and The Netherlands of
civil judgments
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<PAGE> 24
predicated solely upon the Federal securities laws of the United States, in
original actions or in actions for enforcement of judgments of U.S. courts. In
addition, awards of punitive damages in actions brought in the United States or
elsewhere may be unenforceable outside the U.S.
ALLEGED RISKS OF WIRELESS TELEPHONE HANDSETS -- ACTUAL OR PERCEIVED HEALTH RISKS
COULD REDUCE OUR SUBSCRIBERS.
In recent years concerns have been expressed about the potentially negative
effect of electromagnetic emissions from handsets on the health of wireless
telephone users. The European Union Commission has been investigating these
concerns since 1995. The actual or perceived risk of wireless communication
devices, or any litigation relating to that risk, could hurt us by reducing our
subscriber growth rate, subscriber base or average usage per subscriber and
could have a material adverse effect on our business. See "Regulation of the
Polish Telecommunications Industry -- Regulation of the Telecommunications
Industry in the European Union."
SUPPLIERS -- INTERFERENCE WITH OUR SUPPLIES COULD HARM OUR BUSINESS.
Operation of our GSM network, including our mobile switching centers,
base-stations and base-station controllers, operation support systems and
cross-connect systems equipment depends upon obtaining adequate supplies of
transmission, switching, network equipment and telephone handsets on a timely
basis. We purchase such equipment from Ericsson and Siemens, both of which are
leading international telecommunications systems equipment suppliers. Our
results of operations could be adversely affected if we were unable to obtain
adequate supplies of equipment in a timely manner from Ericsson, Siemens or any
other supplier of equipment or services, or if there were significant increases
in the costs of such equipment or services. From time to time, suppliers may
extend lead times, limit supplies to us or increase prices due to capacity
constraints or other factors. Handset vendors have announced that they intend to
establish world-wide allocations of handsets, and we have not experienced any
delays in the receipt of handsets to date. See "Our Business -- Suppliers."
ABSENCE OF PUBLIC MARKET FOR THE NOTES -- THE NOTES WILL BE NEW SECURITIES FOR
WHICH CURRENTLY
THERE IS NO TRADING MARKET.
We do not intend to apply for listing or quotation of the notes on any
securities exchange or quotation system with the exception of the Luxembourg
Stock Exchange. The notes are expected to be eligible for trading in the PORTAL
market. While the initial purchasers have informed us that they currently intend
to make a market in the notes, they are not obligated to do so, and any such
market-making may be discontinued at any time without notice. The liquidity of
any market for the notes will depend upon the number of holders of the notes,
the interest of securities dealers in making a market in the notes and other
factors. Accordingly, there can be no assurance as to the development or
liquidity of any market for the notes.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the notes. There can be no assurance that the market, if any, for the
notes will not be subject to similar disruptions. Any such disruptions may have
an adverse effect on the holders of the notes.
18
<PAGE> 25
THE ISSUER
GENERAL
PTC International Finance II S.A., the Issuer of the notes, is a societe
anonyme organized for unlimited duration under the laws of Luxembourg. The
Issuer has a subscribed and fully paid in capital of E125,000 divided into 125
shares with a par value of E1,000 per share, all of which are owned by PTC
International Finance (Holding) B.V. ("Holdings"), a wholly-owned subsidiary of
our company, and no authorized capital. The corporate purpose of the Issuer, as
set forth in its statuts, or articles of incorporation, is to provide direct or
indirect financial assistance, as well as administrative and marketing
assistance ancillary thereto, to us and our subsidiaries. In furtherance of the
foregoing, the Issuer may inter alia borrow money, issue securities and other
evidences of indebtedness, provide security for such indebtedness and for our
indebtedness and the indebtedness of our subsidiaries, may lend money to us and
our subsidiaries and may guarantee our indebtedness and the indebtedness of our
subsidiaries. The registered office of the Issuer is 41, Avenue de la Gare
L-1611, Luxembourg. The Issuer registered with the Register of Commerce and
Companies in Luxembourg on November 11, 1999. Its registration number is B72250.
The articles of incorporation of the Issuer will be published in the
Memorial, Journal Officiel du Grand-Duche de Luxembourg, Recueil des Societes en
Associations. We anticipate making this publication in January 2000. The
articles of incorporation will be able to be inspected by any interested person
at the Registre du Commerce du Tribunal d'Arrondissement de Luxembourg. In
connection with the listing of the notes on the Luxembourg Stock Exchange, the
constitutional documents of the Issuer and a legal notice (Notice Legale)
relating to the issue of the notes will be deposited prior to listing with the
Chief Registrar of the District Court of Luxembourg (Greffier en Chef du
Tribunal d'Arrondissement de et a Luxembourg), where such documents may be
examined and copies obtained free of charge.
CAPITALIZATION
The following table sets forth the capitalization of the Issuer as of the
date of this prospectus:
<TABLE>
<S> <C>
Share Capital:
Issued and full paid:
125 shares of par value E1,000............................ E125,000
Indebtedness:
E300,000,000 11 1/4% Senior Subordinated Guaranteed Notes E295,584,000
due 2009................................................
$150,000,000 11 1/4% Senior Subordinated Guaranteed Notes E138,265,507(1)
due 2009................................................
------------
E433,849,507
============
</TABLE>
------------------------
(1) Based on the conversion rate of $1.0689 per E1.00.
The Issuer has no other securities outstanding.
BUSINESS
The Issuer was formed for the purpose of issuing the notes. Since the date
of its formation, the Issuer has not engaged in any business other than the
issuance of the notes and the transactions contemplated in connection therewith.
The only assets of the Issuer will be the subordinated intercompany loan being
made to Holdings. The Issuer has no subsidiaries.
DIRECTORS
The directors of the Issuer are Ms. Yves Schmit, company director, residing
in Strassen, Luxembourg, Ms. Carine Bittler, company director, residing in
Berrange, Luxembourg and Mr. Koen de Vleeschauwer, attorney-at-law, residing in
Luxembourg-city, Luxembourg.
19
<PAGE> 26
FINANCIAL STATEMENTS
Since the date of its formation, the Issuer has not prepared financial
statements. So long as the notes are listed on the Luxembourg Stock Exchange and
the rules of the Luxembourg Stock Exchange so require, copies of our annual
financial statements and the annual financial statements of the Issuer will be
available during normal business hours on any weekday at the offices of the
paying agent for the notes in Luxembourg. The Issuer will not prepare financial
statements other than annual financial statements.
HOLDINGS
PTC International Finance (Holding) B.V. ("Holdings"), is a private company
with limited liability incorporated under the laws of The Netherlands. It has a
registered office at Strawinskylaan 3105, 1077 ZX Amsterdam, The Netherlands.
Holdings is one of our wholly-owned subsidiaries and was organized for the
purpose of facilitating the offering of the Old Notes. To effect that purpose,
Holdings was empowered to, among other things, borrow and lend money, guarantee
our indebtedness and the indebtedness of our subsidiaries, grant security
interests in its assets to secure its indebtedness or our indebtedness or the
indebtedness of our subsidiaries and invest its assets in certain securities
(See "Description of the Notes -- Certain Definitions"). Holdings is the owner
of 100% of the capital stock of the Issuer.
CAPITALIZATION
The authorized share capital of Holdings is 200,000 Netherlands guilders
("NLG") divided into 200 ordinary shares with a par value of NLG 1,000 each, of
which 41 fully-paid shares have been issued. As of the date of this prospectus,
Holdings' capitalization consists solely of its issued share capital of NLG
41,000.
MANAGEMENT
Holdings will be managed by a Board of Managing Directors, whose members
are appointed by the general meeting of the shareholders of Holdings and may be
suspended or removed from office by the shareholders at any time. Holdings has
only one director, ABN AMRO Trust Company (Nederland) B.V., which performs the
executive role of Managing Director. Under Holdings' Articles of Association,
the shareholders may instruct the Board of Managing Directors regarding the
general direction of the financial and economic policies to be pursued by
Holdings, and the Board of Managing Directors must follow any such instructions.
FINANCIAL STATEMENTS
Since the date of its formation, Holdings has not prepared financial
statements. So long as the notes are listed on the Luxembourg Stock Exchange and
the rules of the Luxembourg Stock Exchange so require, copies of all annual
financial statements of Holdings will be available during normal business hours
on any weekday at the offices of the paying agent for the notes in Luxembourg.
Holdings will not prepare financial statements other than annual financial
statements.
20
<PAGE> 27
PROCEEDS FROM THE EXCHANGE OFFER
We will not receive any cash proceeds from the issuance of the Exchange
Notes offered by this prospectus. In consideration for issuing the Exchange
Notes as described in this prospectus, we will receive in exchange Old Notes in
like principal amount, the terms of which are identical in all material respects
to those of the Exchange Notes. The Old Notes surrendered in exchange for the
Exchange Notes will be retired and cancelled and cannot be reissued.
The net proceeds from the sale of the Old Notes, which after discounts and
expenses were approximately E419.5 million, were used to repay short-term
construction payables and to pay for capital expenditures, license payments,
working capital requirements and general corporate purposes. We also invested a
portion of the net proceeds in temporary cash investments. See "Description of
the Notes." In addition, concurrently with the closing of the offering of the
Old Notes in November 1999, a portion of the net proceeds sufficient to pay when
due the first five interest payments on the notes (estimated at approximately
E117.0 million) was deposited in escrow accounts, which are secured, for the
benefit of the noteholders. The trustees invested the funds in cash, U.S.
government securities and European government securities.
21
<PAGE> 28
CAPITALIZATION
The following table sets forth our consolidated Cash and Cash Equivalents,
Restricted Investments and capitalization as of September 30, 1999, on an actual
basis and as adjusted to give effect to the offering of the notes and the
application of the estimated net proceeds therefrom. Except as disclosed in this
prospectus, there has been no material change in our capitalization since
September 30, 1999. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements (including the Notes thereto) included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-------------------------------------------
ACTUAL AS ADJUSTED(1)
------------------- ---------------------
PLN US$(2) PLN US$(2)
--------- ------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and Cash Equivalents........................ 111,948 27,211 1,441,991 350,500
========= ======= ========= =========
Restricted Investments(3)........................ -- -- 514,731 125,114
========= ======= ========= =========
Long-term indebtedness:
Senior credit facility......................... 1,087,155 264,251 1,087,155 264,251
Existing Notes................................. 781,332 189,916 781,332 189,916
Notes offered hereby........................... -- -- 1,907,921 463,752
GSM licenses................................... 344,308 83,690 344,308 83,690
Finance leases(4).............................. 189,910 46,160 189,910 46,160
--------- ------- --------- ---------
Total long-term indebtedness..................... 2,402,705 584,017 4,310,626 1,047,769
--------- ------- --------- ---------
Shareholders' loans.............................. 312,629 75,990 312,629 75,990
--------- ------- --------- ---------
Shareholders' equity:
Share capital(5)............................... 471,000 114,484 471,000 114,484
Accumulated deficit............................ (369,972) (89,927) (369,972) (89,927)
Total shareholders' equity....................... 101,028 24,557 101,028 24,557
--------- ------- --------- ---------
Total capitalization............................. 2,816,362 684,564 4,724,283 1,148,316
========= ======= ========= =========
</TABLE>
- ---------------
(1) Gives effect to the issuance of the Old Notes for gross proceeds of PLN
1,907.9 million (Euro 295.6 million and U.S. dollars 147.8 million) with
total estimated discounts, commissions and other expenses of the offering of
the Old Notes of PLN 63.1 million (Euro 14.4 million).
(2) Solely for the convenience of the reader, Proceeds and Restricted
Investments amounts have been translated from Euros and U.S. dollars as well
as into U.S. dollars at the rates of PLN 4.3977 per 1.00 Euro and PLN 4.1141
per 1.00 U.S. dollar, respectively. The translated amounts should not be
construed as representations that the Zloty has been, could have been, or
could in the future be converted into U.S. dollars at this or any other rate
of exchange.
(3) Reflects the estimated portion of the net proceeds from the offering of the
Old Notes to be used to purchase cash, European government securities and
U.S. government securities, which together with interest received thereon,
will be sufficient to pay when due the first five interest payments on the
notes (translated in accordance with Note (2) above).
(4) On March 25, 1997, we entered into a finance lease relating to our new
headquarters building that obligates us to additional future minimum lease
payments of PLN 453.0 million over 15 years. We treat the present value of
such minimum lease payments due after one year as a long-term liability.
(5) Represents our authorized number of shares.
22
<PAGE> 29
RATIO OF EARNINGS TO FIXED CHARGES
For the years ended December 31, 1996, 1997 and 1998 and the nine months
ended September 30, 1999, the ratio of earnings to fixed charges was (3.68),
(1.23), 1.77 and 0.07, respectively. For the year ended December 31, 1998,
earnings exceeded fixed charges by approximately PLN 107.5 million ($22.5
million) as compared to the nine months ended September 30, 1999, where earnings
were insufficient to cover fixed charges by approximately PLN 161.8 million
($39.2 million). For the years ended December 31, 1996 and 1997, earnings were
insufficient to cover fixed charges by approximately PLN 148.5 million ($36
million) and PLN 93 million ($22.5 million), respectively. For purposes of
calculating the ratio of earnings to fixed charges, earnings consist of income
(loss) before taxes and fixed charges (excluding any amount of interest
capitalized during the period), and fixed charges consist of interest expense
(whether expensed or capitalized) plus the amortization of debt expense and
discount or premium relating to any indebtedness, whether expensed or
capitalized (if any) and the interest portion of rental expense (if any).
23
<PAGE> 30
EXCHANGE RATES AND FOREIGN EXCHANGE RESTRICTIONS
EXCHANGE RATES
Since January 1990, Poland has utilized several forms of a fixed exchange
rate mechanism. The Zloty was fixed against the U.S. dollar from January 1990
until May 1991, and then fixed against a basket of weighted currencies. Since
January 1999, the currency basket has been weighted as follows: U.S. dollar 45%
and Euro 55%.
Since October 1991, Poland has used a "crawling peg" system pursuant to
which the National Bank of Poland announces a monthly rate of devaluation of the
Zloty against the currency basket until further notice, and the official
exchange rate announced each day represents the incremental daily devaluation
calculated to achieve the monthly devaluation goal. The National Bank of Poland
has adjusted the rate of the "devaluation" on numerous occasions. Since January
1992, the exchange rate used by banks for interbank foreign exchange
transactions has typically been no more than two percent above or below the
reference exchange rate set by the National Bank of Poland under the crawling
peg system. The National Bank of Poland, in consultation with the Polish Council
of Ministers, announced that, from May 16, 1995, banks licensed to hold foreign
exchange would be free to set exchange rates for interbank foreign exchange
transactions involving the National Bank of Poland at any level within a band
centered on the reference exchange rate. This band has been widened over time
and is currently plus or minus 15% of the reference exchange rate. At 11 a.m.
each day, the National Bank of Poland fixes the exchange rate which serves as a
reference rate for all foreign exchange banks and as the official exchange rate
for calculating foreign currency assets and liabilities.
Exchange rates for a number of currencies against the Zloty are set forth
below:
<TABLE>
<CAPTION>
AT DECEMBER 31, AT
------------------------------------------------------------ SEPTEMBER 30,
1992 1993 1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------ ------ -------------
PLN PER UNIT OF CURRENCY(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
USD.................. 1.5767 2.1344 2.4372 2.4680 2.8755 3.518 3.504 4.1141
GBP.................. 2.3846 3.1602 3.7833 3.8299 4.882 5.8216 5.0861 6.7793
DM................... 0.7690 1.2364 1.5642 1.7235 1.85 1.9635 2.0915 2.2485
ECU/EUR.............. 1.9063 2.3923 2.9740 3.1621 3.5716 3.886 4.0925 4.3977
</TABLE>
- ---------------
(1) Based on the average exchange rate of the National Bank of Poland on
December 31, 1992, 1993 and 1994, December 29, 1995, December 31, 1996, 1997
and 1998 and September 30, 1999.
A significant portion of our operating and capital expenditures are
denominated in Deutschmarks. Our 2007 Notes and certain loan obligations are
denominated in U.S. dollars, and the GSM 900 license and GSM 1800 license fees
are denominated in Euros. As a result, our results of operations may be affected
significantly by relative changes in the value of the U.S. dollar, the
Deutschmark or the Euro. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Quantitative and Qualitative Disclosures
About Market Risk--Foreign Exchange Rate Risk."
FOREIGN EXCHANGE RESTRICTIONS
Polish foreign exchange restrictions are regulated by the Foreign Exchange
Law of December 18, 1998, and the implementing regulations of the Minister of
Finance and the President of the National Bank of Poland. The Foreign Exchange
Law extends convertibility of the Zloty to all current account transactions and
many types of capital market transactions, broadening compliance with the
obligations under Article VIII of International Monetary Fund Articles of
Agreement, to which Poland formally acceded on June 1, 1995. Further regulatory
changes in this area, including full convertibility of Zloty in capital market
transactions, are expected to become effective in 2000.
Under the Foreign Exchange Law, Polish residents may engage, without a
separate foreign exchange permit, in certain types of foreign exchange capital
transactions, including direct and portfolio investments in
24
<PAGE> 31
securities issued by companies having their registered seat in Organization of
Economic Cooperation and Development countries or other countries with which
Poland has signed a bilateral investment treaty. They may also engage in credit
transactions, both commercial and capital market, including the acquisition and
sale of debt instruments, provided the maturity of the agreement (instrument) is
at least one year. Polish residents acquiring such securities on a "regulated
market" abroad must use the services of a licensed domestic brokerage house
which holds a pertinent license under the Polish Securities Law. The term
"regulated market" is defined under the pertinent provision of the Polish
Securities Law as a "mechanism of trading in securities admitted to public
trading, allowing for equal access to market information in the process of
matching buy and sell orders and for trades to be effected on the same terms and
conditions."
Similarly, the Foreign Exchange Law entitles non-resident foreign investors
to subscribe to and acquire, without any permits, equity securities and debt
securities of Polish companies with at least a one-year maturity, as well as to
transfer abroad the proceeds from the subsequent sale or redemption of such
securities or from the liquidation of the company. Dividend and interest income
derived on the foregoing instruments is freely transferable abroad, provided the
foreign investor pays any withholding tax on such income (the withholding is
effected by the investee company) and furnishes the bank at which he converts
such income with a certificate evidencing that the withholding obligation has
been met.
25
<PAGE> 32
SELECTED FINANCIAL DATA
The following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements (including the Notes thereto) included elsewhere in
this prospectus. The Financial Statements have been prepared in accordance with
International Accounting Standards, which differ in certain respects from U.S.
GAAP. See Notes 24 and 26 to the Financial Statements as of and for the nine
months ended September 30, 1999 and 1998, and as of and for the three fiscal
years ended December 31, 1998, 1997 and 1996, respectively. The financial data
set forth below as of and for the three fiscal years ended December 31, 1998
have been derived from our Financial Statements included elsewhere in this
prospectus, which have been audited by Arthur Andersen Sp. z o.o., independent
auditors. The financial data included below as of and for the nine months ended
September 30, 1999 and September 30, 1998, have been derived from our unaudited
Financial Statements, included elsewhere in this prospectus and, in our opinion,
include all adjustments (consisting of normal recurring accruals) necessary for
the fair presentation of the financial data for such period. The results for
these interim periods are not necessarily indicative of results for the full
fiscal year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED DECEMBER 31,
--------------------------------- --------------------------------------------
1999 1998 1998 1997 1996
--------------------- --------- --------------------- --------- --------
PLN US$(1) PLN PLN US$(1) PLN PLN
---------- -------- --------- --------- --------- --------- --------
(IN THOUSANDS, EXCEPT SUBSCRIBER AND CHURN RATE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
International Accounting Standards
Net Sales:
Service revenues and fees............ 1,647,637 400,485 980,143 1,445,340 351,314 534,439 38,900
Sales of telephones and
accessories........................ 166,256 40,411 127,411 165,471 40,220 112,623 32,338
---------- -------- --------- --------- --------- --------- --------
Total net sales.................... 1,813,893 440,896 1,107,554 1,610,811 391,534 647,062 71,238
========== ======== ========= ========= ========= ========= ========
Cost of sales:
Cost of services sold................ (642,345) (156,133) (425,867) (614,824) (149,443) (336,274) (36,583)
Cost of sales of telephones and
accessories........................ (528,494) (128,459) (254,181) (334,516) (81,310) (181,037) (42,190)
---------- -------- --------- --------- --------- --------- --------
Total cost of sales................ (1,170,839) (284,592) (680,048) (949,340) (230,753) (517,311) (78,773)
========== ======== ========= ========= ========= ========= ========
Gross margin (loss).................. 643,054 156,304 427,506 661,471 160,781 129,751 (7,535)
Operating expenses:
Selling and distribution costs....... (330,013) (80,215) (193,626) (279,092) (67,838) (139,685) (36,554)
Administration and other operating
costs.............................. (113,035) (27,475) (81,951) (107,581) (26,149) (47,984) (40,697)
---------- -------- --------- --------- --------- --------- --------
Total operating expenses........... (443,048) (107,690) (275,577) (386,673) (93,987) (187,669) (77,251)
========== ======== ========= ========= ========= ========= ========
Operating profit (loss)............ 200,006 48,614 151,929 274,798 66,794 (57,918) (84,786)
Interest and other financial income
(expenses), net...................... (360,486) (87,621) (143,319) (165,799) (40,300) (74,001) 10,441
---------- -------- --------- --------- --------- --------- --------
Profit (loss) before taxation...... (160,480) (39,007) 8,610 108,999 26,494 (131,919) (74,345)
Taxation............................... (35,331) (8,588) (36,425) (107,530) (26,137) 6,997 23,637
---------- -------- --------- --------- --------- --------- --------
Net income (loss)...................... (195,811) (47,595) (27,815) 1,469 357 (124,922) (50,708)
========== ======== ========= ========= ========= ========= ========
U.S. GAAP
Revenues............................... 1,813,893 440,897 1,107,554 1,610,811 391,534 647,062 71,238
Cost of sales.......................... (1,166,380) (283,508) (677,300) (948,957) (230,660) (510,814) (78,268)
Operating expenses..................... (449,827) (109,338) (272,838) (383,935) (93,322) (190,407) (77,251)
Interest and other financial income
(expenses), net...................... (400,861) (97,436) (174,114) (188,564) (45,834) (104,698) (21,113)
Taxation............................... (35,331) (8,588) (36,425) (107,530) (26,137) 6,997 23,637
---------- -------- --------- --------- --------- --------- --------
Net income (loss)...................... (238,506) (57,973) (53,123) (18,175) (4,419) (151,860) (81,757)
========== ======== ========= ========= ========= ========= ========
</TABLE>
26
<PAGE> 33
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED DECEMBER 31,
--------------------------------- --------------------------------------------
1999 1998 1998 1997 1996
--------------------- --------- --------------------- --------- --------
PLN US$(1) PLN PLN US$(1) PLN PLN
---------- -------- --------- --------- --------- --------- --------
(IN THOUSANDS, EXCEPT SUBSCRIBER AND CHURN RATE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL AND OPERATING DATA
EBITDA (International Accounting
Standards)(2)........................ 383,206 93,145 257,849 439,413 106,807 25,690 (69,781)
EBITDA (U.S. GAAP)(2).................. 383,206 93,145 257,849 435,865 105,945 29,238 (69,781)
Subscribers at end of period........... 1,499,989 -- 646,821 780,740 -- 295,179 36,743
Monthly churn rate(3).................. 2.6 -- 2.0 2.2 -- 2.2 0.0
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
-------------------- -------------------------------
1999 1998 1997 1996
-------------------- --------- --------- -------
PLN US$(1) PLN PLN PLN
--------- ------- --------- --------- -------
(IN THOUSANDS, EXCEPT SUBSCRIBER AND CHURN RATE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
International Accounting Standards
Long-term assets and deferred taxes......................... 3,435,838 835,137 2,340,813 1,484,179 859,806
Total assets................................................ 4,091,888 994,601 2,761,103 1,939,219 976,052
========= ======= ========= ========= =======
Long-term liabilities, deferred tax liabilities and
provisions................................................ 2,751,339 668,758 1,892,501 1,500,020 432,557
Total liabilities........................................... 3,990,860 970,044 2,464,264 1,643,842 555,760
========= ======= ========= ========= =======
Shareholders' equity........................................ 101,028 24,557 296,839 295,377 420,292
U.S. GAAP
Long-term assets............................................ 3,315,512 805,890 2,263,182 1,391,896 805,120
Total assets................................................ 3,971,562 965,354 2,683,472 1,881,232 945,003
========= ======= ========= ========= =======
Shareholders' equity........................................ (19,298) (4,691) 219,208 237,390 389,243
</TABLE>
- ---------------
(1) Solely for the convenience of the reader, Zloty amounts have been translated
into U.S. dollars at the rate of PLN 4.1141 per $1.00, the Fixing Rate
announced by the National Bank of Poland on September 30, 1999. The Fixing
Rate announced for the fiscal year ended December 31, 1998 by the National
Bank of Poland on December 31, 1998 was PLN 3.504 per $1.00. Using this
exchange rate, Net Sales and EBITDA would have been $459.7 million and
$125.4 million, respectively. The translated amounts should not be construed
as representations that the Zloty has been, could have been, or could in the
future be converted into U.S. dollars at this or any other rate of exchange.
(2) EBITDA represents operating profit (loss) before depreciation and
amortization. EBITDA is included as supplemental disclosure because it is
generally accepted as providing useful information regarding a company's
ability to service and incur debt. EBITDA should not, however, be considered
in isolation as a substitute for net income, cash flow provided from
operating activities or other income or cash flow data or as a measure of a
company's profitability or liquidity.
(3) The churn rate is calculated as the average of the monthly churn rates in
the relevant period. The monthly churn rate is calculated as the total
number of voluntary and involuntary deactivations and suspensions during the
relevant month expressed as a percentage of the average number of
subscribers for the month (calculated as the average of the month end total
number of subscribers and the total number of subscribers at the end of the
previous month).
27
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our Financial
Statements and the Notes thereto included elsewhere in this prospectus. Our
Financial Statements, and the related financial information set forth in this
section, have been prepared in accordance with International Accounting
Standards, which differ in certain respects from U.S. GAAP. For a description of
the material differences between International Accounting Standards and U.S.
GAAP see Notes 24 and 26 to the Financial Statements as of and for the nine
months ended September 30, 1999 and 1998, and as of and for the three fiscal
years ended December 31, 1998, 1997 and 1996, respectively. In addition, for a
reconciliation of our results under International Accounting Standards and
Polish statutory accounting regulations, see Notes 23 and 25 to the Financial
Statements as of and for the nine months ended September 30, 1999 and 1998, and
as of and for the three fiscal years ended December 31, 1998, 1997 and 1996,
respectively.
OVERVIEW
Formed in December 1995, we were awarded a 15 year non-exclusive GSM 900
license in February 1996 by the Polish Ministry of Communications. Thereafter,
we commenced construction of our GSM network and, in September 1996, started
offering services to subscribers under the brand name Era GSM. Since that time,
we have experienced rapid growth and development. In August 1999, we were
granted a GSM 1800 license, also on a 15 year non-exclusive basis. The GSM 1800
license will enable us to substantially enhance our call volume capacity,
particularly in major urban centers. We are permitted to, and plan to, commence
providing services under the GSM 1800 license in March 2000.
The following table sets forth information about our subscribers and GSM
cellular network coverage as of the dates indicated:
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED AS OF OR FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------- ----------------------------
1999 1998 1998 1997 1996
--------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
CUSTOMERS:
Net customer additions................... 719,249 351,642 485,561 258,436 36,743
Customers.............................. 1,499,989 646,821 780,740 295,179 36,743
of which:
Post-paid customers.................... 1,180,553 545,811 597,582 295,179 36,743
Pre-paid customers..................... 319,436 101,010 183,158 0 0
Growth of total customers from prior
year end (%)........................ 92% 119% 164% 703% N/A
Churn (%).............................. 23.00% 17.80% 26.20% 25.80% 0.00%
TRAFFIC:
Average monthly revenues per customer
(PLN).................................. 162 212 215 245 231
Change from prior year (%)............. (25)% (13)% (12)% 6% N/A
COVERAGE OF GSM CELLULAR NETWORK IN
POLAND:
Geographical area covered.............. 83% 74% 80% 65% 4%
Population Covered..................... 93% 85% 91% 75% 23%
</TABLE>
FACTORS AFFECTING REVENUES
Our main sources of revenues are air-time tariffs, which consist primarily
of charges for calls that originate or terminate in the Era GSM network. Other
significant revenue sources include monthly service fees, service activation
fees and revenues from the sale of telephones and accessories. Airtime tariffs
include revenues from incoming and outgoing calls, a relatively small amount of
charges for "roaming" calls and
28
<PAGE> 35
revenue from the sale of pre-paid air-time cards. Airtime charges are paid by
the initiators of calls, and where an Era GSM subscriber travels outside Poland,
the subscriber is also charged by us for the international and roaming charges
for incoming calls. We anticipate that, as our network and subscriber base grow
and our business matures in coming years, air-time revenues and monthly service
fees will account for an increasing proportion of our total revenues, while the
proportion of total revenues derived from sales of handsets and accessories, as
well as new subscriber activation fees, will decrease.
Our revenues depend on the number of our active subscribers, call volume
and harmonized tariff pricing and strong segmentation focus. Continued
subscriber and call volume growth will depend on a number of factors, including
pricing and promotions, as well as general economic and market conditions, the
level of competition for obtaining new subscribers and the capacity and coverage
of our network. We expect that average minutes of use and revenue per subscriber
will fall as the cellular penetration level in Poland increases, especially if
increases in the subscriber base occur primarily among those segments of the
population with relatively low usage rates, such as non-business subscribers.
This trend has been accentuated over the last twelve month period by the
increase in our pre-paid subscriber base.
The number of our subscribers is affected by the number of new subscriber
activations and by the rate of churn. New subscriber activations are driven by
the success of our marketing efforts and unmet demand for telecommunications
services in Poland resulting from the growth of the Polish economy and low
wireline penetration rates. "Churn" refers to subscription disconnections,
either voluntary (due to subscribers switching to competing networks or
terminating their use of cellular communications services) or involuntary (due
to nonpayment of bills or suspected fraudulent use). In 1998 and 1997, our
average monthly churn rate was 2.2% and 2.2%, respectively. The most significant
cause of the increase in churn in 1998, was our policy of terminating
subscribers for nonpayment of bills in accordance with their contractual
obligations. As is the case in a number of emerging market countries, Poland
does not have a nationwide credit bureau for individuals, and it is difficult to
verify the creditworthiness of potential individual subscribers. While every new
subscriber must satisfy certain standard documentation requirements, we monitor
usage for subscribers that exceed pre-assigned credit limits or fail to pay
their bill to better measure creditworthiness after activation. In 1998, we also
strengthened our billing and collection systems, thereby increasing our ability
to identify subscribers who should be terminated from the service. We also
believe that the growing proportion of pre-paid subscribers in our overall
subscriber base may increase our churn rate because pre-paid subscribers are not
contractually bound to continue to use our service.
We seek to minimize voluntary customer churn by providing a high-quality
network, loyalty programs and extensive customer service at competitive prices.
In addition, in order to better enable us to recover our subscriber acquisition
costs when churn occurs, we have, since March 1997, required subscribers who
purchase our services during promotional campaigns to pay a fee, equal to the
discount on the full cost of their handset or activation fee, if they change
tariff plans or cancel their subscriber contract prior to the expiration of a
minimum period (generally two years). We have also recently launched a bonus
awards program similar to airline mileage award programs which will be based on
minutes of air-time used by customers. The success of any customer retention or
cost recovery measures, however, will depend to a large extent, upon competitive
factors beyond our control. In particular, the tariff structure and minimum
subscription period requirements implemented by our principal competitors will
be a significant factor.
Our revenues are also affected by subscriber mix, with business users
generally having higher average call volume than private users, particularly
pre-paid subscribers, and "passive subscribers" (subscribers that continue to
pay subscription fees but use their handsets infrequently or not at all). Future
call volume will depend on the prices we charge for our services, calling
patterns, the availability within Poland of wireline telephones, taxes on
telecommunication services and general economic and market factors.
Tariff pricing, consisting of the rates we charge subscribers for air-time,
monthly service and service activation, is significantly dependent on
competitive factors. We offer six post-paid tariff structures and two pre-paid
tariff structures, with different air-time and monthly access charges catering
to the usage patterns of different subscriber market segments. Airtime tariffs
for domestic calls vary depending on the time of day a call is made, while
tariffs for international calls vary according to the destination of the call.
We charge
29
<PAGE> 36
separately for certain of the value-added services we offer, such as call
waiting, short message service and data and facsimile transmission. We have not
increased our prices on any tariff plan we have introduced, except that we have,
from time to time, run promotions in which the price for service activation,
handsets or both have been reduced for the promotion period. Tariffs for inbound
traffic are set by interconnect agreements with TPSA, Polkomtel and Netia
Telecom, a fixed-line service provider in several major Polish markets. The
level of prices in the future, however, will depend on the level of competition
in the Polish GSM telecommunications services market, the general level of
Polish price inflation, other changes in factors affecting underlying costs, and
increased competition from other technologies, including both cellular and other
mobile telecommunications systems, as well as the availability within Poland of
wireline telephones and any limitations on price increases imposed by
regulators.
In 1997, value-added tax, commonly referred to as "VAT", charged on the
cost of telecommunications services in Poland was 7%. In February 1998, however,
VAT charged on the cost of telecommunications services was increased to 22%. The
new VAT rate increased the final cost of telecommunications services to our
subscribers. However, the impact of this higher tax rate on subscriber demand
and revenues was offset by the significant increase in the overall number of
subscribers.
Prior to May 22, 1997, calls between our network and the networks of our
competitors, TPSA, Polkomtel and Centertel, were governed by interim
interconnect arrangements pursuant to which calls were generally billed by each
operator on a "bill and keep" basis (i.e., the operator of the network in which
the call initiated was entitled to retain all of the amount charged for the
call). On May 22, 1997, however, the Polish Ministry of Communications issued an
interconnect decision that replaced the "bill and keep" system with a system of
reciprocal interconnect payments, as described under "-- Factors Affecting
Expenditures -- Cost of Sales." In December 1998, we entered into a framework
agreement with TPSA which established a financial settlement on the basis of the
interconnect decision for all periods since we commenced commercial operations
in September 1996, resulting in a payment by TPSA to us of PLN 6.2 million on
January 26, 1999. However, TPSA appealed the interconnect decision to the Polish
Supreme Administrative Court and notwithstanding the framework agreement, their
appeal has not yet been withdrawn.
FACTORS AFFECTING EXPENDITURES
The principal components of our operating expenditures are cost of sales
and operating expenses, the latter consisting of selling and distribution costs
and administration and other operating costs.
Cost of Sales
Our cost of sales consists primarily of payments by us to suppliers of
equipment (principally handsets and related accessories) that we sell to our
dealers and subscribers, amortization and depreciation charges associated with
our licenses fees and fixed assets, payments for the provision by third-parties,
principally TPSA, of leased lines between other operators' networks and elements
of our network, as well as between TPSA's and our network, commission payments
to our dealers and sales force associated with the acquisition of subscribers,
and payments to other operators, principally TPSA, for delivering calls that
terminate outside our network.
We anticipate that, as our network and subscriber base grow and our
business matures in coming years, the relative proportions of these expenses
will shift away from the cost of merchandise sales (which currently are very
significant because a large majority of our new subscribers have not previously
acquired a GSM-capable handset) and fixed asset amortization and depreciation
charges, toward aggregate leased line and interconnection fees, which vary with
call volumes.
Prior to the issuance in May 1997 of the interconnect decision by the
Polish Ministry of Communications, we incurred no interconnect fees since the
operator of the network in which the call initiated was entitled to retain all
of the amount charged for the call. The interconnect decision established a
system of interconnect charges in which we pay TPSA for calls terminating in
TPSA's network and TPSA pays us for calls terminating in our network. Since the
reciprocal charge system has been in place, the cost of fees payable by us have
been more than offset by increases in revenue from interconnect fees payable to
us
30
<PAGE> 37
for incoming calls. In addition, as a result of a new framework agreement with
TPSA, we are entitled to a 60% discount on certain of TPSA's standard leased
line tariffs, with additional incremental discounts of between 5% and 15% for
long-term arrangements lasting between one and five years. Nevertheless, the
interconnect fees paid to TPSA and the leasing of lines from TPSA each make up a
significant portion of our expenses.
To reduce dependence on TPSA, we have taken two actions. First, we have
entered into a contract with Ericsson to construct an SDH microwave backbone
network in order to reduce our use of leased lines for GSM 900 operations. We
believe that, when completed, the backbone network will reduce cost of sales and
the Company's dependence on external suppliers. Construction of the backbone
network began in November 1998, and the initial phase is expected to be
completed by the end of the second quarter of 2000. The backbone network will
reduce, but not eliminate, the need for leased lines and related fees, as the
backbone network will not offer the complete geographic coverage of Poland that
TPSA lines do, but rather will cover connections between areas of major
population density and high call volume. Although we successfully petitioned to
amend our GSM 900 license in May 1997 and April 1998 so that we were no longer
required to utilize lines leased from TPSA to conduct GSM 900 operations, our
GSM 1800 license still requires us to utilize lines leased from TPSA for our GSM
1800 operations. We have petitioned for an amendment to our GSM 1800 license
similar to the amendment obtained for our GSM 900 license. Although we believe
our chances to obtain such an amendment are good, no assurance can be given that
such an amendment will be obtained. We will have to continue to interconnect
with TPSA to provide international coverage. Second, we have established
interconnect points with Netia Telecom for our GSM 900 network in Warsaw and
have agreed to establish additional interconnect points in the second quarter of
2000.
Operating Expenses
Our operating expenses consist of selling and distribution costs (other
than fixed commissions to dealers and our sales force in connection with the
acquisition of subscribers, which are included in cost of sales), including
advertising costs and provisions for doubtful debtors, and administration and
other operating costs, including external services and operations and staffing
costs associated with our headquarters and regional offices.
RESULTS OF OPERATIONS
Overview
We recorded a net loss of PLN 195.8 million in the first nine months of
1999, as compared with net loss of PLN 27.8 million during the same period in
1998. Operating profits increased to PLN 200.0 million in the first nine months
of 1999, compared with PLN 151.9 million for the same period in 1998. The strong
growth in net sales and gross margin in service revenues and fees was largely
offset by increased cost of sales for promotional telephones and accessories.
The net loss for the first three quarters of 1999, also reflects an increase in
net interest and other financial expense to PLN 360.5 million, as compared to
PLN 143.3 million for the same period in 1998.
We had a net income of PLN 1.5 million in 1998, as compared to a net loss
of PLN 124.9 million and PLN 50.7 million in 1997 and 1996, respectively. In
light of our limited operating history and speed of growth, our results for
these periods are unlikely to be indicative of future financial results.
The following table sets forth our gross margin by net sales category for
the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED DECEMBER 31,
--------------------- ------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- -------- -------
(IN THOUSANDS OF PLN)
<S> <C> <C> <C> <C> <C>
Net service revenues and fees.......... 1,647,637 980,143 1,445,340 534,439 38,900
Cost of services sold.................. 642,345 425,867 614,824 336,274 36,583
--------- --------- --------- -------- -------
Gross margin from service revenues and
fees................................. 1,005,292 554,276 830,516 198,165 2,317
</TABLE>
31
<PAGE> 38
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED DECEMBER 31,
--------------------- ------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- -------- -------
(IN THOUSANDS OF PLN)
<S> <C> <C> <C> <C> <C>
Gross margin percentage of net service
and fees revenue..................... 61.0% 56.6% 57.5% 37.1% 6.0%
Sales of telephones and accessories.... 166,256 127,411 165,471 112,623 32,338
Cost of sales of telephones and
accessories.......................... 528,494 254,181 334,516 181,037 42,190
--------- --------- --------- -------- -------
Gross margin (loss) from sales of
telephones and accessories........... (362,238) (126,770) (169,045) (68,414) (9,852)
Gross margin percentage of net
telephones and accessories revenue... (217.9)% (99.5)% (102.2)% (60.7)% (30.5)%
Net sales.............................. 1,813,893 1,107,554 1,610,811 647,062 71,238
Cost of sales.......................... 1,170,839 680,048 949,340 517,311 78,773
Gross margin (loss).................... 643,054 427,506 661,471 129,751 (7,535)
--------- --------- --------- -------- -------
Gross margin percentage of total net
revenues............................. 35.5% 38.6% 41.1% 20.1% (10.6)%
</TABLE>
Net Sales
Our net sales were PLN 1,813.9 million in the first nine months of 1999, as
compared with PLN 1,107.6 million during the same period in 1998. Service
revenues and fees were PLN 1,647.6 million during the first nine months of 1999,
as compared with PLN 980.1 million during the same period in 1998. Service
revenues and fees included interconnect income of PLN 362.4 million for the
first nine months of 1999, as compared to PLN 196.3 million for the same period
in 1998. The growth in service revenues and fees primarily reflects an increase
in the number of our subscribers to 1.5 million as of September 30, 1999
(including 319,436 Tak Tak pre-paid GSM service subscribers), as compared with
647,000 subscribers as of September 30, 1998. This trend was partially offset by
a decrease in average revenue per subscriber to PLN 162 for the nine months
ended September 30, 1999, as compared to PLN 212 for the same period in 1998.
Our net sales were PLN 1.6 billion in 1998, as compared with PLN 647.1
million and PLN 71.2 million in 1997 and 1996, respectively. Service revenues
and fees were PLN 1.4 billion in 1998, as compared with PLN 534.4 million and
PLN 38.9 million in 1997 and 1996, respectively. The increase in service
revenues and fees in 1998 primarily reflects the increase in the number of our
subscribers to 781,000, including 183,000 Tak Tak customers, as of December 31,
1998, compared to 295,000 subscribers as of December 31, 1997 and 37,000
subscribers as of December 31, 1996. The substantial increase in service
revenues and fees in 1997, reflects the fact that we commenced commercial
operations in September 1996, and consequently had no sales until that time.
Sales of telephones and accessories were PLN 166.3 million during the first
nine months of 1999, as compared with PLN 127.4 million during the first nine
months of 1998. Sales of telephones and accessories were PLN 165.5 million for
the full year of 1998, an increase over PLN 112.6 million and PLN 32.3 million
for the years 1997 and 1996, respectively. Since beginning operations, we have
conducted several promotional campaigns in which we offered reduced prices for
handsets and activation fees during specific periods. As a result of these
promotional campaigns, a significant number of new subscribers have been added,
although revenues from sales of telephones and accessories have been negatively
affected by promotional discounting of the cost of telephones and accessories to
subscribers.
Cost of Sales
Our cost of sales were PLN 1,170.8 million in the first nine months of
1999, as compared with PLN 680.0 million in the same period in 1998. Gross
margin was PLN 643.1 million in the first nine months of 1999, as compared with
a gross margin of PLN 427.5 million in the same period in 1998. As a percentage
of net sales, gross margin represented 35.5% and 38.6% in the first nine months
of 1999 and 1998, respectively.
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<PAGE> 39
The decrease in gross margin as a percentage of net sales for the nine
months ended September 30, 1999, is the result of our increased promotional
activities whereby we often sell telephones and accessories below cost in an
effort to attract subscribers. As a general matter, we do not intend to achieve
positive overall margins on our sales of telephones and accessories. We believe
that in the future a significant majority of our sales and margins will be
derived from air-time revenues and monthly service fees rather than activation
fees and the sale of telephones and accessories, and that discounts on these
latter items will have a decreasing impact upon our results of operations. The
decrease resulting from our increasing gross losses on sales of telephones and
accessories, however, was almost entirely offset by the increase in gross margin
from service revenues and fees, which reflected strong growth in our subscriber
base. Cost of sales included interconnect costs of PLN 89.5 million for the
first nine months of 1999, compared to PLN 51.2 million for the same period in
1998.
Our cost of sales were PLN 949.3 million in 1998, as compared with PLN
517.3 million and PLN 78.8 million in 1997 and 1996, respectively. We had a
gross margin of PLN 661.5 million in 1998, as compared with a gross margin of
PLN 129.8 million in 1997, and a gross loss of PLN 7.5 million in 1996. As a
percentage of net sales, the gross margin represented 41.1% of net sales in
1998, compared to 20.1% of net sales in 1997 and negative 10.6% in 1996.
The increase in the gross margin in 1998 and 1997 primarily reflects growth
in our subscriber base and increased revenue as a consequence of increased
air-time charges and monthly service fees. These increases, however, were
partially offset by a significant increase in our gross losses on sales of
telephones and accessories, which amounted to PLN 169.0 million in 1998, PLN
68.4 million in 1997 and PLN 9.9 million in 1996, reflecting our continued use
of promotional discounts on those items to attract subscribers. The gross loss
in 1996, reflected the fact that we did not commence providing services on a
commercial basis until September 1996. Consequently, revenues for that year were
insufficient to cover sales commissions payable upon the activation of
subscribers and fixed costs associated with operating our network, including the
allocable expense of amortizing our payments for our GSM 900 license to the
Polish government.
Operating Expenses
Our operating expenses were PLN 443.0 million during the first nine months
of 1999, as compared with PLN 275.6 million in the same period in 1998. As a
percentage of net sales, however, operating expenses during the nine months
ended September 30, 1999 were 24.4%, as compared with 24.9% in the nine months
ended September 30, 1998. Selling and distribution costs were PLN 330.0 million
in the nine months ended September 30, 1999, as compared with PLN 193.6 million
in the same period in 1998. The selling and distribution costs for the nine
months ended September 30, 1999, include significant but proportional increases
in advertising costs for promotions associated with our continued marketing
roll-out, sales force salaries and wages and a charge to the doubtful debtors
provision. The charge to doubtful debtors provision increased to PLN 105.9
million for the nine months ended September 30, 1999 from PLN 57.8 million for
the nine months ended September 30, 1998. This was primarily a result of a
substantial increase in the number of our subscribers and the creation of a
nearly full provision for doubtful debtors for prior years.
Our operating expenses were PLN 386.7 million in 1998, as compared with PLN
187.7 million and PLN 77.3 million in 1997 and 1996, respectively. As a
percentage of net sales, however, operating expenses in 1998 were 24.0%, as
compared with 29.0% in 1997. The decrease in operating expenses as a percentage
of net sales in 1998, reflects the continued increase in revenue and the fixed
nature of certain operating expenditures.
Administration and other operating costs, which include external services
fees and operating and staffing costs associated with our headquarters and
regional offices, were PLN 113.0 million for the nine months ended September 30,
1999, as compared with PLN 82.0 million for the same period in 1998. The
increase in operating costs for the first nine months of 1999, as compared with
the same period in 1998, was primarily due to increased employee hiring and
external services to support our growth. Additionally, a portion of the
increased wages and salaries in 1999 was directly offset by lower cost for
social insurance benefits. In 1999, the Polish Government implemented a shared
contribution plan between employers and employees for social
33
<PAGE> 40
insurance pursuant to which a portion of the contribution burden was shifted
from the employer to the employees. We therefore were required to equalize the
impact of this shift to employees by increasing their compensation accordingly.
Administration and other operating costs were PLN 107.6 million in 1998, as
compared with PLN 48.0 million and PLN 40.7 million in 1997 and 1996,
respectively. The increases in administration and other operating costs in 1998
and 1997, were principally due to increases in wages and salaries and related
social security and other benefits associated with the increased number of
employees and increased depreciation and amortization costs for additional
office space needed to accommodate our growth.
Interest and Other Financial Expenses, net
Our interest and other financial expenses, net for the nine months ended
September 30, 1999, were PLN 360.5 million, as compared to PLN 143.3 million for
the same period in 1998. This reflects increased interest charges and foreign
exchange losses primarily due to borrowings and currency exposure under our bank
credit facility and 2007 Notes for the purpose of funding the network build-out.
Net interest expenses were PLN 159.1 million for the nine months ended
September 30, 1999, as compared to PLN 76.4 million for the nine months ended
September 30, 1998. Cash interest on the 2007 Notes does not commence accruing
until July 1, 2002, and is not payable until January 1, 2003. Interest on our
bank credit facility accrues continuously, and is payable each year as
individual drawdowns mature.
As a result of the depreciation of the Zloty in relation to other major
currencies, we have incurred a net foreign exchange loss of PLN 201.4 million in
the first nine months of 1999, as compared to a net foreign exchange loss of PLN
67.0 million during the same period in 1998. For more information you should
read "-- Inflation and Currency Exchange Fluctuations."
Our interest and other financial expenses, net were PLN 165.8 million in
1998, as compared to PLN 74.0 million in 1997, and interest and other financial
income, net, of PLN 10.4 million in 1996. The increases in interest and other
financial expense, net in 1998 and 1997 as compared to 1996, reflect interest
expense associated with the issuance of the 2007 Notes in July 1997, and our
commencement during 1998 of borrowing under our bank credit facility, in each
case for the purpose of funding the continuing build-out of our network. These
increased borrowings were also associated with net foreign exchange losses of
PLN 42.0 million in 1998 and PLN 42.2 million in 1997, arising from the
depreciation of the Zloty in relation to the U.S. dollar, the currency in which
the 2007 Notes are denominated.
Since September 1997, interest and other financial expense, net, has also
included imputed interest expense and net foreign exchange losses in respect of
our obligations to the Polish government in respect of our GSM 900 license (for
which the fee payable to the Polish government is linked to Euros and payable in
Zlotys on March 31 of each year). Pursuant to International Accounting
Standards, imputed interest and foreign exchange losses were capitalized in the
cost of the GSM 900 license during the period of development of our GSM system.
These expenses, which are not reflected in the amount of interest and other
financial expenses, net set forth in our statement of operations, amounted to
PLN 38.5 million in 1997 and PLN 50.7 million in 1996.
Taxation
The loss before taxation was PLN 160.5 million for the nine months ended
September 30, 1999, compared to a profit before taxation of PLN 8.6 million for
the nine months ended September 30, 1998. We incurred a net loss of PLN 195.8
million in the nine months ended September 30, 1999, compared to a net loss of
PLN 27.8 million for the same period in 1998, after reflecting the accounting
effect of taxation.
In accordance with the requirements of the Polish tax authorities, the cost
of the GSM 900 license and GSM 1800 license are recorded on a cash basis, which
are the most significant component of our total deferred tax liability of PLN
135.7 million as of September 30, 1999, as compared to a deferred tax liability
of PLN 64.0 million as at December 31, 1998. We have also recorded a deferred
tax asset relating to the
34
<PAGE> 41
realization of accrued expenses and certain tax loss carry forwards of PLN 101.3
million as of September 30, 1999, as compared to PLN 63.8 million as at December
31, 1998. See Note 9 to the Financial Statements.
We recorded income tax expense of PLN 107.5 million in 1998, compared with
an income tax benefit of PLN 7.0 million in 1997 and PLN 23.6 million in 1996.
After discussions with Polish tax authorities in 1998, we decided to change our
tax treatment of the cost of the GSM 900 license from amortization over 15 years
to a when-paid basis. As a result, the tax returns for 1996 and 1997 have been
re-stated and the resulting increase in tax loss carry forwards has also been
reflected in the deferred tax computation for 1998. The change in the tax
treatment of the GSM 900 license also resulted in a deferred tax liability of
PLN 63.2 million in 1998. In 1998, we also adopted International Accounting
Standard 12 (revised) "Income Taxes" in accounting for our income taxes. The
revised standard permits us to record a deferred tax asset when there is a
reasonable expectation of realization while the previous standard required a
higher level of certainty. This change in accounting for income taxes was
applied retroactively, resulting in a deferred tax asset as of December 31, 1998
of PLN 63.8 million, as compared to PLN 37.1 million and PLN 26.3 million as at
December 31, 1997 and 1996, respectively. See Note 10 to our Financial
Statements as of and for the three fiscal years ended December 31, 1998, 1997
and 1996.
INFLATION AND CURRENCY EXCHANGE FLUCTUATIONS
In connection with its transition from a state-controlled to a free-market
economy, Poland experienced high levels of inflation and significant fluctuation
in the exchange rate for the Zloty. The Polish government has adopted policies
that slowed the annual rate of consumer price inflation from nearly 250% in
1990, to approximately 18.5% in 1996, 13.2% in 1997 and 8.6% in 1998. For the
twelve months ended September 30, 1999, annualized consumer price inflation in
Poland was 8.0% according to the Polish Office of Statistics. Since the launch
of our operations in 1996, cumulative inflation in Poland has been 33.0%. The
Polish Communications Law provides that the Ministry of Communications may
impose a ceiling on the prices that we and other telecommunications service
providers can charge for their services.
Our sales revenues are denominated in Polish Zloty. A significant portion
of our expenses and liabilities, however, are denominated in other currencies.
These include our liabilities to the Polish government for the GSM 900 and GSM
1800 licenses, which are linked to Euro and payable in Zloty, and our
liabilities to our suppliers of network capital equipment and handsets, which
are generally denominated in Deutschmarks, French Francs or U.S. dollars. In
addition, all of our liabilities under the 2007 Notes and shareholder loans are
denominated in U.S. dollars and a significant portion of our liabilities under
our bank credit facility are denominated in Deutschmarks. As a result, our
operating income and cash flow are and will remain significantly exposed to an
appreciation in these non-Polish currencies against the Zloty.
Future currency exchange fluctuations are expected to continue to have a
significant effect on our financial condition and results of operations. We
intend to enter into transactions to hedge the risk of exchange rate
fluctuations, to the extent we can obtain hedging arrangements on commercially
satisfactory terms. There is no assurance that we will be able to obtain hedging
arrangements on commercially satisfactory terms. As an alternative, we may
attempt to structure our foreign currency liabilities so that they are broadly
in line with the currency basket employed by the National Bank of Poland. This
technique will not eliminate foreign exchange losses; however, we believe the
technique may improve our ability generally to manage the magnitude of these
losses. Starting in late 1998 and continuing through the current year, we drew
funds mainly from our bank credit facility and exhausted the Zloty denominated
tranche first in order to minimize the negative effects of currency exchange
fluctuations.
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<PAGE> 42
The table below summarizes our foreign currency denominated long-term
obligations:
EXPECTED MATURITY DATE
<TABLE>
<CAPTION>
FOURTH PRESENT
QUARTER VALUE
1999 2000 2001 2002 2003 THEREAFTER TOTAL 9/30/99
-------- -------- -------- -------- -------- ---------- --------- -------
(IN THOUSANDS OF PLN)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GSM 900 License................... -- 150,929 246,711 -- -- -- 397,640 372,655
GSM 1800 License.................. -- 73,510 73,510 73,510 -- -- 220,530 185,894
Existing Notes.................... -- -- -- -- 111,893 1,488,440 1,600,333 781,332
Bank Credit Facility (excluding
interest)....................... -- 38,787 77,573 90,502 103,431 206,862 517,155 517,155
Shareholder Loans................. -- -- -- -- -- 705,556 705,556 312,629
Headquarters Lease................ 7,391 29,562 29,562 29,562 29,562 327,323 452,962 217,898
Weighted Average Effective
Interest Rate................... 8.7765 8.7765 8.7765 8.7765 8.7765 8.7765 8.7765 8.7765
</TABLE>
We are exposed to interest rate risk primarily as a result of our bank
credit facility which at the end of the third quarter of 1999 consisted of loans
of DM 230 million and PLN 570 million at a rate equal to London or Warsaw
Interbank Offered Rate, commonly referred to as LIBOR or WIBOR, plus 0.95%
before and 0.75%, respectively, after March 1, 1999. The table below presents
information about our bank credit facility including principal cash flows and
estimated weighted interest rates by expected maturity dates for the balance
drawn under our bank credit facility as of September 30, 1999. The weighted
average interest rates computed do not take into account the rate at which
individual drawdowns on the loan will be refinanced. Each drawdown has a
short-term maturity date, which can be rolled over, subject to the annual
repayment schedule for the entire bank credit facility.
EXPECTED MATURITY DATE
<TABLE>
<CAPTION>
FOURTH PRESENT
QUARTER VALUE
BANK CREDIT FACILITY 1999 2000 2001 2002 2003 THEREAFTER TOTAL 9/30/99
- -------------------- -------- ------- ------- ------- ------- ---------- ------- -------
(IN THOUSANDS OF PLN)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable Rate (DM)................. -- 38,787 77,573 90,502 103,431 206,862 517,155 517,155
Weighted Average Effective Interest
Rate............................. -- 3.6519 3.6519 3.6519 3.6519 3.6519 3.6519 3.6519
Variable Rate (PLN)................ -- 42,750 85,500 99,750 114,000 228,000 570,000 570,000
Weighted Average Effective Interest
Rate............................. -- 14.3434 14.3434 14.3434 14.3434 14.3434 14.3434 14.3434
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, our liquidity requirements have arisen primarily from the
need to fund capital expenditures for the expansion of our business and for our
working capital requirements. We expect to continue to incur substantial
additional capital expenditures in order to expand and improve the quality of
our network.
On December 17, 1997, we entered into our bank credit facility, which was
arranged by Citibank (Poland) S.A. and Citibank International plc. The lenders
agreed to make loans to us, on a term loan or revolving credit basis (at our
option) in an aggregate principal amount of not more than DM 672 million,
subject to us having met required liquidity and credit-rating conditions. This
bank credit facility consists of two tranches: (i) an offshore tranche of up to
DM 420.0 million may be drawn in Deutschmarks, U.S. dollars, Euro or other
freely convertible currencies as agreed by the lenders; and (ii) a domestic
tranche equal to the Zloty equivalent of DM 252.0 million available to be drawn
in Zloty. At the end of September 1999, our combined loan limit under both
tranches was DM 540.0 million. As of September 30, 1999, we have made drawings
of PLN 1,087 million under the bank credit facility, which consisted of DM 230
million and PLN 570 million. We have established overdraft facilities with Bank
Rozwoju Eksportu S.A. and Citibank (Poland). These are limited to the Polish
Zloty equivalent of DM 25 million by terms of our bank credit facility.
On August 24, 1999, our major shareholders extended to us US$ 75.0 million
in subordinated loans to fund the GSM 1800 license and to provide continued
liquidity. The respective amounts of those loans from
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<PAGE> 43
our shareholders were as follows: Elektrim, Zloty equivalent of approximately
US$ 40.0 million; DeTeMobil, US$ 17.5 million; and MediaOne, US$ 17.5 million.
Each of these shareholder loans bears an interest rate of 12.5% compounded
semi-annually on June 17 and December 17. The full balances of these loans and
all accrued interest are due on June 19, 2006. However, interest may be due
earlier dependent on our meeting the bank credit facility covenants.
Net cash generated from operating activities during the nine months ended
September 30, 1999 was PLN 405.8 million, as compared to PLN 182.5 million
during the nine months ended September 30, 1998. Non-cash provisions and net
non-operating items for the same periods totalled PLN 640.8 million and PLN
307.4 million, respectively, and principally reflect depreciation, amortization,
provisions for doubtful debtors, unrealized foreign exchange losses and interest
expense resulting from our growth and expanded financial activities. In
addition, cash generated from net working capital items was PLN 67.5 million, as
compared to cash used for net working capital items of PLN 44.4 million for the
same period in 1998. This was primarily due to increased cash generated from
trade payables.
Net cash generated from operating activities was PLN 163.8 million in 1998,
and net cash used in operating activities was PLN 113.4 million and PLN 70.0
million in 1997 and 1996, respectively. These cash flows principally reflect the
improvement in operating results over these periods, offset by increases in
working capital requirements associated with our rapid growth and, in 1998, the
payment of income taxes. Depreciation and amortization was PLN 164.6 million in
1998, as compared with PLN 83.6 million and PLN 15.0 million in 1997 and 1996,
respectively. This increase reflects the substantial growth in our GSM network.
Similarly, provisions for doubtful debtors increased by PLN 90.7 million in
1998, as compared to an increase of PLN 43.7 million in 1997 and PLN 5.8 million
in 1996, reflecting growth in the size of our subscriber base.
Net cash used in investing activities was PLN 1,042.3 million for the nine
months ended September 30, 1999, as compared to PLN 756.8 million for the nine
months ended September 30, 1998, principally reflecting payments to suppliers of
network capital equipment used in the ongoing build-out of our GSM 900 network
and the initial payment on the GSM 1800 license.
Cash flow used in investing activities was PLN 1,004.7 million in 1998, as
compared to PLN 152.6 million and PLN 398.5 million in 1997 and 1996,
respectively. Our investing cash flows reflect PLN 966.7 million, PLN 176.3
million and PLN 41.3 million in payments during 1998, 1997 and 1996,
respectively, to suppliers of tangible fixed assets, which consist primarily of
network capital equipment used in the ongoing build-out of our GSM network.
These amounts are less than our actual purchases of fixed assets, which totaled
PLN 1.0 billion in 1998, PLN 636.6 million in 1997 and PLN 165.8 million in
1996, the difference reflecting our ability to defer payment on a significant
portion of purchases.
In general, our network equipment supply agreements with each of our major
suppliers of network equipment, Siemens and Ericsson, permit us to defer payment
on our network equipment purchases until equipment is installed, placed in
commercial operation and formally accepted by us. In addition, we are currently
negotiating with our bank lenders for an increase in the permissible duration of
trade and construction payables because certain of our suppliers have offered us
longer term financing. In general, the Siemens agreement provides for us to
defer payment on up to DM 100 million of equipment purchases, but requires us to
make payments on a scheduled basis with respect to specific items of equipment
as that equipment is placed into commercial service. The agreement with Ericsson
permits us to make payments on a scheduled basis with respect to specific items
of equipment as agreed in the supplier's contract.
Our net cash generated from financing activities was PLN 742.6 million for
the nine months ended September 30, 1999, as compared to PLN 353.5 million for
the nine months ended September 30, 1998, reflecting increased long-term
borrowings.
Our cash flows from financing activities were PLN 618.4 million in 1998, as
compared to PLN 479.8 million and PLN 471.0 million in 1997 and 1996,
respectively. These amounts reflect the net proceeds from long-term bank
borrowings in 1998, the issuance of the existing Notes in 1997 and the initial
capital investment by our shareholders in 1996.
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<PAGE> 44
As a result of the foregoing, our net cash for the nine months ended
September 30, 1999 increased by PLN 106.1 million, but decreased by PLN 220.8
million for the same period of 1998. Net cash decreased by PLN 222.5 million in
1998, and increased by PLN 213.7 million in 1997 and by PLN 2.5 million in 1996.
In March 1997, we entered into a finance lease relating to our new
headquarters building which obligates us to make additional future minimum lease
payments of PLN 453.0 million over 15 years.
We anticipate that capital expenditures for the last three months of 1999
will total approximately PLN 493 million, including expenditures related to our
SDH microwave backbone network. We also expect that the level of our capital
expenditures will remain significant for the medium-term, as we continue to
expand network capacity, coverage and quality in preparation to offer services
commencing in March 2000 under our new GSM 1800 license.
In order to implement our current business plan, we will need to raise PLN
2,200 million (US$ 534.7 million) to fund anticipated working capital
requirements, capital expenditures and other operating needs. We believe that
the proceeds from the offering of the Old Notes completed in November 1999,
together with our DM 132 million undrawn capacity under our existing bank credit
facility and anticipated cash from operations, will provide the financing
required to implement our business plan through the end of 2000. In order to
provide for the balance of our funding requirements, we have entered into
discussions with, and received preliminary indications of interest from, various
financial institutions to replace our current DM 672 million equivalent bank
credit facility with a larger bank credit facility. If we replace our existing
bank credit facility with the larger bank credit facility, we believe we will
have sufficient financing to implement our current business plan. There can be
no assurance that any or all of the elements of our financing plan will be
achieved and, if not so achieved, that alternative financing arrangements will
be available on acceptable terms or at all. Further, as our capital expenditures
and operating expenses are linked directly to our subscriber additions, our
actual capital expenditure requirements and other cash operating needs may
increase if we are more successful than expected in adding new subscribers. See
"Risk Factors -- Need For Additional Financing."
YEAR 2000 COMPLIANCE
In cooperation with our shareholders, suppliers, energy suppliers,
programmers and other telecommunications operators, we have implemented a
comprehensive project to prevent or minimize Year 2000-related computer hardware
or software malfunctions. The project is managed by a team of our employees with
additional support from consultants from KPMG Polska Sp. z o.o. The project
methodology is based on guidelines prepared by MediaOne, one of our major
shareholders. We believe the year 2000 project team has identified all systems
and services which are critical to our operations and which might lose
information, malfunction or fail completely as a result of the date rollover
before, during and after the year 2000. We believe the process of testing,
upgrading or replacing computer hardware and software potentially vulnerable to
the year 2000 problem was approximately 97% complete as of September 30, 1999.
We also developed, tested and implemented detailed business continuity
plans in the areas of four critical business processes: customer service;
customer care and billing; cash flow; and employee health and safety. Managers
have been appointed to oversee the creation of these plans on all levels
(headquarters, regional offices, retail outlets).
We have also coordinated with other third party entities, including energy
companies, banks, roaming partners and other service providers, suppliers and
vendors, whose failure to address year 2000 issues could adversely affect our
operations, and we can provide no assurance that such third-parties will be year
2000 compliant. Of these third-party entities, TPSA poses the most significant
risk to our operations. We rely on TPSA for network interconnection and as an
international gateway and, consequently, the inability of TPSA to perform these
services could have a material adverse effect on our financial condition and
results of operations. TPSA has announced that it has, and its suppliers have
conducted tests (including date roll-over tests) on the majority of TPSA's
critical systems and, where appropriate, implemented remedies to make those
systems year 2000 compliant. TPSA also stated, however, that no assurance can be
given that its systems will not experience year 2000 problems, or that TPSA's
service providers, suppliers and vendors will
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<PAGE> 45
not experience year 2000 problems. We have tested leased lines and
interconnections as provided under the framework agreement with TPSA, and have
outlined the responsibilities and liabilities of each entity toward the other in
regards to the provision of products and services which may be date-dependent or
affected by the year 2000 problem. We have also worked with the electrical power
supply companies to understand their year 2000 readiness and are developing a
backup plan in case of disrupted power supply. These plans include the use of
generator units and battery packs.
Although we have taken reasonable measures to lessen or eliminate the basis
for year 2000-related problems, the uncertainty surrounding this issue renders
it impossible to know any potential effects of year 2000 problems. A system
modification freeze period has been imposed for all information technology and
GSM network systems for a period before and after the end of 1999. Additionally,
we have allocated a year 2000 compliance budget to deal with any internal or
external problems, and have the capacity to fund all year 2000
compliance-related expenditures including a temporary interruption in
operations. Actual incremental costs incurred on the year 2000 project through
September 30, 1999 were USD 727,000, slightly in excess of the USD 650,000
budget for this initiative. We expect minor additional spending for system
testing and review into the new year.
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<PAGE> 46
OUR BUSINESS
OVERVIEW
We are the largest GSM wireless telephony services provider in Poland with
1.5 million subscribers and a 43% share of the total Polish wireless market as
of December 31, 1999. We are the only wireless services provider in Poland with
both a national GSM 900 and a national GSM 1800 license. As of December 31,
1999, our GSM network covered approximately 84.4% of the geographic area of
Poland, representing approximately 95% of the total Polish population. We are
completing the initial roll-out of an SDH microwave backbone network that will
connect certain key portions of our network and will reduce our reliance on
leased lines, provide better transmission quality and reduce operating costs. We
expect to complete the initial phase of this SDH microwave backbone network by
the end of the second quarter of 2000. We also plan to selectively roll-out GSM
1800 service, which will allow us to increase capacity and to offer seamless
nationwide dual-band (GSM 900/1800) service. We market all of our products and
services under our brand "Era GSM," one of the most recognized brand names in
Poland. In marketing our products and services, we use a distribution network of
31 dealers with approximately 844 points of sale, a direct sales force of 88
representatives and a national network of 46 retail outlets.
We have achieved rapid growth in our subscriber base through internal
growth since we launched our service in September 1996. For the period ended
December 31, 1999, we generated an average of approximately 81,000 net
subscriber additions per month. Since July 1999, we have experienced monthly
churn of approximately 2.2%, which is at a level comparable with that achieved
by Western Europe and U.S. wireless providers. As of December 31, 1999, we
provided wireless service to approximately 1.4 million post-paid subscribers and
365,000 pre-paid subscribers. For the nine months ended September 30, 1999, we
had revenues and EBITDA of PLN 1,813.9 million (US$ 440.9 million) and PLN 383.2
million (US$ 93.1 million), respectively. Our historical revenues and EBITDA for
the nine months ended September 30, 1999 increased by 64% and 49%, respectively,
as compared to the same period in 1998.
We provide a broad range of high-quality wireless telephone services,
including call forwarding, call waiting, voicemail, account information, short
messaging services, information services and wireless internet access. We offer
a range of differentiated tariff plans to attract and retain subscribers having
varying service needs. In particular, we focus on acquiring and retaining high
volume users, converting select pre-paid customers to our post-paid plans and
minimizing churn to increase recurring cash flow from each subscriber.
Additionally, we provide roaming capabilities to our subscribers through 141
international roaming agreements with GSM operators in 74 countries, including
all European countries with GSM services.
Historically, we have benefited from the experience, expertise and support
of DeTeMobil, Elektrim and MediaOne. Employees seconded from our major
shareholders have trained and supervised a number of our local managers, who now
hold key positions in our company. For example, our Director General and our
Deputy Director of Strategy, Marketing & Sales, are among our local managers who
have been trained by our shareholders and have advanced to key positions. As of
December 31, 1999, the number of seconded employees was 11, representing less
than 1% of our work force. For a discussion of our shareholders and their
relations with us and among themselves, you should read "-- Recent
Developments," "Risk Factors -- Risks Related to Shareholder Relationships,"
"Shareholders" and "Certain Relationships and Related Transactions."
OUR BUSINESS STRATEGY
Our strategic objective is to increase our revenues, profitability and cash
flow and maintain our position as the leading provider of high-quality personal
communications services in the Polish telecommunications market. The following
are the key elements of our strategy:
- Provide Superior Network Quality - We have made and continue to make
significant investments in the quality of the network to maintain competitive
nationwide coverage and superior in-building reception with the lowest
percentage of dropped calls in our market. By focusing our capital expenditures
on providing comprehensive in-building coverage in major urban centers in Poland
and enabling subscribers to receive and
40
<PAGE> 47
make wireless connections anywhere within those areas, we attract and retain
subscribers who generate high minutes of use. These subscribers are generally
less price sensitive, less prone to switch operators and represent a lower
credit risk. Maintaining a high-quality network allows us to price our services
at a premium relative to our competitors. The addition of our GSM 1800 license
will improve our network capabilities by allowing us to increase network
capacity selectively in a capital efficient manner. We are also investing in the
construction of an SDH microwave backbone network to carry our traffic. This
backbone network is expected to reduce our reliance on leased lines from TPSA
and others for intranetwork traffic, provide better transmission quality and
reduce operating costs. We expect to complete the initial phase of this SDH
microwave backbone network by the end of the second quarter of 2000.
- Target Key Market Segments - We believe that the provision of
differentiated service packages, including access to value-added services, is a
significant factor in increasing our market share within key segments of the
Polish telecommunications market. We currently offer six distinct post-paid
tariff plans which permit subscribers to select the mix of monthly fees,
air-time charges and value-added services that best suit their service
requirements and frequency of calls. In particular, we target high-volume users
by offering select value-added services at no extra cost and user loyalty
programs. In October 1999, we launched the first loyalty plan in the Polish
telecommunications sector. Under this plan, long-standing customers benefit from
awards such as Era GSM merchandise, free air-time and other rewards from our
exclusive partners including LOT Polish Airlines, British Airways, Panasonic and
Kodak. For those subscribers who do not choose post-paid plans, we offer
pre-paid services under two tariff plans that expand our penetration in the
cellular mass market and reduce our exposure to credit risk and the need for
handset subsidies associated with post-paid subscriber acquisitions.
- Provide Outstanding Customer Service - We believe that high-quality
customer service plays an important role in distinguishing us from our
competitors, expanding our subscriber base and sustaining customer loyalty. We
employ over 700 customer service representatives in our customer service center
located in Warsaw who operate a 24-hour toll-free customer service hotline for
our subscribers, including directory assistance, mobile telephone service
guidance, billing and other information. We have installed information systems
that will immediately activate service for new subscribers and provide clear and
accurate monthly bills. In 1998, we were awarded International Standards
Organization, commonly referred to as ISO, 9002 status for customer service and
are currently the only company in Poland to have been awarded this status for
customer service. Furthermore, we also provide customer support services, such
as handset servicing and billing inquiries at our 43 customer service centers
located in our retail outlets.
- Maintain Brand Awareness - We have made a significant investment in our
brand, "Era GSM," which is the 7th most recognized brand in Poland (according to
Marketing Polska magazine) with an aided and unaided brand awareness of 76% and
53%, respectively (according to SMG Marketing Research). This high-level of
brand awareness assists us in attracting new subscribers. We have positioned the
brand to stand for high-quality, responsiveness and a high standard of service
expected by business customers. In addition, we have also established our
pre-paid service with the service name "Tak Tak." We believe Tak Tak has become
synonymous with pre-paid wireless service in Poland.
- Capitalize on our Relationship with our Major Shareholders - We believe
that we have benefited from the experience, expertise and financial and
operating support of DeTeMobil, Elektrim and MediaOne, our major shareholders.
These shareholders have significant experience in building GSM networks in
Europe, in managing high-growth telecommunications ventures and in implementing
large scale infrastructure projects in Poland. We have used the resources and
experience of these shareholders through the secondment of employees, the
provision of consulting services and proprietary software to design our network
and the benefit of their combined purchasing power. In August 1999, Elektrim
announced that it paid US$ 679.4 million to acquire an additional 15.8% of our
shares. In addition, Deutsche Telekom has announced that it is acquiring
MediaOne Group, Inc.'s ownership interest in our company as part of its
acquisition of MediaOne International B.V. (which holds multiple Central
European wireless assets). See "Certain Relationships and Related Transactions
- -- Agreements among our Shareholders and Us" and "Shareholders."
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<PAGE> 48
ATTRACTIVE POLISH TELECOMMUNICATIONS ENVIRONMENT
We believe that the Polish telecommunications market ranks among the most
attractive in Europe for the following reasons:
- Large and Growing Economy - With a population of 38.7 million and real
gross domestic product ("GDP") of PLN 521.5 billion (US$ 126.8 billion) in 1998,
Poland is the largest Central European economy and one of the fastest growing
economies in Europe. Real gross domestic product growth in Poland was 6.9% in
1997 and 4.8% in 1998, compared to European Union average of 2.7% in 1997 and
2.9% in 1998. Consumer price inflation has fallen from 33.3% in 1994 to 11.7% in
1998. For the twelve months ended September 30, 1999, annualized consumer price
inflation in Poland was 8.0% according to the Polish Office of Statistics.
Poland is currently rated Baa1 and BBB for long-term foreign currency debt by
Moody's Investors Service and Standard & Poor's, respectively.
- Integration with European and International Organizations - Poland has
been successfully integrated with European and international organizations.
Poland's participation in these organizations is expected to help it continue
its transformation into a fully liberalized economy. Poland was selected to be
among the first group of countries from the former Eastern Bloc to become
members of the European Union and Poland is currently negotiating with the
European Union, and pursuing government policies which will position it to join
the European Union by 2003. A member of the Organization of Economic Cooperation
and Development and the World Trade Organization, Poland is also one of only
three countries in the former Eastern Bloc to have become a full member of the
North Atlantic Treaty Organization.
- Pent-up Demand for Telecommunications Services - Poland has large unmet
demand for telecommunication services. Poland has fixed-line teledensity of
approximately 22% (as compared to an average of 52% in the European Union) and
wireless penetration of approximately 10% (as compared to an average of 28% in
the European Union). In addition, Poland has a relatively low average value for
its telecommunications traffic due to a disproportionate share of local calls in
the traffic mix, as well as a nearly two-year average waiting time for
fixed-line installation (according to TPSA).
As a result of this pent-up demand and low penetration, we, along with the
other wireless operators in Poland, have experienced a rapid increase in the
number of subscribers and in the aggregate minutes of use. The key trends
driving this growth include substitution of wireless service for fixed-line
voice telephony and an increase in general voice telephony usage as the number
of persons with access to telephone service increases.
- Continued Liberalization - We believe that Poland will continue the
ongoing liberalization of its telecommunications market. In 1996, the Polish
government liberalized wireless telephony. The government of Poland has opened
the bidding for three domestic long-distance telephone licenses which it has
announced will be awarded by the end of 1999. Furthermore, the government of
Poland has announced that additional international long-distance telephone
licenses will be awarded by 2003. One of the possible benefits of further
liberalization is continued tariff re-balancing (increased local call rates)
which makes any cellular service more price competitive with fixed-line service.
SERVICES AND PRODUCTS
Post-Paid Services
We offer subscribers a basic post-paid service package, consisting of
network access, call divert and forwarding, short message service, calling line
identity (clip) and voicemail pursuant to six alternative tariff plans that
permit subscribers to select the monthly fees, air-time charges and value-added
services that best suit their service requirements and frequency of calls. A
potential subscriber commences service upon payment of the purchase price of the
handset and the subscriber identity module, commonly referred to as a "SIM"
card, issued by us.
We have reduced the activation fee from time to time, in connection with
particular promotions in order to attract subscribers. Nevertheless, our basic
activation fee remains slightly above that charged by our
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<PAGE> 49
competitors. Currently, we do not offer free activation or SIM cards as part of
our promotional campaigns as we believe that these techniques tend to attract
subscribers who are less likely to be frequent users of our services and, who
may present higher credit risks than subscribers willing to pay the full
activation fee.
The tariff structure for our services consists of a monthly service fee,
air-time charges and additional monthly charges for the use of certain
value-added services. We offer our services on the basis of the following six
tariff plans, which vary the monthly service fee inversely with per minute
air-time charges:
- the "Halo" or "Hello" plan, which is designed to be a bridge plan from
our pre-paid service (a lower monthly fee and a higher per minute
charge);
- the "Bialy" or "White" plan, which is designed to suit the requirements
of generally low volume consumers (less than 80 minutes of air-time for
outgoing calls per month);
- the "Po Prostu" or "Plain and Simple" plan, which is designed to suit
consumers who require a consistent per minute charge (a slightly higher
monthly charge and a flat per minute charge anytime anywhere in Poland);
- the "Blekitny" or "Blue" plan, which is designed to suit the
requirements of medium volume consumers (between 80 and 280 minutes of
air-time for outgoing calls per month);
- the "Granatowy" or "Navy Blue" plan, which is designed to suit the
requirements of high volume consumers (more than 280 minutes of air-time
for outgoing calls per month); and
- the "VIP" plan, which is designed to suit high-end, high-volume
subscribers (a high monthly charge and a very low per minute charge). In
addition, to optimize network utilization, calls within our own network
from 11:00 PM to 6:00 AM are offered at night zone pricing, which is the
lowest per minute price in all our tariffs.
The following table sets forth a summary of the tariff rates (excluding the
22% VAT charged on the sale of services in Poland), applicable as of October 15,
1999, for domestic calls by an Era GSM subscriber:
<TABLE>
<CAPTION>
AIR-TIME TARIFF RATES(1) AIR-TIME TARIFF RATES(1) PERCENTAGE OF
(OUTSIDE ERA GSM) (WITHIN ERA GSM) TOTAL SUBSCRIBERS
ACTIVATION MONTHLY ------------------------- ----------------------------- -----------------
TARIFF PACKAGE CHARGE SERVICE FEE PEAK OFF-PEAK PEAK OFF-PEAK NIGHT 1998 1997
- -------------- ---------- ----------- ----------- ----------- --------- --------- ----- ------- -------
(PLN) (PLN) (PLN/MIN) (PLN/MIN) (PLN/MIN) (PLN/MIN)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hello................ 99.00 19.90 2.39 0.89 1.74 0.74 0.24 N/A N/A
White................ 99.00 39.90 1.69 0.89 1.54 0.74 0.24 74.3% 67.6%
Plain and Simple..... 99.00 59.90 1.00 1.00 1.00 1.00 0.24 N/A N/A
Blue................. 99.00 89.90 1.09 0.59 0.94 0.44 0.24 18.0% 23.6%
Navy Blue............ 99.00 129.90 0.89 0.49 0.74 0.34 0.24 7.7% 8.8%
VIP.................. 99.00 199.90 0.55 0.55 0.55 0.55 0.24 N/A N/A
</TABLE>
- ---------------
(1) Subscribers pay for the first minute of each call regardless of the call's
length and then for each thirty-second interval (or portion thereof)
thereafter.
We have not increased the rates on any packages since we began offering
services to subscribers in September 1996. On February 1, 1998, the VAT charged
on the cost of telecommunications services was increased from 7% to 22%, thereby
increasing the final cost of telecommunications services to our subscribers. For
more information, you should read "Risk Factors -- Risks Related to Inflation
and Foreign Currency," "-- Risk of Competition" and "Exchange Rates and Foreign
Exchange Restrictions."
We believe that because average household incomes are relatively low in
Poland (less than PLN 2,500 per month), many subscribers, including medium- and
high-volume users, prefer to enroll in a tariff plan with a lower monthly
service charge. We believe that a certain number of Hello plan subscribers will
migrate to the Plain and Simple, Blue or Navy Blue plans as they become
accustomed to using our services.
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<PAGE> 50
Pre-paid Services
Since June 1998, we have offered a pre-paid GSM service package, under the
product name "Tak Tak." This pre-paid service enables customers to take
advantage of a GSM service without paying a monthly subscription fee or entering
into a contract with us. The Tak Tak pre-paid service is designed to appeal to
those who want to limit the amount they spend on their mobile calls. We offer
two types of pre-paid tariff services, "You and Me," which provides a 15%
discount to the subscriber for up to two of their favorite callers, and "All
Day," which provides the subscriber with a flat per minute price all day and a
lower more competitive price on calls from 11.00 p.m. to 6.00 a.m. We believe
that Tak Tak has become synonymous with pre-paid cellular service in Poland.
Customers who choose our pre-paid service can purchase either a SIM pack
starting from approximately PLN 99 (a SIM card, which is required to open a
pre-paid account, with a stored value of PLN 50) or the pre-paid bundle pack (a
handset and a SIM pack) for approximately PLN 299 to PLN 449, depending on the
handset chosen. Subscribers can then purchase pre-paid vouchers of different
denominations and validity periods. Pre-paid vouchers are sold in all our retail
stores and in over 5,500 other outlets including national news stands, gas
stations, Era GSM stores and through dealers. If the pre-paid card is not topped
up with a voucher of at least PLN 99 within a six month period, the pre-paid
card expires and any remaining balance is forfeited.
As of September 30, 1999, our total subscribers included 319,436 Tak Tak
customers.
The following table sets forth the charges to the pre-paid card for local
and national calls:
<TABLE>
<CAPTION>
CALLS OUTSIDE THE ERA GSM CALLS WITHIN THE ERA GSM
NETWORK(1) NETWORK(1)
------------------------- --------------------------------------
OFF-PEAK AND OFF-PEAK AND
PEAK WEEKENDS PEAK WEEKENDS NIGHT
--------- ------------ --------- ------------ ---------
(PLN/MIN) (PLN/MIN) (PLN/MIN) (PLN/MIN) (PLN/MIN)
<S> <C> <C> <C> <C> <C>
You and Me tariff.............. 2.59 1.20 1.74 0.94 0.24
All Day tariff................. 1.99 1.99 1.39 1.39 0.24
</TABLE>
- ---------------
(1) Subscribers pay for the first minute of each call, regardless of the call's
length and then for each thirty second interval (or portion thereof)
thereafter.
Value-Added Services
In addition to providing basic GSM telecommunications services, we also
provide call divert and voicemail to all subscribers of basic services and
voicemail to all pre-paid customers. Subscribers pay only for the additional
air-time used in accessing these services. We also provide additional
value-added services, and are continually developing new services to meet the
needs of our evolving market and create new revenue streams. Our internet
service, ERANET, combines internet access with an email address that delivers
messages directly to the subscriber's handset. Fax and data services are
available for an additional monthly fee, and short message service is charged
per message with the exception of INFO ERA (which is a short message information
service charged on a monthly basis). In addition to voicemail, our faxmail
service allows deposit and retrieval of faxes from any fax machine world-wide.
Other services such as conference-calling and calling line identity are included
in the price of our premium tariff plans. Subscribers to regular plans may
purchase these services separately. "You and Me," our family and friends
discount program, gives subscribers a 15% discount on calls to their two
favorite numbers, while packages of low-priced minutes provide more value to
subscribers who call regularly and provides incentive for passive users to call
more often.
As the market for GSM services develops over time we intend to introduce
additional value-added services. We anticipate that these additional services
will include advanced voicemail services that allow the subscriber to not only
send and receive messages but also to forward, prioritize and send messages to
multiple recipients, and faxmail, which provides the same features of advanced
voicemail for faxes.
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<PAGE> 51
Handsets and Accessories
We sell handsets and accessories separately from our GSM services, and
subscribers also may purchase a SIM card either with or without a handset. We
sell a variety of handsets ranging from basic to the most advanced models
manufactured by some of the world's leading manufacturers of mobile telephones,
including Alcatel, Ericsson, Motorola, Nokia, Panasonic and Siemens. In
connection with certain promotions, we offer reduced price handsets that can
only be used on our network. The accessories offered by us are priced
competitively and are designed to enhance the convenience and functionality of a
subscriber's handset, including carrying cases, batteries, car kits and
recharging equipment.
We do not intend to achieve positive overall margins on our sales of
handsets. We do not discount handsets except in connection with subscriptions
for our service. For more information, you should read "-- Marketing and
Distribution -- Marketing Activities." In addition, certain handsets sold by us
at a discount pursuant to a promotion are configured so as to accept only our
SIM cards (a "SIM lock"). We intend to use SIM locks only to recoup the
discounted cost of the handset and will enable subscribers to unlock the handset
on request in order to permit its use on other networks once the discounted cost
has been recovered.
We believe that the prominent position of our major shareholders within the
cellular telecommunications market provides a substantial benefit to us when
negotiating with our vendors for the purchase of handsets.
INTERNATIONAL ROAMING
Our digital wireless network uses GSM technology. GSM is the world's most
widely used digital wireless technology, with more than 250 million users in
more than 130 countries as of November 1999. Because GSM is a standardized
technology used throughout most of Europe and internationally, our subscribers
can make and receive calls outside their home calling area in other locations
that also operate a cellular telecommunications network on the GSM standard. As
of December 31, 1999, we had entered into 141 international roaming agreements
with GSM operators in 74 countries. The agreements cover all of the principal
countries in Europe. In general, these international roaming agreements provide
that when one of our subscribers uses the services of a corresponding GSM
network operator in another country, we are responsible for payments of charges
for those services used in accordance with the corresponding GSM network
operator's tariff. We pass these charges through to the relevant subscriber,
together with an additional surcharge of 15%.
Currently we receive relatively small amounts of revenue from charges for
roaming calls. Although we expect these revenues to increase along with our
network and subscriber base, we do not expect overall revenues from charges for
roaming calls to be material to our results of operations. For more information,
you should read "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Factors Affecting Revenues."
CUSTOMER SERVICE
We believe that high-quality customer service plays an important role in
distinguishing us from our competitors, expanding our subscriber base and
sustaining customer loyalty. We employ over 700 customer service representatives
in our Customer Service Center located in Warsaw who operate a 24-hour toll-free
customer service hotline for our subscribers, including directory assistance,
mobile telephone service guidance, billing and other information. We also have
installed information systems to quickly activate service for new subscribers
and to provide clear and accurate monthly bills. We have also introduced a home
page on the Internet that provides information about us, our services and our
network, and allows potential subscribers to subscribe to our services, as well
as to order handsets at a 15% discount from our normal list price. In 1998, we
were awarded ISO 9002 status for customer service. We are currently the only
company in Poland to have been awarded this status for customer service.
Furthermore, we provide additional customer support services, such as handset
servicing, at our 30 customer service centers located in our retail outlets.
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BILLING AND SUBSCRIBER MANAGEMENT
The accuracy and flexibility of our billing and subscriber management
system are important components in our strategy of providing efficient and
responsive customer service. It also allows us to generate accurate and timely
subscriber information and analysis. DeTeMobil supervised the installation of
our billing and subscriber management system and provides operational training
and technical support.
Subscribers are billed on a monthly basis and may pay their bills at our
retail stores, banks or post offices. We also use data obtained from our billing
system to generate a customer lifetime value profile for each of our
subscribers. This enables us to develop different tariff packages and measure
the effect of promotional and advertising campaigns which we then use in
developing new services and marketing strategies.
As is the case in a number of emerging market countries, Poland does not
have a nationwide credit bureau for individuals, and it is difficult to verify
the creditworthiness of potential individual subscribers. We do, however, have a
credit risk management team that conducts credit-checks on new subscribers,
primarily by verifying addresses and through bank references, and is in the
process of developing a credit risk profile model. We also use our billing
system to generate subscriber usage reports on subscribers that have exceeded
preassigned credit limits or have failed to pay their bill. Based on these
reports, subscribers can be contacted by our credit and risk management team
and, depending on the circumstances, a subscriber's service may be deactivated.
We also provide our independent dealers and retail stores with weekly electronic
subscriber management reports. We have also increased our efforts to
aggressively pursue collections.
Our effective management of customer churn has allowed us to maximize
profitability and cash flow. Since the beginning of 1997, our average monthly
churn rate has been 2.4%. However, during the fourth quarter of 1998 and the
first quarter of 1999, our monthly churn increased. In response we initiated a
handset upgrade program for our valued customers, instituted improved credit
information sharing throughout our national distribution network, and launched
the first loyalty plan in the Polish telecommunications sector under which
long-standing customers benefit from awards such as Era GSM merchandise, free
air-time and other rewards from our exclusive partners, which include LOT Polish
Airlines, British Airways, Panasonic and Kodak. In addition, we aggressively
pursue collections and disconnect subscribers who pose a credit risk. We have
created a proprietary credit database and have initiated a new dealer commission
structure linked to the life of each subscriber acquisition. Our average monthly
churn in the second and third quarters of 1999 was 2.4% and 2.4%, respectively.
MARKETING AND DISTRIBUTION
Our marketing and distribution efforts are designed to develop brand
leadership for "Era GSM", including "Tak Tak," and to enable us to target
specific segments of the Polish telecommunications market, particularly those
subscriber profiles with high customer lifetime values. Currently, we target the
professional and business segments with our post-paid products and the mass
market with our pre-paid products.
Marketing Activities
Our marketing efforts currently are focused on potential subscribers who
are likely to recognize the enhancements in productivity that may result from
having a mobile phone, and others who are unable to otherwise access wireline
telephony because of the long waiting times for telephone installation common in
Poland. Our primary target market for GSM services is small-to-medium-size
businesses, professionals and large corporations who generally use tariff plans
consistent with high volume usage, such as the Blue, Navy Blue or VIP tariff
plans. We seek to attract business subscribers by providing certain value-added
services, including call waiting and conference call facilities, free of charge
as part of our Blue, Navy Blue and VIP tariff plans.
We have used extensive national advertising campaigns to create awareness
and to promote the benefits of subscribing to a Era GSM service. We advertise
primarily through television advertising and also use print media, billboards
and radio advertising. The brand name "Era GSM" was selected after an extensive
name
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search and customer research program because it is short and easy to remember.
We have also developed the product name "Tak Tak" to promote our pre-paid
services. We believe Tak Tak has become synonymous with pre-paid services in
Poland. In October 1999, we launched a consumer loyalty program called
"Stokrotka" or "Gratitude," which is the first major type of such program
offered in the telecommunications industry in Poland. This campaign is designed
to provide incentives based on usage, payment and longevity. Using a program
similar to airline mileage award programs, subscribers will be awarded benefits
such as Era GSM merchandise and free cellular air-time.
We also believe that demand for GSM services in Poland is stimulated by
promotional campaigns in which reduced prices for GSM services and accessories
are offered. We have engaged in such campaigns from time to time, including
offering handsets at reduced prices and reduced activation fees during specific
periods. In general, however, we avoid promotional techniques, such as providing
free air-time or waiving our activation or monthly fees, because we believe that
these types of incentives tend to attract passive or inactive subscribers as
well as subscribers who are higher credit risks.
We have required that subscribers who purchase our services as a result of
a promotional campaign may not change tariff plans or cancel their subscriber
contract prior to the expiration of a minimum period (generally two years)
except by paying an additional amount equal to the discount on the full cost of
their handset. Other subscribers may change tariff plans at will upon payment of
a small fee and may cancel their subscriber contract upon one month's notice
without charge.
Distribution Channels
We have established distribution channels through a number of independent
dealers and our own retail stores and sales force.
Our largest distribution channel is our network of 31 independent dealers,
which operated as of December 31, 1999 through 844 points of sale, consisting
primarily of retail stores. In addition to our services and products, these
dealers typically sell other electronic products, such as cameras and office
automation equipment. During the third quarter of 1999, our dealers accounted
for the acquisition of approximately 76% of our basic services subscribers. We
generally enter into an agreement with each of our dealers providing that the
dealer will not market or sell the telecommunications services of our
competitors. Our ability to enforce this provision may be limited by the terms
of our GSM licenses and Polish anti-monopoly regulation. See "-- The Licenses."
Our dealer agreements generally have no predetermined term but may be cancelled
by either party at any time subject to three months' notice.
Dealers are paid a commission by us based on the number of new subscribers
acquired, and they receive a bonus for acquiring subscribers in excess of
quarterly targets we establish. We retain the right to "claw back" a certain
percentage of the commission paid to a dealer to the extent that subscribers do
not remain active users of our services during a period of up to six months
after activation. We established a partnership incentive plan to award dealers
that achieve high volumes of activations per point of sale and are timely with
payments for product and activation sales. The partnership incentive plan
provides for increased commissions and additional bonuses to dealers. We also
offer our dealers a cooperative advertising plan whereby we pay a portion of the
dealer's cost of advertising.
We provide our dealers with handsets during promotions at a price slightly
lower than the promotion price. Those handsets that remain unsold at the end of
a promotion may be returned to us. We also cooperate with our dealers to
increase brand awareness by providing ancillary point of sale materials, events
financing, packaging, brochures and promotional stands.
Our retail distribution channels currently consist of 46 owned retail
stores. These stores are located in the central, high traffic areas of Polish
cities and only sell cellular services, handsets and ancillary products.
Employees at our retail stores are paid a salary, plus commissions based on the
number of activations sold. During 1999, retail store outlets accounted for
approximately 17.3% of the total number of our basic services subscribers
overall.
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We believe that our retail stores are a valuable promotional vehicle for
our services and products, offering a wider range of customer services and
support than those offered by dealers at the relevant point of sale. Each of our
retail stores have customer service staff capable of immediately activating a
new subscriber as well as responding to billing and other enquiries from current
subscribers. We also provide handset servicing in our retail stores, including
providing subscribers with temporary replacement handsets in the event that the
subscriber's handset is returned to the manufacturer for repair.
We believe that our direct sales force provides an important resource in
our strategy of increasing the proportion of our subscribers using the Blue,
Navy Blue and VIP tariff plans, as well as attracting higher usage customers.
Our direct sales force has 88 representatives responsible for the acquisition
and servicing of major business accounts. Representatives are paid a base salary
plus a commission for each new activation.
We believe that our retail sales force and direct sales force can achieve a
higher level of sales to high-volume subscribers than our dealers by offering
higher quality service and, in the case of the direct sales force, a more
focused marketing effort on desirable major accounts.
NETWORK AND FACILITIES
Network Infrastructure
Assisted by our own engineering specialists, DeTeMobil employees designed
and planned our network infrastructure and utilized DeTeMobil's proprietary cell
site planning software to do so. We now rely on our own engineering employees to
operate and maintain the network, assisted by six secondees from DeTeMobil.
Components, subsystems and interfaces constituting the network have been (and
continue to be) supplied on a turn-key basis by Siemens and Ericsson. In
addition, we have recently entered into an agreement with Alcatel, a French
telecommunications company, to supply certain network equipment.
The infrastructure of cellular networks such as ours are based upon the
division of the geographical area covered by the network into a number of cells
that have diameters ranging from a few hundred meters up to 30 kilometers. Each
cell contains one or more transceivers at a base-station that communicate by
radio signal with active cellular subscribers in the cell. Transmissions between
cellular telephones and base-stations generally cover no more than the diameter
of the cell, and therefore can be made at relatively low power. In a GSM
cellular network, the base-stations installed in each cell are connected to
base-station controllers which, in turn, are connected to a mobile switching
center. Mobile switching centers are connected to other Mobile switching centers
in the same network and to other fixed cellular networks. Mobile switching
centers control the routing (and the billing) of calls and allow cellular
telephone users to move freely from cell to cell while continuing calls.
Connections between base-stations, base-station controllers and Mobile switching
centers consist of transmission lines, including fibre optic cables, copper
cables and microwave links.
The major elements of our GSM network are:
- the base-station subsystem which as of December 31, 1999, was made up of
2,637 base-stations controlled by 84 base-station controllers;
- 17 mobile switching centers; and
- the operations and maintenance sub-system and the network management
center, both of which are located in Warsaw and enable us to centrally
manage and coordinate network operations and maintenance.
From our network management center in Warsaw, we monitor service over our
entire network. To mitigate the effects of potential switching failures or
failures of other network elements, we have installed back-up equipment and have
constructed alternative routes between critical network elements. As of December
31, 1999, our network covered approximately 84.4% of the geographic area of
Poland representing approximately 95% of the total Polish population.
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We have been granted nationwide GSM licenses to operate in the 900 MHz
bandwidth (license granted July 1996) and in the 1800 MHz bandwidth (license
granted in August 1999). The increase in available bandwidth will create
significant additional capacity for both voice and data services.
The smaller cell radius of GSM 1800, requires a larger amount of network
equipment, and generally raises the cost of operating such a system,
particularly in rural areas. However, the costs of building-out our GSM 1800
network will be lessened by the fact that we intend to build our GSM 1800
network primarily to serve urban, densely populated areas and other areas of
high telephone usage, in which our GSM 900 network already features a high
density of base-stations and relatively small cell sizes. Calls will be switched
between our GSM 900 and 1800 networks to maximize capacity and efficiency, but
our customers will not notice any difference or interruption as calls are
switched between our networks.
We intend to selectively roll-out our GSM 1800 service. We commenced
operation of this service in March 2000 (the earliest date permitted under our
GSM 1800 license).
Transmission lines for GSM network connections between base-stations,
base-station controllers and Mobile switching centers have been leased by our
company from TPSA. In order to reduce dependence on TPSA, we have entered into a
contract with Ericsson to construct an SDH microwave backbone network. This SDH
microwave backbone network will connect the major centers served by our GSM
networks, and will reduce but not eliminate the need for leased lines from TPSA.
See "-- Interconnect Agreements." We expect that the initial phase of the
roll-out of the SDH microwave backbone network will be completed in the second
quarter of 2000.
Network Quality
Our network has been designed to provide comprehensive high-density
coverage in major urban centers within Poland. The high-density of coverage in
urban areas, which results from using cells of approximately one kilometer in
diameter as opposed to cells of approximately 30 kilometers in diameter in rural
areas, enables subscribers to receive and make wireless transmissions anywhere
within those urban areas, including inside buildings. We believe that our
ability to provide indoor reception and transmission in major urban areas is a
significant advantage in the Polish cellular telecommunications market. We also
believe that any focus on high-density coverage in urban areas at the early
stage of our network development has been more economical than attempting to
increase density of coverage in these locations at a later stage.
We regularly monitor congestion on our network and attempt to alleviate
congestion by adding base-stations where necessary. During 1998, we had an
average dropped call rate (the percentage of calls not completed or
involuntarily terminated because all circuits are busy or because access to the
network is unavailable measured between 8:00 a.m. and 10:00 p.m. Monday through
Friday) of less than 2%. The dropped call rate depends both on the performance
of our network and, to the extent a call is originated or terminated in another
network, on the performance of that other network. We are unable to accurately
estimate the dropped call rate for calls transferred from one of our mobile
switching centers to a wireline subscriber. The additional capacity granted
under the GSM 1800 license will further alleviate congestion on our network.
This additional capacity should decrease our dropped call rate.
We have been assigned six-digit telephone numbers with the prefixes 602,
604 and 606 and consequently, have the ability to generate approximately three
million numbers. See "-- The Licenses -- GSM 900 License Terms" and "-- GSM 1800
License Terms." We believe, therefore, that we have sufficient numbers to meet
anticipated subscriber demand. Moreover, we believe that additional telephone
numbers would be available if and when we need them. See "Regulation of the
Polish Telecommunications Industry."
SUPPLIERS
Ericsson and Siemens designed, manufactured, delivered, installed,
commissioned and prepared our GSM network, including our mobile switching
centers, base-stations and base-station controllers, operation support systems
and cross-connect systems equipment. These suppliers now provide maintenance and
repair services for our network, and we intend to utilize these suppliers,
together with Alcatel, to provide new equipment
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necessary for our GSM 1800 network and the completion of the final stages of our
GSM 900 network. We believe, however, that there are a number of other companies
capable of supplying us with GSM network equipment, given the compatibility and
interchangeability of equipment among different vendors ensured by GSM standard
specifications.
CELL SITE PLANNING
Cell site planning, which historically was carried out jointly by our
company and our suppliers, is now principally done by our company's engineers.
The design for network coverage is determined with the aid of a specialized
software package developed by DeTeMobil and we have entered into an agreement
with DeTeMobil governing our continued use of this software. As of December 31,
1999, we have entered into leases for 3,172 base-station sites.
NETWORK CONSTRUCTION
As of December 31, 1999, our GSM 900 network now covers 84.4% of Poland's
geography and 95% of Poland's population. We have established a project
management team that reviews the progress of the GSM 900 network build-out on a
monthly basis to ensure that the pace of the build-out is sufficient to meet the
requirements of our GSM 900 license. In addition, we and each of our suppliers
have entered into contracts of intent relating to network equipment purchases
for 1999 and a portion of 2000. These arrangements contemplate that the
suppliers will receive financial incentives for achieving certain targets
related to the schedule for the network build-out. See "Risk Factors -- Need to
Meet Requirements of Our Licenses."
The construction of our GSM 1800 network is underway and we commenced GSM
1800 operations in March 2000. There is only one requirement in the GSM 1800
license relating to achieving specified levels of population or geographic
coverage. Under the terms of the GSM 1800 License we must achieve combined
geographic coverage by our GSM 900 and 1800 network, taken together, of 90% by
June 2004. The GSM 900 license requires 84.9% GSM 900 geographic coverage by the
end of 2000. Since the achievement of required coverage is less pressing under
the GSM 1800 license, we intend to roll-out our GSM 1800 network selectively,
choosing areas most in need of the higher capacity afforded by such networks.
The costs of further construction of our networks will thus become primarily
"variable" costs rather than "fixed" costs, as decisions to expand will be
driven principally by increases in call volume, rather than the need to meet
license requirements.
MAINTENANCE OF THE NETWORK
Each of our supply agreements provides that the supplier is obligated to
provide maintenance, spare parts and relevant upgrades for the software and
hardware supplied under such supply agreements for a period of 15 years
following the date of commercial acceptance of the relevant component. Our
suppliers warrant their equipment for 24 months from the date of acceptance and
provide maintenance training to our employees. With respect to software, each
supplier is required to:
- take action to remedy any defect or malfunction in the software provided
within four hours of the occurrence of a defect or malfunction, or
reimburse us for the services of a third party;
- provide a help desk to support us;
- release upgrades or updates for its software to us; and
- cooperate with us on the management of release procedures for its
software.
With respect to hardware, each supplier is required to:
- make replacement parts available at market rates;
- repair and replace parts of the network pursuant to either a monthly
account with us or compensation on a case-by-case basis; and
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- make us aware of and offer to provide such enhancements, upgrades and
evolutionary improvements to hardware in the network.
THE LICENSES
GSM 900 License Terms
General. Following a competitive tender, on February 23, 1996, we received
a license granting us:
- a concession to provide telecommunications services according to
European telecommunications GSM standards in the 900 MHz frequency band;
- a permit to install and use GSM network equipment;
- an allocation of 37 channels within the 900 MHz frequency band; and
- an allocation of telephone numbers with the prefix 602 and 604.
Fees. We are required to pay to the Polish government a fee equal to the
Zloty equivalent of Euro 217,731,831 for the GSM concession. This fee is payable
in six installments with the first installment due upon the grant of the license
and one installment on each March 31 thereafter. We paid Euro 101,494,831 of
this fee in 1996, Euro 1,980,000 on March 31, 1997, Euro 8,107,000 on March 31,
1998, Euro 15,730,000 on March 31, 1999 and will be required to pay Euro
34,320,000 on March 31, 2000 and Euro 56,100,000 on March 31, 2001. See Notes 16
and 18 to the Financial Statements as of and for the nine months ended September
30, 1999 and 1998, and as of and for the three fiscal years ended December 31,
1998, 1997 and 1996, respectively. In addition, we are required to pay to the
Polish State Radiocommunication Agency an annual fee for each of the permit and
frequency allocation in an amount that is determined under the ordinance of the
Polish Ministry of Finance and the Polish Ministry of Communications. This
amount was set at PLN 2,368,000 for our first year of operation (following the
award of our GSM 900 license), PLN 3,872,000 for the second year, PLN 3,990,000
for the third year and PLN 4,500,000 for each of the following years.
In addition, we are required to pay an initial fee of PLN 500 for the
permit and frequency allocation for each of our base-stations and PLN 250 for
any changes in this permission. We are also obligated to pay a fixed annual fee
of PLN 160 for each of the channels used by each of our base-stations.
Term. The GSM 900 license was issued for a term of fifteen years and
provides that we may make an application to extend the term for an agreed period
one year prior to its expiration date. The GSM 900 license is not transferable.
Therefore, any transfer of our business would require a revocation and
reissuance of the GSM 900 license. In addition, the approval of the Polish
Ministry of Communications is required in the event that an acquisition of our
shares or any rights to our shares by a single entity would, together with any
shares or rights currently held by that entity, result in that entity having
rights or owning a percentage in excess of any of 10%, 25%, 33% or 50%.
Under the terms of the GSM 900 license, we are not entitled to request
additional frequency until five years after the commencement of commercial
operations and subject to compliance with the terms and conditions of the GSM
900 license. In November 1997, however, the Polish Ministry of Communications
allocated to us eight additional channels. See "Telecommunications Regulation"
and "Risk Factors -- Need to Meet Requirements of Our licenses."
License Conditions. The GSM 900 license is subject to a number of
commercial and technical conditions. While Polish law provides that the GSM 900
license may be revoked or limited in the event that we fail to meet any of these
conditions, we believe that we are currently in material compliance with all of
the GSM 900 license conditions.
The GSM 900 license requires us to meet certain coverage and technical
criteria, including a requirement that our dropped call rate not exceed 5%
during peak hours, and that we attain geographical coverage of 63.4%, 79.6%,
84.2% and 84.9% and population coverage of 73.1%, 90.1%, 94.8% and 95.6% by the
end of
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1997, 1998, 1999 and 2000, respectively. We have met our requirements for each
of the years ended 1997, 1998 and 1999.
The GSM 900 license requires us to provide certain emergency connections
free of charge and to provide certain priority services to Polish governmental
entities.
The GSM 900 license generally requires us to comply with certain
competition and anti-monopoly rules currently in force in Poland. The GSM 900
license also specifically prohibits us from entering into exclusive arrangements
with "service providers." We believe, however, that our dealers are not "service
providers" as that term is used in the GSM 900 license and, therefore, that our
exclusive contracts with our dealers do not constitute a violation of the GSM
900 license conditions. See "-- Distribution and Marketing."
In its original form, the GSM 900 license prohibited us from establishing
transmission links between elements of our GSM network and required us to lease
transmission lines from TPSA. In addition, the GSM 900 license prohibited us
from establishing transmission links between components of our network and the
TPSA network or other wireless networks. The GSM 900 license also prohibited any
form of interconnection between our network and other wireless networks
including wireless networks, outside Poland, without using TPSA's transmission
lines. On January 17, 1997, however, pursuant to a complaint from the Polish
Ombudsman, the Polish Supreme Administrative Court repealed these prohibitions
on the grounds that the Polish Minister of Communications had insufficiently
substantiated his rationale for imposing them. In response, the Polish Minister
of Communications issued a decision dated May 13, 1997, amending the GSM 900
license to permit us to install and use a transmission infrastructure to connect
the elements of our GSM network. We were still required to use transmission
lines leased from TPSA to interconnect each of our mobile switching centers and
to interconnect ours with the TPSA network, unless TPSA is unable to provide
such leased lines to us within one month following our request. Also, the
interconnection with other mobile telephony networks was permitted only through
our mobile switching centers, which meant in practice that we had to use leased
lines from TPSA to connect with other mobile telephony networks. On April 27,
1998, the Polish Supreme Administrative Court repealed these restrictions on the
grounds that the Polish Minister of Communications did not provide sufficient
reasons for its decision and on the grounds that the restrictions might be
incompatible with the competition provisions of the Europe Agreement dated
December 16, 1991. Pursuant to this judgment, we are free to connect components
of our network and to interconnect with other cellular providers in Poland
without the use of leased lines from TPSA. We are also free to lease lines from
other operators who can provide such service. The judgment also allows us to
build the SDH microwave backbone network.
We currently lease transmission lines from TPSA to interconnect the
elements of our GSM network. Tariffs for the lease of these transmission lines
are based on the distance between the elements of our GSM network and the length
and capacity of the relevant transmission line. The Polish Office for
Competition and Consumer Protection found these increases to be
anti-competitive. Pursuant to the interconnect decision, described below, we are
entitled to a 60% discount on TPSA's standard leased line tariffs and certain
additional incremental discounts. See "-- Interconnect Agreements." We may, in
appropriate circumstances, seek to lease transmission lines from third-parties
such as railway or electricity companies.
GSM 1800 License Terms
General. On August 11, 1999, we received a license granting us:
- a concession to provide telecommunications services according to
European telecommunications GSM/DCS standards in the 1800 MHz frequency
band;
- a permit to install and use GSM/DCS network equipment;
- an allocation of 48 channels within the 1800 MHz frequency band; and
- an allocation of telephone numbers with the prefix 606. This license
allows us to use these new 1800 MHz frequencies beginning March 1, 2000.
We have begun to install the necessary GSM/DCS equipment.
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Fees. We are required to pay to the Polish government a fee equal to the
Zloty equivalent of Euro 100,293,000 for the GSM/DCS concession, payable in four
installments. We paid Euro 50,146,500 of this fee in 1999, and we will be
required to pay Euro 16,715,500 on each of August 31, 2000, 2001 and 2002. See
Notes 16 and 18 to the Financial Statements as of and for the nine months ended
September 30, 1999 and 1998, and as of and for the fiscal three years ended
December 31, 1998, 1997 and 1996, respectively. In addition, we are required to
pay to the Polish State Radiocommunication Agency an annual fee for each of the
permit and frequency allocation in an amount that is determined under the
ordinance of the Polish Ministry of Finance and the Polish Ministry of
Communications. This amount has been set at PLN 3,072,000 for the first year of
license operations, PLN 3,648,000 for the second year, PLN 4,224,000 for the
third year and PLN 4,800,000 for each of the following years.
Term. The GSM 1800 license was issued for a term of fifteen years and
provides that we may make an application to extend the term for an agreed period
one year prior to its expiration date. The GSM 1800 license is not transferable.
Therefore, any transfer of our business would require a revocation and
reissuance of the GSM 1800 license. In addition, the approval of the Polish
Ministry of Communications is required in the event that an acquisition of our
shares or rights to acquire our shares by a single entity would, together with
any shares or rights currently held by that entity, result in that entity having
rights to an ownership percentage of our shares in excess of any of 10%, 25%,
33% or 50%.
License Conditions. The GSM 1800 license is subject to a number of
commercial and technical conditions. While Polish law provides that the GSM 1800
license may be revoked or limited in the event that we fail to meet any of these
conditions, we believe that we are currently in material compliance with all of
the GSM 1800 license conditions.
Similar to the GSM 900 license, the GSM 1800 license requires that we meet
certain coverage and technical criteria, including a requirement that our
dropped call rate not exceed 5% during peak hours and that we attain
geographical coverage combined with our 900 MHz and 1800 MHz frequencies of 90%
by July 2004.
The GSM 1800 license requires us to provide certain emergency connections
free of charge and to provide certain priority services to Polish governmental
entities.
The GSM 1800 license generally requires us to comply with certain
competition and anti-monopoly rules currently in force in Poland. The GSM 1800
license also specifically prohibits us from entering into exclusive arrangements
with service providers. We believe, however, that dealers are not service
providers as that term is used in the GSM 1800 license and, therefore, exclusive
contracts with dealers will not constitute a violation of the GSM 1800 license
conditions. See "-- Marketing and Distribution."
The GSM 1800 license prohibits us from establishing transmission links
between elements of our GSM network and requires us to lease transmission lines
from TPSA. In addition, the GSM 1800 license prohibits us from establishing
transmission links between components of our network and the TPSA network or
other cellular networks. The GSM 1800 license also prohibits any form of
interconnection between our network and other cellular networks including
cellular networks outside Poland, without using TPSA's transmission lines.
Similar provisions under the original GSM 900 license, however, were repealed by
the Polish Supreme Administrative Court on January 17, 1997 and on April 27,
1999. We anticipate that the Polish Ombudsman and the Supreme Administration
Court will find that these restrictions should be repealed, but we cannot be
certain.
We anticipate that we will lease transmission lines from TPSA to
interconnect the elements of our GSM 1800 network. Generally, tariffs for the
lease of these transmission lines are based on the distance between the elements
of the GSM network and the length and capacity of the relevant transmission
line. We are currently negotiating the tariff for leased transmission lines for
the 1800 MHz frequency with TPSA.
COMPETITION
We are one of three wireless communications providers in Poland providing
GSM mobile telecommunications services in both the 900 MHz and 1800 MHz
frequency band. We believe that the
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existing level of competition is likely to increase in all areas of the Polish
telecommunications market over the next few years, particularly in light of the
anticipated liberalization of the Polish domestic and international
long-distance markets in coming years. Increased competition, in the form of
both new entrants and existing operators that widen the scope of their
telecommunication activities, could force us and our competitors to take
measures that could raise subscriber acquisition costs or reduce our share of
net new subscriber additions.
We face competition primarily from Polkomtel (a joint venture between Tele
Danmark A.S., Vodafone AirTouch and certain Polish companies), and Centertel, (a
joint venture between TPSA and France Telecom Mobiles International) and
wireline telephone services. Polkomtel was awarded its GSM 900 license in
February 1996, and currently provides services under the trade name "Plus GSM."
Polkomtel was awarded its GSM 1800 license in September 1999. Polkomtel is
completing the process of building out its GSM 900 network. In November 1997,
the Polish Ministry of Communications awarded eight additional channels in the
900 MHz frequency band (which had previously been reserved for military use) to
each of us and Polkomtel.
Centertel provides analog and GSM 1800 digital wireless telecommunications
services in Poland. Centertel launched its analog service in June 1992 and as of
December 31, 1999, reported approximately 147,000 subscribers. Centertel's
analog network has the most coverage of any of the Polish mobile networks,
covering approximately 93% of the territory and 98% of the population. Centertel
announced that it intends to invest only in maintenance and any necessary
technical upgrades of the network. In March 1998, Centertel launched its GSM
1800 service and as of December 31, 1999, reported approximately 537,000
subscribers. The network is being constructed to cover the area designated by
the terms of Centertel's GSM 1800 license, which includes ten of Poland's
largest metropolitan areas and four arterial transport routes. As of December
31, 1999, Centertel claimed its network covered 29% of the territory of Poland
and approximately 42.5% of the population. Centertel has had a GSM 900 license
since July 1999. Centertel competes on price terms against other networks.
We also compete with wireline telecommunications providers in Poland,
principally TPSA, insofar as low wireline penetration rates and long waiting
times for telephone installation have encouraged consumers who are otherwise
unable to access wireline telephony to acquire mobile telecommunications
services. TPSA currently owns approximately 96% of Poland's existing fixed-line
telecommunications infrastructure and is the only entity within Poland that
provides domestic long-distance telecommunications services (although additional
domestic long-distance licenses may be issued in 2000) or is authorized to
provide international telecommunications services. Consequently, wireless
telecommunications operators are required to enter into interconnection
agreements with TPSA in order to complete calls made from or to receive calls
made to their networks. For more information, you should read "-- Interconnect
Agreements."
In October 1998, the Polish Ministry of Communications commenced the
privatization of TPSA with an initial public offering of 25% of the total number
of its outstanding shares. It has been announced that the government of Poland
intends to sell additional shares to a strategic investor. The privatization of
TPSA, including the investment in TPSA by a strategic investor, may result in
increased investment by TPSA in wireline telephone penetration (or wireless
telephone services through its investment in Centertel) or other
telecommunications technology and in increased services for TPSA subscribers,
potentially lessening demand for our services.
In addition to the privatization of TPSA, the government has furthered its
efforts to liberalize and increase competition in the telecommunications
industry in Poland by announcing its intention to auction at least three
additional domestic long-distance telephone licenses in 1999-2000, and an
additional international long-distance telephone license in 2003. Similar
liberalization in other countries suggests that Poland's liberalization may lead
to continued tariff re-balancing (increased local call rates) which would make
cellular service more price competitive with fixed-line service. No assurance
can be given, however, that these benefits will obtain as a result of
liberalization. However, the increase in competition in our market and any
potential investments by TPSA in wireline telephone penetration will result in
more overall telephone lines in Poland, which in turn should increase our
overall subscriber usage.
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INTERCONNECT AGREEMENTS
Like other wireless operators, our wireless network requires
interconnection with a fixed-line network to enable subscribers to initiate and
receive calls to and from persons using fixed-line networks or other cellular
networks. We therefore require a switched access arrangement with TPSA,
Polkomtel and Centertel. The terms of these arrangements, particularly with
TPSA, are important to our financial results.
TPSA is the only entity in Poland currently permitted to provide domestic
long-distance and international telecommunications services and is Poland's
largest provider of fixed-line telecommunications services. Prior to May 22,
1997, we had operated with TPSA on a bill and keep system for domestic calls on
the basis of an agreement. On May 22, 1997, the Polish Ministry of
Communications issued a decision establishing a system of interconnect payments
whereby we would pay TPSA for calls terminating in TPSA's network and TPSA would
pay us for calls terminating in our network. In addition, this interconnect
decision reduced the proportion of TPSA's tariff payable by us in the case of
international calls to 67%. While we subsequently settled interconnection
charges between us and TPSA on the basis of the interconnect decision for all
periods since the interconnect decision was issued, TPSA thereafter appealed the
interconnect decision to the Polish Supreme Administrative Court. While this
appeal has not been withdrawn, we nevertheless entered into an agreement on the
terms and conditions of co-operation and mutual interconnection on December 9,
1998, commonly referred to as the "framework agreement," with TPSA pursuant to
which TPSA has paid us an amount of PLN 6.6 million for interconnect charges
covering the period from the beginning of our commercial activity in September
1996 to May 21, 1997. In addition to acknowledging the interconnect decision,
the framework agreement establishes a cooperative environment between us and
TPSA with respect to communicating in case of network problems and future
negotiations in the event there are significant market changes.
We have also entered into a contract with Ericsson to construct a microwave
backbone transmission network in order to minimize our use of leased lines. We
believe that, when completed, the backbone network will reduce cost of sales and
our dependence on external suppliers. Construction of the backbone network began
in November 1998, and the initial phase of construction is expected to be
completed by March 2000. The backbone transmission network will reduce but not
eliminate the need for leased lines and interconnection fees, as the backbone
transmission network will not offer the complete geographic coverage of Poland
that TPSA lines do, but rather will cover connections between areas of major
population density and high call volume. Further, we will have to continue to
interconnect with TPSA to provide international coverage. In addition, we
successfully petitioned to amend our GSM 900 license in May 1997, so that we are
no longer required to utilize lines leased from TPSA to conduct GSM 900
operations, but our GSM 1800 license requires us to utilize lines leased from
TPSA for our GSM 1800 operations. We have petitioned for an amendment to our GSM
1800 license similar to the amendment we obtained for our GSM 900 license.
Although we believe our chances to obtain such an amendment are good, no
assurance can be given that such an amendment will be obtained. Second, we have
agreed with Netia Telekom to establish interconnect points for our GSM 900
network in three major cities in Poland by the end of the second quarter of
2000.
We entered into a further interconnect agreement with Polkomtel on December
17, 1997, which provides Polkomtel subscribers direct access to our network and
our subscribers direct access to the Polkomtel's network on a symmetric billing
basis, whereby we and Polkomtel pay each other an agreed upon charge for the
time our respective subscribers use the other network.
EMPLOYEES
As of December 31, 1999, we had 2,606 employees, including 1,523 in sales,
marketing and strategy, 667 in network operations and 416 in finance and
administration. Eleven employees are expatriates seconded from either DeTeMobil
or MediaOne. Employees, other than seconded employees, enter into an initial
three-month employment contract with us. After termination of this initial
contract, employees enter into an employment contract of indefinite term subject
to termination upon a stated notice period.
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Our employees are not covered by any collective bargaining agreements. We
do not have any history of strikes or work-stoppages and no material
labor-related claims are pending. We believe that relations with our employees
are good.
We do not currently have a pension plan or stock option plan, but the
introduction of a pension plan is under consideration.
PROPERTIES
Our principal properties consist of telecommunications network
infrastructure and related buildings throughout Poland. We lease the majority of
our base-station sites for a minimum period of five to ten years. We have a
financial lease for our main office space in Warsaw and operating leases for our
office space in Katowice, Poznan, Gdansk and Krakow. We also lease each of our
retail stores.
LEGAL PROCEEDINGS
Except for TPSA's appeal of the interconnect decision discussed in
"Interconnect Agreements," we are not party to any material pending legal
proceedings.
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REGULATION OF THE POLISH TELECOMMUNICATIONS INDUSTRY
For your general information, set forth below is a summary description of
the telecommunications regulatory framework in Poland. This summary does not
restate Polish laws and regulations in their entirety and is not intended as a
comprehensive discussion of all laws, regulations, rules, legal interpretations
and legal enforcement practices that may be relevant to our business.
Since the early 1990s, Poland has been in the process of liberalizing its
telecommunications market. The Polish regulatory environment for
telecommunications is expected to undergo further change as a result of Poland's
current and proposed commitments to the European Union. Poland applied for
membership in the European Union in 1994 and negotiations on admission continue.
As Poland progresses towards European Union membership, it will be required to
accelerate the process of liberalization and harmonize its telecommunications
law and regulations with the European Union directives and regulations. The
European Union has issued directives establishing the basic principles of
liberalization of the European Union telecommunications market, which we believe
may be indicative of Poland's future regulatory regime as the country prepares
to join the European Union by 2003. For more information, you should read "--
Regulation of the Telecommunications Industry in the European Union."
Until the adoption of the Polish Telecommunications Act of November 23,
1990 (the "Communications Act"), the Polish state was the exclusive provider of
local and long-distance telecommunications service. In 1992, a government-owned
joint stock company, Telekomunikacja Polska S.A. or TPSA, was formed and took
over the telecommunications assets and activities of the Polish state. Although
the Communications Act provided the framework for the licensing of operators
other than TPSA to provide a broad range of telecommunications services,
licenses for important telecommunications activities have only been granted
gradually. Wireless was the first market to be opened to private operators.
TPSA still dominates the Polish telecommunications market, and owns
approximately 95% of Poland's nationwide fixed-line telecommunications
infrastructure. TPSA's exemption from the requirement that it obtain, maintain
and observe the conditions of the licenses necessary to conduct its activities.
The proposed Telecommunications Bill will eliminate TPSA's exemption from the
requirement that it obtain, maintain and observe the conditions of the licenses
necessary to conduct its activities. The proposed Bill, however, specifies that
TPSA initially will be granted long-term licenses covering all of its current
activities.
TPSA currently uses its revenue from domestic and international
long-distance services to subsidize its below-market local tariffs. The Polish
Ministry of Communications is requiring TPSA to eliminate gradually such
cross-subsidization through tariff rebalancing by 2003.
THE COMMUNICATIONS ACT
Telecommunications activity in Poland is regulated by the Polish Ministry
of Communications pursuant to the Communications Act. The Communications Act
removed the state-maintained monopoly on domestic telecommunications services in
Poland and authorized the demerger of the state post and telecommunications
entity in 1991 to form TPSA, the national telecommunications carrier.
In an effort to further harmonize Polish and European Union regulation, in
February 1999 the Polish Council of Ministers submitted a Telecommunications
Bill to the lower house of Polish Parliament. The Bill is currently under
legislative review in a Parliamentary Subcommittee. Although subject to future
revision, the proposed Telecommunications Bill provides for significant
regulatory reforms designed to increase competition, including:
- the establishment of an independent governmental supervisory agency that
will regulate telecommunications with the Polish Ministry of
Communications;
- the revision of the licensing regime, eliminating tenders and high
licensing fees except for those activities for which frequency or
numbering resources are limited;
- the establishment of mandatory access by operators to the networks of
other operators under a new interconnection and leased-line framework;
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- the elimination of all restrictions on foreign ownership of
telecommunications assets and licenses, however, until 31 December 2002,
no license for the provision of international telephony services will be
granted to a company whose shares are owned by foreign entities; and
- the establishment of a universal service requirement under which
operators must contribute to the provision of basic telephony service to
the population of each region.
The Telecommunications Bill has undergone, and still may undergo,
substantial revision before its adoption. It is expected generally to come into
force 12 months after its promulgation, although some provisions (e.g. relating
to the independent regulatory body) should come into force earlier. Before the
Telecommunications Bill is promulgated, it will have to be approved by the lower
house and upper house of Parliament, signed by the President of the Republic of
Poland and promulgated in the Official Journal of Laws (Dziennik Ustaw). The
Telecommunications Bill is expected to be approved by the lower house of
Parliament in the first half of 2000, although no assurance in this respect can
be given.
REGULATORY BODIES
The telecommunications industry in Poland is currently regulated by the
Polish Ministry of Communications, which has the power under the Communications
Act to regulate, among other things, licensing, spectrum management, numbering,
interconnection and prices. In March 1997, the government transferred its
ownership interest in TPSA from the Polish Ministry of Communications to the
Polish Ministry of the State Treasury to introduce greater separation between
the regulator and the incumbent service provider.
The Polish State Radiocommunication Agency is the agency of the Polish
Ministry of Communications established to plan and co-ordinate the use of radio
frequencies and to allocate frequencies to users and is authorized by the Polish
Ministry of Communications to issue permits for the installation and utilization
of mobile network equipment. The Polish State Radiocommunications Agency is also
entrusted with monitoring, directly or through local agencies, compliance of
operators.
The Telecommunications Bill, if adopted in its current form, will establish
a new independent agency, the Office for Telecommunications Regulation, headed
by its president, who will be appointed by the Prime Minister for a term of five
years. In accordance with Poland's undertakings to the European Union and the
World Trade Organization, the Telecommunications Bill provides for the transfer
of all current licensing, monitoring and enforcement authorities of the Polish
Minister of Communications to the Polish Office for Telecommunications
Regulation. The Polish Minister of Communications will retain, inter alia, the
authority to establish standards with respect to universal service concept and
procedures with respect to their enforcement and to set out guidelines for
interconnection and leased lines.
The Polish antitrust regulatory body, the Office for Competition and
Consumer Protections, regulates the activities of telecommunications operators
including TPSA in respect of monopolistic practices. They investigate abuses of
dominant market position and anti-competitive business arrangements, with the
power to impose financial penalties.
LICENSING FRAMEWORK
The term "license" covers telecommunications permits and concessions.
Permits allow the holder to install and operate a telecommunications network in
Poland and are granted for a nominal fee upon the applicant's satisfaction of
technical and safety criteria. Concessions allow the holder to provide
particular telecommunications services and are awarded on a discretionary basis
based upon the evaluation of a broad range of criteria, usually through a
competitive tender process which may impose investment obligations and
significant licensing fees. In order to provide mobile telephony services in
Poland, an operator must hold a telecommunications permit and concession.
TPSA, however, is exempted from this requirement and its activities are
effectively authorized and regulated under the Communications Act. In addition
to the ability to provide local and long-distance wireline
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domestic services, the scope of TPSA's authorization currently extends to a
monopoly on the provision of international services.
Under the Communications Act, licenses may only be granted to Polish
entities, with restrictions on foreign ownership of Polish licensees. In the
case of Polish cellular operators, foreign entities may not own more than 49% of
the licensee's share capital and such licensee's charter must provide that:
- voting rights of foreign entities and entities controlled by foreign
entities are limited to no more than 49% of total voting rights; and
- Polish citizens residing in Poland constitute a majority of the members
of the management and supervisory boards.
The proposed Telecommunications Bill, if adopted in its current form, will
eliminate all restrictions on foreign control of Polish communications operators
except with respect to the provision of international long-distance services.
In addition to licenses and permits, mobile telecommunications operators
are required to obtain an allocation of radio frequency from the Polish State
Radiocommunications Agency. This Agency has the right to decrease the number of
radio frequencies that a licensee is entitled to use if the licensee fails to
make economic use of the frequencies. Alternatively, the licensee may seek
additional radio frequencies if the licensee is in compliance with its license
and can demonstrate a need. The discretionary award of additional frequencies
and the determination of related charges are decided in line with the
Communications Act. In particular, the Polish State Radiocommunications Agency
may refuse a request to assign frequencies due to a lack of available frequency,
or to a risk of interference with other frequencies. See "Our Business -- The
Licenses."
Although the Communications Act does not address license renewal, the
licenses generally contain a provision allowing application for renewal to be
made one year prior to the expiration date of the relevant license. Our licenses
allow for an application for renewal to be made one year prior to their
expiration.
Our licenses set forth certain rights (such as frequency allocation),
certain discretionary rights (such as the ability to request additional
telephone numbers and radio frequencies) and certain obligations (such as
network coverage requirements and compliance with technical standards,
prohibitions on anti-competitive practices, foreign ownership restrictions,
obligations to obtain the approval of the Polish Ministry of Communications for
certain changes in shareholdings and requirements for the provision of pricing
information to the Polish Ministry of Communications). See "Our Business -- The
Licenses." In addition, operators are required to pay an annual frequency
utilization fee as well as an annual fee for the use of telecommunications
lines, equipment and network. The level of such fees are determined jointly by
the Polish Ministry of Communications and the Polish Ministry of Finance. See
"Our Business -- The Licenses." Public telecommunications operators, including
us, Polkomtel, Centertel and TPSA, also are subject to additional requirements
such as the publication of information in respect of services and prices, and an
obligation to provide services to subscribers in compliance with standards
established in conjunction with the Polish Ministry of Communications.
The Polish Ministry of Communications has wide powers to revoke or limit
licenses, although before any decision to revoke or limit a license may be made,
the licensee must be given the opportunity to take remedial steps. Circumstances
in which the Ministry must revoke a license include breach by the licensee of
the Communications Act (including by reason of failure to comply with foreign
ownership restrictions) or the conditions of its license, failure to fulfil
build obligations or to pay annual fees, changes in the capital structure of the
licensee that contravene Polish law in respect of foreign-owned companies or the
requirement to obtain consent from the Ministry of Communications for the
acquisition of specified percentages of shares in the licensee. In addition, the
Ministry of Communications has discretion to revoke or limit a license in cases
where another entity acquires direct or indirect control over the licensed
activity or the licensee has been wound-up. In the event of non-compliance, the
Ministry also may limit a license in respect of the permitted services that a
licensee may offer.
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The Telecommunications Bill, if adopted in its current form, will establish
a new simplified licensing regime. The construction, operation or provision of
service to the public through any telecommunications network will require a
"license." Additional permits will only be required for the use of additional
frequencies and equipment incidental to the operation of the network. License
fees will not be more than the cost of issuing the license, except when the
limited number of frequencies or telephone numbers available prevents the issue
of licenses to all interested parties. In such cases, the Polish Office for
Telecommunications Regulation will conduct a competitive tender for the license.
INTERCONNECTION AND LEASED LINES
All operators of public networks in Poland are obligated by the
Communications Act to provide to other operators interconnection facilities, the
terms of which must be specified in interconnection agreements. TPSA is
currently the only entity licensed to provide domestic long-distance and
international telephone services in Poland. Accordingly, all other telephone
operators in Poland must access the TPSA network in order to send or receive
calls from outside their licensed territory. In order to avoid abuse by TPSA of
its effective monopoly position, functional sharing guidelines have been issued
by the Polish Ministry of Communications governing the relationship between TPSA
and the private local operators. For more information, you should read "-- The
Communications Act."
Our GSM 900 license, as amended, allows us to connect components of our
network and to interconnect with other cellular providers in Poland without the
use of TPSA's leased lines. We are also free to build the SDH microwave backbone
network as its construction will not breach the provisions relating to
long-distance services of the Communications Act.
TARIFFS AND PRICE REGULATION
A licensee may determine the prices charged to its subscribers in
accordance with the provisions of the Communications Law, but is obligated to
keep the Polish Ministry of Communications informed of the tariffs, rates and
fees which it charges and to provide certain emergency services free of charge.
The Ministry of Communications may, however, set maximum charges for all
operators for the provision of telecommunications services of universal
character, although to date it has not done so. In addition, public
telecommunications operators are required to publish their domestic and
international tariffs. Tariffs of all operators are also subject to Polish
antitrust rules, which prohibit activities such as price fixing, abuse of
dominant position and predatory pricing.
REGULATION OF THE TELECOMMUNICATIONS INDUSTRY IN THE EUROPEAN UNION
In 1997, the European Union issued a positive opinion regarding Poland's
application for admission, with membership contemplated at the earliest for
2003. Accordingly, Poland has moved to liberalize its telecommunications regime
in order to harmonize it with European Union requirements.
The European Union has adopted a number of directives that are intended to
harmonize telecommunication technical interface standards and related approval
procedures, the licensing of telecommunications services and other related
issues affecting market access. Pursuant to these services directives, member
states are obliged to withdraw special and exclusive rights for
telecommunications services other than basic telephone services (such services
include data services, services for closed-user groups and value-added
services). Satellite and mobile services have also been brought within the scope
of the services directives. It is likely that Poland will be required to conform
with its legislation prior to accession to the European Union, and accordingly
will abolish foreign ownership restrictions in respect of European Union
nationals seeking to provide such services. TPSA's current legal monopoly on
international services and de facto monopoly on domestic long-distance would
also be abolished.
Under a 1996 amendment to these services directives, voice telephony
service was due to be liberalized in most European Union member states by
January 1, 1998. The most recent amendment to the services directives also
provides for the liberalization in the European Union of infrastructure
provision and use. As of July l, 1996, European Union member states were
obligated to remove restrictions on the provision and use
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of so-called alternative infrastructure (e.g., networks owned by utility and
cable television companies). By January l, 1998, all further restrictions on
infrastructure were required to be lifted. Deferments similar to those granted
for voice telephony services have also been granted in this area.
In addition to the above measures, which are largely based on European
Union competition rules, an important component of European Union law and policy
in the telecommunications sector consists of so-called "Open Network Provision"
rules. Essentially, these rules seek to ensure that dominant public
telecommunications operators grant new entrants access to their networks on
non-discriminatory terms and conditions in accordance with a minimum set of
technical characteristics and at cost-oriented tariffs. To date, the European
Union has adopted legally binding rules in this area for the supply by
telecommunications operators of leased circuits, voice services and
interconnection. Such legislation is considered by the European Commission to be
a priority for early adoption by Poland and the other states applying for
European Union membership. At least as a political matter, pre-accession
adoption of European Union telecommunications rules by Poland would also improve
its position as a candidate for European Union membership. As referred to above,
Poland has issued guidelines for reforms to telecommunications legislation which
would improve alignment with European Union rules. However, these guidelines do
not fully comply with all European Union principles. The precise scope of, and
timetable for, liberalization may be the subject of detailed negotiations with
the European Commission during the process leading up to Poland's eventual
accession to the European Union.
European Union rules are designed to ensure that basic telecommunications
services are available to all consumers. Specifically, the dominant local
telephony operator in each region is required to provide basic services to all
users at an affordable cost and must also fulfill various other obligations that
serve special policy objectives. Other telecommunications operators may also be
required to contribute financially, especially to the provision of such
services. Thus, if the Polish telecommunications law is harmonized with European
Union law and policy, the Polish telecommunications operators will be affected
by such obligations. The Telecommunications Bill contains provisions designed to
implement a similar public service requirement in Poland, which may impose such
obligations on telephony operators well in advance of Polish European Union
membership.
The European Union is also taking steps to harmonize numbering systems.
Existing European Union legislation requires national numbering plans to be
controlled by independent national regulators, who must ensure that numbers are
allocated in an objective and non-discriminatory manner. The emerging European
Union initiatives on the question of Europe-wide numbering are not yet legally
binding, but are likely to impact future numbering in Poland.
The European Commission granted Spain, Portugal, Ireland and Greece a
transitional period during which these countries were permitted to conform
aspects of their national telecommunications regulations to European Union
norms. Although a maximum of five years was originally envisioned as the
additional transitional period, the European Commission decided on an individual
assessment of the situation in each member state. Pursuant to such assessments,
shorter periods were established, including a three year transition period for
Greece, a two year period for Ireland and Portugal and an 11 month period for
Spain. Luxembourg, on account of its "very small network," was permitted a
deferment of seven months. The current government of Poland has stated that it
will not request such a transitional period. However, Poland would probably be
in a position to justify a request for a transitional period using similar
arguments to those employed by these European Union member states.
The Committee for European Union Integration, a governmental body under the
Prime Minister of Poland that advises the government on the process of European
Union integration, has stated its belief that the Telecommunications Bill, in
its present form, implements all mandatory European Union regulation on
telecommunications, with one exception. This exception is the Bill's prohibition
of direct foreign ownership of equity of a Polish international long-distance
license holder. It is not certain that the Telecommunication Bill will be
adopted in its current form, or that the European Union and its regulatory
bodies and courts will agree that the draft Telecommunication Bill implements
all mandatory European Union regulations in the
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telecommunications sphere. Therefore, additional legislation may have to be
adopted in order to conform Polish law with European Union norms.
INTERNATIONAL REGULATION OF TELECOMMUNICATIONS
Poland became a member of the World Trade Organization on July 1, 1995, and
is a signatory of the General Agreement on Trade in Services. Pursuant to the
negotiations on basic telecommunications, which ended on February 15, 1997,
Poland has committed, among other things, to grant independent
telecommunications providers access to international public voice services and
facilities and mobile satellite services by 2003. Poland's commitment to provide
access to cellular mobile telecommunications services is subject to use of
TPSA's infrastructure until 2003, except to the extent that TPSA is unable to
establish such connections. Poland has also accepted the World Trade
Organization's regulatory principles relating to competitive safeguards to
prevent anticompetitive and discriminatory measures by major service providers
and network operators.
Poland is also a member of the International Telecommunications Union. This
group regulates international accounting rates that determine the inter-operator
payments for the handling of international telephone calls. The basis of
calculation of these rates is currently the subject of review by them,
particularly in light of disparities between rates charged and the actual costs
to operators of handling calls.
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MANAGEMENT
SUPERVISORY BOARD
Set forth below is certain biographical information concerning the current
members of the Supervisory Board:
<TABLE>
<CAPTION>
NAME APPOINTED BY
- ---- ------------
<S> <C>
Piotr Mroczkowski (Chairman)................................ Elektrim
Moritz Gerke (Deputy Chairman).............................. DeTeMobil
Jacek Walczykowski (Secretary).............................. Elektrim
Jan Kolodziejczak........................................... Elektrim
Steve Boyd.................................................. MediaOne
Michael Gunther............................................. DeTeMobil
William "Bill" Norris....................................... MediaOne
Jan Waga.................................................... Kulczyk Holding
Andrzej Wojcik.............................................. BRE
</TABLE>
Piotr Mroczkowski is the Vice-President of the Management Board and Chief
Operating Officer of Elektrim S.A. Additionally, Mr. Mroczkowski is the Chairman
of our Supervisory Board and the Supervisory Boards of Mostostal Warszawa S.A.,
Regionalne Sieci Telekomunikacyjne EL-NET S.A., Telefonia Regionalna Sp. z o.o.;
Deputy Chairman of the Supervisory Boards of Elektrim-Volt S.A., Elektrim-
Telekomunikacja Sp. z o.o., and MPTE "Energia" S.A.; and a member of the
Supervisory Boards of Elektrim-Motor S.A., Elektrim-Energetyka S.A., Elektrim
Kable Polskie S.A., Elester S.A., VII NFI im., Kazimierza Wielkiego and Central
European Growth Fund plc. Mr. Mroczkowski holds a master's degree and Ph.D. in
economics and joined Elektrim in 1986. He served until 1992 in various positions
starting with Section Manager and progressing to Deputy Financial Director in
1991. Mr. Mroczkowski rejoined Elektrim in 1993 as Deputy Financial Director. In
1996, he became Vice-President of the Management Board and Chief Financial
Officer and in 1999, he assumed his current position.
Moritz Gerke has been the Senior Executive Director and Head of the Central
and Eastern European and Middle Eastern Regions of DeTeMobil since 1995. Prior
to his current position, Mr. Gerke worked for Marcam GmbH as the General Manager
of Business Development Japan from 1994 to 1995, and as the Managing Director of
the Central and Eastern European Region from 1991 to 1995. Additionally, he held
various positions with HP GmbH from 1982 to 1990. Mr. Gerke has a master's
degree in electrical engineering. He also is a member of the Supervisory Boards
for Matav RT (Hungary), Magyarcom GmbH (Germany), Barak (Israel), Dial (Israel),
Radiomobil (Czech Republic), Cmobil (Netherlands), and Detesat (Germany).
Jacek Walczykowski is General Legal Counsel and Deputy General Director of
Elektrim S.A. and is the Secretary to the Supervisory Board. He holds a master's
degree in law and was in legal practice from 1979 to 1999. Mr. Walczykowski is
also a member of the Supervisory Boards of Mostostal Warszawa S.A., Elektrim
Kable Polskie S.A., Elektrim Motor S.A. and Penetrator S.A., and is the
President of the Management Board of Telco.
Jan Kolodziejczak is the Chairman of the Supervisory Board for Elektrim
S.A. and since 1993 has been Vice Chairman of the Supervisory Board of Cimet
S.A. He holds a master's degree in engineering.
Steve Boyd is the Executive Vice-President of European Wireless Operations
for MediaOne International. Mr. Boyd joined US West, the former owner of
MediaOne, in 1989 where he has held a variety of positions. Some of these
included the President and CEO of US West New Vector Group (1997-1998), the
President and CEO of US West Dex (1995-1997), Vice-President of Finance and
Chief Financial Officer of US West Marketing Resources, and Vice President of
Wireless Business Strategy and Development for US West, Inc (1992-1994). Prior
to US West, Mr. Boyd worked for Booz, Allen & Hamiltion, Inc., AT&T and was
President and Co-founder of Network Plus, Inc. Mr. Boyd has a bachelor's degree
in civil engineering and a master's degree in business administration, both from
Brigham Young University.
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Michal Gunther has been the Chief Financial Officer of Deutsche Telekom
Mobil Net GmbH in Germany since October 1998. Previously, Mr. Gunther served as
the Chief Financial Officer of the Business Customer Division of Deutsche
Telecom AG from January 1996 to October 1998, and the Chief Financial Officer of
Deutsche Telekom Systems GmbH from April 1994 to January 1996. Mr. Gunther holds
a degree in business administration from the University of Hamburg.
Additionally, Mr. Gunther is a member of the Supervisory Boards for One2One
(UK), Max Mobil (Austria) and RadioMobil (Czech Republic).
William "Bill" Norris is the Chief Financial Officer of the European
Wireless Group of MediaOne International. Mr. Norris has worked in the start-up
and growth of MediaOne and former US West International wireless businesses
since 1990. Prior to joining MediaOne, Mr. Norris was the Chief Financial
Officer of Aweida Systems and Vice President of Wells Fargo Leasing Corporation.
He holds a bachelor's degree in business administration with an accounting
emphasis from the University of Denver (1975), and a master's of business
administration with a finance emphasis from the University of Pennsylvania
(1977). Mr. Norris also serves on the Supervisory Boards of Westel 900
(Hungary), Delta Telecom (Russia), and the Russian Telecommunications
Development Corporation.
Jan Waga has served on the Supervisory Board since 1996, and was appointed
by Kulczyk Holding, a former minority shareholder. Mr. Waga is Chairman of the
Management Board of EuroAgro Centrum S.A., a holding company that invests in the
privitization of Polish state entities. He also serves on the Supervisory Board
of several other Polish companies, including Kulczyk Holding and Towarzystwo
Ubezpieczen i Reasekuracji "Warta" S.A.
Andrzej Wojcik has served on the Supervisory Board since 1996, and was
appointed by Bank Rozwoju Eksportu S.A., a former minority shareholder. Mr.
Wojcik is the Vice-President of the Management Board for Bank Rozwoju Eksportu
S.A. and joined the bank in 1991. Formerly, he was the Secretary of State in the
Polish Ministry of Foreign Economic Relations. Mr. Wojcik is a graduate of
Warsaw University and has a master's of economics from the Central School of
Planning and Statistics in Warsaw.
MANAGEMENT BOARD
Set forth below is certain biographical information concerning the current
members of the Management Board:
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Bogusffiaw Kuffiakowski.................................. Director General
Wojciech Ploski.......................................... Director of Strategy, Marketing & Sales
Wilhelm Stueckemann...................................... Director of Network Operations
Stanisffiaw Majewski..................................... Director of Finance
Ryszard Pospieszynski.................................... Director of Administration
</TABLE>
Bogusffiaw Kuffiakowski is our Director General and was appointed to the
Management Board by Elektrim in September 1999. Mr. Kuffiakowski formerly held
the internal positions of Director of Customer Care, and most recently, Chief
Strategist. Before joining us, he worked as Marketing Director for SAP Polska
and Marketing Consultant for Coca-Cola, New York. Mr. Kuffiakowski is a 1990
graduate of Maria Curie Sklodowska University (Poland) with a master's degree of
law, a 1995 graduate from New York State University (USA) with a master's degree
of business administration, and a 1999 graduate of Technical University Delft
(The Netherlands) with a master's degree of business telecommunications.
Wojciech Ploski began working for us in May 1996 as the Deputy Director of
Marketing (Product and Logistics). In September 1997, he assumed the position of
Director of Logistics and Sales. Mr. Ploski was one of the main developers of
our direct, indirect and retail sales network and the purchasing department.
Prior to joining us, Mr. Ploski worked for the Curtis Company (television
manufacturer) for ten years and held a variety of positions, including the
Executive Director of the television factory in Mlawa and the Commercial
Director of Curtis International. Mr. Ploski holds a degree from the Warsaw
University of Technology, Telecommunications Department.
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<PAGE> 71
Karim Khoja is our Director of Strategy, Marketing & Sales and was
appointed to the Management Board by MediaOne in 1996. Formerly, Mr. Khoja
served as President and Chief Executive Officer of Mobilink, a nationwide GSM
cellular company in Pakistan, from April 1995 to August 1996, and served as
Sales and Marketing Director of Spectronics Microsystems Ltd., in Cambridge,
England from March 1993 to April 1995. He has a management science degree in
biochemistry from the University of London and an Executive MBA from Harvard
University.
Wilhelm Stueckemann is our Director of Network Operations and was appointed
to the Management Board by DeTeMobil in 1996. Mr. Stueckemann has held a variety
of positions with DeTeMobil, mainly in the development of GSM businesses and the
establishment of a team of engineers responsible for the D-1 network in Germany.
Mr. Stueckemann studied electrical engineering in Bielefeld.
Stanisffiaw Majewski is our Director of Finance and was appointed to the
Management Board by Elektrim in September 1999. Mr. Majewski was formerly the
Finance Director and Associate Comptroller with Procter & Gamble, Polska,
Baltics and Belarus, where he was employed for over nine years. Prior to Procter
& Gamble, he held positions as Finance Director at OMC Poll Ltd. (medical
distributor) and Zrzeszenie Przemysffiu Ciagnikowego Ursus (agricultural
equipment manufacturer). Mr. Majewski holds degrees in economics from the
University of odz (1973); in production and management systems, and marketing
and market research from the Central School of Planning and Statistics (1982 and
1984, respectively); and in international business from the University of
Bristol, UK (1997); and an Executive MBA from Ecole Nationale des Ponts et
Chaussees -- France (1998). Additionally, Mr Majewski is a Chartered Accountant
with auditing licenses for both industrial and trade companies, and has his
Certification for Supervisory Boards of State Companies in Poland.
Ryszard Pospieszynski is our Director of Administration and was appointed
by Elektrim to the Management Board in 1996. Previously, Mr. Pospieszynski
served as Director General of PTK, a cable television company from 1994 to 1996,
President of the Board of Elektrim TV from 1992 to 1994, Chairman of FATA Ltd.,
and the General Director of PHZ Film Polski from 1981 to 1989. He studied
economics, specializing in foreign trade from 1989 to 1992.
REMUNERATION OF DIRECTORS
For the year ended December 31, 1999, we paid an aggregate of PLN 6,462,315
to the members of our Supervisory Board and the Management Board, including
compensation for salary, bonuses and pension plans. In addition, some of the
members of the Management Board were paid by the respective shareholders who
have seconded them to us. We have reimbursed those shareholders for those
payments in the total amount of PLN 3,034,844 for the year ended December 31,
1999.
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<PAGE> 72
SHAREHOLDERS
The following table sets forth information regarding the ownership of our
ordinary shares. As of the date of this prospectus, we had 471,000 shares
outstanding.
<TABLE>
<CAPTION>
NUMBERS OF SHARES PERCENTAGE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
- ------------------------------------ ------------------ --------------------
<S> <C> <C>
Elektrim Telekomunikacja Sp. z o.o.(1).................... 226,079 47.9998%
Panska 77/79
00-834 Warszawa
DeTeMobil Deutsche Telekom MobilNet GmBH.................. 105,975 22.5%
Landgrabenweg 151
53227 Bonn Germany
MediaOne International B.V.(2)............................ 105,975 22.5%
Foppingadreef 20-22
BS Amsterdam
The Netherlands
Polpager Sp. z o.o........................................ 18,840 4.0%
ul. Zurawia 24/4
00-515 Warsaw, Poland
Elektrim Autoinvest S.A.(3)............................... 5,181 1.1%
ul. Panska 85
00-834 Warsaw, Poland
Carcom WARSZAWA Sp. z o.o.(4)............................. 8,949 1.9%
Ul. Krucza 16/22
00-526 Warsaw, Poland
Elektrim S.A.............................................. 1 0.0002%
Panska 77/79
00-834 Warsaw
</TABLE>
- ---------------
(1) Elektrim S.A. owns 51% and Vivendi S.A. (a French telecommunications
company) owns 49% of the outstanding capital of Elektrim Telekomunikacja Sp.
z o.o..
(2) MediaOne Group, Inc. has entered into an agreement with Deutsche Telekom to
sell MediaOne International B.V. which holds these shares.
(3) Elektrim S.A. owns 45% and has 51% management control of the outstanding
capital of Elektrim Autoinvest S.A.
(4) Elektrim S.A. owns 100% of the outstanding capital of Carcom WARSZAWA Sp. z
o.o.
In August 1999, Elektrim announced that it had acquired an additional 15.8%
of our shares for a purchase price of US$ 679.4 million. Prior to August 1999,
Elektrim owned 34.1% of our shares. Elektrim also holds a 45.0% interest in
Elektrim Autoinvest, which holds an additional 1.1% of our shares and is
believed to be controlled by Elektrim. DeTeMobil is disputing the transfer on
our share registry books of a portion (representing approximately 3.0% of our
shares) of Elektrim's announced acquisition. DeTeMobil sought an injunction to
prevent such transfer on our registry books in the Warsaw Regional Court, but
the Court denied the injunction. DeTeMobil has announced that it will appeal
this decision. DeTeMobil also announced in October the commencement of an
arbitration claim (at the International Arbitration Court in Vienna) against
Elektrim and certain smaller shareholders. The claim seeks the declaration that
a portion of shares involved in Elektrim's announced acquisition should have
been sold to DeTeMobil in recognition of its first refusal rights under the
shareholders agreement. The timing of the resolution of this arbitration is
uncertain.
On December 9, 1999, Elektrim S.A. registered with the Warsaw Regional
Court the transfer of 226,079 of our shares to Elektrim Telekomunikacja Sp. z
o.o. Elektrim S.A. retained one share of direct ownership. At the request of
Elektrim S.A., our Management Board also filed these changes in our share
registry book with the Warsaw Regional Court. However, two of five Management
Board members did not sign the request to change our share registry book, as
they had reservations given DeTeMobil's dispute over the right of first
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refusal to purchase 3% of the shares earlier acquired by Elektrim S.A. A formal
statement of the members' reservations was filed with the Warsaw Regional Court
together with the changes in our registry book. The Warsaw Regional Court has
not responded to the situation, and it should be noted, the Court's response is
typically not required.
DeTeMobil currently owns 22.5% of our shares. On October 22, 1999, Deutsche
Telekom announced that it had entered into an agreement with MediaOne Group
Inc., to acquire its wholly-owned subsidiary, MediaOne International B.V. (the
owner of 22.5% of our shares). Assuming that Deutsche Telekom consummates this
acquisition, it will hold, directly or indirectly, 45.0% of our shares.
If the issues relating to Elektrim's announced acquisition are settled in
Elektrim's favor, Elektrim will undisputably own, directly or indirectly, 51.0%
of our shares. However, the shareholders agreement provides that many important
actions cannot be approved by our Supervisory Board unless all members of the
Supervisory Board who are present at meetings and who were appointed by our
major shareholders, DeTeMobil, Elektrim and MediaOne, vote or consent to approve
of such actions. The shareholders agreement also requires that at least one
member of each of our major shareholders be in attendance at all meetings. The
actions which must be approved by representatives of all of the operating
parties include amendments to our five-year business plan and annual budgets,
acquisitions or dispositions of assets above certain values, incurrence of
indebtedness (other than in the ordinary course of business or below certain
limits) and entry into long-term contracts (with certain exceptions). Our
Supervisory Board includes nine members, two appointed by each of DeTeMobil,
Elektrim, and MediaOne. The three other members have been historically appointed
by the smaller Polish shareholders, whose shares are part of Elektrim's
announced acquisition. Should the issues relating to Elektrim's announced
acquisition be settled in Elektrim's favor, Elektrim will be entitled to appoint
two of such directors, and may be entitled to appoint the third of such
directors as well. If Deutsche Telekom completes its acquisition of MediaOne,
following such acquisition Deutsche Telekom will control both DeTeMobil's and
MediaOne's rights under the shareholders agreement and will be able to control
the appointment of four members of our Supervisory Board. See "Risk Factors --
Risks Related to Shareholder Relationships."
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AGREEMENTS AMONG THE SHAREHOLDERS AND US
We have entered into service agreements with each of DeTeMobil, Elektrim
and MediaOne. These agreements relate to the licensing by, and development of
software and computer databases, and arrangements for management, sales and
technological support, including secondment of employees of DeTeMobil, Elektrim
and MediaOne.
Agreements with DeTeMobil
- DeTeMobil Framework Agreement for Secondment -- Under a framework
agreement for secondment of employees entered into by us with DeTeMobil,
DeTeMobil agreed to allow its employees to be seconded to us, for discrete or
extended periods of time, for the purpose of assisting us with research and
management operations, depending on our need. The term of this framework
agreement is one year, and it is automatically renewable by either party unless
terminated in writing three months prior to the end of the period.
Under the framework agreement for secondment, we have the right to request
the secondment of an employee of DeTeMobil by specifying the skills needed. We
were also given a specified period during which to accept or reject the
secondment candidate identified by DeTeMobil, and during which we are entitled
to interview several other candidates from DeTeMobil for secondment.
We have all rights to any inventions developed by the seconded employee
alone or together with our other employees during the time of secondment. We are
obligated to compensate DeTeMobil for any seconded employee as well as pay any
value-added tax applicable under Polish law. DeTeMobil has responsibility for
meeting any filing requirements associated with applicable tax, social security,
procurement of visas and work permits, although we have agreed to assist
DeTeMobil with meeting these requirements.
- DeTeMobil Framework Agreement for Services -- Pursuant to an additional
framework agreement with DeTeMobil, DeTeMobil agreed to also provide know-how
support services to us in areas such as technical, managerial, logistical and
administrative services, including product development, research skills and
management know-how. DeTeMobil also provides personnel support in the
performance of specific services where requested when possible. The term of this
framework agreement is one year, and it is automatically renewable unless
terminated in writing by either party three months prior to the end of the
period.
DeTeMobil may not disclose work results with third-parties without our
consent, but may use the knowledge, experience and results obtained from any
services provided for its own purposes. We also agreed with DeTeMobil that any
damage compensation resulting from liability due to gross negligence would be
limited to the amount of the specific service orders placed by us, and would be
limited to an amount not to exceed DM 500,000.
Under the framework agreement for services, compensation for DeTeMobil is
provided in Deutschmarks according to daily and monthly fee schedules. The
monthly rates are based on 40-hour work weeks. In addition, we pay DeTeMobil for
the provision of technical know-how (not including new know-how, the price of
which will be set forth in service orders). We are also obligated to pay any
applicable tax under Polish law. We expect to pay DeTeMobil in aggregate
approximately PLN 9.6 million for services, including employee secondments, for
1999.
- Billing and Customer Care Upgrade Agreement -- On December 3, 1998, we
entered into an agreement with DeTeMobil to provide enhancements to the billing
and customer care system (BSCS Pink). Payments to DeTeMobil for these services
in 1999 were PLN 5.9 million.
Agreement with Elektrim
- Elektrim Service Agreement -- We entered into an agreement with Elektrim
in May 1996, to render services in respect of securing the commercial side of
contracts, pursuant to which Elektrim prepares and implements contracts relating
to the development of digital network of GSM mobile for us. Under this service
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agreement, Elektrim provides a working team, consisting of a minimum of five
persons, and performs specific services, including preparation and negotiation
of the commercial, financial and legal aspects of contracts with suppliers. The
Elektrim working team supervises meetings with the contractors the timely
transfer of payments and performs administrative functions such as arranging and
coordinating customs clearance and submitting, filing and processing claims
based on quality defects or quantity shortage.
Agreements with MediaOne
- MediaOne Framework Agreement -- On December 13, 1996, we entered into a
framework agreement with MediaOne under which MediaOne agreed to assist us with
marketing and sales operations. Once we have requested services, there follows a
period during which we must accept or reject MediaOne's offer of service.
MediaOne may not use outside contractors, and must perform the tasks itself
unless the parties agree otherwise. The term of this agreement is one year, and
it is automatically renewable unless terminated in writing by either party three
months prior to the end of the period.
We compensate MediaOne for employees seconded from it, and for specific
technical services in accordance with daily and monthly fee schedules. To the
extent we agree that MediaOne may engage third-parties in the provision of
services to us, we bear the cost of third party services. In addition, we are
obligated to pay MediaOne for know-how relating to sales and marketing.
- Project Outline Agreement -- We entered into a project outline agreement
with MediaOne on April 14, 1997, that sets forth the conditions of cooperation
between the parties with respect to the creation, development and delivery of
software and related services. This agreement expires on December 7, 2001.
Pursuant to the project outline agreement, MediaOne granted us the exclusive
right to use software developed by MediaOne or its subcontractors upon our
request, commonly referred to as "individual software," as well as a
non-exclusive license to use software otherwise developed and owned by MediaOne
or its subcontractors, commonly referred to as "standard software." We agreed
not to use the standard software to support the operation of third-party
networks. MediaOne will provide support related to the use of the individual and
standard software to us and our employees, including a training program
consisting of four courses, a support services help desk, software updates and
problem resolution emergency numbers.
Under this project outline agreement, we were supplied three major software
products in addition to a database that ties them together. These software
products and database form the core of our telecommunications management network
system. The system provides access to network information and enhances network
management.
In 1997, we paid MediaOne an aggregate of US$ 2,110,000 in fixed fees for
software licenses and for the integration and delivery by MediaOne of the
software it provides.
- Implementation Agreement -- On April 14, 1997, we reached an agreement
with MediaOne regarding the type of software to be supplied pursuant to the
project outline agreement, the service and training obligations of MediaOne
under the project outline agreement and the fees to be paid by us to MediaOne.
Pursuant to this implementation agreement, MediaOne provides us with computer
platforms and communications equipment to link several major operating software
packages to each other and to the telecommunications management network system,
a management information base, as well as computer platforms and data
communications equipment that allow us to connect network equipment supplied by
our suppliers.
In addition to the services provided to us pursuant to the MediaOne
framework agreement and the project outline agreement, we acquired a targeted
list of 800,000 potential subscribers from MediaOne Polska S.A., a wholly-owned
subsidiary of MediaOne, which operates a telephone directory business in Poland.
We paid MediaOne and DeTeMobil an aggregate of PLN 18.6 million and PLN
23.6 million, respectively in 1999 for seconded employees, specific technical
services and sales and marketing know-how.
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SHAREHOLDERS AGREEMENT
Elektrim, MediaOne, DeTeMobil, Polpager Sp. z o.o., Elektrim-Autoinvest
S.A. and Kulczyk Holding S.A., which together hold 89.0% of our outstanding
ordinary shares, entered into a shareholders agreement dated December 21, 1995
and amended March 11, 1997, pursuant to which Elektrim, DeTeMobil and MediaOne,
our major shareholders, control our Supervisory Board and appoint our senior
executive officers. Under this shareholders agreement, certain actions require
the unanimous approval of our major shareholders. See "-- Control by Operating
Parties."
- Transfer Restrictions/Call Options - The shareholders agreement
prohibits the holders of our shares from transferring any of our shares without
the prior consent of our Supervisory Board. This consent will be given in cases
of transfer of the entire interest of a party to another party if:
- the transferee assumes any and all obligations of the transferor to us
and the other shareholders;
- the transfer is permitted under the terms of the GSM 900 license and all
other applicable laws; and
- no party can establish by clear evidence that the transfer would result
in a material commercial injury to us.
Notwithstanding the foregoing, Elektrim and Elektrim Autoinvest S.A., may
transfer their shares to one of our existing shareholders, provided that
Elektrim retains at least a 26% interest in our company. Our Supervisory Board
may establish procedures that require the shareholder intending to transfer its
shares to first offer the shares to our remaining shareholders. To date, our
Supervisory Board has not established any such procedures.
Each shareholder who is party to the shareholders agreement (except Kulczyk
and Elektrim-Autoinvest) has granted our major shareholders an option to
purchase its shares at an exercise price equal to the shareholder's
proportionate share of the net asset value of our company plus all capital
contributions made after the date of our financial statement for the last
completed fiscal year. The option becomes exercisable when either the
shareholder admits in writing that it has materially defaulted or an arbitration
court declares the shareholder is in material default. A material default
occurs, among other events, when the shareholder:
- defaults in making a payment for new shares subscribed for in writing;
- is in material default of any obligation under the shareholders
agreement;
- becomes subject to any liquidation, bankruptcy, settlement or similar
proceeding that remains unresolved for thirty days;
- files a petition under bankruptcy or similar proceedings; or
- admits in writing its inability to pay debts when due.
- Control by our Major Shareholders -- Under the shareholders agreement,
our business is controlled by our Supervisory Board, which is authorized to
assume the responsibilities and powers of the shareholders meeting to the extent
permitted by Polish law, and managed by our Management Board.
Certain actions by us require the unanimous consent of all of our major
shareholders. These include:
- the acquisition of shares of, or entry into, partnership with another
entity;
- any extension of our business outside Poland;
- a change in our business from providing 900 GSM services or surrender of
our GSM 900 license;
- the adoption of our business plan, dividend policy, share transfer
restrictions, accounting principles and any revisions to our overall
strategy;
- the disposal of assets in excess of PLN 500,000, incurring any debts or
financing, granting any mortgage or lien over our assets and granting
any loan to third-parties in excess of an annual aggregate amount of PLN
100,000 or to any individual in excess of PLN 10,000;
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- any change in the competence, voting, rules of procedure of our
Supervisory Board and our Management Board or restructuring our
management; and
- the entry into any contract for more than one year or any amount in
excess of PLN 500,000.
- Covenant Not to Compete -- Pursuant to the terms of the shareholders
agreement, the shareholders party thereto are prohibited from entering into any
GSM business (selling equipment and providing services) in Poland (including
businesses involving use of DCS 1800 and similar technology), but may provide
other telephony services in Poland. The shareholders are also prohibited from
assisting our third party competitors, except in the ordinary course of business
as currently conducted.
The shareholders party to the shareholders agreement may engage in a
competing business with the explicit approval of our Supervisory Board.
SHAREHOLDER LOANS
On August 24, 1999, our three major shareholders extended loans to us on
substantially identical terms. The total amount of the loans was the Zloty
equivalent of $75 million, provided by the shareholders as follows: $39,843,750
from Elektrim and $17,578,125 from each of DeTeMobil and MediaOne. These loans
are subordinated to senior debt. Each loan bears interest at 12.5% annually and
must be repaid by June 19, 2006. The maturity of the loans may be accelerated if
we default on any payment due under them, if amounts owed by us under our bank
credit facility or in respect of the 2007 Notes are declared to be immediately
due and payable or if we are judicially declared to be or admit to being
insolvent. The terms of the notes and the indentures prohibit payment of these
loans unless such payment is permitted by the covenant described under
"Description of the Notes -- Certain Covenants -- Limitation on Restricted
Payments."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by us on November 23, 1999, in a private placement.
In connection with that placement, we granted the initial purchasers
registration rights, which require that we file a registration statement under
the Securities Act of 1933, with respect to the Exchange Notes and, upon the
effectiveness of that registration statement, offer to you the opportunity to
exchange your Old Notes for a like principal amount of Exchange Notes, which
will be issued without a restrictive legend and may be reoffered and resold by
you (if you are not our affiliate) without registration under the Securities Act
of 1933. Upon the completion of the exchange offer, our obligations with respect
to the registration of the Old Notes and the Exchange Notes will terminate. A
copy of the Registration Rights Agreement has been filed as an exhibit to the
registration statement of which this prospectus is a part. Following the
completion of the exchange offer holders of Old Notes not tendered will not have
any further registration rights and those Old Notes will continue to be subject
to certain restrictions on transfer. Accordingly, the liquidity of the market
for the Old Notes could be adversely affected upon completion of the exchange
offer.
HOW TO DETERMINE WHETHER YOU ARE ELIGIBLE TO PARTICIPATE IN THE EXCHANGE OFFER
In order to participate in the exchange offer, you must represent to us,
among other things, that:
- the Exchange Notes acquired by you pursuant to the exchange offer are
being obtained in the ordinary course of your business or the business
of the person receiving the Exchange Notes, whether or not such person
is the holder of the Old Notes;
- neither you nor any person who receives the notes from you is engaging
in or intends to engage in a distribution of the Exchange Notes;
- neither you nor any person who receives the notes from you has an
arrangement or understanding with any person to participate in the
distribution of the Exchange Notes;
- neither you nor any person who receives the notes from you is our
affiliate; and
- if you are a broker-dealer, that you acquired the Old Notes as a result
of market-making or other trading activities, and that you will deliver
a copy of this prospectus in connection with any resale of Exchange
Notes.
Based on an interpretation by the staff of the Securities and Exchange
Commission set forth in interpretive letters issued to third-parties unrelated
to us, we believe that, with the exceptions set forth below, Exchange Notes
issued pursuant to the exchange offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by you, whether or not you are the
holder (other than our affiliates) without compliance with the registration and
prospectus delivery provisions of the Securities Act of 1933, provided that:
- the Exchange Notes are acquired in the ordinary course of your business,
and
- neither you nor any person who receives the notes from you has an
arrangement or understanding with any person to participate in the
distribution of such Exchange Notes.
If you tender your Old Notes in the exchange offer for the purpose of
participating in a distribution of the Exchange Notes you cannot rely on this
interpretation by the staff of the Securities and Exchange Commission, and must
comply with the registration and prospectus delivery requirements of the
Securities Act of 1933. If you are a broker-dealer and receive Exchange Notes
for your own account in exchange for Old Notes, where your Old Notes are a
result of market-making activities or other trading activities, you must
acknowledge that you will deliver a prospectus in connection with any resale of
the Exchange Notes. See "Plan of Distribution."
Pursuant to the Registration Rights Agreement, we are required to file a
registration statement for a continuous offering pursuant to Rule 415 under the
Securities Act of 1933, in respect of the Old Notes if
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existing interpretations by the staff of the Securities and Exchange Commission
are changed such that the Exchange Notes received by you in the exchange offer
are not, or would not be, upon receipt, transferable by you (other than you or
one of your affiliates) without restriction under the Securities Act of 1933.
Following the completion of the exchange offer, if you do not tender your
Old Notes you will not have any further registration rights and those Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for your Old Notes could be adversely affected upon
completion of the exchange offer if you do not participate in the exchange
offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all Old Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on April 25,
2000. We will issue E1,000 and $1,000 principal amounts of Exchange Notes in
exchange for each E1,000 and $1,000 principal amounts of outstanding Old Notes,
respectively, pursuant to the exchange offer.
The form and terms of the Exchange Notes are identical to the form and
terms of the Old Notes except that the Exchange Notes have been registered under
the Securities Act of 1933, and will not bear legends restricting their
transfer. The Exchange Notes will evidence the same debt as the Old Notes and
will be issued pursuant to, and entitled to the benefits of, the indentures
pursuant to which the Old Notes were issued.
As of the date of this prospectus, Old Notes representing E300,000,000 and
$150,000,000 aggregate principal amounts at maturity were outstanding. This
prospectus, together with the letter of transmittal, is being sent to you and to
others believed to have beneficial interest in the Old Notes. We intend to
conduct the exchange offer in accordance with the applicable requirements of the
Securities Exchange Act of 1934, and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder.
We will be deemed to have accepted validly tendered Old Notes when, as, and
if we have given oral or written notice thereof to State Street Bank and Trust
Company, the exchange agent. State Street Bank and Trust Company will act as
agent for the tendering holders for the purposes of receiving the Exchange Notes
from us. If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to you as promptly as practicable after April 25, 2000.
If you tender Old Notes in the exchange offer, you will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the exchange offer. We will pay all charges and expenses, other than
certain applicable taxes, in connection with the exchange offer. See "-- Fees
and Expenses."
CONDITIONS
The exchange offer is not conditioned upon any minimum principal amount of
the Old Notes being tendered for exchange. However, the exchange offer is
conditioned upon the declaration by the Securities and Exchange Commission of
the effectiveness of the registration statement of which this prospectus
constitutes a part.
EXPIRATION DATE; EXTENSION; AMENDMENTS
The term "expiration date" means 5:00 p.m., New York City time, on April
25, 2000 unless we extend the exchange offer, in which case the expiration date
will be the latest date and time to which the exchange offer is extended. In
order to extend the exchange offer, we will notify State Street Bank and Trust
Company and each participant that holds a Book-Entry interest in an Old Notes of
any extension prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date. We reserve the right to delay
accepting any Old Notes or to extend the exchange offer, by giving oral or
written notice of such delay, or extension to State Street Bank and Trust
Company.
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PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender Old Notes in the exchange offer.
Except as set forth under "-- Book Entry Transfer," to tender Old Notes in the
exchange offer you must complete, sign and date the letter of transmittal, have
the signatures thereon guaranteed if required by the letter of transmittal and
mail or otherwise deliver the letter of transmittal to State Street Bank and
Trust Company prior to the expiration date. In addition, either:
- certificates for such Old Notes must be received by State Street Bank
and Trust Company along with the letter of transmittal; or
- a timely confirmation of a book-entry transfer of such Old Notes, if
that procedure is available, into State Street Bank and Trust Company's
account at The Depositary Trust Company, Euroclear and/or Clearstream
pursuant to the procedure for book-entry transfer described below, prior
to the expiration date; or
- you must comply with the guaranteed delivery procedures described below.
To be tendered effectively, the letter of transmittal and other required
documents must be received by State Street Bank and Trust Company at the address
set forth under "-- Exchange Agent" prior to the expiration date.
Any tender by you that is not withdrawn before the expiration date will
constitute an agreement between you and us in accordance with the terms and
subject to the conditions set forth herein and in the letter of transmittal.
The method of delivery of Old Notes, the letter of transmittal and all
other required documents to State Street Bank and Trust Company is at your
election and risk. Instead of delivery by mail, it is recommended that you use
an overnight or hand-delivery service. In all cases, sufficient time should be
allowed to assure delivery to State Street Bank and Trust Company before the
expiration date. No letter of transmittal or Old Notes should be sent to us. You
may request your respective brokers, dealers, commercial banks, trust companies,
or nominees to effect these transactions for you.
If you are a beneficial owner whose Old Notes are registered in the name of
a broker, dealer, commercial bank, trust company, or other nominee and you wish
to tender, you should contact the registered holder promptly and instruct the
registered holder to tender on your behalf. If a beneficial owner wishes to
tender on the registered holder's behalf, the beneficial owner must, prior to
completing and executing the letter of transmittal and delivering the Old Notes,
either make appropriate arrangements to register ownership of the Old Notes in
its name or obtain a properly completed bond power from the registered holder.
The transfer of registered ownership may take considerable time.
Signatures on the letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
- for the account of an Eligible Institution.
If signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, the guarantee must be made by an
eligible guarantor institution that is a member, of or participant in, the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program, the Stock Exchange Medallion Program or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution").
If the letter of transmittal is signed by a person other than the
registered holder of any Old Notes, the Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by the registered holder
as that registered holder's name appears on the Old Notes, with the signature
thereon guaranteed by an Eligible Institution. If the letter of transmittal or
any Old Notes or bond powers are signed by trustees,
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executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to us of
their authority to so act must be submitted with the letter of transmittal
unless waived by us.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
us, which determination will be final and binding. We reserve the absolute right
to reject any and all Old Notes not properly tendered or any Old Notes our
acceptance of which would, in the opinion of our counsel, be unlawful. We also
reserve the right to waive any defects, irregularities, or conditions of tender
as to particular Old Notes. Our interpretation of the terms and conditions of
the exchange offer (including the instructions in the letter of transmittal)
will be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Old Notes must be cured within such time as we shall determine, in our sole
discretion. Although we intend to notify holders of defects or irregularities
with respect to tenders of Old Notes, neither we, State Street Bank and Trust
Company, nor any other person shall incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old Notes received
by State Street Bank and Trust Company that are not properly tendered, and as to
which the defects or irregularities have not been cured or waived, will be
returned by State Street Bank and Trust Company to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In addition, we reserve the right in our sole discretion to purchase or
make offers for any Old Notes that remain outstanding after the expiration date
or, as set forth under "The Exchange Offer -- Conditions," to terminate the
exchange offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, privately negotiated transactions otherwise. The terms
of any such purchases or offers could differ from the terms of the exchange
offer.
BOOK-ENTRY TRANSFER
State Street Bank and Trust Company will make a request to establish an
account with respect to the Old Notes at the Depositary Trust Company, Euroclear
and/or Clearstream for purposes of the exchange offer within two business days
after the date of this prospectus. Any financial institution that is a
participant in the Depositary Trust Company, Euroclear and/or Clearstream's
systems may make book-entry delivery of Old Notes being tendered by causing the
Depositary Trust Company, Euroclear and/or Clearstream to transfer such Old
Notes into State Street Bank and Trust Company's account at the Depositary Trust
Company, Euroclear and/or Clearstream, in accordance with their procedures for
transfer. However, although delivery of Old Notes may be effected through
book-entry transfer at the Depositary Trust Company, Euroclear and/or
Clearstream, the letter of transmittal or copy thereof, with any required
signature guarantees and any other required documents, must, in any case other
than as set forth in the following paragraph, be transmitted to and received by
State Street Bank and Trust Company at the address set forth under "-- Exchange
Agent" on or prior to the expiration date or the guaranteed delivery procedures
described below must be complied with.
The Depositary Trust Company's Automated Tender Offer Program ("ATOP") is
the only method of processing exchange offers through the Depositary Trust
Company. To accept the exchange offer through ATOP, you must send electronic
instructions to the Depositary Trust Company through the Depositary Trust
Company's communication system instead of sending a signed, hard copy of the
letter of transmittal. The Depositary Trust Company is obligated to communicate
those electronic instructions to State Street Bank and Trust Company. To tender
Old Notes through ATOP, the electronic instructions sent to the Depositary Trust
Company and transmitted by the Depositary Trust Company to State Street Bank and
Trust Company, must contain the character by which you acknowledge your receipt
of, and agree to be bound by, the letter of transmittal.
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GUARANTEED DELIVERY PROCEDURES
If you desire to tender your Old Notes and the Old Notes are not
immediately available, time will not permit your Old Notes or the required
documents to reach State Street Bank and Trust Company before the expiration
date or the procedure for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if:
- the tender is made through an Eligible Institution;
- prior to the expiration date, State Street Bank and Trust Company
receives from such Eligible Institution a properly completed and duly
executed letter of transmittal (or a facsimile thereof) and notice of
guaranteed delivery, substantially in the form provided by us (by
telegram, telex, facsimile transmission, mail or hand-delivery), setting
forth your name, address, the amount of Old Notes you are tendering,
stating that the tender is being made thereby and guaranteeing that
within four New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a
confirmation of a book-entry transfer, as the case may be and other
documents required by the letter of transmittal, will be deposited by
the Eligible Institution with State Street Bank and Trust Company; and
- the certificates for all physically tendered Old Notes, in proper form
for transfer, or a confirmation of a book-entry transfer, as the case
may be, and all other documents required by the letter of transmittal,
are received by State Street Bank and Trust Company within four New York
Stock Exchange trading days after the date of execution of the notice of
guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw your tender at any time prior to 5:00 p.m., New York City
time, on the expiration date.
For your withdrawal of a tender of Old Notes to be effective, your written
or electronic ATOP transmission notice of withdrawal (for the Depositary Trust
Company participants) must be received by State Street Bank and Trust Company at
its address set forth herein prior to 5:00 p.m., New York City time, on the
expiration date. Any such notice of withdrawal must:
- specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor");
- identify the Old Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Old Notes);
- be signed by you in the same manner as the original signature on the
letter of transmittal by which your Old Notes were tendered (including
any required signature guarantees), or be accompanied by documents of
transfer sufficient to have the trustee register the transfer of such
Old Notes into the name of the person withdrawing the tender; and
- specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by us. Our determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the exchange offer.
Any Old Notes which have been tendered for exchange, but which are not exchanged
for any reason, will be returned to the holder thereof without cost to such
holder as soon as practicable after withdrawal, rejection of tender, or
termination of the exchange offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "The Exchange
Offer -- Procedures for Tendering," at any time on or prior to the expiration
date.
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EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent
for the exchange offer. Questions, requests for assistance and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to State Street Bank and Trust Company addressed as follows:
For information or
Confirmation by Telephone:
617-662-1452
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Facsimile Transmission: By Hand or Overnight Delivery:
617-662-1523
State Street Bank and Trust Attention: Kellie Mullen State Street Bank and Trust
Company Company
Corporate Trust Department Corporate Trust Department
Two Avenue de Lafayette Two Avenue de Lafayette
Fifth Floor Fifth Floor
Boston, MA 02111-1724 Boston, MA 02111-1724
Attention: Kellie Mullen Attention: Kellie Mullen
</TABLE>
FEES AND EXPENSES
We will not make any payments to brokers, dealers, or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail. Additional solicitations may be made in person or by telephone by our
officers and employees.
The estimated cash expenses to be incurred in connection with the exchange
offer will be paid by us, and are estimated in the aggregate to be $300,000,
which includes fees and expenses of State Street Bank and Trust Company,
accounting, legal, printing and related fees and expenses.
TRANSFER TAXES
If you tender your Old Notes you will not be obligated to pay any transfer
taxes in connection therewith, except that if you instruct us to register
Exchange Notes in the name of, or request that Old Notes not tendered or not
accepted in the exchange offer be returned to, a person other than yourself, you
will be responsible for the payment of any applicable transfer tax thereon.
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DESCRIPTION OF OTHER INDEBTEDNESS
Set forth below is a description of certain terms of our bank credit
facility, the 2007 Notes and certain other indebtedness. See also "Risk Factors
- -- Risks Related to Financial Leverage," "-- Risks Related to Subordination of
the Notes and Restrictive Covenants" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
THE BANK CREDIT FACILITY
In December 1997, we entered into a bank credit facility with ABN Amro Bank
N.V., Citibank N.A., Dresdner Bank AG, ABN Bank (Polska) S.A., Bank
Prezemyslowo-Handlowy S.A., Bank Rozwoju Eksportu S.A., Bank Slaski, S.A.,
Citibank (Poland) S.A., BNP-Dresdner (Polska) S.A., ING Bank N.V., Warsaw Branch
and Wielkopolski Bank Kredytowy S.A., as arrangers, the lenders party thereto,
and Citibank (Poland) S.A., Citibank N.A., and Citibank International plc, as
agents.
Pursuant to the bank credit facility, the lenders agreed to make loans to
us, on a term loan, guarantee or revolving credit basis (as we desire), in the
aggregate principal amount of not more than DM 672 million. The bank credit
facility is comprised of two tranches:
- an offshore tranche consisting of commitments totalling DM 420 million,
under which amounts may be made available in Deutschmarks, US dollars,
Euros or other freely convertible currencies as agreed by the lenders;
and
- a domestic tranche consisting of commitments totalling the Zloty
equivalent of DM 252 million, under which amounts may be made available
in Zlotys.
Our ability to borrow funds under the bank credit facility depends upon the
satisfaction of a number of conditions precedent, including customary
affirmative covenants and the continuing accuracy of our representations and
warranties. The principal amount of the bank credit facility is required to be
repaid and the lenders' commitments thereunder reduced according to the
following schedule:
<TABLE>
<CAPTION>
MONTH AFTER SIGNING OF THE BANK CREDIT FACILITY AMORTIZATION
- ----------------------------------------------- ------------
<S> <C>
36..................................................... 7.5%
42..................................................... 7.5%
48..................................................... 7.5%
54..................................................... 7.5%
60..................................................... 10%
66..................................................... 10%
72..................................................... 10%
78..................................................... 10%
84..................................................... 10%
90..................................................... 10%
96..................................................... 10%
</TABLE>
All borrowings, whether in the form of a term loan, guarantee or revolving
credit under the bank credit facility, bear interest at a rate per annum equal
to London or Warsaw Interbank Offered Rate, commonly referred to as LIBOR or
WIBOR, or, in certain circumstances when LIBOR or WIBOR, as applicable, is not
available to a lender, its cost of funds, plus in each case an applicable margin
that varies with our senior debt to EBITDA ratio (as determined pursuant to the
bank credit facility) and, in the case of any advances made under the offshore
funds in sterling through a lender's lending office located in the United
Kingdom, any additional cost resulting from such lender's compliance with any
mandatory liquid assets requirements of the Bank of England imputed to such
lender.
The bank credit facility contains affirmative covenants which include,
among others, maintenance of:
- ratios of senior debt to EBITDA;
- ratios of excess cash flow to consolidated debt service;
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- ratios of EBITDA to interest expense; and
- requires scheduled senior debt principal repayments and/or reductions of
the bank credit facility.
The bank credit facility also requires that we operate our network in
accordance with our licenses and applicable laws, comply with our obligations
under material contracts and contains restrictive covenants that impose
restrictions and/or limitations on our operations and activities, including,
among others, the incurrence of indebtedness, the sale of assets, investments
and acquisitions and the ability to make loans and give guarantees outside the
normal course of our business.
The covenants under the bank credit facility allow us, under certain
circumstances, to declare or pay dividends or make other payments or
distributions to shareholders. The bank credit facility also provides for
various events of default, including:
- those which occur upon the failure to make payments of interest and
principal, breaches of our covenants, agreements, representations and
warranties under the bank credit facility;
- a default under any other indebtedness having an aggregate principal
amount of DM 10 million;
- the existence of a material unsatisfied judgment or order not subject to
appeal;
- the occurrence of certain events relating to bankruptcy or insolvency,
or our making material changes in the nature of our business without the
lenders' prior consent;
- a change of control;
- any governmental action that, in the reasonable opinion of the majority
of the lenders, has a material adverse effect on our condition or our
ability to perform our obligations;
- our failure to comply with any of the material provisions of, or our
obligations under, the documents governing the 2007 Notes;
- the termination, revocation or suspension of any license for the
operation of a telecommunications business; and
- the reduction or diminishment of any of the rights of our major
shareholders (DeTeMobil, Elektrim or MediaOne) under the shareholders
agreement, or the cancellation, suspension or termination of the
shareholders agreement without its replacement by an agreement having
substantially the same terms and conditions, or any other event or
series of events occurs that is likely to have a material adverse
effect.
In addition, the bank credit facility provides that it will be an event of
default if any of our principal shareholders are declared insolvent by a court
of competent jurisdiction, is unable to pay its debts as they fall due or admits
inability to pay its debts as they fall due or if any liquidator, official
receiver, judicial custodian or the like is appointed in respect of any of our
principal shareholders.
The repayment of the loans is also secured by a pledge of all our shares
and most of our assets.
THE 2007 NOTES
In July 1997, PTC International Finance B.V., one of our finance company
subsidiaries, issued $253,203,000 of Senior Subordinated Guaranteed Discount
Notes (the "2007 Notes") which we have guaranteed on a senior subordinated
basis. The 2007 Notes were sold at a discount in the amount of $150,000,591, in
order to reflect that no payments of interest will be made on the 2007 Notes
prior to July 1, 2002. After July 1, 2002, the 2007 Notes will bear interest at
a rate of 10 3/4% per annum, which will be payable in cash on January 1st and
July 1st of each year, beginning on January 1, 2003.
The 2007 Notes are unsecured senior subordinated obligations of the PTC
International Finance B.V., which rank junior in right of payment to its senior
debt. PTC International Finance B.V.'s senior debt consists of, among other
things, its obligations under its guarantees of our senior debt, including the
bank credit facility. PTC International Finance B.V.'s guarantees of our senior
debt are secured by a lien on
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amounts owed to it by us in respect of the loan it made to us with the proceeds
from the sale of the 2007 Notes. Our guarantee of the 2007 Notes ranks senior in
right of payment to all of our existing and future subordinated indebtedness,
and equal with our guarantee of the notes.
The 2007 Notes may be redeemed at any time on or after July 1, 2002, at the
option of PTC International Finance B.V., in whole or in part, at 105.375% of
their principal amount at maturity, plus accrued interest, declining to 100% of
their principal amount at maturity, plus accrued interest, on or after July 1,
2005.
At any time prior to July 1, 2000, PTC International Finance B.V., may
redeem up to 35% of the aggregate principal amount of the 2007 Notes at a
redemption price of 110.75% of the accreted value thereof, with the proceeds of
one or more public equity offerings; provided, that not less than 60% of the
original principal amount at maturity of the 2007 Notes remains outstanding
immediately after giving effect to such redemption. The 2007 Notes are also
redeemable, in whole but not in part, at PTC International Finance B.V.'s
option, in the event of certain changes affecting the withholding tax treatment
of certain payments on the 2007 Notes.
The indenture governing the 2007 Notes contains covenants which, among
other things, significantly limit or prohibit us and our subsidiaries' ability
to incur indebtedness, pay dividends, engage in transactions with shareholders
and affiliates, create liens, sell assets, and engage in mergers and
consolidations. If PTC International Finance B.V., fails to comply with these
covenants, its obligations to repay the 2007 Notes may be accelerated. These
limitations, however, are subject to a number of important qualifications and
exceptions. In particular, while the indenture governing the 2007 Notes
restricts PTC International Finance B.V.'s ability to incur additional
indebtedness by requiring compliance with special leverage ratios, it permits
PTC International Finance B.V. to incur a substantial amount of additional
indebtedness.
In addition, the indenture governing the 2007 Notes provides that upon the
occurrence of a change of control PTC International Finance B.V., will be
required to make an offer to repurchase the 2007 Notes at a purchase price equal
to 101% of their accreted value on the purchase date, plus accrued interest, if
any. A "change of control" is defined to mean such things as:
- a "person" or "group" (within the meaning of Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) becomes the ultimate "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50%
of the total voting power of our voting stock on a fully diluted basis;
- we sell, assign, lease, convey, dispose or transfer, directly or
indirectly, all or substantially all of our assets (other than as an
entity to one of our wholly-owned subsidiaries or to certain other
specified permitted holders), or if we amalgamate, consolidate or merge
with another person or another person amalgamates, consolidates or merges
with us, in either case pursuant to a transaction in which our voting
stock is reclassified into or exchanged for cash, securities or other
property, other than any such transaction where:
(i) our voting stock is reclassified into or exchanged for voting
stock of the surviving corporation; and
(ii) no person or group (other than one or more of the permitted
holders referred to above) owns, directly or indirectly, 50% or
more of the total voting stock of the surviving corporation after
the transaction in question.
- if during any period of two consecutive years, individuals who at the
beginning of such period constituted our Supervisory Board ceased for any
reason to constitute a majority of our supervisory board then in office;
or
- either Standard & Poor's or Moody's Investors Service reduces its rating
on the 2007 Notes by a certain amount or withdraws its rating in respect
of the 2007 Notes.
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Neither (i) a grant by a holder of our shares, nor a grant by a holder of
shares of any of our subsidiaries of a security interest in such shares to
secure our senior debt, nor (ii) the exercise by the holders of such senior debt
of such security interest, will constitute a change of control as long as, in
the case of clause (ii), any transferee of our shares is one of the permitted
holders referred to above. PTC International Finance B.V.'s obligations to
repurchase the 2007 Notes upon a change of control is guaranteed by us on a
senior subordinated basis.
The indenture governing the 2007 Notes also contains certain customary
events of default. If such an event of default occurs, PTC International Finance
B.V.'s obligations to repay the 2007 Notes and our obligations to repay the bank
credit facility may be accelerated.
SHAREHOLDER LOANS FROM DETEMOBIL, ELEKTRIM AND MEDIAONE
On August 24, 1999, DeTeMobil, Elektrim and MediaOne extended to us US$
75.0 million in subordinated loans on substantially identical terms. The
respective amounts of these loans from DeTeMobil, Elektrim and MediaOne were US$
17,578,125, the Zloty equivalent of US$ 39,843,750 and US$ 17,578,125,
respectively. Each of these loans is subordinated to our senior debt and bears
an interest rate of 12.5% compounded semi-annually on June 17 and December 17.
The full loan balance and all accrued interest are due on June 19, 2006. The
maturity of these loans may be accelerated if we default on any payment due
under them, if amounts owed by us under the bank credit facility or in respect
of the 2007 Notes are declared to be immediately due and payable or if we are
declared to be or admit to being insolvent. The terms of the notes and the
indentures prohibit payment of these loans unless such payments are permitted by
the covenant described under "Description of the Notes -- Certain Covenants --
Limitation on Restricted Payments".
OVERDRAFT LOAN AGREEMENTS
We currently have two loans outstanding in the amounts of 30 million
Zlotys, owed to Bank Rozwoju Eksportu Bank S.A., pursuant to overdraft loan
agreements dated May 15, 1998 and January 12, 1999, and a 15 million Deutschmark
loan outstanding owed to Citibank (Poland) S.A., pursuant to an overdraft loan
agreement dated December 15, 1998.
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DESCRIPTION OF THE NOTES
The notes are issued under two indentures (collectively, the "Indentures"),
one for the Euro Notes and one for the Dollar Notes, each of which are dated as
of November 23, 1999, and are between PTC International Finance II S.A., as
Issuer, Polska Telefonia Cyfrowa, as guarantor, Holdings and State Street Bank
and Trust Company, as trustee. You may obtain a copy of the Indentures from us
upon request. The terms of the notes include those stated in the Indentures, and
those made part of the Indentures by reference to the Trust Indenture Act of
1939, as amended. In this description, the words "we," "our," and "us" refer to
Polska Telefonia Cyfrowa Sp. z o.o., the word "Issuer" refers to PTC
International Finance II S.A. and the word "Holdings" refers to PTC
International Finance (Holding) B.V., and not in each case to any of their
subsidiaries, and the word "holder" or "holders" refers to you.
The following description is a summary of the material terms of the
Indentures. It does not restate either agreement in its entirety. We therefore
urge you to read the Indentures because they, and not this description, define
your rights with respect to the notes. You can find the definitions of certain
terms used in this description under the sub-heading "Certain Definitions."
References in this description to specific amounts in one currency mean those
amounts, or the equivalent of those amounts in other currencies, on the date of
determination.
GENERAL
The notes will mature at par on December 1, 2009 and will be limited to
E300 million aggregate principal amount of Euro Notes and US$ 150 million
aggregate principal amount of Dollar Notes. We guarantee the notes on a senior
subordinated basis. The notes are also guaranteed by Holdings. Recourse to
Holdings in respect of its obligations under the Holdings' guarantee is limited
to the amounts deposited in the escrow accounts. The trustees hold a portion of
the net proceeds from the offering of the Old Notes (estimated at approximately
E 117.0 million), for the benefit of the noteholders, in escrow accounts which
are secured, as described under "-- Disbursement of Funds -- Escrow Accounts."
The escrow accounts may be replaced at our election, with letters of credit
posted in favor of the trustees, for the benefit of the holders of the notes in
an amount sufficient to permit the timely payment of any remaining interest to
be paid on the notes, up to and including the fifth interest payment. Currently,
the consent of the lenders under the bank credit facility is required to replace
the escrow accounts with the letters of credit.
The notes will be issued in fully registered form, without interest
coupons, in denominations of $1,000, in the case of Dollar Notes, and E1,000, in
the case of Euro Notes, or any integral multiple thereof. The principal of the
notes will be paid, upon surrender of the notes, at the offices of State Street
Bank and Trust Company, State Street Bank Luxembourg, S.A., or any other paying
agent we appointed. Holders of notes will receive interest at the rates set
forth on the cover page of this prospectus semiannually on June 1 and December 1
in each year, commencing on June 1, 2000. Interest on each note will begin
accruing as of the date the notes are issued. We will pay interest on each note
as of the record date immediately preceding the applicable interest payment
date, computing interest on the basis of a 360-day year comprised of twelve
30-day months. We will pay interest on overdue principal and other overdue
amounts at the rates payable in respect of the notes set forth on the cover page
of this prospectus. Further, the circumstances under which the Issuer may be
required to pay additional interest in cash on the notes are described below
under "-- Exchange Offer; Registration Rights."
ISSUER GUARANTEE
The Issuer will issue a guarantee pursuant to which it will guarantee our
obligations under the bank credit facility and our hedging obligations on a
senior basis. There is currently DM 484 million outstanding under our bank
credit facility and no outstanding hedging obligations. The Issuer's obligations
under its guarantee relating to our bank credit facility will be secured by a
lien on the intercompany receivables, which reflect the loan of the proceeds of
the offering of the Old Notes to Holdings, and which are and will be the
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Issuer's only significant assets. The Issuer's guarantee may be provided, at its
option, with respect to other of our senior debt.
SUBORDINATION OF THE NOTES
The notes will be senior subordinated obligations of the Issuer secured by
a security in the escrow accounts described below. See "-- Disbursement of
Funds; Escrow Accounts." The payment of the principal of, premium, if any, and
interest on, and all other obligations in respect of the notes will be
subordinated in right of payment, as set forth in the Indentures, and summarized
below, to the payment when due of all Senior Debt (as defined). Each note will
rank equally with the other notes, if:
- any principal, interest, premium or other amounts payable in respect of
any Designated Senior Debt (defined below) is not paid when due; or
- any other default under any Designated Senior Debt occurs and the
maturity of such Designated Senior Debt is accelerated in accordance with
its terms.
In such case neither we nor the Issuer may make any payment or distribution in
respect of principal of, or premium, if any, or interest on, or other amounts
payable under or in respect of the notes or our guarantees or make any deposit
with respect to legal or covenant defeasance, and neither may repurchase, redeem
or otherwise retire the notes pursuant to a change of control or otherwise
(collectively, "Pay the Notes").
The preceding sentence will not apply if the default has been cured or
waived and any such acceleration has been rescinded or such Designated Senior
Debt has been paid in full. Regardless, however, we or the Issuer may pay the
notes if we, or the Issuer and the trustees, receive written notice approving
such payment from the Representative (as defined below) of such Designated
Senior Debt. During the continuance of any default (other than a default
described in the preceding paragraph) with respect to any Designated Senior
Debt, including any event that, with notice or lapse of time, or both, would
become an event of default, neither we nor the Issuer may pay the notes for a
period (a "Payment Blockage Period") commencing upon the receipt by us or by the
Issuer of written notice of such default from the Representative of the Bank
Debt specifying an election to effect a Payment Blockage Period (a "Payment
Blockage Notice") and ending 179 days thereafter, unless earlier terminated:
- by written notice to the trustee and us or the Issuer from the
representative of the Bank Debt;
- because no defaults under any Designated Senior Debt are continuing; or
- because all Designated Senior Debt has been repaid in full.
Notwithstanding the provisions described in the immediately preceding
paragraph, unless the holders of any Designated Senior Debt or the
representative of such holders have accelerated the maturity of such Designated
Senior Debt and not rescinded such acceleration, we or the Issuer may (unless
otherwise prohibited as described in the first sentence of the preceding
paragraph or in the paragraph below) resume payments on the notes after the end
of such Payment Blockage Period. Not more than one Payment Blockage Notice with
respect to all issues of Designated Senior Debt may be given in any consecutive
360-day period, irrespective of the number of defaults with respect to one or
more issues of Designated Senior Debt during such period.
Other than a voluntary dissolution of the Issuer or merger of the Issuer
into Holdings or us, solely for the purpose of permitting Holdings or us to
assume all obligations in respect of the notes as if either of us were the
direct obligor with respect thereto, and in which all of the Issuer's assets are
transferred to Holdings or us and no material payment or distribution is made to
creditors, upon any payment or distribution to creditors of ours or of the
Issuer upon a total or partial liquidation, dissolution or winding-up of us or
the Issuer or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to us or the Issuer or our or their respective
property, or in an assignment for the benefit of creditors or any marshaling of
the Issuer's or our assets and liabilities, the holders of Senior Debt will be
entitled to receive payment in full of the Senior Debt before the holders of the
notes are entitled to receive any payment or distribution of any kind or
character, whether in cash, property or securities (including any payment or
distribution that may be
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payable or deliverable by reason of the payment of any other of our Debt or the
Debt of the Issuer that is subordinated to the payment of the notes), of
principal of, or premium, if any, or interest on, or other amounts payable under
or in respect of the notes or the guarantees of the notes, including, without
limitation, on account of any purchase or other acquisition of notes by the
Issuer or us.
In addition, until the Senior Debt is paid in full, any payment or
distribution to which holders of the notes would be entitled to, either directly
or pursuant to our guarantees of the notes but for the subordination provisions
of the Indentures, will be made directly to holders of the Senior Debt or their
representatives. In the event that, notwithstanding the foregoing, the trustees
or the holder of any note receive any payment or distribution before all the
Senior Debt is paid in full, then such payment or distribution will be required
to be held in trust by the trustees or such holder for the benefit of, and paid
over or delivered forthwith to, the holders of the Senior Debt or their
representatives for application to (in the case of cash), or as collateral for
(in the case of non-cash property or securities), the payment or prepayment of
all Senior Debt until all Senior Debt shall have been paid in full.
Because of such subordination provisions, in the event of a bankruptcy
receive reorganization, insolvency, receivership, winding-up or similar
proceeding relating to us or the Issuer, holders of Senior Debt may recover
more, ratably, than the holders of the notes. In such event, after giving effect
to such subordination, there may be insufficient assets or no assets remaining
to pay interest or principal on the notes.
The terms of the subordination provisions described above will not apply to
payments of money or the proceeds of European Government Securities or U.S.
Government Obligations pledged to, or held in trust by the trustees for the
payment of principal of, and interest on the notes pursuant to the provisions
described under "-- Disbursement of Funds; Escrow Accounts" and "-- Legal
Defeasance and Covenant Defeasance."
SUBORDINATION OF OUR GUARANTEES
Pursuant to our guarantees of the notes, we will unconditionally guarantee,
on an unsecured senior subordinated basis, to each holder of notes and the
trustees, the full and prompt performance of the Issuer's obligations under the
Indentures and the notes, including the payment of principal of and interest on
premium, if any, Special Interest (as defined below), if any, and Additional
Amounts (as defined below), if any, on the notes. Our guarantees will be
subordinated to our Bank Debt and other Senior Debt on the same basis and to the
same extent as the notes are subordinated to Senior Debt, and will rank equally
with our guarantee of the 2007 Notes. On a pro forma basis, giving effect to the
maximum amount of borrowings available under our bank credit facility and the
sale of the Old Notes as of September 30, 1999, there would have been
outstanding PLN 1,511 million (DM 672 million) of Senior Debt ranking senior to
the notes and our obligations under our guarantees, and there would have been
outstanding PLN 781 million ($190 million) of Debt ranking equally with the
notes and our obligations under our guarantees.
In addition, all future debt and other liabilities of our subsidiaries, if
any, including the claims of trade creditors, secured creditors and creditors
holding debt and guarantees issued by such subsidiaries, and claims of preferred
stockholders, if any, of such subsidiaries, will be effectively senior to our
obligations under our guarantees with respect to the assets of such
subsidiaries. Although each Indenture contains limitations on the amount of
additional Debt that we and our Restricted Subsidiaries may incur, the amounts
of such Debt could be substantial and, in any case, such Debt may be either
Senior Debt or Debt of the subsidiaries which will be effectively senior in
right of payment to the notes and our guarantees of the notes. We currently do
not have any subsidiaries other than the Issuer, Holdings and PTC International
Finance B.V., the issuer of the 2007 Notes. For more information, you should
read "-- Certain Covenants -- Limitation on Debt" and "-- Certain Covenants --
Limitation on Debt and Preferred Stock of Restricted Subsidiaries."
An application has been made to list the notes on the Luxembourg Stock
Exchange. The Issuer will be required to use commercially reasonable efforts to
maintain that listing or another listing on a recognized stock exchange with
respect to the notes and the exchange notes at all times. So long as the notes
are listed on the Luxembourg Stock Exchange and the rules of the stock exchange
require it, the Issuer will maintain a paying agent in Luxembourg at all times
that payments are required to be made in respect of the notes. If the notes are
listed on any other securities exchange, the Issuer will satisfy any requirement
at that securities exchange as to paying agents.
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SINKING FUND
The notes will not be entitled to the benefit of any sinking fund.
REDEMPTION
Except as set forth herein, the Issuer may not redeem the notes prior to
December 1, 2004. The Issuer at its option may, from time to time, redeem all or
a part of the Euro Notes and all or part of the Dollar Notes at any time on or
after December 1, 2004, on not less than 30 nor more than 60 days' prior notice,
in amounts of E1,000 or US$ 1,000, as the case may be, or integral multiples
thereof at the following redemption prices (expressed as percentages of
principal amount at maturity), plus accrued interest, if any, to the redemption
date, if redeemed during the 12-month period beginning on the dates indicated
below (subject to the right of holders of record on relevant record dates to
receive interest due):
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ------ ----------
<S> <C>
December 1, 2004............................................ 105.625%
December 1, 2005............................................ 103.750%
December 1, 2006............................................ 101.875%
December 1, 2007 and thereafter............................. 100.000%
</TABLE>
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS
In addition, prior to December 1, 2002, the Issuer may, on one or more
occasions, redeem up to 35% of the initial aggregate principal amount of the
Euro Notes and up to 35% of the initial aggregate principal amount of the Dollar
Notes, as the case may be, with all or a portion of the net proceeds of a Public
Equity Offering (as defined below), provided that:
- immediately after the offering at least 60% in aggregate principal
amount of the applicable notes remains outstanding;
- it has received an equivalent amount of proceeds as a prepayment of the
Intercompany Receivables; and
- the redemption must occur within 75 days of the closing of the Public
Equity Offering.
The redemption price for the notes is 111.25% of the principal amount
thereof, together with accrued interest, if any, to the date of redemption
(subject to the right of holders of record on record dates to receive interest
due on interest payment dates).
The provisions of the bank credit facility prohibit us or the Issuer from
electing to repurchase the notes pursuant to any of the redemption provisions
described herein without first obtaining the consent of the banks or other
financial institutions party thereto.
REDEMPTION UPON ASSET SALE
If an Asset Sale (as defined below) occurs, the Issuer may be required to
make an offer to purchase all or some of the outstanding Euro Notes and Dollar
Notes at a price of 100% of the principal amount of the notes together, with
accrued interest, if any, to the date of redemption.
REDEMPTION FOR CHANGES IN WITHHOLDING TAXES
The Issuer at its option may from time to time redeem all, but not less
than all, of the notes at 100% of the principal amount of the notes together
with accrued interest, including Special Interest, if any, on the notes to the
redemption date. This redemption applies only if as a result of any amendment
to, or change in, the laws (or any rules or regulations thereunder) of
Luxembourg, The Netherlands or Poland or any political subdivision or taxing
authority thereof or therein or, in the case of Additional Amounts payable by a
successor person to the Issuer or us, of the jurisdiction in which such
successor Person is organized or any
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political subdivision or taxing authority thereof or therein or any amendment to
or change in any official interpretation or application of such laws or rules or
regulations, or any execution of or amendment to any treaty affecting taxation
to which Luxembourg, The Netherlands or Poland, or any political subdivision or
taxing authority thereof or therein or any other relevant jurisdiction or
political subdivision or taxing authority is a party, which amendment or change
or execution is effective on or after the date of the Indentures (or, in the
case of Additional Amounts payable by a successor person to us, Holdings or the
Issuer, the date on which such successor person became such pursuant to
applicable provisions of the Indentures), either:
- the Issuer with respect to the notes, us, with respect to our guarantees
of the notes or Holdings with respect to its guarantees of the notes
have become or will become obligated to pay Additional Amounts (as
described below under "-- Payment of Additional Amounts"), or
- us or Holdings have become or will become obligated to pay similar
Additional Amounts with respect to the Intercompany Receivables,
on the next date on which any amount would be payable with respect to the notes
or the Intercompany Receivables, as the case may be, and, such obligation cannot
be avoided by the use of reasonable measures available to us, Holdings or the
Issuer, as the case may be.
No such notice of redemption may be given earlier than 90 days prior to the
earliest date on which we, the Issuer or Holdings, as the case may be, would be
obligated to pay such Additional Amounts were a payment in respect of the notes,
our guarantees of the notes or Holdings' guarantees of the notes then due. At
the time such notice of redemption is given, such obligation to pay such
Additional Amounts must remain in effect. Immediately prior to the mailing of
any notice of redemption pursuant to this section, the Issuer shall deliver to
the trustee a certificate stating that we are entitled to elect to effect such
redemption and set forth a statement of facts showing that the conditions
precedent to the Issuer's right to so elect to redeem has occurred.
The provisions of the bank credit facility prohibit us from electing to
repurchase the notes pursuant to any of the redemption provisions described
herein without first obtaining the consent of the banks or other financial
institutions party thereto.
SELECTION AND NOTICE OF REDEMPTION
If less than all the notes are to be redeemed, the particular notes to be
redeemed will be selected by the appropriate trustee by a method it deems fair
and appropriate. The trustee will make this selection not more than 60 days
before the redemption date. Partial redemption may only be made in integral
multiples of E1,000 or US$ 1,000, as the case may be.
Notice of redemption will be mailed, first-class postage prepaid, at least
30 but not more than 60 days before the redemption date to each holder of notes
to be redeemed at its registered address. So long as the notes are listed on the
Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange
require, the Issuer will, once in each year in which there has been a partial
redemption of any of the notes, cause to be published in a leading daily
newspaper of general circulation in Luxembourg (which is expected to be the
Luxembourg Wort ) a notice specifying the aggregate principal amount at maturity
of notes outstanding and a list of the notes drawn for redemption but not
surrendered.
On and after the redemption date, interest will cease to accrue on notes or
portions thereof called for redemption and accepted for payment.
ADDITIONAL AMOUNTS
All payments made by us, under or with respect to the notes, by the Issuer,
under or with respect to our guarantees of the notes and by Holdings, under or
with respect to its guarantees of the notes, will be made free and clear of and
without withholding or deduction for or on account of, any present or future
tax, duty, levy, impost, assessment or other governmental charge imposed or
levied by or on behalf of the government of Luxembourg, The Netherlands or
Poland or any political subdivision or taxing authority or agency thereof
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or therein (hereinafter "Taxes") unless we, Holdings or the Issuer, as the case
may be, are required to withhold or deduct Taxes by law or by the interpretation
or administration thereof.
If we, Holdings or the Issuer are so required to withhold or deduct any
amount for or on account of Taxes from any payment made under or with respect to
the notes, our guarantees of the notes, or Holdings' guarantees of the notes, as
the case may be, we, Holdings or the Issuer will pay such additional amounts
("Additional Amounts") as may be necessary so that the net amount received by
each holder (including Additional Amounts) after such withholding or deduction
will not be less than the amount such holder would have received if such Taxes
had not been required to be withheld or deducted; provided, however, that the
foregoing obligation to pay Additional Amounts does not apply to:
- any Taxes that would not have been so imposed but for the existence of
any present or former connection between the relevant holder (or between
a fiduciary, settlor, beneficiary, member or shareholder of, or
possessor of power over the relevant holder, if the holder is an estate,
nominee, trust or corporation) and Luxembourg, The Netherlands, or
Poland or any political subdivision or taxing authority or agency
thereof or therein (other than the mere receipt of such payment or the
ownership or holding outside of Luxembourg, The Netherlands or Poland of
such note);
- any estate, inheritance, gift, sales, excise, transfer, personal
property tax or similar tax, assessment or governmental charge;
- any Taxes payable otherwise than by deduction or withholding from
payments of principal of (or premium, if any, on) or interest on such
note; or
Nor will additional amounts be paid;
- if the payment could have been made without such deduction or
withholding if the beneficiary of the payment had presented the note for
payment within 30 days after the date on which such payment or such note
became due and payable or the date on which payment thereof is duly
provided for, whichever is later, except to the extent that the holder
would have been entitled to Additional Amounts had the note been
presented on the last day of such 30-day period); or
- with respect to any payment of principal of (or premium, if any, on) or
interest on such note to any holder who is a fiduciary or partnership or
any person other than the sole beneficial owner of such payment, to the
extent that a beneficiary or settlor with respect to such fiduciary, a
member of such a partnership or the beneficial owner of such payment
would not have been entitled to the Additional Amounts had such
beneficiary, settlor, member or beneficial owner been the actual holder
of such note.
The foregoing provisions shall survive any termination or discharge of
either Indenture and shall apply equally, except with necessary changes related
to the jurisdiction, to any jurisdiction in which any successor person to us,
Holdings or the Issuer is organized or any political subdivision or taxing
authority or agency thereof or therein.
PURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
If a Change of Control (defined below) occurs at any time (the date of such
occurrence being the "Change of Control Date"), then you, as a holder of notes,
will have the right to require the Issuer to purchase your notes, in whole or in
part in integral multiples of E1,000 or US$ 1,000 principal amount, as
applicable, at a purchase price (the "Change of Control Purchase Price") in cash
in an amount equal to 101% of the principal amount of the notes, plus accrued
and unpaid interest, if any, to the date of purchase (the "Change of Control
Purchase Date"), pursuant to the offer described below (the "Change of Control
Offer") and the other procedures set forth in the Indentures. We and Holdings
will advance to the Issuer as a prepayment under the Intercompany Receivables,
an amount of funds sufficient to consummate the Change of Control Offer, and the
Issuer's obligation to repurchase the notes upon a Change of Control will be
guaranteed on a subordinated basis by us pursuant to the our guarantees of the
notes.
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"Change of Control" means the occurrence of (x) any of the following events
and (y) a Rating Decline:
- if any "Person" or "group" (as such terms are used in Sections 13(d)(3)
and 14(d)(2) of the Securities Exchange Act of 1934, or any successor
provision to either of the foregoing, including any group acting for the
purpose of acquiring, holding, voting or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Securities Exchange Act of
1934), other than any one or more of the Permitted Holders, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, except that a Person will be deemed to have
"beneficial ownership" of all shares that any such Person has the right
to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of 50% or more of the
total voting power of all classes of our Voting Stock;
- the sale, assignment, lease, conveyance, disposition or transfer,
directly or indirectly, of all or substantially all of our assets (other
than a transfer of such assets as an entirety or virtually as an
entirety to a wholly-owned subsidiary or one or more Permitted Holders)
shall have occurred, or we amalgamate, consolidate or merge with or into
any other person (other than one or more Permitted Holders) or any other
person (other than one or more Permitted Holders) amalgamates,
consolidates or merges with or into us, in any such event pursuant to a
transaction in which our outstanding Voting Stock is reclassified into
or exchanged for cash, securities or other property, other than any such
transaction where (a) our outstanding Voting Stock is reclassified into
or exchanged for Voting Stock of the surviving corporation and (b) no
person or group (other than any one or more of the Permitted Holders)
(as defined in clause (a) above) owns, directly or indirectly, 50% or
more of the total voting power of all classes of Voting Stock of such
surviving corporation immediately after such transaction; or
- during any period of two consecutive years, individuals who at the
beginning of such period constituted our Supervisory Board (together
with any new directors whose election or appointment to such board was
approved or confirmed as acceptable for purposes of this provision, by a
vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved or confirmed) cease
for any reason to constitute a majority of our Supervisory Board then in
office;
provided, however, that (a) the grant by any holder of our shares or the shares
of any of our subsidiaries of a security interest in such shares to secure
Senior Debt, and (b) the exercise by the holders of such Senior Debt of their
rights and remedies in respect thereof shall not constitute a Change of Control
hereunder as long as, in the case of the second clause, any transferee of our
shares is a Permitted Holder or such transfer does not otherwise constitute a
Change of Control.
"Permitted Holders" means:
- MediaOne, DeTeMobil and Elektrim or any person of which the foregoing
"beneficially owns" (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934) voting securities representing at least
66 2/3% of the total voting power of all classes of Voting Stock of such
person (exclusive of any matters as to which class voting rights exist)
or any person that "beneficially owns" voting securities representing at
least 66 2/3% of the total voting power of all classes of Voting Stock
of MediaOne or DeTeMobil or Elektrim;
- any international telecom company with (a) substantial experience in
mobile telecommunications operations, (b) a long-term debt rating by
Moody's of at least Baa3 or by S&P of at least BBB-, or a comparable
credit-rating by another internationally recognized rating agency, and
(c) consolidated revenues for its most recent full fiscal year of at
least $2.5 billion or the equivalent in another currency; and
- any corporation (or other entity) which owns all of our outstanding
Capital Stock if such entity acquires such ownership in a transaction in
which the owners of all of our Capital Stock immediately prior to such
transaction acquire proportionate ownership of all of the Capital Stock
(or similar
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equity ownership interest) of such entity (or any parent organization
which owns all of the outstanding Capital Stock (or similar equity
ownership interest) of such entity).
Within 60 days following any Change of Control, we or the Issuer shall,
subject to compliance with the requirements of the second succeeding paragraph,
(a) cause a notice of the Change of Control Offer to be sent at least once to
the Dow Jones News Service or similar business news service in the United
States, and (b) send, by first-class mail, with a copy to each trustee, to each
holder of notes, at such holder's address appearing in the Security Register, a
notice stating, among other things:
- that a Change of Control has occurred and a Change of Control Offer is
being made pursuant to the covenant entitled "Change of Control," and
that all notes timely and otherwise properly tendered will be accepted
for payment;
- the Change of Control Purchase Price and the purchase date, which shall
be, subject to any contrary requirements of applicable law, a Business
Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed (the "Purchase Date");
- that any note (or portion thereof) accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the
Purchase Date;
- that any notes (or portions thereof) not tendered or accepted for
payment will continue to accrue interest;
- a description of the transaction or transactions constituting the Change
of Control; and
- the procedures that holders of notes must follow in order to tender
their notes (or portions thereof) for payment, and the procedures that
holders of notes must follow in order to withdraw an election to tender
notes (or portions thereof) for payment.
The Issuer's obligation to repurchase the notes upon a Change of Control
will be guaranteed by us on a senior subordinated basis pursuant to our
guarantees of the notes.
In the event that at the time of a Change of Control the terms of the Bank
Debt or any other Senior Debt restrict or prohibit the repurchase of notes as
described in the foregoing paragraph, then prior to the mailing of the Change of
Control notice to holders of the notes, but in any event within 30 days
following such Change of Control, we will:
- repay or cause to be repaid in full, and terminate all commitments under
the Bank Debt and such other Senior Debt or, if the Bank Debt or such
other Senior Debt is not, by its terms, then repayable or prepayable, to
offer to repay in full all Bank Debt or such other Senior Debt and to
repay or cause to be repaid the Bank Debt and such other Senior Debt of
each lender who has accepted such offer; or
- obtain the requisite consent under the agreements governing the Bank
Debt and such other Senior Debt to permit the repurchase of the notes as
described above.
Our bank credit facility prohibits the repurchase of the notes prior to
full repayment of indebtedness thereunder.
The occurrence of certain of the events which would constitute a Change of
Control could constitute a default under our bank credit facility and might
constitute a default under any of our future indebtedness. In addition, the
exercise by the holders of the notes of their right to require the Issuer to
repurchase the notes could cause a default under such indebtedness, even if the
Change of Control itself does not, due to the financial effect of such
repurchase on us. Finally, if a Change of Control Offer is made, there can be no
assurance that we or the Issuer will have sufficient funds or other resources to
pay the Change of Control Purchase Price for all the notes that might be
delivered by holders thereof seeking to accept the Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
assignment, lease, conveyance, disposition or transfer of "all or substantially
all" of our assets. Although there is a developing body of case
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law interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of notes to require us to repurchase such notes as a result of a sale,
assignment, lease, conveyance, disposition or transfer of less than all of our
assets to another person may be uncertain.
We and the Issuer, as appropriate, will comply with the requirements of
Rule 13e-4 and Rule 14e-1 of Regulation 14E of the Securities Exchange Act of
1934 and any other U.S., Luxembourg, Dutch or Polish securities laws or
regulations in connection with the repurchase of notes pursuant to any Change of
Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with the Change of Control Offer, we, Holdings and the
Issuer will comply with such provisions and will not be deemed to have breached
its obligations under the Change of Control covenant by virtue thereof.
CURRENCY INDEMNITY
The U.S. dollar is the sole currency of account and payment for all sums
payable under the Dollar Notes and the applicable Indenture. Any amount received
or recovered in currency other than U.S. dollars in respect of the Dollar Notes
(whether as a result of, or of the enforcement of, a judgment or order of a
court of any jurisdiction, in the winding-up or dissolution of the Issuer, us,
any Subsidiary or otherwise) by the holder in respect of any sum expressed to be
due to it from us, Holdings or the Issuer shall constitute a discharge of us,
Holdings or the Issuer only to the extent of the U.S. dollar amount which the
recipient is able to purchase with the amount so received or recovered in other
currency on the date of that receipt or recovery (or, if it is not possible to
make that purchase on that date, on the first date on which it is possible to do
so). If that U.S. dollar amount is less than the U.S. dollar amount expressed to
be due to the recipient under any Dollar Note, we, Holdings and the Issuer shall
indemnify the recipient against the cost of making any such purchase. For the
purposes of this paragraph, it will be sufficient for the holder to certify that
it would have suffered a loss had the actual purchase of U.S. dollars been made
with the amount so received in that other currency on the date of receipt or
recovery (or, if a purchase of U.S. dollars on such date had not been possible,
on the first date on which it would have been possible). These indemnities, to
the extent permitted by law:
- constitute a separate and independent obligation from the other
obligations of us, Holdings and the Issuer;
- shall give rise to a separate and independent cause of action;
- shall apply irrespective of any waiver granted by any holder; and
- shall continue in full force and effect despite any other judgment,
order, claim or proof for a liquidated amount in respect of any sum due
under any Dollar Note or any other judgment or order.
The Euro is the sole currency of account and payment for all sums payable
under the Euro Notes and the applicable Indenture. Any amount received or
recovered other than in Euro in respect of the Euro Notes (whether as a result
of, or of the enforcement of, a judgment or order of a court of any
jurisdiction, in the winding-up or dissolution of us, Holdings or the Issuer or
otherwise) by the holder in respect of any sum expressed to be due to it from
us, Holdings or the Issuer shall constitute a discharge of us, Holdings or the
Issuer only to the extent of the Euro amount which the recipient is able to
purchase with the amount so received or recovered in other currency on the date
of that receipt or recovery (or, if it is not possible to make that purchase on
that date, on the first date on which it is possible to do so). If that Euro
amount is less than the Euro amount expressed to be due to the recipient under
any Euro Note, we, Holdings and the Issuer shall indemnify the recipient against
the cost of making any such purchase. For the purposes of this paragraph, it
will be sufficient for the holder to certify that it would have suffered a loss
had an actual purchase of Euro been made with the amount so received in that
other currency on the date of receipt or recovery (or, if a purchase of Euro on
such date had not been possible, on the first date on which it would have been
possible). These indemnities, to the extent permitted by law:
- constitute a separate and independent obligation from the other
obligations of ours, of Holdings and of the Issuer;
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- shall give rise to a separate and independent cause of action;
- shall apply irrespective of any waiver granted by any holder; and
- shall continue in full force and effect despite any other judgment,
order, claim or proof for a liquidated amount in respect of any sum due
under any Euro Note or any other judgment or order.
DISBURSEMENT OF FUNDS; ESCROW ACCOUNT
The notes are secured pursuant to two Escrow Agreements made by Holdings in
favor of the relevant trustee for the benefit of the holders of the notes. Each
of these Escrow Agreements provides for the grant by Holdings of security in the
Escrow Accounts created thereunder on the Issue Date. Recourse to Holdings in
respect of its obligations under Holdings' guarantees of the notes will be
limited to the amounts deposited in the Escrow Accounts.
Securities in such amount and with such maturity as will be sufficient,
upon receipt of scheduled interest and principal payments on such securities,
(in the opinion of an internationally recognized firm of independent public
accountants selected by us) to provide for payment in full of the first five
scheduled interest payments (excluding Additional Amounts) due on the notes will
be deposited in the Escrow Accounts on the Issue Date. The amount of securities
deposited in the Escrow Accounts may be insufficient to provide for the payment
of interest due on the notes in the event that an increased rate of interest
becomes payable on the notes. The securities will consist of five groups of U.S.
Government Securities, in the case of the Dollar Escrow Agreement, or European
Government Securities, in the case of the Euro Escrow Agreement, one for each of
the first five scheduled interest payments. Each such group will consist of U.S.
Government Securities or European Government Securities denominated in the
currency of the relevant interest payment maturing on, or as nearly as possible
prior to, the date of the corresponding scheduled interest payment in an
aggregate amount sufficient upon receipt of scheduled interest and principal
payments of such securities (determined as described above) to provide for
payment in full of scheduled interest payments on the relevant notes.
Approximately E117.0 million of the net proceeds of the offering was used to
acquire the securities, however, the precise amount of securities acquired
depends upon the interest rates on U.S. Government Securities or European
Government Securities prevailing on the Issue Date. The securities will be held
in the relevant Escrow Accounts in the name of the relevant trustee or Holdings.
Pursuant to each Escrow Agreement, prior to an interest payment date on the
notes, Holdings may either deposit with the relevant trustee funds otherwise
available to Holdings cash an amount sufficient to pay the interest scheduled to
be paid on such date, or Holdings may direct the relevant trustee to release
from the relevant Escrow Account (or otherwise procure the release of) an amount
sufficient to pay interest then due on the relevant notes. In the event that
Holdings exercises the former option, it may thereafter direct the relevant
trustee to release to it (or otherwise procure the release of) an amount in cash
or securities from the relevant Escrow Account in an amount equal to such cash
deposited with the relevant Trustee. Failure to pay interest on the notes in a
timely manner through the first five scheduled interest payment dates will
constitute an immediate Event of Default under the applicable Indenture with no
grace or cure period.
Interest earned on the relevant securities will be added to the relevant
Escrow Account. In the event that the funds or securities held in an Escrow
Account exceed the amount sufficient, in the opinion of an internationally
recognized firm of independent public accountants selected by us, to provide for
payment in full of the first five scheduled interest payments (excluding
Additional Amounts unless then due and payable) due on the relevant notes (or,
in the event an interest payment or payments have been made, an amount
sufficient to provide for payment in full of any interest payments remaining, up
to and including the fifth scheduled interest payment), the relevant trustee
will be permitted to release to us upon request any such excess amount.
Although the funds and securities deposited in the Escrow Accounts and the
proceeds realized thereon will only be sufficient to provide for payment in full
of the first five scheduled interest payments (excluding Additional Amounts) on
the notes, the security in the Escrow Accounts will be granted to secure not
only the Issuer's obligations to make such interest payments, but also all of
its other obligations under the notes.
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Each Escrow Agreement provides that once we have made the first five
scheduled interest payments on the relevant notes in a timely manner, the
relevant trustee's security in the relevant Escrow Account shall be terminated
and the funds and securities therein returned to the control of Holdings. After
security in an Escrow Account is terminated, the relevant notes will be
completely unsecured.
Your ability, as holders of notes, to realize any of the funds or
securities in the Escrow Accounts may be subject to certain bankruptcy law
limitations in the event of the bankruptcy of the Issuer, Holdings or us.
Each Escrow Agreement provides that funds in the Escrow Accounts may only
be disbursed to pay interest on the relevant notes that are outstanding, and, in
the event that principal and interest on the securities deposited in an Escrow
Account exceeds 100% of the amount sufficient, in the written opinion of a
nationally recognized firm of independent accountants selected by Holdings, to
provide for payment in full of the first five scheduled interest payments due on
the notes, any such excess amount.
Holdings may also replace an Escrow Account with a letter of credit posted
in favor of the relevant trustee, for the benefit of the holder of the notes, in
an amount equal to any remaining interest payments to be made on the notes up to
and including the fifth interest payment. Currently, the consent of the lenders
under our bank credit facility is required to replace an Escrow Account with a
letter of credit. If we replace an Escrow Account with a letter of credit, we
will publicize the replacement in a daily leading newspaper with general
circulation in Luxembourg, and we will also inform the Luxembourg Stock
Exchange.
CERTAIN COVENANTS
Each of the Indentures will contain, among others, the following covenants:
Limitation on Debt. We will not, directly or indirectly, incur any Debt
other than Permitted Debt unless, after giving pro forma effect to the
incurrence of such Debt and any other Debt Incurred or repaid since the date of
the most recently available quarterly or annual balance sheet and the receipt
and application of the proceeds thereof, no Event of Default would occur as a
consequence of such incurrence or be continuing following such incurrence, and
either:
- the ratio of:
(a) the aggregate consolidated principal amount of our Debt and the
Debt of our Restricted Subsidiaries outstanding as of the most
recently available quarterly or annual balance sheet, after giving
pro forma effect to the incurrence of such Debt and any other Debt
Incurred or repaid since such balance sheet date and the receipt
and application of the proceeds thereof; to
(b) Adjusted Cash Flow for the four full fiscal quarters next preceding
the incurrence of such Debt for which consolidated financial
statements are available, determined on a pro forma basis as if any
such Debt had been incurred and the proceeds thereof had been
applied at the beginning of such four fiscal quarters, would be
less than 5.0 to 1.0;
or
- the Consolidated Capital Ratio as of the most recent available quarterly
or annual balance sheet, after giving pro forma effect to the incurrence
of such Debt and any other Debt Incurred or repaid since such balance
sheet date and the receipt and application of the proceeds thereof, is
less than 2.0 to 1.0.
"Permitted Debt" is defined as follows:
- Debt Incurred pursuant to our guarantees of the notes, the 2007 Notes
Guarantee, the notes and the Intercompany Receivables, and Refinancing
Debt Incurred in respect thereof;
- Debt Incurred under our bank credit facility and any Qualified Debt
Offering and Refinancing Debt Incurred in respect thereof, provided that
the aggregate principal amount of all such Debt, together with all such
Debt of Restricted Subsidiaries, at any one time outstanding does not
exceed DM 760 million, which amount shall be permanently reduced by the
amount of (a) Scheduled Reductions and (b) repayments pursuant to the
provisions of our bank credit facility relating to the
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proceeds of Asset Sales not reinvested; provided, however, that the total
reductions pursuant to (a) and (b) above shall not exceed DM 672 million;
- Debt Incurred in respect of Capital Expenditure Debt and Refinancing
Debt Incurred in respect thereof, provided that:
(a) the aggregate principal amount of such Debt does not exceed the
Fair Market Value of the Property or assets acquired or constructed
(including the cost of design, development, construction,
installation and integration thereof);
(b) the property or assets acquired or constructed are used in a
Telecommunications Business; and
(c) the aggregate principal amount outstanding of all Debt Incurred
under this bullet point and under the second bullet point of
"Limitation on Debt and Preferred Stock of Restricted Subsidiaries"
does not exceed an amount equal to (w) $250.0 million plus (x) an
amount equal to $30 million for each million persons residing in
the coverage area of the GSM 1800 License, plus (y) an amount equal
to (i) if the Guarantor or any Subsidiary acquires a UMTS License,
$40 million for each million persons residing in the coverage area
of such UMTS License for the development of UMTS service minus (ii)
the aggregate principal amount of Debt Incurred pursuant to the
immediately preceding clause (x), plus (z), if Minutes of Use
exceed an average of 383 million per month for any four months in a
consecutive six-month period through December 31, 2001, $3 for each
such excess Minute of Use;
- that percentage of our Debt owing to and held by any Restricted
Subsidiary that is equal to the percentage of our direct or indirect
ownership interest in such Restricted Subsidiary; provided, however,
that:
(a) any subsequent issue or transfer of Capital Stock or other event
that results in a reduction in our direct or indirect ownership
interest in such Restricted Subsidiary, or
(b) any subsequent transfer of such Debt (except to us or a
Wholly-Owned Subsidiary) shall be deemed, in each case, to
constitute the incurrence of such Debt by us in the following
amounts:
(i) in the case of (a) above, the full amount of such Debt if such
Restricted Subsidiary does not remain a Restricted Subsidiary,
and otherwise the percentage of such Debt equal to the
percentage reduction in our direct or indirect ownership
interest in such Restricted Subsidiary; and
(ii) in the case of (b) above, the full amount of such Debt if it
is not transferred to a Restricted Subsidiary, and otherwise a
percentage of such Debt equal to (x) the percentage of our
direct or indirect ownership interest in the Restricted
Subsidiary that previously held such Debt less (y) the
percentage of our indirect ownership interest in the
Restricted Subsidiary to which such Debt is transferred;
- Debt (other than Debt permitted by the first four or the last two
clauses of this definition) in an aggregate principal amount outstanding
at any time not to exceed $25.0 million;
- Debt under Interest Rate Protection Agreements entered into by us for
the purpose of limiting interest rate risk in respect of our Debt or the
Debt of any Restricted Subsidiary in the ordinary course of our
financial management and not for speculative purposes;
- Debt under Currency Exchange Protection Agreements, provided that such
Currency Exchange Protection Agreements were entered into by us for the
purpose of limiting currency exchange rate risks directly related to
transactions entered into in the ordinary course of business and not for
speculative purposes;
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- Debt in connection with one or more standby letters of credit or
performance bonds issued in the ordinary course of business or pursuant
to self-insurance obligations and not in connection with the borrowing
of money or the obtaining of advances or credit; and
- Debt outstanding on the Issue Date and listed on a schedule to each
Indenture, and Refinancing Debt Incurred in respect thereof.
Limitation on Debt and Preferred Stock of Restricted Subsidiaries. We will
not permit any Restricted Subsidiary to, directly or indirectly, Incur any Debt
or Preferred Stock except:
- Debt Incurred under our bank credit facility and any Qualified Debt
Offering and Refinancing Debt Incurred in respect thereof, provided that
the aggregate principal amount of all such Debt, together with all of
our such Debt, at any one time outstanding does not exceed DM 760
million, which amount shall be permanently reduced by the amount of (a)
Scheduled Reductions and (b) repayments pursuant to the provisions of
our bank credit facility relating to the proceeds of Asset Sales not
reinvested; provided, however, that the total reductions pursuant to (a)
and (b) above shall not exceed DM 672 million;
- Debt Incurred in respect of Capital Expenditure Debt and Refinancing
Debt Incurred in respect thereof, provided that:
(a) the aggregate principal amount of such Debt does not exceed the
fair market value of the property or assets acquired or constructed
(including the cost of design, development, construction,
installation or integration);
(b) the property or assets acquired or constructed are used in a
Telecommunications Business; and
(c) the aggregate principal amount outstanding of all Debt Incurred
under this bullet point and under the third bullet point of "--
Limitation on Company Debt" does not exceed an amount equal to (w)
$250.0 million plus (x) an amount equal to $30 million for each
million persons resident in the coverage area of the GSM 1800
license, plus (y) an amount equal to (i) if we or any subsidiary
acquires a UMTS License, $40 million for each million persons
residing in the coverage area of such UMTS License for the
development of UMTS service minus (ii) the aggregate principal
amount of Debt Incurred pursuant to the immediately preceding
clause (x), plus (z), if Minutes of Use exceed an average of 383
million per month for any four months in a consecutive six-month
period through December 31, 2001, $3 for each such excess Minute of
Use;
- that percentage of Debt of a Restricted Subsidiary owing to and held by
any Restricted Subsidiary that is equal to the percentage of our direct
or indirect ownership interest in such Restricted Subsidiary; provided,
however, that:
(a) any subsequent issue or transfer of Capital Stock or other event
that results in a reduction in our direct or indirect ownership
interest in such Restricted Subsidiary; or
(b) any subsequent transfer of such Debt (except to us or a
Wholly-Owned Subsidiary) shall be deemed, in each case, to
constitute the incurrence of such Debt by the Issuer thereof in the
following amounts:
(i) in the case of (x) the full amount of such Debt if such
Restricted Subsidiary does not remain a Restricted Subsidiary,
otherwise the percentage of such Debt equal to the percentage
reduction in our direct or indirect ownership interest in such
Restricted Subsidiary; and
(ii) in the case of (y), the full amount of such Debt if it is not
transferred to a Restricted Subsidiary, and otherwise a
percentage of such Debt equal to (x) the percentage of our
direct or indirect ownership interest in the Restricted
Subsidiary that previously held such Debt less (y) the
percentage of our indirect ownership interest in the
Restricted Subsidiary to which such Debt is transferred;
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- Debt of a Restricted Subsidiary Incurred and outstanding on or prior to
the date on which such Restricted Subsidiary was acquired by us or
otherwise became a Restricted Subsidiary (other than Debt Incurred as
consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became
a subsidiary or was otherwise acquired by us), provided, however, that
at the time such Restricted Subsidiary is acquired or otherwise became a
Restricted Subsidiary of us, we would have been able to Incur $1.00 of
additional Debt pursuant to the first two clauses of the first paragraph
of the covenant described under "-- Limitation on Debt;"
- Debt under Interest Rate Protection Agreements entered into by such
Restricted Subsidiary for the purpose of limiting interest rate risk in
respect of our Debt or the Debt of a Restricted Subsidiary in the
ordinary course of the financial management of such Restricted
Subsidiary and not for speculative purposes;
- Debt under Currency Exchange Protection Agreements, provided that such
Currency Exchange Protection Agreements were entered into by such
Restricted Subsidiary for the purpose of limiting currency exchange rate
risks directly related to transactions entered into in the ordinary
course of business and not for speculative purposes;
- Debt in connection with one or more standby letters of credit or
performance bonds issued in the ordinary course of business or pursuant
to self-insurance obligations and, in each case, not in connection with
the borrowing of money or the obtaining of advances or credit;
- Debt or Preferred Stock outstanding on the Issue Date and listed on a
schedule to the Indentures;
- Debt Incurred pursuant to the Indentures and the guarantees of the
notes; and
- Refinancing Debt Incurred in respect of Debt Incurred pursuant to the
provisions of the fourth, eighth and ninth clauses of this paragraph.
Limitation on Layered Debt. Neither the Issuer nor we will, directly or
indirectly, incur any Debt if such Debt provides by its terms that it is
subordinate or junior in ranking to any Senior Debt of ours or Senior Debt of
the Issuer, as the case may be, unless such Debt is Senior Subordinated Debt or
is expressly subordinated in right of payment to Senior Subordinated Debt;
provided, however, that nothing herein shall apply to:
- intercreditor agreements among creditors of the Issuer or of ours but to
which neither the Company nor we are a party; or
- agreements relating to priorities of payment or rights in respect of
collateral among the Issuer, us and the banks or other financial
institutions party to our bank credit facility (or any Refinancing
Indebtedness in respect thereof) and any related Hedging Obligations.
Limitation on Restricted Payments. We will not, and will not permit any
Restricted Subsidiary to, directly or indirectly:
- declare or pay any dividend or make any other payment or distribution
(whether made in cash, Property or securities), except for any dividend
or distribution which is made solely to us or a Restricted Subsidiary
(and, if such Restricted Subsidiary is not a Wholly-Owned Subsidiary, to
the other shareholders of such Restricted Subsidiary on a pro rata
basis), or dividends or distributions payable solely in shares of
Capital Stock (other than Redeemable Stock) of us;
- purchase, redeem, acquire or retire any of our Capital Stock or a
Capital Stock of a Restricted Subsidiary held by persons other than us
or any Wholly-Owned Subsidiary;
- make any payment on, or with respect to, or redeem, repurchase, defease
or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled sinking fund or mandatory redemption payment, any
Subordinated Obligation (other than the purchase, repurchase or other
acquisition of any Subordinated Obligation purchased in anticipation of
satisfying a sinking fund obligation,
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principal installment or final maturity, in each case due within one year
of the date of acquisition), or make any payment on, redeem, repurchase,
defease or otherwise acquire or retire for value the Shareholder Loans;
or
- make an Investment (other than Permitted Investments) in any person (all
such payments and other actions set forth in these four clauses being
collectively referred to as "Restricted Payments").
Notwithstanding the foregoing, we or any other Restricted Subsidiary may
make any Restricted Payment if at the time of, and after giving effect to, such
proposed Restricted Payment:
- no Default or an Event of Default shall have occurred and be continuing;
- we could incur at least $1.00 of additional Debt pursuant to the first
two bullet points contained in the first paragraph of the covenant
described under "-- Limitation on Debt;" or
- the aggregate amount of such Restricted Payment and all other Restricted
Payments declared or made since the Issue Date (the amount of any
Restricted Payment, if made other than in cash, to be based upon Fair
Market Value) would not exceed an amount equal to the sum of:
(a) the remainder of:
(i) Adjusted Cash Flow for the period (treated as one accounting
period) from the Issue Date to the end of our most recent
fiscal quarter, ending at least 45 days prior to the date of
such proposed Restricted Payment; less
(ii) the product of 1.75 times the sum of (i) Adjusted Interest
Expense; plus
(iii) Adjusted Foreign Debt FX Losses for such period;
(b) Capital Stock Sale Proceeds;
(c) the amount by which Debt (other than Subordinated Obligations) of
ours or any Restricted Subsidiary is reduced on our balance sheet
upon the conversion or exchange (other than by a Subsidiary)
subsequent to the Issue Date of any Debt of ours or any Restricted
Subsidiary convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of ours (less the amount of any cash or
other Property distributed by us or any Restricted Subsidiary upon
such conversion or exchange);
(d) an amount equal to the sum of:
(i) the net reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans, advances or
other transfers of assets, in each case to us or any Restricted
Subsidiary from Unrestricted Subsidiaries; and
(ii) the portion (proportionate to our equity interest in such
subsidiary) of the Fair Market Value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum shall not exceed, in the case
of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by us or
any Restricted Subsidiary in such Unrestricted Subsidiary; and
(e) $10 million.
Notwithstanding the foregoing limitations, we may:
- pay dividends on our Capital Stock within 60 days of the declaration
thereof if, on said declaration date, such dividends could have been
paid in compliance with the Indentures; provided, however, that at the
time of such payment of such dividend, no Default or Event of Default
shall have occurred and be continuing (or result therefrom), provided
further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
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- redeem, repurchase, defease, acquire or retire for value, any
Subordinated Obligation with the proceeds of any Refinancing Debt;
provided, however, that such redemption, repurchase, defeasance or other
acquisition or retirement for value shall be excluded in the calculation
of the amount of Restricted Payments; or
- acquire, redeem or retire our Capital Stock or our Subordinated
Obligations made by exchange for, or out of the proceeds of the
substantially concurrent sale of, our Capital Stock (other than
Disqualified Stock and other than Capital Stock issued or sold to a
subsidiary of ours or an employee stock ownership plan or to a trust
established by us or any of our subsidiaries for the benefit of their
employees); provided, however, that:
(a) such acquisition, redemption or retirement shall be excluded in the
calculation of the amount of Restricted Payments; and
(b) the Net Cash Proceeds from such sale shall be excluded from the
calculation of the amount of Capital Stock Sale Proceeds.
Transactions with Affiliates. We will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, conduct any business, enter
into or permit to exist any transaction or series of related transactions
(including the purchase, sale, transfer, assignment, lease, conveyance or
exchange of any Property or the rendering of any service) with any Affiliate of
ours (an "Affiliate Transaction") unless:
- the terms of such Affiliate Transaction are:
(a) set forth in writing; and
(b) no less favorable in any material respect, taken as a whole, to us
or such Restricted Subsidiary, as the case may be, than those that
could be obtained in a comparable arm's-length transaction with a
person that is not an Affiliate of ours or such Restricted
Subsidiary, as determined in good faith by any Officer; and
- with respect to an Affiliate Transaction involving aggregate payments,
the transfer of assets or provision of services, in each case having a
value in excess of $5.0 million, either:
(a) our Supervisory Board (including a majority of the disinterested
members of the Supervisory Board) approves such Affiliate
Transaction and, in its good faith judgment, believes that such
Affiliate Transaction complies with item (b) under the first bullet
point of this paragraph as evidenced by a Board Resolution; or
(b) with respect to those transactions having a value in excess of
$10.0 million, we obtain and provide to the trustees a written
opinion from an Independent Appraiser to the effect that such
Affiliate Transaction is fair, from a financial point of view, to
us.
Notwithstanding the foregoing limitation, we may enter into or suffer to
exist the following:
- any transaction or series of transactions between us and a Restricted
Subsidiary or between Restricted Subsidiaries that are in the ordinary
course of business and do not adversely affect holders of the notes;
- any Restricted Payment permitted to be made pursuant to the covenant
described under "-- Limitation on Restricted Payments;"
- any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by our
Supervisory Board;
- the payment of reasonable fees and provision of reasonable indemnities
to directors and consultants of ours and our Restricted Subsidiaries who
are not our employees or employees of our Restricted Subsidiaries;
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- loans and advances to employees made in the ordinary course of business
and consistent with past practice of ours or our Restricted Subsidiary,
as the case may be, provided that such loans and advances do not exceed
$1.0 million in the aggregate at any one time outstanding;
- transactions pursuant to the 2007 Notes, the notes, the Registration
Rights Agreements, the Intercompany Receivables or the Shareholders
Agreement;
- transactions between us and our subsidiaries entered into in connection
with our bank credit facility;
- agreements in existence on the Issue Date and any renewal thereof,
provided that any such renewal is on terms no less favorable in any
material respect, taken as a whole, than the terms of any such existing
agreement and provided that we will not, and will not permit any
Restricted Subsidiary to, amend, modify or in any way alter the terms of
any existing Affiliate Agreements in a manner materially adverse to the
holders of the notes;
- contracts that have been awarded to an Affiliate pursuant to which the
Affiliate has granted us "most favored terms" pursuant to a competitive
bid, provided that we certify to the Trustee that such contract complies
with this subsection;
- agreements relating to the offer and sale of Capital Stock of the
Guarantor that the Management Board determines in good faith to be
customary for such an offer and sale;
- any employment agreement or employment arrangement entered into by us or
any Restricted Subsidiary in the ordinary course of business that is
consistent with industry practice or approved by a majority of the
disinterested members of our Supervisory Board; and
- any guarantee or grant of collateral by us or a Restricted Subsidiary in
connection with Senior Debt.
Limitation on Liens. We will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, incur any Lien (other than Permitted
Liens) upon any of its Property, including any shares of Capital Stock or Debt
of any Restricted Subsidiary, whether owned at the Issue Date or thereafter
acquired, or any interest therein or any income or profits therefrom, or assign
or otherwise convey any right to receive income thereon unless it has made or
will make effective provision whereby the notes will be secured by such Lien
equally and ratably with (or prior to) all other Debt of ours or any Restricted
Subsidiary secured by such Lien (subject to applicable priorities of payment);
provided, however, that we may incur other Liens to secure Debt as long as the
amount of outstanding Debt secured by Liens Incurred pursuant to this provision
does not exceed 5% of Consolidated Net Tangible Assets, as determined based on
our consolidated balance sheet as of the end of the most recent fiscal quarter
ending at least 45 days prior thereto.
Limitation on Asset Sales. We shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale
after the Issue Date unless:
- we or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the Property subject to such Asset Sale;
- at least 75% of the consideration paid to us or such Restricted
Subsidiary in connection with such Asset Sale is in the form of cash or
cash equivalents; and
- we deliver an Officers' Certificate to the trustees certifying that such
Asset Sale complies with the first two bullet points.
The Net Available Cash (or any portion thereof) from Asset Sales may be
applied by us or a Restricted Subsidiary, to the extent we or such Restricted
Subsidiary elects:
- to prepay, repay or purchase our Senior Debt or Debt of a Restricted
Subsidiary (excluding Debt owed to us or an Affiliate of ours and
Preferred Stock of a Restricted Subsidiary); or
- to reinvest in Additional Assets (including by means of an Investment in
Additional Assets by a Restricted Subsidiary with Net Available Cash
received by us or another Restricted Subsidiary);
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provided, however, that in connection with any prepayment, repayment or purchase
of Debt pursuant to clause (a) above, we or such Restricted Subsidiary shall
retire such Debt and shall cause the related revolving or term loan commitment
(if any) to be permanently reduced by an amount equal to the principal amount so
prepaid, repaid or purchased, with the further effect (if applicable)
contemplated by the second clause of the definition of Permitted Debt.
Any Net Available Cash from an Asset Sale not applied in accordance with
the preceding paragraph within twelve months from the date of the receipt of
such Net Available Cash shall constitute "Excess Proceeds." Within five business
days from the date the aggregate amount of Excess Proceeds exceeds $10.0 million
(taking into account income earned on such Excess Proceeds, if any), we,
directly or through the Issuer, will be required to make an offer (the "Asset
Sale Offer") to purchase the notes, which offer shall be in the amount of the
Excess Proceeds, at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any (including Special
Interest, if any), to the Purchase Date (as defined below) in accordance with
the procedures (including pro-rating in the event of oversubscription) set forth
in the Indentures. To the extent that any portion of the amount of Net Available
Cash remains after compliance with such procedures and provided that all holders
of notes have been given the opportunity to tender their notes for purchase in
accordance with the Indentures, we or such Restricted Subsidiary may use such
remaining amount for general corporate purposes and the amount of Excess
Proceeds will be reset to zero.
We and the Issuer, as appropriate, will comply with the requirements of
Rule 13e-4 and Rule 14e-1 of Regulation 14E of the Securities Exchange Act of
1934 and any other U.S., Luxembourg, Dutch or Polish securities laws or
regulations in connection with the repurchase of notes described above. To the
extent that the provisions of any securities laws or regulations conflict with
the repurchase offer, we and the Issuer will comply with such provisions and
will not be deemed to have breached its obligations under the Asset Sale
covenant by virtue thereof.
The provisions of our bank credit facility prohibit us from repurchasing
the notes pursuant to any of the provisions described herein without first
obtaining the consent of the banks or other financial institutions party
thereto.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. We will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or permit to exist or become
effective, any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
- pay dividends, in cash or otherwise, or make any other distributions on
or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, or pay any Debt or other
obligation owed, to us or a Restricted Subsidiary;
- make any loans or advances to us or a Restricted Subsidiary; or
- transfer any of its property or assets to us or a Restricted Subsidiary.
Such limitations will not apply:
- to encumbrances and restrictions:
(a) in existence under or by reason of any agreements (not otherwise
described in clause (c) below) in effect on the Issue Date;
(b) relating to Debt of a Restricted Subsidiary, and existing at such
Restricted Subsidiary at the time it became a Restricted
Subsidiary, if such encumbrance or restriction was not created in
connection with or in anticipation of the transaction or series of
related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by us,
(c) set forth in our bank credit facility;
(d) applicable to a Restricted Subsidiary that is contained in an
agreement or instrument governing or relating to Senior Debt,
provided that the provisions of such agreement do not prevent
(other
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than following an event of default on such Senior Debt) the payment
of interest and mandatory payment or mandatory prepayment of
principal pursuant to the terms of the Indentures and the notes, but
provided further that such agreement may nevertheless contain
customary net worth, leverage, invested capital and other financial
covenants and customary covenants regarding the merger of or sale of
all or any substantial part of our assets or the assets of any
Restricted Subsidiary, customary restrictions on transactions with
Affiliates and customary subordination provisions governing Debt owed
to us or any Restricted Subsidiary; or
(e) which result from the renewal, refinancing, extension or amendment
of an agreement referred to in (a) through (c) of this bullet point
or in (a) and (b) of the following bullet point, provided such
encumbrance or restriction is no less favorable in any material
respect, taken as a whole, to the holders of notes than those under
the agreement evidencing the Debt so renewed, refinanced, extended
or amended, as determined in good faith by our Management Board and
evidenced by a Board Resolution; and
- with respect only to the third clause in the first paragraph of this
covenant, to:
(a) any encumbrance or restriction relating to Debt that is permitted
to be incurred pursuant to the provisions described under "--
Limitation on Debt" or "-- Limitation on Debt and Preferred Stock
of Restricted Subsidiaries" and secured pursuant to the provisions
described under "-- Limitation on Liens;"
(b) any encumbrance or restriction in connection with an acquisition of
Property, so long as such encumbrance or restriction relates solely
to the Property so acquired and was not created in connection with
or in anticipation of such acquisition;
(c) customary provisions of leases and customary provisions in other
agreements that restrict assignment of such agreements or rights
thereunder;
(d) customary restrictions contained in asset sale agreements limiting
the transfer of such Property pending the closing of such sale;
(e) any encumbrance or restriction existing by reason of a customary
merger or acquisition agreement for the purchase or acquisition of
the stock or assets of us or any of our subsidiaries by another
Person;
(f) customary restrictions contained in operating leases for real
property and restricting only the transfer of such real property or
effective only upon the occurrence and during the continuance of a
default in the payment of rent;
(g) any encumbrance or restriction arising as the result of applicable
law or regulation; or
(h) any restriction or encumbrance that may be imposed by governmental
licenses, franchises or permits.
The Subsidiaries. We will ensure that each of the Issuer, Holdings and PTC
International Finance B.V. remains a Wholly-Owned Subsidiary; provided, however,
that nothing herein shall limit:
- the ability of us or Holdings to grant a security interest in the shares
of the Issuer to secure Senior Debt;
- the rights of the holders of such Senior Debt to exercise their rights
and remedies in respect thereof, as long as the Surviving Person meets
the requirements set forth in the first two items under "--
Consolidation, Merger and Sale of Assets;" or
- a voluntary dissolution of the Issuer or merger of the Issuer into
Holdings, or Holdings into us, solely for the purposes of permitting
Holdings or us to assume all obligations in respect of the notes as if
it were the direct obligor with respect thereto, and in which all our
assets are transferred to Holdings or in which all the assets of
Holdings are transferred to us and no material payment or distribution
is made to creditors.
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Reports to Holders. Prior to the consummation of the exchange offer or the
effectiveness of a Shelf Registration Statement, we and the Issuer will make
available, upon request, to any holder of notes, prospective investor and
securities analyst in the United States, the information specified in Rule
144A(d)(4) of the Securities Act of 1933, unless we are subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, at or prior to the time of such
request.
If we or the Issuer are subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, we or the Issuer, as appropriate, shall file with the
trustee and provide holders of notes, within 15 days after filing with, or
furnishing to, the Securities and Exchange Commission which filing shall be made
electronically and shall be made in a form prescribed by the Securities and
Exchange Commission, to allow it to be available via the Securities and Exchange
Commission's Internet site at http://www.sec.gov, or any successor electronic
medium to such site, copies of our respective annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Securities and Exchange Commission may by rules and
regulations prescribe) which the Issuer or we are required to file with the
Securities and Exchange Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, or is required to furnish to the Securities and
Exchange Commission pursuant to the Indentures.
Notwithstanding that the Issuer or we may not be required to remain subject
to the reporting requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, or otherwise report on an annual and quarterly basis on forms
provided for such annual and quarterly reporting pursuant to rules and
regulations promulgated by the Securities and Exchange Commission, the
Indentures require us to continue to file with, or furnish to, which filing
shall be made electronically, and shall be made in a form prescribed by the
Securities and Exchange Commission to allow it to be available via the
Securities and Exchange Commission's Internet site at http://www.sec.gov, and
provide the trustee and holders of notes:
- within 90 days after the end of each fiscal year (or such shorter period
as the Securities and Exchange Commission may in the future prescribe),
annual reports on Form 20-F (or any successor form) containing the
information required to be contained therein (or required in such
successor form);
- within 45 days after the end of each of the first three fiscal quarters
of each fiscal year (or such shorter period as the Securities and
Exchange Commission may in the future prescribe), reports on Form 6-K
(or any successor form) containing substantially the same information
required to be contained in Form 10-Q (or required in any successor
form); and
- promptly from time to time after the occurrence of an event required to
be therein reported, such other reports on Form 6-K (or any successor
form) containing substantially the same information required to be
contained in Form 8-K (or any successor form).
In addition, the Indentures require us to use reasonable efforts to conduct
conference calls on a quarterly basis with holders of notes and securities
analysts.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Neither the Issuer nor we nor Holdings will merge or consolidate with or
into any other entity or sell, transfer, assign, lease, convey or otherwise
dispose of all or substantially all of its Property in any one transaction or
series of transactions (other than a merger, amalgamation or consolidation of a
Restricted Subsidiary (including us and Holdings) into, or the transfer of all
or any portion of the assets and liabilities of a Restricted Subsidiary to, us
or Holdings (with respect to us only)) unless, in our case:
- we shall be the surviving Person (the "Surviving Person") or the
Surviving Person (if other than us) formed by such consolidation or
merger, or the Person to which such sale, transfer, assignment, lease,
conveyance or disposition is made, shall be a corporation organized and
existing under the laws of Poland, the United States or a state thereof
or the District of Columbia, Germany, France, The Netherlands,
Luxembourg or the United Kingdom;
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- the Surviving Person (other than us) expressly assumes, by supplemental
indenture in form satisfactory to the trustee, executed and delivered to
the trustee by such Surviving Person, the due and punctual payment of
our obligations under our guarantees of the notes and the due and
punctual performance and observance of all the covenants and conditions
of the related Indenture to be performed by us;
- in the case of a sale, transfer, assignment, lease, conveyance or other
disposition of all or substantially all of our Property, such Property
shall have been transferred as an entirety or substantially as an
entirety to one person;
- immediately before and after giving effect to such transaction or series
of transactions on a pro forma basis (and treating any Debt which
becomes, or is anticipated to become, an obligation of the Surviving
Person or any Restricted Subsidiary as a result of such transaction or
series of transactions as having been incurred by the Surviving Person
or such Restricted Subsidiary at the time of such transaction or series
of transactions), no Default or Event of Default shall have occurred and
be continuing;
- immediately after giving effect to such transaction or series of
transactions on a pro forma basis (and treating any Debt which becomes,
or is anticipated to become, an obligation of the Surviving Person or
any Restricted Subsidiary as a result of such transaction or series of
transactions as having been incurred by the Surviving Person or such
Restricted Subsidiary at the time of such transaction or series of
transactions), we or the Surviving Person, as the case may be, would be
able to incur at least $1.00 of additional Debt under the first or
second clause of the first paragraph of the covenant described under "--
Certain Covenants -- Limitation on Debt;" and
- in connection with any consolidation, merger, transfer or other
transaction contemplated by this provision, we shall deliver, or cause
to be delivered, to the trustee, in form and substance reasonably
satisfactory to the trustee, an Officer's Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, transfer or other
transaction, and the supplemental indenture in respect thereto comply
with this provision, and that all conditions precedent herein provided
for relating to such transaction or transactions have been complied
with;
provided, however, that in the case of any merger, amalgamation or consolidation
permitted above, the security granted in the Escrow Accounts in favor of the
trustees shall be preserved, and in connection with any merger of the Issuer
into Holdings, Holdings' Guarantees of the notes shall remain in full force and
effect, and Holdings shall assume by supplemental indentures all our obligations
under the Indentures; provided further, however, that the provisions of the
fourth and fifth bullet points above shall not apply to a reorganization of us,
effected for the purpose of converting us to a spoffika akcyjna (a joint stock
company), in which the holders of our Capital Stock before and after such
reorganization remain unchanged.
A Surviving Person (other than us) satisfying the requirements of the
preceding paragraph will succeed to, and be substituted for, and may exercise
every right and power of ours under the Indentures, and the predecessor of us
(except in the case of a lease) will be released from the obligation to pay the
principal of, and premium, if any, and interest on, the notes.
Nothing in the Indentures shall prevent any Restricted Subsidiary from
consolidating with, merging into or transferring all or part of its properties
and assets to us or any other Restricted Subsidiary.
RESTRICTED AND UNRESTRICTED SUBSIDIARIES
Our Management Board may designate or redesignate any of our subsidiaries
or any Restricted Subsidiary to be an Unrestricted Subsidiary if:
- the subsidiary to be so designated does not own any Capital Stock,
Redeemable Stock or Debt of, or own or hold any Lien on any Property or
assets of, us or any other Restricted Subsidiary;
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- the subsidiary to be so designated is not obligated by any Debt, Lien or
other obligation that, if in default, would result (with the passage of
time or notice or otherwise) in a default on any Debt of the Issuer or
any Restricted Subsidiary; and
- either (a) the subsidiary to be so designated has total assets of $1,000
or less, or (b) such designation is effective immediately upon such
subsidiary becoming a subsidiary of us or any Restricted Subsidiary.
Unless designated as an Unrestricted Subsidiary, any person that becomes a
subsidiary of ours or of any Restricted Subsidiary, will be classified as a
Restricted Subsidiary. Except as provided in the first sentence of this
paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary. Any such designation by our Management Board will be evidenced to
each trustee by promptly filing with the trustees, a copy of the Board
Resolution giving effect to such designation, and an Officers' Certificate
certifying that such designation complies with the foregoing provisions.
We will not, and will not permit any Unrestricted Subsidiary to, take any
action or enter into any transaction or series of transactions that would result
in a Person becoming a Restricted Subsidiary (whether through an acquisition,
the redesignation of an Unrestricted Subsidiary or otherwise), unless after
giving effect to such action, transaction or series of transactions, on a pro
forma basis:
- we could incur at least $1.00 of additional Debt pursuant to the first
or second bullet points of the first paragraph of the covenant described
under "-- Certain Covenants -- Limitation on Debt;"
- such Restricted Subsidiary could then incur under "-- Certain Covenants
-- Limitation on Debt" all Debt as to which it is obligated at such
time; and
- no Default or Event of Default would occur or be continuing.
DEFAULTS
An "Event of Default" will occur under each of the Indentures if:
- we and the Issuer fail to make any payment of interest (including
Special Interest, if any) and Additional Amounts, if any, on any note
when the same shall become due and payable, whether or not such payments
shall be prohibited as described under "Subordination of the Notes," and
such failure continues for a period of 30 days, provided that the
failure to make any of the first five scheduled interest payments on the
Notes will constitute an Event of Default with no cure or grace period;
- we and the Issuer:
(a) fail to make the payment of the principal or premium, if any on any
note, when the same becomes due and payable at its Stated Maturity,
upon declaration, redemption, acceleration, required purchase or
otherwise, whether or not such payments shall be prohibited as
described under "-- Subordination of the Notes,"; or
(b) fail to redeem or purchase the notes when required pursuant to
either Indenture or the notes, whether or not such redemption or
purchase shall be prohibited as described under "-- Subordination
of the Notes;"
- we and the Issuer fail to make or consummate a Change of Control Offer
described under "-- Change of Control," or to comply with the provisions
described under "-- Limitation on Restricted Payments;"
- we or the Issuer fail to comply with any of their respective covenants
in the notes or either Indenture (other than those specified in the
first three clauses), and such failure continues for a period of 60 days
after the notice specified below;
- Debt for borrowed money of ours or any Restricted Subsidiary is not paid
within any applicable grace period after final maturity, in effect from
time to time or is accelerated by the holders thereof,
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and the total amount of such Debt unpaid or accelerated exceeds $15.0
million, or its equivalent at the time;
- any judgment or decree aggregating in an uninsured amount in excess of
$15.0 million, or its equivalent at the time, is rendered against us or
any Restricted Subsidiary, and there is a period of 60 days following
the entry of such judgment or decree during which such judgment or
decree is not discharged, waived or the execution thereof stayed, and
such default continues for ten days after the notice specified below;
- we, the Issuer or any Significant Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(a) commences a voluntary insolvency proceeding;
(b) consents to the entry of an order for relief against it in an
involuntary insolvency proceeding;
(c) consents to the appointment of a custodian or official receiver of
it or for any substantial part of its Property; or
(d) makes a general assignment for the benefit of its creditors, or
takes any equivalent action under any foreign laws relating to
insolvency or laws having a similar effect for creditors; provided,
however, that the dissolution of a Restricted Subsidiary and the
assumption by us of all its obligations, including (in our case)
the obligations on the notes, together with the transfer of all the
assets of such Restricted Subsidiary to us or (other than in the
case of the Issuer) another Restricted Subsidiary, shall not
constitute an Event of Default under this subsection;
- a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(a) is for relief against us, the Issuer or any Significant Subsidiary
in an involuntary insolvency proceeding;
(b) appoints a custodian or official receiver of us, the Issuer or any
Significant Subsidiary or for any substantial part of its Property;
or
(c) orders the involuntary winding-up or liquidation of us, the Issuer
or any Significant Subsidiary; or any equivalent relief is granted
under any foreign laws relating to insolvency and the order or
decree remains unstayed and in effect for 90 days;
- either of our GSM licenses is revoked, terminated or suspended or
otherwise ceases to be effective, resulting in the cessation or
suspension of operations for a period of more than 180 days of our
cellular communication business;
- any of our guarantees of the notes or Holdings' guarantees of the notes
for any reason shall be or shall cease to be, or shall, for any reason
be asserted in writing by the Issuer, Holdings or us not to be, in full
force and effect and enforceable in accordance with its terms, except to
the extent contemplated by the Indentures, our guarantees of the notes
or Holdings' guarantees of the notes; or
- either Escrow Agreement becomes, or we or Holdings assets or
acknowledges in writing, that either Escrow Agreement is invalid or
unenforceable, otherwise than in accordance with its terms.
A Default under the fourth, fifth, or sixth bullet points above will not be
an Event of Default until either trustee or the holders of at least 25% in
aggregate principal amount of the notes then outstanding under either Indenture
notify us of the Default and we do not cure such Default within the time
specified after receipt of such notice. Such notice must specify the Default,
demand that it be remedied and state that such notice is a "Notice of Default."
We will deliver to the trustees, within 30 days after the occurrence
thereof, written notice in the form of an Officer's Certificate, of any event
which, with the giving of notice and the lapse of time, would become an Event of
Default under the fourth, fifth, or sixth bullet points above, its status and
what action we are taking or proposes to take with respect thereto.
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ACCELERATION
If an Event of Default (other than an Event of Default specified in the
seventh or eighth bullet points above) occurs and is continuing, either trustee,
by notice to us, or the holders of at least 25% in aggregate principal amount of
the notes then outstanding under either Indenture, by notice to us and the
trustees, may declare the principal of, premium if any, and accrued interest on
all notes under the relevant Indenture to be due and payable. Upon such a
declaration, such premium and interest will be due and payable immediately;
provided, however, that so long as any Bank Debt or any commitment therefor is
outstanding, any such notice or declaration shall not become effective until ten
Business Days after such notice is delivered to the Representative of the Bank
Debt, and provided further, that if such Event of Default is no longer
continuing at the end of such ten Business Day period, such notice or
declaration shall be deemed rescinded and of no further force or effect.
If an Event of Default specified in the seventh or eighth bullet points
above occurs, the interest on all the notes will become and be immediately due
and payable without any declaration or other act on the part of either trustee
or any holders of notes.
The holders of a majority in principal amount of the Euro Notes or Dollar
Notes, by notice to the relevant trustee, may under the relevant Indenture
rescind an acceleration and its consequences, if the rescission would not
conflict with any judgment or decree, and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of acceleration. No such rescission will affect any
subsequent Default or impair any right consequent thereto.
The holders of a majority in aggregate principal amount of the Euro Notes
or Dollar Notes by notice to the relevant trustee may waive an existing Default
and its consequences except:
- a Default in the payment of the principal of, premium, if any, or
interest on a note; or
- a Default in respect of a provision that cannot be amended without the
consent of each holder affected.
When a Default is waived, it is deemed cured, but no such waiver will
extend to any subsequent or other Default or impair any consequent right.
The holders of a majority in aggregate principal amount of the Euro Notes
or Dollar Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the relevant trustee, or of exercising
any trust or power conferred on such trustee. However, the trustee may refuse to
follow any direction that conflicts with law or the relevant Indenture, or that
such trustee determines is unduly prejudicial to the rights of other holders or
would involve the trustee in personal liability; provided, however, that such
trustee may take any other action deemed proper by such trustee that is not
inconsistent with such direction. Prior to taking any action under the
Indentures, the trustees will be entitled to indemnification satisfactory to
them, in their sole discretion, against all losses and expenses caused by taking
or not taking such action.
You may not pursue any remedy with respect to an Indenture or the notes
unless:
- you give to the relevant trustee written notice stating that an Event of
Default is continuing;
- you, along with holders of at least 50% in aggregate principal amount of
the Euro Notes or Dollar Notes, as the case may be, then outstanding
make a written request to the trustee to pursue the remedy;
- you offer to the relevant trustee reasonable security or indemnity
satisfactory to the trustee against any loss, liability or expense;
- the relevant trustee does not comply with the request within 179 days
after receipt of the request and the offer of security or indemnity;
- you, along with the holders of a majority in principal amount of the
Euro Notes or Dollar Notes, as the case may be, do not give the relevant
trustee a written direction inconsistent with the request during such
179-day period; and
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- in any event, such holder shall request that any judgment be paid to the
relevant trustee as agent for such holder.
Notwithstanding any other provision of the Indentures, your rights to
receive payment of principal of and interest on the notes held by you, on or
after the respective due dates expressed in the notes, or to bring suit for the
enforcement of any such payment on or after such respective dates, will not be
impaired or affected without your consent.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, either Indenture may be amended or
supplemented with the written consent of the holders of at least a majority in
aggregate principal amount of the relevant notes then outstanding, and any
existing default or compliance with any provisions may be waived with the
consent of the holders of at least a majority in aggregate principal amount of
the relevant notes then outstanding. However, without the consent of each holder
of an outstanding Euro Note or Dollar Note, as the case may be, no amendment
may, among other things:
- reduce the amount of affected notes whose holders must consent to an
amendment;
- reduce the rate of, or extend the time for, payment of interest on any
affected note;
- reduce the principal or extend the Stated Maturity of any affected note;
- reduce the premium payable upon the redemption of any affected note or,
change the time or times at which any affected notes may or shall be
redeemed;
- make any affected note payable in money other than that stated in the
note;
- impair the right of any holder of affected notes to institute suit for
the enforcement of any payment on, or with respect to, any affected
notes;
- release any security that may have been granted in respect of the
affected notes;
- make any change to the provisions described under "-- Subordination of
the Notes" that adversely affects the rights of any holder of affected
notes under such provisions; or
- modify any of the provisions of either Escrow Agreement.
Without the consent of any holder of the notes, we, the Issuer and the
applicable trustee may, among other things, amend or supplement the Indentures
to cure any ambiguity, omission, defect or inconsistency, to provide for the
assumption by a successor issuer of the Issuer's obligations, or a successor
issuer of our obligations, under the Indentures, to add guarantees with respect
to the notes or to secure the notes, to add to our covenants or the covenants of
the Issuer for the benefit of the holders of the notes, to surrender any right
or power conferred upon us or the Issuer, to make any change that does not
adversely affect the rights of any holder of the notes, to make any change to
the provisions described under "-- Subordination of the Notes" that would limit
or terminate the benefits available to any holder of Senior Debt under such
provisions or to comply with any requirement of the Securities and Exchange
Commission in connection with the qualification of the Indentures under the U.S.
Trust Indenture Act.
Any amendment pursuant to the two preceding paragraphs may not make any
change that adversely affects the rights under the provisions described under
"-- Subordination of the Notes" of any holder of Senior Debt then outstanding
unless the holders of such Senior Debt (or any group or representative thereof
authorized to give a consent that would be binding on all the holders of such
Senior Debt) consent to such change.
Neither your consent nor the consent of the other holders of the notes is
necessary under the Indentures to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the substance of the
proposed amendment.
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After an amendment under either Indenture becomes effective, we are
required to mail to you and each registered holder of the relevant notes, at
your respective addresses appearing in the Security Register, a notice briefly
describing such amendment. However, the failure to give such notice to all
holders of the notes, or any defect therein, will not impair or affect the
validity of the amendment.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuer may, at any time, terminate:
- all our obligations and the obligations of the Issuer and Holdings under
the notes, the Indentures, our guarantees of the notes and Holdings'
Guarantees of the notes ("legal defeasance option"); or
- our obligations and the obligations of the Issuer and Holdings to comply
with certain restrictive covenants, including certain of the covenants
described under "-- Certain Covenants" ("covenant defeasance option").
The Issuer may exercise its legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option.
If the Issuer exercises its legal defeasance option, payment of the
defeased notes may not be accelerated because of an Event of Default. Such
defeasance means that we will be deemed to have paid and discharged the entire
Debt represented by the outstanding Euro and/or Dollar Notes, and to have
satisfied all our other obligations under such notes and the relevant Indenture,
insofar as such notes are concerned except for:
- the rights of holders of outstanding notes to receive payments in
respect of the principal or premium, if any, and interest on such notes
when such payments are due;
- our obligations to issue temporary notes, register the transfer or
exchange of any such notes, replace mutilated, destroyed, lost or stolen
notes, maintain an office or agency for payments in respect of such
notes and segregate and hold such payments in trust;
- the rights, powers, trusts, duties and immunities of the relevant
trustee; and
- the defeasance provisions of the Indentures.
If the Issuer exercise its covenant defeasance option, payment of the notes
may not be accelerated because of certain Events of Default described under "--
Defaults" (not including, among others, Events of Default relating to
nonpayment, bankruptcy and insolvency events) or because of its failure or our
failure to comply with certain covenants specified in the Indentures.
The Issuer may exercise its legal defeasance option or covenant defeasance
option only if:
- we or the Issuer irrevocably deposit in trust with the relevant trustee,
cash in Euros or European Government Securities, in the case of the Euro
Notes, cash in United States dollars or U.S. Government Securities, in
the case of the Dollar Notes, for the payment of principal of and
interest on the relevant notes related to maturity or redemption, as the
case may be;
- we or the Issuer deliver to the trustee a certificate from a nationally
or internationally recognized firm of independent certified public
accountants expressing their opinion that the payments of principal and
interest, when due and without reinvestment, will provide cash at such
times and in such amounts as will be sufficient to pay principal and
interest when due on all the relevant Notes relevant to maturity or
redemption, as the case may be;
- 184 days pass after the deposit is made and during the 184-day period no
Default described in the seventh or eighth clause under "-- Defaults"
occurs which is continuing at the end of the period;
- the deposit does not constitute a default under any other agreement or
instrument binding on the Issuer, and is not prohibited by the
provisions described under "-- Subordination of the Notes";
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- we or the Issuer deliver to the relevant trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, nor is qualified as, a regulated investment company under
the U.S. Investment Company Act of 1940;
- in the case of the legal defeasance option, we or the Issuer deliver to
the relevant trustee:
(a) an Opinion of Counsel stating that either:
(i) we or the Issuer has received from the U.S. Internal Revenue
Service a ruling; or
(ii) since the date of the relevant Indenture there has been a
change in the applicable U.S. Federal income tax law, to the
effect that, and based thereon, such Opinion of Counsel shall
confirm that, the holders of the notes will not recognize
income, gain or loss for U.S. Federal income tax purposes as a
result of such defeasance and will be subject to U.S. Federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had
not occurred; and
(b) an Opinion of Counsel in each of Luxembourg, The Netherlands,
France, Germany and the United Kingdom to the effect that the
holders of the notes will not recognize income, gain or loss for
Luxembourg, Dutch, French, German or United Kingdom tax purposes as
a result of such covenant defeasance and will be subject to,
Luxembourg, Dutch, French, German and the United Kingdom tax on the
same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred;
- in the case of the covenant defeasance option, we or the Issuer delivers
to the relevant trustee:
(a) an Opinion of Counsel to the effect that the holders of the
relevant notes will not recognize income, gain or loss for U.S.
Federal income tax purposes as a result of such covenant
defeasance, and will be subject to U.S. Federal income tax on the
same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred;
and
(b) an Opinion of Counsel in each of Luxembourg, The Netherlands,
France, Germany and the United Kingdom to the effect that the
holders of the notes will not recognize income, gain or loss for
Luxembourg, Dutch, French, German or United Kingdom tax purposes as
a result of such covenant defeasance, and will be subject to
Luxembourg, Dutch, French, German and the United Kingdom tax on the
same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred;
and
- we or the Issuer delivers to the relevant trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the relevant notes have
been complied with as required by the Indentures.
SATISFACTION AND DISCHARGE OF THE INDENTURES
The relevant Indenture will cease to be of further effect (except as to
surviving rights of registration of transfer, or exchange of the relevant notes
as expressly provided for in the relevant Indenture), and the relevant trustee,
at the expense of the Issuer, will execute proper instruments acknowledging
satisfaction and discharge of such Indenture when:
- either:
(a) all such notes theretofore authenticated (other than destroyed,
lost or stolen notes which have been replaced or paid) have been
delivered to such trustee for cancellation; or
(b) all such notes not theretofore delivered to the relevant trustee for
cancellation:
(i) have become due and payable;
(ii) will become due and payable at Stated Maturity within one
year; or
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(iii) are to be called for redemption within one year under
arrangements satisfactory to the relevant trustee for the giving
of notice of redemption by the relevant trustee in our name and
at our expense, and we have irrevocably deposited or caused to
be deposited with the relevant trustee, trust funds in trust for
such purpose in an amount sufficient to pay and discharge the
entire Debt on such notes not theretofore delivered to the
relevant Trustee for cancellation, of principal or, premium, if
any, and interest on the notes to the date of such deposit (in
the case of notes which have become due and payable), or to the
Stated Maturity or redemption date, as the case may be;
- we, the Issuer or Holdings has paid or caused to be paid or all other
sums payable under relevant Indenture by us, the Issuer or Holdings;
- the Issuer has delivered irrevocable instructions to the relevant
trustee to apply the deposited money toward the payment of notes at
Maturity or on the redemption date, as the case may be; and
- the Issuer has delivered to the relevant trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided in the relevant Indenture relating to the satisfaction
and discharge of such Indenture have been complied with.
THE TRUSTEES; PAYING AGENT
Each Indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set forth
in such Indenture. If an Event of Default has occurred and is continuing, the
relevant trustee will exercise such rights and powers vested in it under the
relevant Indenture, and use the same degree of care and skill in its exercise as
a prudent person would exercise under similar circumstances in the conduct of
such person's own affairs.
Each Indenture and the provisions of the Trust Indenture Act, which are
incorporated by reference into each Indenture, contain limitations on the rights
of the trustee thereunder should it become our creditor or a creditor of
Holdings or the Issuer, to obtain payment of claims in certain cases, or to
realize on certain property received by it in respect of any such claims, as
security or otherwise. The trustees are permitted to engage in other
transactions; provided, however, that if they acquire any conflicting interest
(as defined in the Trust Indenture Act) they must eliminate such conflict or
resign.
We and the Issuer reserve the right to vary or terminate the appointment of
any paying agent and/or to appoint additional or other paying agents, provided
that they will at all times maintain a paying agent in Luxembourg, as long as
the notes may be listed on the Luxembourg Stock Exchange. Notice of any change
in or addition to the paying agents will be provided as specified below.
NOTICES
Notices to you will be given by mail to the registered addresses of such
holders.
All notices to you will be deemed to have been duly given upon:
- the mailing by first-class mail, postage prepaid, of such notices to
registered holders of the notes at their registered addresses as
recorded in the registers; and
- publication in a leading daily newspaper with general circulation in a
major western European capital or, if not practicable, in a leading
daily English language newspaper having general circulation in Europe
previously approved by the relevant trustee. Any such notice will be
deemed to have been given on the date of such publication or, if
published more than once or on different dates, on the first date on
which publication is made in the manner required in the newspaper or
newspapers.
For notes which are represented by global certificates held on behalf of
Euroclear or Clearstream, notices may be given by delivery of the relevant
notices to Euroclear or Clearstream for communication to entitled account
holdings in substitution for the aforesaid publication. So long as any notes are
listed on the Luxembourg Stock Exchange, and the rules and regulations of the
Luxembourg Stock Exchange so require,
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any such notice to the holders of the relevant notes shall also be published in
a leading daily newspaper of general circulation in Luxembourg. Such publication
is expected to be the Luxembourg Wort.
CONSENT TO JURISDICTION AND SERVICE OF PROCESS
The Indentures provide that we, Holdings and the Issuer, will each
irrevocably appoint CT Corporation System as its agent for service of process in
any suit, action or proceeding with respect to the Indentures or the notes,
brought in any federal or state court located in the Borough of Manhattan, City
and State of New York, and that each of the parties submits to the jurisdiction
thereof.
GOVERNING LAW
The Indentures, the notes, our guarantees of the notes and Holdings'
guarantees of the notes will be governed by, and construed in accordance with,
the laws of the State of New York.
CERTAIN DEFINITIONS
The following definitions, among others, are used in the Indentures and the
notes:
"2007 Notes" means the 10 3/4% Senior Subordinated Guaranteed Discount
Notes due July 1, 2007, issued by PTC International Finance B.V., our
Wholly-Owned Subsidiary of the Guarantor.
"2007 Notes Guarantee" means our guarantee of PTC International Finance
B.V.'s obligations under the 2007 Notes and the Indenture for the Existing
Notes.
"Additional Amounts" means additional amounts to be paid by us, Holdings or
the Issuer under the notes, our guarantees of the notes, Holdings' guarantees of
the notes or the Intercompany Receivables, as the case may be, in an amount
calculated so that the net amount received by each holder of the notes, or the
Issuer under the Intercompany Receivables, as the case may be, including
Additional Amounts, after withholding or deducting any amount for or on account
of Taxes, will not be less than the amount that any such holder or the Issuer
would have received if such Taxes were not required to be so withheld or
deducted.
"Additional Assets" means:
- any Property (other than Debt and Capital Stock) used in a
Telecommunications Business, as determined in good faith by our
Management Board and certified with an Officers' Certificate;
- Capital Stock of a Person that becomes a Restricted Subsidiary as a
result of the acquisition of such Capital Stock by the Issuer or another
Restricted Subsidiary; or
- Capital Stock constituting a minority interest in any person that at
such time is a Restricted Subsidiary;
provided, however, that, in the case of the first two bullet points, such
Restricted Subsidiary is primarily engaged in a Telecommunications Business as
determined in good faith by our Management Board and certified with an Officers'
Certificate.
"Adjusted Cash Flow" means, for any period, the Cash Flow for each fiscal
quarter (and any shorter period) during such period, translated into U.S.
dollars at the Dollar/Zloty exchange rate applicable during each such quarter
(or shorter period).
"Adjusted Consolidated Net Worth" means the sum of:
- each equity investment (other than investments in Disqualified Stock) in
us, translated into U.S. dollars at the Dollar/Zloty exchange rate at the
time of each such investment; plus
- Consolidated Net Income for each full fiscal quarter (or shorter period)
from the formation of the Issuer to the date of calculation, translated
into U.S. dollars at the Dollar/Zloty exchange rate applicable during
each such quarter (or shorter period); minus
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- any dividends, distributions or payments that would be Restricted
Payments under either of the first two clauses of the definition of
Restricted Payments, translated into U.S. dollars at the Dollar/Zloty
exchange rate applicable at the time of such dividend, distribution or
payment.
"Adjusted Foreign Debt FX Losses" means, for any period, Consolidated
Foreign Debt FX Losses for each fiscal quarter (and any shorter period) during
such period, translated into U.S. dollars at the Dollar/Zloty exchange rate
applicable during each such quarter (or shorter period).
"Adjusted Interest Expense" means, for any period, Consolidated Interest
Expense for each fiscal quarter (and any shorter period) during such period,
translated into U.S. dollars at the Dollar/Zloty Exchange Rate applicable during
each such quarter (or shorter period).
"Affiliate" of any specified Person means:
- any other person, directly or indirectly, controlling or controlled by
or under direct or indirect common control with such specified person;
or
- any other person who is a director or officer:
(a) of such specified person;
(b) of any subsidiary of such specified person; or
(c) of any person described in the first clause above.
For the purposes of this definition, "control" when used with respect to
any person, means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. For purposes of the
covenant described under "-- Certain Covenants -- Limitation on Transactions
with Affiliates" and "-- Certain Covenants -- Limitation on Asset Sales" only,
"Affiliate" shall also mean any beneficial owner of shares representing 10% or
more of the total voting power of our Voting Stock (on a fully diluted basis),
or of rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence of this definition.
"Asset Sale" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by us or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), other than individual isolated transactions not
in excess of $250,000 each, of:
- any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares or shares required by applicable law to be
held by a person other than the Issuer or a Restricted Subsidiary);
- all, or substantially all, the assets of any division or line of
business of ours or any Restricted Subsidiary; or
- any other assets of ours or any Restricted Subsidiary outside of the
ordinary course of business or the business such Restricted Subsidiary;
other than:
- a disposition of short-term investments, inventory, receivables, or
other current assets;
- a disposition governed by the provisions of the relevant Indenture
described under the caption "-- Consolidation, Merger and Sale of
Assets;"
- a disposition by a Restricted Subsidiary to ours or by us or a
Restricted Subsidiary to a Wholly-Owned Subsidiary; or
- a disposition that constitutes a Restricted Payment permitted by the
covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments."
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"Attributable Debt" means Debt deemed to be incurred in respect of a Sale
and Leaseback Transaction and shall be, at the date of determination, the
greater of:
- the Fair Market Value of the Property subject to such Sale and Leaseback
Transaction; and
- the present value (discounted at the interest rate borne by the notes,
compounded annually), of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such Sale
and Leaseback Transaction (including any period for which such lease has
been extended).
"Average Life" means, as of the date of determination, with respect to any
Debt or Preferred Stock, the quotient obtained by dividing:
- the sum of the product of the numbers of years (rounded to the nearest
one-twelfth of one year) from the date of determination to the dates of
each successive scheduled principal payment of such Debt, or redemption
or similar payment with respect to such Preferred Stock, multiplied by
the amount of such payment; by
- the sum of all such payments.
"Bank Credit Facility" means the senior syndicated loan facility agreement
entered into by us with a syndicate of banks or other financial institutions and
each Senior Finance Document referred to therein, as they may be amended,
modified, supplemented, replaced, renewed, extended or restated from time to
time.
"Bank Debt" means Senior Debt under or in respect of our Bank Credit
Facility and, following the payment in full of our Bank Credit Facility, Senior
Debt under or in respect of a Senior Debt financing facility (including, without
limitation, debt securities) outstanding, or committed in a principal amount of
at least $10 million, that is designated by us from time to time in a notice to
the trustee, which is signed by the Representative of the immediately preceding
facility constituting the Bank Debt as constituting the "Bank Debt."
"Bankruptcy Law" means Title 11, United States Code, or any similar Federal
or state law for the supervision or relief of debtors, or any analogous law of
any other nation, legal jurisdiction or any political subdivision thereof or
therein.
"Board Resolution" means a copy of a resolution certified by an Officer to
have been duly adopted by the Management Board or the Supervisory Board, as the
context may require, and to be in full force and effect on the date of such
certification, and which is delivered to the trustee.
"Cash Flow" means, for any period, the sum of:
- Consolidated Net Income; plus
- Consolidated Interest Expense; plus
- to the extent deducted in calculating such Consolidated Net Income for
such period:
(a) all income tax expense of us and our consolidated Restricted
Subsidiaries;
(b) depreciation expense of us and our consolidated Restricted
Subsidiaries;
(c) amortization expense of us and our consolidated Restricted
Subsidiaries (excluding amortization expense attributable to a
prepaid cash item that was paid in a prior period);
(d) Consolidated Foreign Debt FX Losses; and
(e) all other non-cash charges of us and our consolidated Restricted
Subsidiaries (excluding any such non-cash charge to the extent that
it represents an accrual of or reserve for cash expenditures in any
future period); minus
- all non-cash items added in calculating such Consolidated Net Income for
such period, all determined in accordance with IAS consistently applied.
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Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
Restricted Subsidiary shall be added to Consolidated Net Income to compute Cash
Flow only to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income and
only if a corresponding amount would be permitted at the date of determination
to be dividended to us by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders.
"Capital Expenditure Debt" means Debt (including Capital Lease Obligations)
Incurred by us or a Restricted Subsidiary to finance a capital expenditure
related to the Telecommunications Business so long as:
- such capital expenditure is or should be included as an addition to
"Tangible Fixed Assets or Intangible Fixed Assets, at cost" in
accordance with IAS;
- such Debt is Incurred within 180 days of the date such capital
expenditure is made; and
- such Debt does not exceed the fair market value of the assets acquired
or constructed.
"Capital Lease Obligations" means Debt represented by obligations under a
lease that is required to be capitalized for financial reporting purposes in
accordance with IAS. The amount of such Debt shall be the capitalized amount of
such obligations determined in accordance with IAS, and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty. For purposes of "-- Certain
Covenants -- Limitation on Liens," a Capital Lease Obligation shall be deemed
secured by a Lien on the Property being leased.
"Capital Stock" means, with respect to any person, any and all shares or
other equivalents (however designated) of corporate stock, partnership interests
or any other participation, right, warrant, option or other interest in the
nature of an equity interest in such person, but excluding any debt security
convertible or exchangeable into such equity interest; provided, however, that
"Capital Stock" shall not include Disqualified Stock.
"Capital Stock Sale Proceeds" means the aggregate Net Cash Proceeds
received by us from the issue or sale (other than pursuant to a subsidiary or an
employee stock ownership plan or trust established by us or any subsidiary) by
us of any class of our Capital Stock (other than Disqualified Stock) after the
Issue Date, including Capital Stock issued upon conversion of convertible debt
and upon the exercise of options, warrants or rights to purchase Capital Stock.
"Consolidated Capital Ratio" means, as of any date, the ratio of:
- the aggregate consolidated principal amount of our Debt and the Debt of
our Restricted Subsidiaries then outstanding; to
- Adjusted Consolidated Net Worth.
"Consolidated Current Liabilities" means, as of any date of determination,
the aggregate amount of our liabilities and of our consolidated Restricted
Subsidiaries which may properly be classified as current liabilities (including
taxes accrued as estimated), on a consolidated basis, after eliminating:
- all intercompany items between us and any Restricted Subsidiary; and
- all current maturities of long-term Debt, all as determined in
accordance with IAS consistently applied.
"Consolidated Foreign Debt FX Losses" means, for any period, all of our
losses or expenses and the losses or expenses of our Consolidated Restricted
Subsidiaries, reflected in the consolidated statement of operations in respect
of Debt of us or a Restricted Subsidiary that is denominated in a currency other
than the Polish Zloty, to the extent that such loss or expense is due to a
decline in the value of the Polish Zloty against such foreign currency and is
deducted in calculating Consolidated Net Income for such period.
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"Consolidated Interest Expense" means, for any period, the total interest
expense of us and our consolidated Restricted Subsidiaries, plus, to the extent
not included in such total interest expense, and to the extent incurred by us or
our Restricted Subsidiaries:
- interest expense attributable to capital leases and one-third of the
rental expense attributable to operating leases;
- amortization of debt discount and debt issuance cost;
- capitalized interest;
- non-cash interest expenses;
- accrued interest;
- commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing;
- net costs associated with Hedging Obligations (including amortization of
fees);
- Preferred Stock dividends in respect of all Preferred Stock held by
persons other than us or a Wholly-Owned Subsidiary;
- interest incurred in connection with Investments in discontinued
operations;
- interest accruing on any Debt of any other person to the extent such
Debt is guaranteed by us or any Restricted Subsidiary; and
- the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to
pay interest or fees to any person (other than us), in connection with
the Debt incurred by such plan or trust.
"Consolidated Net Income" means, for any period, our net income (loss) and
the net income (loss) of our consolidated subsidiaries; provided, however, that
there shall not be included in Consolidated Net Income
- any net income (loss) of any person if such person is not a Restricted
Subsidiary, except that:
(a) subject to the exclusion contained in the fourth clause below, our
equity in the net income of any such person for such period shall be
included in such Consolidated Net Income up to the aggregate amount
of cash distributed by such person during such period to us or a
Restricted Subsidiary as a dividend or other distribution (subject,
in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in the third clause below;
and
(b) our equity in a net loss of any such person for such period shall
be included in determining such Consolidated Net Income;
- any net income (loss) of any person acquired by us or a subsidiary of
such person in a pooling of interests transaction for any period prior
to the date of such acquisition;
- any net income (loss) of any Restricted Subsidiary if such subsidiary is
subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions, directly or indirectly, to us,
except that:
(a) subject to the exclusion contained in the fourth clause below, our
equity in the net income of any such Restricted Subsidiary for such
period shall be included in Consolidated Net Income, up to the
aggregate amount of cash distributed by such Restricted Subsidiary
during such period to us or another Restricted Subsidiary as a
dividend (subject, in the case of a dividend or other distribution to
another Restricted Subsidiary, to the limitation contained in this
clause); and
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(b) our equity in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income;
- any gain (but not loss) realized upon the sale or other disposition of
any of our Property or the Property of our consolidated subsidiaries
(including pursuant to any Sale and Leaseback Transaction) which is not
sold or otherwise disposed of in the ordinary course of business;
- any extraordinary gain or loss; and
- the cumulative effect of a change in accounting principles.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the sum of the amounts that would appear on a consolidated balance sheet of us
and our consolidated Restricted Subsidiaries, as the total assets (less
accumulated depreciation and amortization, allowances for doubtful receivables,
other applicable reserves and other properly deductible items) of us and our
consolidated Restricted Subsidiaries, determined on a consolidated basis in
accordance with IAS consistently applied, and after deducting therefrom
Consolidated Current Liabilities and, to the extent otherwise included, the
amounts of (without duplication):
- the excess of cost over Fair Market Value of assets or businesses
acquired;
- any revaluation or other write-up in book value of assets subsequent to
the last day of our fiscal quarter immediately preceding the Issue Date
as a result of a change in the method of valuation in accordance with
IAS;
- un-amortized debt discount and expenses and other un-amortized deferred
charges, goodwill, patents, trademarks, service marks, trade names,
copyrights, licenses, organization or developmental expenses and other
intangible items;
- minority interests in consolidated subsidiaries held by persons other
than us or a Restricted Subsidiary;
- treasury stock;
- cash set aside and held in a sinking or other analogous fund established
for the purpose of redemption or other retirement of Capital Stock, to
the extent such obligation is not reflected in Consolidated Current
Liabilities; and
- investments in and assets of Unrestricted Subsidiaries.
"Currency Exchange Protection Agreement" means, in respect of a person, any
foreign exchange contract, currency swap agreement, currency option or other
similar agreement or arrangement designed to protect such person against
fluctuations in currency exchange rates.
"Debt" means, with respect to any person on any date of determination
(without duplication):
- the principal of and premium (if any) in respect of (a) debt of such
person for money borrowed and (b) debt evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such person
is responsible or liable;
- all Capital Lease Obligations of such person and all Attributable Debt
in respect of Sale and Leaseback Transactions entered into by such
person;
- all obligations of such person issued or assumed as the deferred
purchase price of Property, the principal component of all conditional
sale obligations of such person, and all obligations of such person
under any title retention agreement (but excluding trade accounts
payable or accrued expenses arising in the ordinary course of business);
- all obligations of such person for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in the first three clauses
above) entered into in the ordinary course of business of such person to
the extent such letters of credit are not drawn upon
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or, if and to the extent drawn upon, such drawing is reimbursed no later
than the tenth Business Day following receipt by such person of a demand
for reimbursement following payment on the letter of credit);
- the amount of all obligations of such person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Restricted Subsidiary of such person, any Preferred
Stock of such Restricted Subsidiary (but excluding, in each case, any
accrued dividends);
- all obligations of the type referred to in the first five clauses of
other persons, and all dividends of other persons for the payment of
which, in either case, such person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of
any guarantee of the notes, other than an obligation owed, or dividends
payable, to us or a Restricted Subsidiary;
- all obligations (other than an obligation owed to us or a Restricted
Subsidiary) of the type referred to in the first six clauses of other
persons secured by any Lien on any Property or asset of such person
(whether or not such obligation is assumed by such person), the amount
of such obligation being deemed to be the lesser of the value of such
Property or assets or the amount of the obligation so secured; and
- to the extent not otherwise included in this definition, Net Payment
Obligations under Hedging Obligations of such person. With respect to
the second and fourth clauses above, the amount of Debt of any person at
any date shall be the outstanding balance at such date of all
unconditional obligations, as described in such clauses, plus the
maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Debt" means Senior Debt under or in respect of our Bank
Credit Facility and each other Senior Debt facility outstanding or committed in
a principal amount of at least $20.0 million.
"Disqualified Stock" means, with respect to any person, Redeemable Stock of
such person that is owned other than by us or another Restricted Subsidiary as
to which the maturity, mandatory redemption, conversion or exchange (other than
a conversion or exchange into Subordinated Obligations of us or a Restricted
Subsidiary) or redemption at the option of the holder thereof occurs, or may
occur, on or prior to the first anniversary of the Stated Maturity of the notes;
provided, however, that Redeemable Stock in such person that would not otherwise
be characterized as Disqualified Stock under this definition, shall not
constitute Disqualified Stock if such Redeemable Stock is convertible or
exchangeable into Debt solely at the option of the issuer thereof.
"Dollar Escrow Account" means the escrow account established with the
trustee for the Dollar Notes, pursuant to the terms of the Dollar Escrow
Agreement, for the deposit of a portion of the proceeds from the sale of the
Dollar Notes.
"Dollar Escrow Agreement" means the Escrow Agreement, dated as of the date
of the Indenture for the Dollar Notes, made by Holdings in favor of the trustee
for the Dollar Notes.
"Dollar/Zloty Exchange Rate" means the U.S. Dollar/Polish Zloty exchange
rate published by the National Bank of Poland at the end of the trading day in
Warsaw on the date of determination or, in the case of a period, the average of
such exchange rates so published on each day during such period.
"Escrow Accounts" means the Euro Escrow Account and the Dollar Escrow
Account.
"Escrow Agreements" means the Euro Escrow Agreement and the Dollar Escrow
Agreement.
"Euro Escrow Account" means the account established with the trustee for
the Euro Notes pursuant to the terms of the Euro Escrow Agreement for the
deposit of a portion of the proceeds from the sale of the Euro Notes.
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"Euro Escrow Agreement" means the Escrow Agreement, dated as of the date of
the Indenture for the Euro Notes, made by Holdings in favor of the trustee for
the Euro Notes.
"European Government Securities" means securities that are direct and
unconditional obligations of the German government meeting the requirements of
the Euro Escrow Agreement.
"Event of Default" has the meaning set forth under "-- Events of Default."
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means with respect to any Property or asset, the price
of which could be negotiated in an arm's-length free-market transaction, for
cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair Market Value will
be determined, except as otherwise provided:
- if such Property or asset has a Fair Market Value of $5.0 million or
less, by any Officer; or
- if such Property or asset has a Fair Market Value in excess of $5.0
million, by a majority of the Management Board and evidenced by a Board
Resolution, dated within 30 days of the relevant transaction, delivered
to the trustee.
"Guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Debt of any other person and any
obligation, direct or indirect, contingent or otherwise, of such person:
- to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt of such other person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise); or
- entered into for the purpose of assuring, in any other manner, a
creditor or other obligee of such other person against loss in respect
thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include:
- endorsements for collection or deposit in the ordinary course of
business; or
- a contractual commitment by one person to invest in another person for
so long as such Investment is reasonably expected to constitute a
Permitted Investment under the second clause of the definition of
Permitted Investments. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hedging Obligation" of any person means any obligation of such person
pursuant to any Interest Rate Protection Agreement, Currency Exchange Protection
Agreement or any other similar agreement or arrangement.
"IAS" means accounting principles issued by the International Accounting
Standards Committee from time to time.
"Incur" means, with respect to any Debt or other obligation of any person,
to create, issue, incur (by merger, conversion, exchange or otherwise), extend,
assume, Guarantee or become liable in respect of such Debt or other obligation
or the recording, as required pursuant to IAS or otherwise, of any such Debt or
obligation on the balance sheet of such person (and "Incurrence," "Incurred,"
"Incurrable" and "Incurring" shall have meanings correlative to the foregoing);
provided, however, that a change in IAS that results in an obligation of such
person that exists at such time, and is not theretofore classified as Debt,
becoming Debt shall not be deemed an incurrence of such Debt; provided further,
that solely for purposes of determining compliance with "-- Certain Covenants --
Limitation on Debt" and "-- Certain Covenants -- Limitation on Debt and
Preferred Stock of Restricted Subsidiaries," amortization of debt discount shall
not be deemed to be the incurrence of Debt, provided that in the case of Debt
sold at a discount, the amount of such Debt incurred shall at all times be the
aggregate principal amount at Stated Maturity.
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"Independent Appraiser" means an investment banking firm of national
standing or any third-party appraiser of national standing; provided, however,
that such firm or appraiser is not our Affiliate.
"Intercompany Receivables" means the obligations of us and, if applicable,
any Restricted Subsidiary, to the Issuer in respect of the loans by the Issuer
to us and any such Restricted Subsidiary of the proceeds of the notes.
"Interest Rate Protection Agreement" means, for any person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect against fluctuations in interest
rates.
"Investment" by any person means any direct or indirect loan (other than
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of such person), advance or other
extension of credit or capital contribution (by means of transfers of cash or
other Property to others or payments for Property or services for the account or
use of others, or otherwise) to, or incurrence of a Guarantee of any obligation
of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidence of Debt issued by, any other person. For purposes
of the definition of "Restricted Payment" and the covenant described under "--
Certain Covenants -- Limitation on Restricted Payments," "Investment" shall
include the portion (proportionate to our equity interests in such Subsidiary)
of the Fair Market Value of the net assets of any subsidiary of us at the time
that such subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a re-designation of such subsidiary as a Restricted
Subsidiary, we shall be deemed to continue to have a permanent "Investment" in
an Unrestricted Subsidiary equal to an amount (if positive) equal to:
- the net amount of our "Investment" in such subsidiary through the date
of such re-designation; less
- the portion (proportionate to our equity interest in such subsidiary) of
the Fair Market Value of the net assets of such subsidiary at the time of
such re-designation.
In determining the amount of any Investment made by the transfer of any
Property other than cash, such Property shall be valued at its Fair Market Value
at the time of such investment.
"Issue Date" means the date on which the notes are initially issued.
"Issuer Guarantees" means all obligations of the Issuer under or in respect
of its Guarantees of us and our Subsidiaries under:
- our bank credit facility;
- Hedging Obligations that constitute Permitted Debt; and
- other Senior Debt of us in respect of which such Guarantees may be
provided at the option of the Issuer, as such Guarantees may be amended,
modified, supplemented, replaced renewed extended or restricted from time
to time.
"Lien" means, with respect to any Property of any person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, Lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority,
ograniczone prawo rzeczowe ("limited property right") or other security
agreement or preferential arrangement of any kind or nature whatsoever, whether
consensual or statutory on or with respect to such Property (including any
Capital Lease Obligation, conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing or any
Sale and Leaseback Transaction).
"Loan Document" means any credit agreement, letter of credit, related
guarantee, related security agreement or related security trust deed.
"Management Board" means our Management Board or any committee thereof duly
authorized to act on behalf of such Board.
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"Minutes of Use" means, for any period with respect to incoming and
outgoing calls, the aggregate amount of time billed to all subscribers to our
systems for such period.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Cash" from an Asset Sale means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring person of Debt or other obligations relating to such
Properties or received in any other noncash form) in each case net of:
- all legal, title and recording tax expenses, commissions and other fees
and expenses incurred, and all federal, state, provincial, foreign and
local taxes required to be accrued as a liability under IAS, as a
consequence of such Asset Sale;
- all payments made on any Debt which is secured by any Property subject
to such Asset Sale, in accordance with the terms of any Lien upon or
other security agreement of any kind with respect to such Property, or
which must by its terms, or in order to obtain a necessary consent to
such Asset Sale, or by applicable law be repaid out of the proceeds from
such Asset Sale;
- all distributions and other payments required to be made to minority
interest holders in subsidiaries or joint ventures as a result of such
Asset Sale; and
- the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with IAS, against any liabilities associated with
the Property disposed in such Asset Sale and retained by us or any
Restricted Subsidiary after such Asset Sale.
"Net Cash Proceeds" means, with respect to any issuance or sale of Capital
Stock, the cash proceeds of such issuance or sale, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Net Payment Obligations" means, at any time, the net amount that a person
would be required to pay to a counterparty upon the consensual termination at
such time of all Hedging Obligations to which such Person is a party.
"Notch" will mean any change in gradation (+ and - for S&P; 1, 2 and 3 for
Moody's) with respect to Rating Categories.
"Officer" means our general director or our director of finance or any
other member of our Management Board or our Supervisory Board.
"Officers' Certificate" means a certificate signed by an Officer, in the
case of us, or a managing director of the Issuer or any person authorized by a
resolution of the board of managing directors of the Issuer, and in each case
delivered to the relevant trustee.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the trustee. The counsel may be an employee of or counsel to us or
the relevant trustee.
"Parent Guarantees" means our obligations pursuant to our guarantees of the
Issuer's obligations under the notes and the Indentures.
"Permitted Debt" means Permitted Debt as defined above under "-- Certain
Covenants -- Limitation on Debt".
"Permitted Investment" means an Investment by us; or any Restricted
Subsidiary in:
- (a) the form of loans or advances to us; or (b) a Restricted Subsidiary
or a person which will, upon the making of such Investment, become a
Restricted Subsidiary; provided, however, that the primary business of
such Restricted Subsidiary is a Telecommunications Business;
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- another person if as a result of such Investment such other person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, us or a Restricted Subsidiary; provided,
however, that such person's primary business is a Telecommunications
Business;
- Temporary Cash Investments;
- receivables owing to us or any Restricted Subsidiary, if created or
acquired in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms; provided, however, that such
trade terms may include such concessionary trade terms as we or any such
Restricted Subsidiary deem reasonable under the circumstances;
- payroll, travel and similar advances to cover matters that are expected
at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business;
- loans and advances to employees made in the ordinary course of business
consistent with past practices of us or such Restricted Subsidiary, as
the case may be, provided that such loans and advances do not exceed $1.0
million at any one time outstanding;
- stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to us or any Restricted
Subsidiary or in satisfaction of judgments;
- any person to the extent such Investment represents the non-cash portion
of the consideration received in connection with an Asset Sale
consummated in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Asset Sales;" and
- in addition to Investments described in the first eight clauses of this
definition of "Permitted Investments," Investments valued at Fair Market
Value at the time made not to exceed $10.0 million outstanding at any one
time in the aggregate.
"Permitted Liens" means:
- Liens securing Senior Debt;
- Liens on our Property or the Property of any Restricted Subsidiary
existing on the Issue Date, including with respect to the Escrow
Accounts;
- Liens to secure Debt permitted to be Incurred under the third clause of
the definition of "Permitted Debt" set forth in the covenant described
under "-- Certain Covenants -- Limitation on Debt" and under the second
clause of the covenant described under "-- Certain Covenants --
Limitation on Debt and Preferred Stock of Restricted Subsidiaries;"
- Liens for taxes, assessments or governmental charges, duties or levies
on our Property or the Property of any Restricted Subsidiary if the same
shall not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate
proceedings promptly instituted and diligently conducted; provided that
any reserve or other appropriate provision that shall be required in
conformity with IAS shall have been made therefor;
- Liens imposed by law, such as carriers', warehousemen's, mechanics' and
landlord's Liens and other similar Liens on our Property or the Property
of any Restricted Subsidiary arising in the ordinary course of business
and securing payment of obligations which are not more than 60 days past
due or are being contested in good faith and by appropriate proceedings;
- Liens on our Property or the Property of any Restricted Subsidiary
incurred in the ordinary course of business to secure performance of
obligations with respect to statutory or regulatory requirements,
performance or return-of-money bonds, surety bonds or other obligations
of a like nature and incurred in a manner consistent with industry
practice, in each case, which are not incurred in connection with the
borrowing of money, the obtaining of advances or credit or the payment of
the deferred purchase price of Property and which do not in the aggregate
impair in any material respect
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the use of Property in the operation of the business of us and our
Restricted Subsidiaries taken as a whole;
- Liens on Property at the time us or any Restricted Subsidiary acquired
such Property, including any acquisition by means of a merger or
consolidation with or into us or any Restricted Subsidiary; provided,
however, that such Lien shall not have been Incurred in anticipation or
in connection with such transaction or series of transactions pursuant to
which such Property was acquired by us or any Restricted Subsidiary;
- pledges or deposits by us or any Restricted Subsidiary under workmen's
compensation laws, unemployment insurance laws or similar legislation,
good faith deposits in connection with bids, tenders, contracts (other
than for the payment of Debt) or leases to which we or any Restricted
Subsidiary is a party, deposits to secure public or statutory obligations
of us, and deposits for the payment of rent, in each case Incurred in the
ordinary course of business;
- Liens on the Property of a Person at the time such person becomes a
Restricted Subsidiary; provided, however, that any such Lien may not
extend to any other Property of us or any other Restricted Subsidiary
which is not a direct subsidiary of such person; provided further,
however, that any such Lien was not Incurred in anticipation of or in
connection with the transaction or series of transactions pursuant to
which such person became a Restricted Subsidiary;
- utility easements, building or zoning restrictions and such other
encumbrances or charges against real Property and defects of title as are
of a nature generally existing with respect to properties of a similar
character;
- Liens on the Property of us or any Restricted Subsidiary to secure any
extension, renewal, refinancing, replacement or refunding (or successive
extensions, renewals, refinancings, replacements or refundings), in whole
or in part, of any Debt secured by Liens referred to in any of the first,
second, third, seventh, or ninth clauses; provided, however, that any
such Lien will be limited to all or part of the same Property that
secured the original Lien (plus improvements on such Property) and the
aggregate principal amount of Debt that is secured by such Lien will not
be increased to an amount greater than the sum of (a) the outstanding
principal amount, or, if greater, the committed amount, of the Debt
secured by Liens described under the first, second, third, seventh, or
ninth clauses at the time the original Lien became a Permitted Lien under
the Indenture, and (b) an amount necessary to pay any premiums, fees and
other expenses incurred by us in connection with such refinancing,
refunding, extension, renewal or replacement;
- Liens on the Property of any Unrestricted Subsidiary;
- Liens in favor of us or any Restricted Subsidiary;
- Liens on our Property or the Property of any Restricted Subsidiary
pursuant to conditional sale or title retention agreements;
- Liens on our Property or the Property of any Restricted Subsidiary
relating to judgments being contested in good faith by us or any
Restricted Subsidiary;
- Liens on our Property or the Property of any Restricted Subsidiary
pursuant to good faith contract deposits;
- Liens on our Property or the Property of any Restricted Subsidiary
arising as a result of immaterial leases of such Property to other
persons;
- any Lien securing Debt of us or any Restricted Subsidiary, provided that
the Lien only extends to cash or other current assets to be used by the
Issuer or such Restricted Subsidiary to make payments of interest (and
other obligations) on such Debt; or
- extensions or renewals of Liens permitted by the above clauses.
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"Person" means any individual, corporation, company (including any limited
liability company), partnership, joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Polish Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the Republic of
Poland (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the Republic of Poland is pledged.
"Preferred Stock" means any Capital Stock of a person, however designated,
which entitles the holder thereof to a preference with respect to the payment of
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such person over shares of any other class of
Capital Stock issued by such person.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of the Indentures, a calculation performed in
accordance with Article 11 of Regulation S-X promulgated under the Securities
Act, of 1933, as interpreted in good faith by our Management Board after
consultation with our independent certified public accountants, or otherwise a
calculation made in good faith by our Management Board after consultation with
our independent certified public accountants, as the case may be.
"Property" means, with respect to any person, any interest of such person
in any kind of Property or asset, whether real, personal or mixed, or tangible
or intangible, including Capital Stock in, and other securities of, any other
person. For purposes of any calculation required pursuant to the Indentures, the
value of any Property shall be its Fair Market Value.
"Public Equity Offering" means a bona fide public offering to a substantial
number of offerees of our ordinary shares with aggregate net proceeds to us of
not less than $100.0 million.
"Qualified Debt Offering" means an incurrence by us or a Restricted
Subsidiary of Debt to banks or other financial institutions or pursuant to a
domestic note offering in Poland in an aggregate principal amount that, when
taken together with Debt outstanding under our bank credit facility and
Refinancing Debt Incurred in respect thereof, does not exceed, and with
maturities that would not result in amounts exceeding, the amount of Debt
permitted under the second clause of the definition of "Permitted Debt" or the
first clause under "Limitation on Debt and Preferred Stock of Restricted
Subsidiaries."
"Rating Agency" means S&P and Moody's.
"Rating Categories" means:
- with respect to S&P, any of the following categories: AAA, AA, A, BBB,
BB, B, CCC, CC or C; and
- with respect to Moody's, any of the following categories: Aaa, Aa, A,
Baa, Ba, B, Caa, Ca or C.
"Rating Date" means the date which is the earlier of:
- 120 days prior to the occurrence of an event specified in the first
three clauses of the definition of a Change of Control; and
- the date of the first public announcement of the possibility of such
event.
"Rating Decline" means the occurrence on any date within the 90-day period
following the occurrence of an event specified in the first three clauses of the
definition of a Change of Control (which period shall be extended so long as
during such period the rating of the notes is under publicly announced
consideration for possible downgrade by a Rating Agency) of either of the
following events:
- either Rating Agency shall lower its rating on the notes at least two
Notches below the rating of the notes by such Rating Agency on the Rating
Date; or
- either Rating Agency shall withdraw its rating of the notes.
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In determining how many Notches the rating of the notes has decreased,
gradation with respect to Rating Categories will be taken in account (e.g., with
respect to S&P, a decline in a rating from BB+ to BB, or from BB- to B+, will
constitute a decrease of one Notch).
"Redeemable Stock" means, with respect to any person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise:
- matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
- is or may become redeemable or repurchaseable at the option of the
holder thereof, in whole or in part; or
- is convertible or exchangeable for Debt or Disqualified Stock.
"Refinancing Debt" means any Debt that renews, extends, repays,
substitutes, refinances or replaces (collectively, "refinances", "refinanced"
and "refinancing" shall have correlative meanings) any Debt, including any
successive refinancings so long as:
- such Debt is in an aggregate principal or commitment amount (or if
incurred with original issue discount, an aggregate issue price) not in
excess of the sum of:
(a) the aggregate principal or commitment amount (or if incurred with
original issue discount, the aggregate accreted value) then
outstanding or in effect, respectively, of the Debt being refinanced;
and
(b) an amount necessary to pay any fees and expenses, including
premiums and defeasance costs, related to such refinancing; and
- in the case of Subordinated Obligations:
(a) the Average Life of such Debt is equal to or greater than the
Average Life of the Debt being refinanced;
(b) the Stated Maturity of such Debt is no earlier than the Stated
Maturity of the Debt being refinanced; and
(c) such Debt is subordinated in right of payment to Senior Debt or the
notes to at least the same extent, if any, as the Debt being
refinanced;
provided that Refinancing Debt shall not include our Debt or the Debt of
Restricted Subsidiary that refinances Debt of an Unrestricted Subsidiary.
"Registration Rights Agreement" means the Registration Rights Agreements,
dated as of November 23, 1999, among us, the Issuer and the Initial Purchasers.
"Representative" means the trustee, agent or representative expressly
authorized to act in such capacity, if any, for any Senior Debt or, if no such
person is so authorized, the holders of such Senior Debt.
"Representative of the Bank Debt" means the trustee, agent or
representative expressly authorized to act in such capacity, if any, for any
Bank Debt or, if no such person is so authorized, the holders of such Bank Debt.
"Restricted Subsidiary" means:
- any of our subsidiary on or after the Issue Date unless such subsidiary
shall have been designated an Unrestricted Subsidiary as permitted or
required pursuant to "-- Certain Covenants -- Designation of Restricted
and Unrestricted Subsidiaries;" and
- an Unrestricted Subsidiary which is redesignated as a Restricted
Subsidiary as permitted pursuant to "-- Certain Covenants -- Designation
of Restricted and Unrestricted Subsidiaries."
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., and its successors.
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"Sale and Leaseback Transaction" means an arrangement relating to Property
now owned or hereafter acquired whereby we or a Restricted Subsidiary transfers
such Property to a person and the Guarantor or a Restricted Subsidiary leases it
from such person.
"Scheduled Reductions" means the following amounts on the following dates:
- DM 50,400,000 on each January 1 and July 1 from January 1, 2002 through
July 1, 2003; and
- DM 67,200,000 on each January 1 and July 1 from January 1, 2004 through
January 1, 2007.
"Secured Debt" means any of our Debt secured by a Lien.
"Securities" means U.S. Government Securities under the Indenture for the
Dollar Notes and European Government Securities under the Indenture for the Euro
Notes.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Senior Debt" means Senior Debt of the Issuer and our Senior Debt.
"Senior Debt of the Guarantor" means the principal of (and premium, if
any), interest (including interest following the filing of any petition in
bankruptcy or for reorganization relating to the Guarantor or us, whether or not
such claim for post-petition interest is an allowed claim in such proceeding)
on, reimbursements, indemnification, margin payments, fees and other amounts
payable under or in respect of:
- the bank credit facility;
- refinancings and refundings in whole or in part of the bank credit
facility (including successive refinancings and refundings);
- Hedging Obligations that constitute Permitted Debt; and
- our other Debt for borrowed money (including, without limitation,
Capital Lease Obligations and long-term financing provided by vendors of
capital equipment) that does not by its terms expressly provide that it
is subordinated in right of payment to any of our other Debt.
"Senior Debt of the Issuer" means all our obligations under or in respect
of
- the Issuer's guarantees;
- refinancings and refundings in whole or in part of the Issuer's
guarantees (including successive refinancings and refundings); and
- other Debt for borrowed money that does not by its terms expressly
provide that it is subordinated in right of payment to any of our other
Debt.
"Senior Subordinated Debt" means our Senior Subordinated Debt and Senior
Subordinated Debt of the Issuer.
"Senior Subordinated Debt of the Guarantor" means our Debt that
specifically provides that such Debt is to rank equally with our obligations
under our guarantees of the notes, and the 2007 Guarantee and does not by its
terms expressly provide that it is subordinated to any other of our obligations
which is not our Senior Debt.
"Senior Subordinated Debt of the Issuer" means our Debt that specifically
provides that such Debt is to rank equally with our obligations under the notes
and does not by its terms expressly provide that it is subordinated to any other
obligation of ours which is not Senior Debt of the Issuer.
"Shareholders Agreement" means the agreement among the Issuer, Elektrim,
MediaOne, DeTeMobil and certain other of our shareholders dated December 2,
1995, as amended on March 11, 1997.
"Shareholders Loans" means the loans made to us by each of Elektrim,
DeTeMobil and MediaOne, each dated August 24, 1999 and any refinancings thereof.
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"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries:
- as of the end of such fiscal year, was the owner of more than 15% of the
consolidated assets of us and its Restricted Subsidiaries; or
- for our most recent fiscal year, accounted for more than 15% of EBITDA,
all as set forth on our most recently available consolidated financial
statements.
"Special Interest" means the Special Interest, if any, payable pursuant to
the provisions described below under "-- Exchange Offer; Registration Rights."
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond our control unless such contingency has occurred).
"Subordinated Obligation" means any Debt of us or the Issuer (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment, in the case of our Debt, to our obligations under
our guarantees of the notes, the 2007 Notes Guarantee and, in our case, to the
notes, in each case pursuant to a written agreement to that effect.
"Subsidiary" of any specified person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired:
- in the case of a corporation, of which at least 50% of the total voting
power of the Voting Stock is held by such first-named person or any of
its subsidiaries and such first-named person or any of its Subsidiaries
has the power to direct the management, policies and affairs thereof; or
- in the case of a partnership, joint venture, association, or other
business entity, with respect to which such first-named person or any of
its subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise if in
accordance with IAS such entity is consolidated with the first-named
person for financial statement purposes.
"Supervisory Board" means our Supervisory Board or any committee thereof
duly authorized to act on behalf of such Board.
"Telecommunications Business" means the business of:
- transmitting, or providing services relating to the transmission of,
voice, video or data through owned or leased transmission facilities;
- constructing, creating, developing or marketing communications related
network equipment, software and other devices for use in a
telecommunications business; or
- evaluating, participating or pursuing any other activity or opportunity
that is primarily related to those identified in the first two clauses
above.
"Telecommunications License" means each of:
- the GSM 900 license awarded to us by the Polish Ministry of
Communications in February 1996; and
- the GSM 1800 license to us awarded by the Polish Ministry of
Communications in August 1999, each to provide digital GSM services, and
any renewal, extension or replacement thereof.
"Temporary Cash Investments" means any of the following:
- Investments in U.S. Government Securities or Polish Government
Obligations maturing within 90 days of the date of acquisition thereof
and Investments in Securities;
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- Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 90 days of the date of acquisition
thereof issued by Citibank (Poland) S.A., BRE S.A. or a bank or trust
company which is organized under the laws of the United States of
America or any state thereof or any country recognized by the United
States of America having capital, surplus and undivided profits
aggregating in excess of $500,000,000 and whose long-term debt is rated
"A-3" or higher according to Moody's or "A-" or higher according to S&P
(or a similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the
Securities Act)),
- repurchase obligations with a term of not more than 7 days for
underlying securities of the types described in the first clause entered
into with a bank meeting the qualifications described in the second
clause above; and
- Investments in commercial paper, maturing not more than 90 days after
the date of acquisition, issued by a corporation (other than our
Affiliates) organized and in existence under the laws of the United
States of America or a member country of the European Union with a
rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's or "A-1" (or higher) according to S&P
(or a similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the
Securities Act)).
"UMTS License" means any license awarded by the Polish Ministry of
Communications, or a successor governmental entity to operate a Universal Mobile
Telecommunications System.
"Unrestricted Subsidiary" means:
- any of our subsidiaries in existence on the Issue Date (other than the
Issuer) that is designated as an Unrestricted Subsidiary;
- any subsidiary of an Unrestricted Subsidiary; and
- any of our subsidiaries that is designated after the Issue Date as an
Unrestricted Subsidiary as permitted pursuant to "-- Certain Covenants
-- Designation of Restricted and Unrestricted Subsidiaries" and not
thereafter redesignated as a Restricted Subsidiary as permitted pursuant
thereto.
"U.S. Dollar Equivalent" means with respect to any monetary amount in a
currency other than U.S. Dollars, at any time for the determination thereof, the
amount of U.S. Dollars obtained by converting such foreign currency involved in
such computation into U.S. Dollars at the spot rate for the purchase of U.S.
Dollars with the applicable foreign currency as published in the Wall Street
Journal in the "Exchange Rates" column under the heading "Currency Trading" on
the date two business days prior to such determination.
"U.S. Government Securities" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly-Owned Subsidiary" means, at any time, a Restricted Subsidiary all
the Voting Stock of which (except directors' qualifying shares) is at the time
owned, directly or indirectly, by us and our other Wholly Owned Subsidiaries.
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BOOK ENTRY; DELIVERY AND FORM
GENERAL
Dollar Notes sold to qualified institutional buyers will initially be
represented by one global note in registered form without interest coupons
attached (the "Dollar Rule\ 144A Global Note"), and Dollar Notes sold to non-US
persons outside the United States in reliance on Regulation S under the
Securities Act ("Regulation S") will initially be represented by one global note
in registered form without interest coupons attached (the "Dollar Regulation S
Global Note" and, together with the Dollar Rule 144A Global Note, the "Dollar
Global Notes"). The Dollar Global Notes will be registered in the name of Cede &
Co., as nominee of The Depository Trust Company ("DTC"). Euro Notes sold to
qualified institutional buyers will initially be represented by one global note
in registered form without interest coupons attached (the "Euro Rule 144A Global
Note"). The Euro Rule 144A Global Note will be registered in the name of Cede &
Co., as nominee of DTC. Euro Notes sold to non-U.S. persons outside the United
States in reliance on Regulation S under the Securities Act will initially be
represented by one global note in registered form without interest coupons
attached (the "Euro Regulation S Global Note and, together with the Euro 144A
Global Note, the "Euro Global Notes" and, together with the Dollar Global Notes,
the "Global Notes"). The Euro Regulation S Global Note will be deposited with a
common depositary, and registered in the name of the nominee of the common
depositary for the accounts of Euroclear and Clearstream.
Ownership of interests in the Euro or Dollar Rule 144A Global Note
("Restricted Book-Entry Interests") and the Dollar Regulation S Global Note will
be limited to persons that have accounts with DTC, including Euroclear and/or
Clearstream, or persons that hold interests through such participants. Ownership
of interests in the Euro Regulation S Global Note (along with interests in the
Dollar Regulation S Global Note, the "Unrestricted Book-Entry Interests" and
together with the Restricted Book-Entry Interests, the "Book-Entry Interests")
will be limited to persons that have accounts with Euroclear and/or Clearstream,
or persons that hold interests through such participants. Prior to the 40(th)
day after the later of the commencement of this offering or the date the notes
were originally issued (the "Distribution Compliance Period"), interests in a
Euro or Dollar Regulation S Global Note may only be held through Euroclear or
Clearstream. After the end of the Distribution Compliance Period, investors may
also hold interests in the Dollar Regulation S Global Note through organizations
other than Clearstream or Euroclear that are participants in the DTC system.
Clearstream and Euroclear will hold interests in the Regulation S Global Note,
on behalf of their participants, through customers' securities accounts in their
respective names on the books of their respective depositaries, which, in the
case of the Dollar Regulation S Global Note, will in turn hold such interests in
customers' securities accounts in the depositaries' names on the books of DTC.
Except under the limited circumstances described below, Book-Entry Interests
will not be held in definitive form.
Book-Entry Interests will be shown on, and transfers thereof will be
effected only through, records maintained in book-entry form by DTC, Euroclear
and Clearstream and their participants. The laws of some jurisdictions,
including certain states of the United States, may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. The foregoing limitations may impair your ability to own, transfer or
pledge Book-Entry Interests. In addition, while the notes are in global form,
holders of Book-Entry Interests will not be considered the owners or "Holders"
of notes for any purpose.
So long as the notes are held in global form, DTC, Euroclear and/or
Clearstream, as applicable, (or their respective nominees) will be considered
the sole Holder of Global Notes for all purposes under the Indentures. In
addition, participants must rely on the procedures of DTC, Euroclear and
Clearstream, and indirect participants must rely on the procedures of the
participants through which they own Book-Entry Interests to transfer their
interests or to exercise any rights of Holders under the Indentures.
Neither we nor the Issuer nor the trustees will have any responsibility or
be liable for any aspect of the records relating to the Book-Entry Interests.
REDEMPTION OF THE GLOBAL NOTES
In the event either Global Note (or any portion thereof) is redeemed, DTC,
Euroclear and/or Clearstream, as applicable, will redeem an equal amount of the
Book-Entry Interests in such Global Notes from the
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amount received by it in respect of the redemption of such Global Note. The
redemption price payable in connection with the redemption of such Book-Entry
Interests will be equal to the amount received by DTC, Euroclear and
Clearstream, as applicable, in connection with the redemption of such Global
Note (or any portion thereof). We understand that, under existing practices of
DTC, Euroclear and Clearstream, if fewer than all of the notes are to be
redeemed at any time, DTC, Euroclear and Clearstream will credit their
respective participants' accounts on a proportionate basis (with adjustments to
prevent fractions), by lot or on such other basis as they deem fair and
appropriate; provided, however, that no Book-Entry Interest of E1,000 principal
amount or $1,000 principal amount, as the case may be, or less may be, redeemed
in part.
PAYMENTS ON GLOBAL NOTES
Payments of any amounts owing in respect of the Global Notes (including
principal, premium, if any, and interest) will be made by the Issuer to DTC or
its nominee (in the case of the Dollar Global Notes and the Euro 144A Global
Note), and to the common depositary or its nominee for Euroclear and Clearstream
(in the case of the Euro Regulation S Global Note), which will distribute such
payments to participants in accordance with their procedures. Payments of all
such amounts will be made without deduction or withholding for, or on account
of, any present or future taxes, duties, assessments or governmental charges of
whatever nature except as may be required by law, and if any such deduction or
withholding is required to be made by any law or regulation of Luxembourg, The
Netherlands or Poland then, to the extent described under "Description of Notes
- -- Additional Amounts" above, such Additional Amounts will be paid as may be
necessary in order that the net amounts received by any holder of the Global
Notes or owner of Book-Entry Interests, after such deduction or withholding,
will equal the net amounts that such holder or owner would have otherwise
received in respect of such Global Note or Book-Entry Interest, as the case may
be, absent such withholding or deduction. We expect that payments by
participants to owners of Book-Entry Interests held through such participants
will be governed by standing customer instructions and customary practices.
Under the terms of the Indentures, we and the trustees will treat the
registered holders of the Global Notes (e.g., DTC, Euroclear or Clearstream or
their respective nominees as the owner thereof for the purpose of receiving
payments and for all other purposes. Consequently neither we, the trustees nor
any agent of the Issuer or the trustees has or will have any responsibility or
liability for:
- any aspect of the records of DTC, Euroclear, Clearstream or any
participant or indirect participant relating to, or payments made on
account of a Book-Entry Interest or for maintaining, supervising or
reviewing the records of DTC, Euroclear, Clearstream (or any participant
or indirect participant relating to or payments made on account of a
Book-Entry Interest); or
- DTC, Euroclear, Clearstream or any participant or indirect participant.
CURRENCY OF PAYMENT FOR THE GLOBAL NOTES
The principal of, premium, if any, and interest on, and all other amounts
payable in respect of, the Dollar Global Notes will be paid in dollars. The
principal of, premium, if any, and interest on, and all other amounts payable in
respect of, the Euro Rule 144A Global Note will be paid:
- in Euros to holders of interests in such note who hold such interests
through Euroclear and/or Clearstream (the "Euro Rule 144A
Euroclear/Clearstream Holders"); and
- in dollars to holders of interests in such note who hold such interests
through DTC (the "DTC Holders").
The principal of, premium, if any, and interest on, and all other amounts
payable in respect of, the Euro Regulation S Global Note will be paid to holders
of interests in such note (along with the Euro Rule 144A Euroclear/Clearstream
Holders, the "Euroclear/Clearstream Holders") in Euros.
At present, DTC can only accept payment in dollars. As a result, DTC
Holders will receive payments in dollars as described above, unless they elect
to receive payments in Euros as described below.
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Notwithstanding the payment provisions described above,
Euroclear/Clearstream Holders may elect to receive payments in respect of:
- the Euro Rule 144A Global Note; and
- the Euro Regulation S Global Note in dollars, and DTC Holders may elect
to receive payments in respect of the Euro Rule 144A Global Note in
Euros.
A Euroclear/Clearstream Holder may receive payments of amounts payable in
respect of its interest in the Euro Rule 144A Global Note or the Euro Regulation
S Global Note in dollars, in accordance with Euroclear's and Clearstream's
customary procedures, which include, among other things, giving to Euroclear or
Clearstream, as appropriate, a notice of such Holder's election to receive such
payments in dollars. All costs of conversion resulting from any such election
will be borne by such Holder.
A DTC Holder may receive payments of amounts payable in respect of its
interest in the Euro Rule 144A Global Note in Euros in accordance with DTC's
customary procedures, which include, among other things, giving to DTC a notice
of such Holder's election to receive such payments in Euros. All costs of
conversion resulting from any such election will be borne by such Holder.
ACTION BY OWNERS OF BOOK-ENTRY INTERESTS
DTC, Euroclear and Clearstream have advised us that they will take any
action permitted to be taken by a Holder of notes (including the presentation of
notes for exchange as described above) only at the direction of one or more
participants to whose account the Book-Entry Interests in the Global Notes are
credited, and only in respect of such portion of the aggregate principal amount
of notes as to which such participant or participants has or have given such
direction. DTC, Euroclear and Clearstream will not exercise any discretion in
the granting of consents, waivers or the taking of any other action in respect
of the Global Notes. However, if there is an Event of Default under the notes,
each of DTC, Euroclear and Clearstream reserve the right to exchange the Global
Notes for definitive registered notes in certificated form, and to distribute
such definitive registered notes to its participants.
TRANSFERS
Transfers between participants in DTC will be effected in accordance with
DTC rules, and will be settled in immediately available funds. If a holder
requires physical delivery of definitive registered notes for any reason,
including to sell notes to persons in states which require physical delivery of
such securities or to pledge such securities, such holder must transfer its
interest in the Global Notes in accordance with the normal procedures of DTC,
and in accordance with the procedures set forth in the Indentures.
The Global Notes will bear a legend to the effect set forth in "Notice to
Investors." Book-Entry Interests in the Global Notes will be subject to the
restrictions on transfers and certification requirements discussed under "Notice
to Investors."
During the Distribution Compliance Period, any sale or transfer of
ownership of a Book-Entry Interest in the Euro or Dollar Regulation S Global
Note (an "Unrestricted Book-Entry Interest") to U.S. persons shall not be
permitted unless such resale or transfer is made pursuant to Rule 144A of the
Securities Act ("Rule 144A"). Accordingly, Unrestricted Book-Entry Interests may
be transferred to a person who takes delivery in the form of a Book-Entry
Interest in a Euro or Dollar Rule 144A Global Note (a "Restricted Book-Entry
Interest") only upon delivery by the transferor of a written certification (in
the form provided in the Indentures), to the effect that such transfer is being
made to a person who the transferor reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A, in a transaction meeting
the requirements of Rule 144A or otherwise in accordance with the transfer
restrictions described under "Notice to Investors," and in accordance with any
applicable securities laws of any state of the United States or any other
jurisdiction. After the Distribution Compliance Period, such certification
requirements will no longer apply to such transfers, but such transfers will
continue to be subject to the transfer restrictions contained in the legend
appearing on the face of the applicable Rule 144A Global Note, as set forth in
"Notice to Investors."
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Transfer of Restricted Book-Entry Interests to persons wishing to take
delivery of Restricted Book-Entry Interests will at all times be subject to such
transfer restrictions.
Restricted Book-Entry Interests may be transferred to a person who takes
delivery in the form of any Unrestricted Book-Entry Interest only upon delivery
by the transferor of a written certification (in the form provided in the
Indentures), to the effect that such transfer is being made in accordance with
Regulation S or Rule 144 (if available) under the Securities Act of 1933.
Transfers involving an exchange of an Unrestricted Book-Entry Interest for
a Restricted Book-Entry Interest will be effected in DTC by means of an
instruction originated by the relevant trustee through the DTC
Deposit/Withdrawal at Custodian system. Accordingly, in connection with any such
transfer, appropriate adjustments will be made to reflect a decrease in the
principal amount of the applicable Regulation S Global Note, and a corresponding
increase in the principal amount of the applicable Rule 144A Global Note. The
policies and practices of DTC may prohibit transfers of Unrestricted Book-Entry
Interests in the Regulation S Global Notes prior to the expiration of the
Distribution Compliance Period. Any Book-Entry Interest in one of the Global
Notes that is transferred to a person who takes delivery in the form of a
Book-Entry Interest in the other Global Euro or Dollar Note, as the case may be,
will, upon transfer, cease to be a Book-Entry Interest in the first-mentioned
Global Note and become a Book-Entry Interest in such other Global Note, and
accordingly will thereafter be subject to all transfer restrictions, if any, and
other procedures applicable to Book-Entry Interests in such other Global Note
for as long as it remains such a Book-Entry Interest.
DEFINITIVE REGISTERED NOTES
Under the terms of the Indentures, owners of the Book-Entry Interests will
receive Definitive Registered Notes:
- if DTC, Euroclear or Clearstream notifies the Issuer that it is
unwilling or unable to continue to act as depositary and a successor
depositary is not appointed by the Issuer within 120 days;
- if DTC, Euroclear or Clearstream so requests following an Event of
Default under either Indenture; or
- if the owner of a Book-Entry Interest requests such exchange in writing
delivered through either DTC, Euroclear or Clearstream following an
Event of Default under either Indenture.
In the case of the issuance of definitive registered notes, the holder of a
definitive registered note may transfer such note by surrendering it to the
registrar or a transfer agent. In the event of a partial transfer or a partial
redemption of a holding of definitive registered notes represented by one
definitive registered note, a definitive registered note shall be issued to the
transferee in respect of the part transferred and a new definitive registered
note in respect of the balance of the holding not transferred or redeemed shall
be issued to the transferor or the holder, as applicable; provided, that no
definitive registered note in a denomination less than E1,000 or $ 1,000 shall
be issued. The cost of preparing, printing, packaging and delivering the
definitive registered notes shall be borne by the Issuer.
We shall not be required to register the transfer or exchange of definitive
registered notes for a period of 15 calendar days preceding:
- the record date for any payment of interest on the notes;
- any date fixed for redemption of the notes; or
- the date fixed for selection of the notes to be redeemed in part.
Also, we are not required to register the transfer or exchange of any notes
selected for redemption. In the event of the transfer of any definitive
registered note, the relevant trustee may require a holder, among other things,
to furnish appropriate endorsements and transfer documents as described in the
Indentures. We may require a holder to pay any taxes and fees required by law
and permitted by the Indentures and the notes. Payments of principal, any
repurchase price, any premiums and interest on the definitive registered notes
will be payable by check at the Issuer's office.
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If definitive registered notes are issued and a holder thereof claims that
such definitive registered notes has been lost, destroyed, wrongfully taken or
if such definitive registered note is mutilated and is surrendered to the
registrar or at the office of a transfer agent, we shall issue, and the relevant
trustee shall authenticate, a replacement definitive registered note if the
relevant trustee's and our requirements are met. We, or the relevant trustee,
may require a holder requesting replacement of a definitive registered note to
furnish an indemnity bond sufficient in the judgment of both to protect us, the
relevant trustee or any paying agent appointed pursuant to the Indentures, from
any loss, which any of them may suffer if a definitive registered note is
replaced. We will maintain a transfer agent in Luxembourg for as long as the
notes are listed on the Luxembourg Stock Exchange. We may charge for our
expenses in replacing a definitive registered note.
In case any such mutilated, destroyed, lost or stolen definitive registered
note has become or is about to become due and payable, or is about to be
redeemed or purchased by us pursuant to the provisions of the Indentures, we in
our discretion may, instead of issuing a new definitive registered note, pay,
redeem or purchase such definitive registered note, as the case may be.
Definitive registered notes may be transferred and exchanged for Book-Entry
Interests in a Global Note only in accordance with the Indentures and, if
required, only after the transferor first delivers to the trustee a written
certification (in the form provided in the Indentures), to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such notes. See "Notice to Investors."
INFORMATION CONCERNING DTC, EUROCLEAR AND CLEARSTREAM
We and the Issuer understand as follows with respect to DTC, Euroclear and
Clearstream:
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "Clearing
Agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodian
relationship with a Euroclear or Clearstream participant, either directly or
indirectly.
Euroclear and Clearstream hold securities for participating organizations,
and facilitate the clearance and settlement of securities transactions between
their respective participants through electronic book-entry changes in accounts
of such participants. Euroclear and Clearstream provide to their participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Euroclear and Clearstream interface with domestic securities markets.
Euroclear and Clearstream participants are financial institutions such as
underwriters, securities brokers and dealers, banks, trust companies and certain
other organizations. Indirect access to Euroclear or Clearstream is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodian relationship with Euroclear or Clearstream
participant, either directly or indirectly.
GLOBAL CLEARANCE AND SETTLEMENT UNDER THE BOOK-ENTRY SYSTEM
The notes represented by the Global Notes are expected to be eligible to
trade in the PORTAL market and listed on the Luxembourg Stock Exchange and to
trade in DTC's Same-Day Funds Settlement System. Any permitted secondary market
trading activity in such notes will, therefore, be required by DTC to be settled
in immediately available funds. We expect that secondary trading in any
certificated notes will also be settled in immediately available funds. Subject
to compliance with the transfer restrictions applicable to the Global Notes,
cross-market transfers between the participants in DTC, on the one hand, and
Euroclear or Clearstream participants on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of each of Euroclear or
Clearstream by its common depositary. However, such cross-market transactions
will require delivery of instructions to Euroclear or Clearstream by the
counterparty in such
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system in accordance with the rules and procedures, and within the established
deadlines (New York time) of such system. Euroclear or Clearstream will, if the
transaction meets its settlement requirements, deliver instructions to the
common depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the Global Notes in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream
participants may not deliver instructions directly to the common depositary.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a Global Note from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. Cash received in
Euroclear and Clearstream as a result of sales of interest in a Global Note by
or through a Euroclear or Clearstream participant to a participant in DTC will
be received with value on the settlement date of DTC, but will be available in
the relevant Euroclear or Clearstream cash account only as of the business day
for Euroclear or Clearstream following DTC's settlement date.
Although DTC, Euroclear or Clearstream are expected to follow the foregoing
procedures in order to facilitate transfers of interests in the Global Notes
among participants of DTC, Euroclear or Clearstream, as the case may be, they
are under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. None of the Issuer, the
trustees or any paying agent will have any responsibility for the performance by
DTC, Euroclear or Clearstream or their respective participants or indirect
participants, of their respective obligations under the rules and procedures
governing their operations.
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TAXATION
LUXEMBOURG
The information set out below is a summary only of Luxembourg tax laws in
effect on the date hereof and which may change from time to time. Because the
summary does not address all tax considerations, under Luxembourg or other laws,
prospective investors should consult their professional advisors as to the tax
consequences of the purchase, ownership and disposition of the notes, including
in particular the effect of tax laws of any other jurisdiction.
The following summary outlines certain Luxembourg tax consequences for
holders of notes.
Under Luxembourg tax laws currently in effect, there is no withholding tax
on payment of principal, interest, nor on accrued but unpaid interest in respect
of the notes, nor is any Luxembourg withholding tax payable upon the redemption,
repurchase or exchange of the notes. Holders of notes who are non-residents of
Luxembourg and who do not hold notes through a permanent establishment in
Luxembourg are not liable for Luxembourg income tax on payments of principal,
interest, accrued but unpaid interest, nor upon redemption, repurchase or
exchange of the notes, nor on capital gains on sale of any notes.
Holders of notes resident in Luxembourg who are fully taxable ("Luxembourg
Resident Holders"), or who have a permanent establishment in Luxembourg (a
"Luxembourg Permanent Establishment"), with whom the holding of the notes is
connected, must for income tax purposes include any interest received in their
taxable income.
Individual Luxembourg Resident Holders of notes are not subject to taxation
on capital gains upon the disposal of notes unless the disposal of notes
precedes the acquisition thereof, or the notes are disposed of within six months
of the date of acquisition thereof. Upon a sale, repurchase or redemption of
notes, individual Luxembourg Resident Holders will however need to include the
portion of the purchase, repurchase or redemption price corresponding to accrued
but unpaid interest, in their taxable income.
A corporate entity, or societe de capital, which is a Luxembourg Resident
Holder of notes (a "Corporate Entity") or a Luxembourg Permanent Establishment
will need to include in its taxable income the difference between the purchase,
repurchase or redemption price (including accrued but unpaid interest) and the
lower of cost or book value of the notes, sold, repurchased or redeemed.
An exchange of notes pursuant to the exchange offer should not give rise to
recognition of any gain or income for Luxembourg tax purposes.
No stamp, value-added, issue, registration, transfer or similar taxes or
duties will be payable in Luxembourg by the holders of the notes as a
consequence of the issue of the notes, nor will any such tax be payable as a
consequence of a subsequent transfer, redemption or exchange of the notes.
POLAND
The following general summary is based upon the income tax laws of Poland
and interpretations thereof by the Polish Ministry of Finance, as in effect on
the date of this prospectus and is subject to any change that may come into
effect after that date.
Payments of Principal, Interest and Redemption Premium under the Notes
All payments of interest, principal and redemption premium under the notes
by the Issuer may be made free of withholding taxes withheld or assessed by
Poland or any political subdivision or taxing authority thereof or therein. If
you derive income from a note or realize a gain on the disposal or redemption of
a note, you will be subject to Polish taxation on income or capital gains if you
are, or are deemed to be, resident in Poland for the purposes of the relevant
provisions in the tax laws of Poland.
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The Exchange Offer
You should not be subject to Polish taxation on income or capital gains by
reason only of the exchange offer or the exchange of notes for Exchange Notes.
Payments of Principal, Interest and Redemption Premium under Guarantee to
Holders of the Notes
Generally, a Polish withholding tax of 20% applies to payments of interest
under our Guarantees in respect of the notes, in each case paid by us under our
Guarantees to non-residents of Poland. Withholding tax may, however, be reduced
by an appropriate double taxation treaty to which Poland is a party, and the
"interest" article of which provides for full or partial exemption from
withholding on interest payments. Treaties providing for full exemption from
withholding on interest payments are currently in effect between Poland and (i)
the United States and (ii) the United Kingdom, among others.
The difference between the issue price and the redemption price of the
notes in the case of early redemption may be treated as income obtained in
Poland.
Stamp Duty Consequences of the Assumption by Us of the Obligations of the
Issuer under the Notes
Polish stamp duty at a rate of 2% applies to any sale of property rights
that are to be exercised in Poland. Accordingly, in the event that we assume the
obligations of the Issuer on the notes, Polish stamp duty may apply to sales or
dispositions of the notes or any right therein by holders of notes. Since the
notes, after such assumption, will confer rights that will be enforceable in
Poland, it will be arguable that sales of the notes between foreign holders may
also be subject to stamp duty. The applicability of Polish stamp duty to such
sales is not free from doubt.
THE NETHERLANDS
Dutch Holders
Corporate and individual noteholders who are tax residents in The
Netherlands will, under current Dutch tax laws, generally have to include the
gross amount of any interest received in their taxable income. Dutch resident
corporate noteholders who realize a capital gain upon disposal of notes will be
subject to Dutch corporate income tax. A capital loss is deductible. Dutch
resident individual noteholders are not subject to taxation on capital gains
upon the disposal of notes, unless the notes form part of the assets of an
enterprise of the Dutch resident individual noteholder.
The Ministry of Finance has introduced a bill on Dutch income tax which is
scheduled to enter into force as per January 1, 2001. If adopted, this bill will
change the Dutch income tax position of a Dutch resident individual noteholder
who would then be taxed on a deemed return regardless of actual income derived
from a note, or gain or loss realized upon disposal or redemption of a note.
Dutch resident individual noteholders who are in doubt as to their tax position
should consult a professional advisor.
UNITED STATES
General
The following summary contains a description of the material United States
federal income tax consequences of the purchase, ownership and disposition of
the notes acquired for cash upon the initial offering of the notes at a price
equal to their issue price (as defined below). This summary is not a
comprehensive description of all of the tax considerations that may be relevant
to a decision to purchase notes. In particular, this summary of United States
federal income tax matters deals only with holders that will hold notes as
capital assets for United States federal income tax purposes (generally, assets
held for investment) and does not address special tax situations, such as the
United States tax treatment of holders that are: (i) subject to special tax
rules (e.g., financial institutions, securities or currency dealers, brokers,
insurance companies, regulated investment companies and tax-exempt
organizations); (ii) holding notes as part
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of a hedging or larger integrated financial transaction; or (iii) "U.S. Holders"
(as defined below) with a currency other than the U.S. dollar as their
functional currency.
This summary is based upon the United States Internal Revenue Code of 1986,
as amended (the "Code"), the Treasury regulations issued thereunder, and
official interpretations thereof, each as in effect on the date hereof, all of
which are subject to change, possibly with retroactive effect. Prospective
purchasers of the notes should consult their own tax advisers as to the United
States federal tax consequences of the purchase, ownership and disposition of
the notes, in addition to the effect of any state or local tax laws or the laws
of any jurisdiction other than the United States.
U.S. Holders
As used herein, a "U.S. Holder" means a beneficial owner of a note who is
for U.S. federal income tax purposes (i) a citizen or resident of the United
States of America (including the states thereof and the District of Columbia),
its territories, possessions and other areas subject to its jurisdiction,
including the Commonwealth of Puerto Rico (the "United States"); (ii) a
corporation created or organized in the United States or under the laws of the
United States or of any state; (iii) any estate, the income of which is subject
to United States federal income taxation regardless of its source; and (iv) any
trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all substantial decisions of the
trust.
Interest on the Notes
Interest on the notes may be included in a U.S. Holder's income at the time
the interest is accrued or received, in accordance with the Holder's method of
tax accounting. Although the notes will be issued at a discount from their
stated redemption price at maturity, U.S. Holders will not be required to
include such discount in income prior to maturity because the amount of such
discount is considered de minimis for U.S. tax purposes.
A U.S. Holder of Euro Notes that uses the cash method of accounting for tax
purposes will realize interest income equal to the U.S. dollar value of the
interest payment, based on the exchange rate on the date of receipt, regardless
of whether the payment-in-fact is converted into U.S. dollars. No exchange gain
or loss will be recognized with respect to the receipt of such payment.
A U.S. Holder of Euro Notes that uses the accrual method of accounting for
tax purposes will determine the amount of interest income allocatable to an
accrual period in Euros, and then will translate that amount into U.S. dollars
at the average exchange rate in effect during the interest accrual period (or
portion thereof within the U.S. Holder's taxable year), unless the Holder has
made the election described below. An accrual basis holder may make an election
(which must be applied consistently to all debt instruments from year to year
and may not be revoked without the consent of the Internal Revenue Service) to
translate accrued interest income at the spot rate of exchange on the last day
of the accrual period (or the last day of the taxable year within that accrual
period if the accrual period includes more than one taxable year), or at the
spot rate on the date of receipt, if that date is within five business days of
the last day of the accrual period. A U.S. Holder that uses the accrual method
of accounting for tax purposes will recognize foreign currency gain or loss on
the receipt of an interest payment if the exchange rate in effect on the date
the payment is received differs from the rate applicable to an accrual of that
interest. This foreign currency gain or loss will be treated as ordinary income
or loss, and generally will not be treated as an adjustment to interest income.
Sale and Redemption of Notes
A U.S. Holder generally will recognize capital gain or loss upon the sale,
exchange, retirement or other disposition of a note in an amount equal to the
difference between the amount realized upon such sale, exchange, retirement or
other disposition, and such U.S. Holder's adjusted tax basis in the note. A U.S.
Holder's adjusted tax basis in a note will generally equal such U.S. Holder's
initial investment in the note reduced by the amount of any payments received on
the note. Capital gain or loss realized by a U.S. Holder on the sale, exchange,
retirement or other disposition of a note, generally, will be U.S. source gain
or foreign
135
<PAGE> 142
source loss and will be long-term capital gain or loss if the note is held for
more than one year. Under current law, net long-term capital gains of
individuals are, under certain circumstances, taxed at lower United States
federal income tax rates than are items of ordinary income. The deductibility of
capital losses by a U.S. Holder, however, is subject to limitations.
Subject to the discussion of "backup" withholding below, a non-U.S. Holder
is currently exempt from United States federal income taxes with respect to
interest on the notes unless the non-U.S. Holder is (i) an insurance company
carrying on a United States insurance business to which the interest is
attributable, within the meaning of the Code; or (ii) an individual or
corporation that has an office or other fixed place of business in the United
States, to which the interest is attributable, and the interest is derived in
the active conduct of a banking, financing or similar business within the United
States, or is received by a corporation the principal business of which is
trading in stock or securities for its own account. In addition, subject to the
discussion of back-up withholding below, a non-U.S. Holder will not be subject
to federal income tax on any gain on a sale or other disposition of a note
unless (a) the holder is an individual who is present in the United States for
183 days or more during the taxable year, and certain other conditions exist, or
(b) the gain is effectively connected with the conduct of a trade or business
within the United States. In addition, the notes will be deemed to be situated
outside the United States for purposes of the United States federal estate tax
and may not be included in the gross estate for purposes of such tax in the case
of a non-resident of the United States who is not a citizen of the United States
at the time of death.
Exchange Offer
The exchange of the notes for Exchange Notes pursuant to the exchange offer
should not be a taxable exchange. As a result, a U.S. Holder should not
recognize taxable income upon exchanging the notes for exchange notes pursuant
to the exchange offer.
We will be required to pay additional cash interest on the notes if we fail
to comply with certain obligations under the Registration Rights Agreements.
Such additional interest should be taxable to a U.S. Holder as ordinary income
at the time it accrues or is received in accordance with each such U.S. Holder's
method of accounting. It is possible, however, that the IRS may take a different
position, in which case U.S. Holders might be required to include such
additional interest in income as it accrues or becomes fixed (regardless of
their usual method of accounting).
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to certain
payments of interest within the United States, including payments made by the
United States office of a paying agent, broker or other intermediary, and to
proceeds of a sale, redemption or other disposition of notes through a United
States branch of a United States or foreign broker. A 31.0% "backup withholding"
tax may apply to such payments or proceeds if the beneficial owner fails to
provide a correct taxpayer identification number or certification of exempt
status or, in the case of payments of interest, fails to certify that he is not
subject to such withholding or fails to report interest and dividend income in
full. The proceeds of a sale, redemption, or other disposition of notes through
a foreign branch of a United States broker or United States-related broker
generally will be subject to information reporting, but are not currently
subject to backup withholding. Non-U.S. Holders are generally exempt from the
information reporting and backup withholding rules, but may be required to
comply with certification and identification requirements in order to prove
their exemption. For purposes of these rules, a "United States-related broker"
is a broker or other intermediary that is a controlled foreign corporation for
United States tax purposes, or that is a non-U.S. person with 50.0% or more of
its gross income from all sources which, over a specified three-year period, is
effectively connected with a United States trade or business. Any amounts
withheld under the backup withholding rules from a payment to a beneficial owner
will be allowed as a refund or credit against such beneficial owner's United
States federal income tax liability, provided the required information is
furnished to the IRS.
136
<PAGE> 143
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes in the exchange offer for
Old Notes held for its own account must acknowledge that it will deliver a
prospectus in connection with any resale of those Exchange Notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with the resale of Exchange Notes received in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities. We have agreed that until the close of
business on September 8, 2000, we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until September 8, 2000, all dealers affecting transaction
in the Exchange Notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers, or to or through brokers or dealers or dealers who
may receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the exchange offer, and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933, and any profit
of any such resale of Exchange Notes, and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act of 1933. The letter of transmittal that accompanies this
prospectus states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933.
Until April 25, 2000, we will promptly send additional copies of this
prospectus, and any amendment or supplement to this prospectus, to any
broker-dealer that requests such documents in the letter of transmittal. We have
agreed to pay all expenses incident to the exchange offer and will indemnify the
holders of the notes against certain liabilities, including liabilities under
the Securities Act of 1933.
SELLING RESTRICTIONS
United Kingdom
Each Initial Purchaser has severally represented and agreed that: (a) it
has not offered or sold and, prior to the expiration of the period of six months
from the Issue Date, will not offer or sell in the United Kingdom, by means of
any document and notes other than to persons whose ordinary activities involve
them in acquiring holding, managing or disposing of investments (as principal or
agent) for the purpose of their business or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995,
(b) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by them in relation to
the notes in, from, or otherwise involving the United Kingdom, and (c) it has
only issued or passed on and will only issue or past on to any person in the
United Kingdom any document received by them in connection with the issuance of
the notes if that person is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996,
as amended, or is a person to whom the document may otherwise be lawfully issued
on passed on.
Poland
The Initial Purchasers have agreed that the notes will not be offered
generally to unspecified persons in Poland or advertised in Poland by means of
the mass media nor will the notes be offered to more than 300 persons in Poland
and, accordingly each Initial Purchaser has undertaken to observe and comply
with all restrictions set out in the Act on Public Trading in Securities of
August 21, 1997 (as amended) of Poland.
137
<PAGE> 144
The notes have not been, and will not be, registered with the Komsja Papierow
Wanosciowych, the Securities Commission of Poland.
The Netherlands
Each Initial Purchaser has represented and warranted in the Purchase
Agreement that (i) it has not offered or sold and will not offer or sell the
notes whether directly or indirectly, as part of its initial distribution or at
any time thereafter, and this Prospectus has only been distributed and
circulated and will not distribute and circulate to any individual or legal
entity situated in the Netherlands other than to individuals or legal entities
who or which trade or invest in securities in the conduct of their profession or
business within the meaning of the Exemption Regulation of 21 December 1995 (as
amended) issued pursuant to The Netherlands Securities Markets Supervision Act
1995 (Wer Toezicht Effectenverkeer), (which includes banks, brokers securities
institutions, insurance companies, pension funds, investment institutions, other
institutional investor and other parties, including treasury departments of
commercial enterprises and finance companies of groups which are regularly
active in the financial markets in a professional manner) and (ii) it has
mentioned and will mention upon making any offer of these notes and in all offer
advertisements, publications and other documents in which an offer of the notes
is made or a forthcoming offer is announced that the offer is exclusively made
to the said individuals or legal entities. These restrictions shall cease to
apply if the Securities Board of The Netherlands (Stichting Toezicht
Effectenverkeer) has granted a dispensation on the offering pursuant to the
Registration Statement in connection with the exchange offer or a shelf
registration.
138
<PAGE> 145
LEGAL MATTERS
The validity of the notes and the guarantees will be passed upon for us by
Clifford Chance (with respect to matters of New York, Dutch, and Polish law) and
by Faltz & Kremer (with respect to matters of Luxembourg law).
INDEPENDENT ACCOUNTANTS
The consolidated financial statements as of December 31, 1998, 1997 and
1996, and for each of the years ended December 31, 1998 and 1997, and for the
period ended December 31, 1996, included in this prospectus have been audited by
Arthur Andersen Sp. z o.o., independent accountants, to the extent and for the
period indicated in their report thereon.
139
<PAGE> 146
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................. F-2
Consolidated Statements of Operations for the periods from
January 1, 1998 to December 31, 1998, from January 1,
1997 to December 31, 1997 and from December 27, 1995 to
December 31, 1996...................................... F-3
Consolidated Balance Sheets as of December 31, 1998,
December 31, 1997 and December 31, 1996................ F-4
Consolidated Statements of Cash Flows for the periods from
January 1, 1998 to December 31, 1998, from January 1,
1997 to December 31, 1997 and from December 27, 1995 to
December 31, 1996...................................... F-5
Consolidated Statements of Change in Equity for the
periods from January 1, 1998 to December 31, 1998, from
January 1, 1997 to December 31, 1997 and from December
27, 1995 to December 31, 1996.......................... F-6
Notes to the Consolidated Financial Statements............ F-7
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations for the three month
and nine month periods ended September 30, 1999 and
September 30, 1998..................................... F-29
Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998...................................... F-30
Consolidated Statements of Cash Flows for the nine month
periods September 30, 1999 and September 30, 1998...... F-31
Consolidated Statements of Change in Equity for the
periods from January 1, 1999 to September 30, 1999 and
from January 1, 1998 to September 30, 1998............. F-32
Notes to the Condensed Consolidated Financial
Statements............................................. F-33
</TABLE>
F-1
<PAGE> 147
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Supervisory Board of Polska Telefonia Cyfrowa Sp. z o.o.
We have audited the accompanying consolidated balance sheets of Polska
Telefonia Cyfrowa Sp. z o.o. (a Polish limited liability company) and its
subsidiary as of December 31, 1998, 1997 and 1996, and the related consolidated
statements of operations, consolidated statements of changes in equity and cash
flows for each of the years ended December 31, 1998 and 1997 and the period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States and International Standards on Auditing. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Polska
Telefonia Cyfrowa Sp. z o.o. and its subsidiary, as of December 31, 1998, 1997
and 1996, and the results of its operations and its cash flows for each of the
years ended December 31, 1998 and 1997 and the period ended December 31, 1996 in
accordance with Statements of International Accounting Standards issued by the
International Accounting Standards Committee.
Arthur Andersen
Warsaw, Poland
March 22, 1999
F-2
<PAGE> 148
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS FROM JANUARY 1, 1998 TO DECEMBER 31, 1998,
FROM JANUARY 1, 1997 TO DECEMBER 31, 1997 AND
FROM DECEMBER 27, 1995 TO DECEMBER 31, 1996
(IN THOUSANDS OF PLN)
<TABLE>
<CAPTION>
NOTES 1998 1997 1996
----- --------- -------- -------
<S> <C> <C> <C> <C>
NET SALES.............................................. 6 1,610,811 647,062 71,238
COST OF SALES.......................................... 7 (949,340) (517,311) (78,773)
--------- -------- -------
GROSS MARGIN........................................... 661,471 129,751 (7,535)
OPERATING EXPENSES..................................... 7 (386,673) (187,669) (77,251)
--------- -------- -------
OPERATING PROFIT/(LOSS)................................ 274,798 (57,918) (84,786)
NON-OPERATING ITEMS
Interest and other financial income.................. 8 21,398 35,651 11,533
Interest and other financial expenses................ 9 (187,197) (109,652) (1,092)
--------- -------- -------
INCOME/(LOSS) BEFORE TAXATION.......................... 108,999 (131,919) (74,345)
TAXATION (CHARGE)/BENEFIT.............................. 10 (107,530) 6,997 23,637
--------- -------- -------
COMPREHENSIVE NET INCOME/(LOSS)........................ 1,469 (124,922) (50,708)
========= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 149
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(IN THOUSANDS OF PLN)
<TABLE>
<CAPTION>
NOTES 1998 1997 1996
----- --------- --------- -------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.......................... 24 5,695 228,156 2,544
Trade short-term investments....................... 11 -- 5,084 27,785
Debtors and prepayments............................ 12 253,585 143,111 32,323
Accounts receivable from State Treasury............ 12 85,064 44,380 28,547
Inventory.......................................... 13 75,946 34,309 25,047
--------- --------- -------
420,290 455,040 116,246
DEFERRED TAX ASSET................................... 10 -- 30,748 23,637
LONG-TERM ASSETS
Tangible fixed assets, net......................... 14 1,671,182 760,785 154,912
Intangible fixed assets, net....................... 15 638,872 675,583 681,257
Deferred cost...................................... 16 30,759 17,063 --
--------- --------- -------
2,340,813 1,453,431 836,169
--------- --------- -------
TOTAL ASSETS......................................... 2,761,103 1,939,219 976,052
========= ========= =======
CURRENT LIABILITIES.................................. 17 571,763 143,822 123,203
LONG-TERM LIABILITIES................................ 18 1,890,218 1,498,744 431,936
DEFERRED TAX LIABILITY............................... 10 172 -- --
PROVISIONS FOR LIABILITIES AND CHARGES............... 19 2,111 1,276 621
--------- --------- -------
TOTAL LIABILITIES.................................... 2,464,264 1,643,842 555,760
--------- --------- -------
SHAREHOLDERS' EQUITY
Share capital...................................... 20 471,000 471,000 471,000
Retained losses.................................... (174,161) (175,630) (50,708)
Currency translation adjustment.................... -- 7 --
--------- --------- -------
296,839 295,377 420,292
--------- --------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........... 2,761,103 1,939,219 976,052
========= ========= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 150
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS FROM JANUARY 1, 1998 TO DECEMBER 31, 1998
FROM JANUARY 1, 1997 TO DECEMBER 31, 1997 AND
FROM DECEMBER 27, 1995 TO DECEMBER 31, 1996
(IN THOUSANDS OF PLN)
<TABLE>
<CAPTION>
1998 1997 1996
---------- -------- --------
(SEE NOTE 24)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) BEFORE TAXATION........................... 108,999 (131,919) (74,345)
ADJUSTMENTS FOR:
Depreciation and amortization............................... 164,615 83,608 15,005
Change to provision for doubtful debtors.................... 90,694 43,714 5,800
Change to provisions for inventory.......................... (3,309) 5,009 2,080
Other provisions and special funds.......................... 835 655 621
Unrealized foreign exchange losses, net..................... 10,880 37,806 235
Loss on sales of tangibles and intangibles.................. 983 216 (102)
Interest expense, net....................................... 123,770 31,801 (11,317)
Other....................................................... (593) 614 --
---------- -------- --------
OPERATING CASH FLOWS BEFORE WORKING CAPITAL CHANGES......... 496,874 71,504 (62,023)
Increase in inventory....................................... (38,328) (14,271) (27,127)
Increase in debtors, prepayments and deferred cost.......... (219,943) (173,612) (66,670)
Increase in trade payables and accruals..................... 86,406 13,072 85,783
---------- -------- --------
CASH FROM/(USED IN) OPERATIONS.............................. 325,009 (103,307) (70,037)
Interest paid............................................... (47,526) (10,118) --
Income taxes paid........................................... (113,668) -- --
---------- -------- --------
NET CASH FROM/(USED IN) OPERATING ACTIVITIES................ 163,815 (113,425) (70,037)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of intangible fixed assets........................ (52,855) (18,677) (345,295)
Purchases of tangible fixed assets.......................... (966,649) (176,272) (41,268)
Sales/(purchases) of short-term investments, net............ 5,084 22,934 (27,785)
Proceeds from sale of equipment and intangibles............. 894 3,932 4,506
Interest received........................................... 8,816 15,422 11,349
---------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES....................... (1,004,710) (152,661) (398,493)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital subscriptions......................... -- -- 471,000
Proceeds from long-term borrowings.......................... 593,870 -- --
Proceeds from senior subordinated debt issuance............. -- 479,785 --
Net change in overdraft facility............................ 24,558 -- --
---------- -------- --------
NET CASH FROM FINANCING ACTIVITIES.......................... 618,428 479,785 471,000
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS........ (222,467) 213,699 2,470
EFFECT OF FOREIGN EXCHANGE CHANGES ON CASH AND CASH
EQUIVALENTS............................................... 6 11,913 74
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 228,156 2,544 --
---------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. 5,695 228,156 2,544
---------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 151
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY
FOR THE PERIODS FROM JANUARY 1, 1998 TO DECEMBER 31, 1998,
FROM JANUARY 1, 1997 TO DECEMBER 31, 1997 AND
FROM DECEMBER 27, 1995 TO DECEMBER 31, 1996
(IN THOUSANDS OF PLN)
<TABLE>
<CAPTION>
CURRENCY
SHARE RETAINED TRANSLATION
CAPITAL EARNINGS ADJUSTMENT TOTAL
------- -------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 27, 1995........................ -- -- -- --
Share capital contribution.......................... 471,000.. -- -- 471,000
Net loss for the period, as reported................ -- (74,345) -- (74,345)
Changes in accounting policy with respect to
implementation of IAS 12 (revised), see Note 5b... -- 23,637 -- 23,637
------- -------- -------- --------
BALANCE AT DECEMBER 31, 1996........................ 471,000 (50,708) -- 420,292
Net loss for the period, as reported................ -- (132,033) -- (132,033)
Changes in accounting policy with respect to
implementation of IAS 12 (revised), see Note 5b... -- 7,111 -- 7,111
Currency translation adjustment..................... -- -- 7 7
------- -------- -------- --------
BALANCE AT DECEMBER 31, 1997........................ 471,000 (175,630) 7 295,377
Currency translation adjustment..................... -- -- (7) (7)
Net income for the year............................. -- 1,469 -- 1,469
------- -------- -------- --------
BALANCE AT DECEMBER 31, 1998........................ 471,000 (174,161) -- 296,839
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 152
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF PLN)
1. INCORPORATION AND PRINCIPAL ACTIVITIES
Polska Telefonia Cyfrowa Sp. z o.o. (the "Company") was incorporated under
Polish Law as a limited liability company based on a Notarial Act dated December
20, 1995. The Company was registered in the Regional Court in Warsaw, XVI
Commercial Department on December 27, 1995.
The principal activities of the Company are providing cellular telephone
communication services in accordance with the GSM license granted by the
Minister of Telecommunications and the sale of cellular telephones and
accessories compatible with its cellular services.
During 1996 the Company signed an interim interconnect agreement with
Telekomunikacja Polska S.A. ("TPSA") on a "bill and keep" basis. On May 22, 1997
the Ministry of Communications issued a decision with respect to new
interconnect arrangements between the Company and TPSA. The decision was binding
for both parties, however, certain terms, including the effective date, were
still to be agreed. The decision defined interconnect, international and
leased-lines settlements with TPSA.
In the course of 1997, TPSA filed in the Supreme Administration Court an
appeal against the above mentioned decision. In the appeal, it challenges the
entitlement of the Minister to issue the above decision on the basis that the
established interconnect rates are not fair.
On December 9, 1998, the Company signed a frame agreement with TPSA
defining the terms of mutual interconnect arrangements.
2. PRINCIPLES OF CONSOLIDATION
A. GROUP ENTITIES
All intercompany balances and transactions are eliminated in consolidation.
The consolidated financial statements include the financial statements of
Polska Telefonia Cyfrowa Sp. z o.o. and its wholly-owned subsidiary, PTC
International Finance B.V. On June 17, 1997, PTC International Finance B.V.
was incorporated under the laws of the Netherlands for the purpose of
issuing long-term Notes (see Note 18). The Company has acquired 40
fully-paid shares with a par value of 1,000 Netherlands Guilders each,
issued by PTC International Finance B.V. PTC International Finance B.V. has
no subsidiaries of its own.
B. REPORTING CURRENCY
The Company primarily generates and expends cash through its operating
activities in Polish Zloty ("PLN"). Additionally, all of the receivables
and the majority of its short-term liabilities are PLN denominated.
Therefore, Management has designated the PLN as the functional currency of
the Company.
The accompanying consolidated financial statements are reported in
thousands of PLN.
3. ACCOUNTING STANDARDS IN POLAND
The Company maintains its books of account in accordance with accounting
principles and practices employed by enterprises in Poland as required by
Polish accounting regulations. The accompanying financial statements
reflect certain adjustments not reflected in the Company's books to present
these statements in accordance with standards issued by the International
Accounting Standards Committee. These adjustments and their effect on
earnings for the periods from January 1, 1998 to December 31, 1998, from
January 1, 1997 to December 31, 1997 and from December 27, 1995 to December
31, 1996 are shown in Note 25 to these Financial Statements.
F-7
<PAGE> 153
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
3. ACCOUNTING STANDARDS IN POLAND (CONTINUED)
The differences between International Accounting Standards ("IAS") and
generally accepted accounting principles in the United States ("U.S. GAAP")
and their effect on net results for the periods from January 1, 1998 to
December 31, 1998, from January 1, 1997 to December 31, 1997 and from
December 27, 1995 to December 31, 1996 have been presented in Note 26 to
these Financial Statements.
4. PRINCIPAL ACCOUNTING POLICIES
A. TANGIBLE FIXED ASSETS
Tangible fixed assets are shown at historical cost less accumulated
depreciation. Depreciation is calculated using the straight-line method
over the estimated useful life of the asset. The following depreciation
rates have been applied:
<TABLE>
<CAPTION>
ANNUAL RATE ESTIMATED
IN % USEFUL LIVES IN YEARS
------------ ---------------------
<S> <C> <C>
Leasehold improvements.................................. Lease term
Buildings............................................... 2.5% 40
Plant and equipment..................................... 4.0 - 30.0% 3.3 - 25
Motor vehicles.......................................... 12.5 - 30.0% 3.3 - 8
Other................................................... 20.0% 5
</TABLE>
B. INTANGIBLE FIXED ASSETS
LICENSE
The Company has acquired from the Polish State, represented by the Ministry
of Communications, a license to provide telecommunication services
according to ETSI/GSM standard, including a permit to install and use
network equipment and to use its allocation of ETSI/GSM frequencies. The
license was acquired on February 23, 1996 and has been valued at the
present value of the payments due to the State. For the period of
development of the GSM system, the cost of imputed interest and foreign
exchange losses were capitalized in the cost of the asset. This development
period terminated during the third quarter of 1997.
The license is un-amortized over the period of its validity, i.e., 15 years
on a straight-line basis.
OTHER INTANGIBLE FIXED ASSETS
Other intangible assets are stated at cost less accumulated amortization.
Amortization is calculated using the straight-line method over the
estimated useful life of the asset. The following amortization rates have
been applied:
<TABLE>
<CAPTION>
ANNUAL RATE
IN %
------------
<S> <C>
Technical drawings and plans................................ 20.0%
Computer software........................................... 10.0 - 50.0%
Trademarks.................................................. 6.7%
Other intangible assets..................................... 25.0 - 50.0%
</TABLE>
F-8
<PAGE> 154
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
4. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
C. DEBTORS
Amounts due from debtors are shown net of provisions for doubtful accounts.
The provisions are based on specific amounts due where realization is
unlikely and on a general basis, calculated using historic collection
experience.
D. INVENTORIES
Inventories are stated at the lower of cost and net realizable value. Cost
is determined principally under the average method. Provisions are set for
obsolete, slow moving and damaged inventory and are deducted from the
related inventory balances.
E. SPECIAL FUNDS
Special funds consist primarily of the social fund. These amounts have been
included in provisions for liabilities and charges in the balance sheet.
Contributions to the special funds are expensed in the period to which they
relate.
F. FOREIGN CURRENCY
Transactions denominated in foreign currencies are recorded in the local
currency (the Polish Zloty) at actual exchange rates prevailing at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are reported at the rates of exchange prevailing at the end of
the period. Any gain or loss arising from a change in exchange rates
subsequent to the date of the transaction is recorded in the statement of
operations as a foreign exchange gain or loss, included in non-operating
items in the statement of operations.
G. VACATION PAY
Vacation pay is accrued when earned by employees.
H. TAXATION
The current provision, if any, for corporate income tax is calculated in
accordance with Polish or Dutch tax regulations.
Deferred taxation (which arises from differences in the timing of the
recognition of items by the tax authorities and in these financial
statements) is calculated using the liability method. Deferred tax is
provided on the future tax consequences of all events that have been
recognized in the Company's financial statements or tax returns. A deferred
tax asset is recognized if its realization is probable.
I. NET SALES
Net sales consists of the value of sales (excluding value-added tax) of
goods and services in the normal course of business but excludes
extraordinary disposals of inventory and other assets.
Revenue is recognized when services are provided or goods are shipped out.
Sales allowances are accounted in the same period when the related portion
of revenue is recognized.
J. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments approximates the
reported carrying amounts.
F-9
<PAGE> 155
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
4. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
K. USE OF ESTIMATES
Preparation of financial statements requires Management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
5. CHANGES IN ACCOUNTING POLICIES
A. INVENTORY PROVISION
Until December 31, 1997, an inventory provision was recorded for planned
promotional discounts. In January 1998, the Company discontinued this
practice and recognizes loss on promoted inventory in the period when the
promotion is carried out. Should the principles applied in 1998 been used
in 1997, the net loss for the period of twelve months ended December 31,
1997 would have been decreased by PLN 3,548.
B. DEFERRED TAXES
Effective January 1, 1998 the Company has adopted IAS 12 (revised) "Income
Taxes" in accounting for its income taxes. The resulting change in
accounting policy was applied retrospectively, resulting in a positive
adjustment to the opening balance of retained losses of PLN 23,637 as at
January 1, 1997. The resulting adjustment to the opening balance of
retained loss as at January 1, 1998 resulted in a decrease by PLN 30,748.
Additionally, the net loss reported for the period from December 27, 1995
to December 31, 1996 was decreased by PLN 23,637 and for the twelve-month
period ended December 31, 1997 was decreased by PLN 7,111.
6. NET SALES
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Service revenues and fees.............. 1,445,340 534,439 38,900
Sales of telephones and accessories.... 165,471 112,623 32,338
--------- ------- ------
1,610,811 647,062 71,238
========= ======= ======
</TABLE>
The Company operates in one segment (providing cellular telecommunication
services and the ancillary sale of cellular telephones and accessories) and
in one market (the Republic of Poland).
F-10
<PAGE> 156
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
7. COSTS AND EXPENSES
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cost of sales:
Cost of services sold.................. 614,824 336,274 36,583
Cost of sales of telephones and
accessories.......................... 334,516 181,037 42,190
--------- ------- -------
949,340 517,311 78,773
Operating expenses:
Selling and distribution costs......... 279,092 139,685 36,554
Administration and other operating
costs................................ 107,581 47,984 40,697
--------- ------- -------
386,673 187,669 77,251
--------- ------- -------
1,336,013 704,980 156,024
========= ======= =======
</TABLE>
The following costs and expenses were included in cost of sales:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Merchandise sold....................... 334,516 176,028 40,110
Depreciation and amortization.......... 142,004 75,663 11,398
Other external services................ 127,091 62,356 1,293
Leased lines........................... 92,869 49,696 7,955
Commissions............................ 89,710 77,653 13,018
Interconnect........................... 77,490 32,413 --
Roaming................................ 44,137 16,273 --
Wages and salaries..................... 13,314 7,386 1,338
Social security and other benefits..... 11,194 4,578 1,259
Materials and energy................... 10,911 6,429 322
Taxes and other charges................ 2,493 1,986 --
Change to inventory provision, net..... (3,309) 5,009 2,080
Other.................................. 6,920 1,841 --
------- ------- ------
949,340 517,311 78,773
======= ======= ======
</TABLE>
F-11
<PAGE> 157
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
7. COSTS AND EXPENSES (CONTINUED)
The following costs and expenses were included in selling and distribution
costs:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Advertising costs...................... 98,223 41,655 26,308
Charge to doubtful debtors provision... 90,694 43,714 5,800
External services...................... 27,271 17,773 --
Wages and salaries..................... 25,851 16,129 2,959
Social security and other benefits..... 18,554 8,150 1,457
Depreciation and amortization.......... 7,974 4,434 --
Materials and energy................... 4,542 4,464 30
Taxes and other charges................ 3,628 1,201 --
Other.................................. 2,355 2,165 --
------- ------- ------
279,092 139,685 36,554
======= ======= ======
</TABLE>
The following costs and expenses were included in administration costs:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
External services...................... 52,703 21,577 27,167
Wages and salaries..................... 20,496 10,407 4,108
Depreciation and amortization.......... 14,637 3,511 3,607
Social security and other benefits..... 11,928 5,869 1,558
Materials and energy................... 6,259 948 1,502
Taxes and charges...................... 5,158 2,715 1,091
Other.................................. (3,600) 2,957 1,664
------- ------- ------
107,581 47,984 40,697
======= ======= ======
</TABLE>
8. INTEREST AND OTHER FINANCIAL INCOME
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Foreign exchange gains................. 12,816 19,996 101
Interest income........................ 8,582 15,655 11,349
Other financial income................. -- -- 83
------ ------ ------
21,398 35,651 11,533
====== ====== ======
</TABLE>
F-12
<PAGE> 158
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
9. INTEREST AND OTHER FINANCIAL EXPENSES
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Interest expense....................... 132,353 47,456 32
Foreign exchange losses................ 54,844 62,196 1,060
------- ------- -----
187,197 109,652 1,092
======= ======= =====
</TABLE>
10. TAXATION
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Polish current tax charge............. (76,223) -- --
Polish deferred tax benefit........... 3,039 38,454 25,493
Foreign current tax charge............ (387) (114) --
Foreign deferred tax charge........... -- -- --
Change in valuation allowance......... (33,959) (31,343) (1,856)
-------- ------- ------
Tax benefit/(charge).................. (107,530) 6,997 23,637
======== ======= ======
</TABLE>
Tax losses for the period from December 27, 1995 to December 31, 1996 can
be offset with future taxable income in three equal installments during the
three years following the loss. The unused portion of a tax loss
installment expires. The 1996 tax losses, taking into account the effect of
the changes in tax treatment of certain items (see Note 10 below), were
being utilized as follows: 58,006 in 1997 and 122,550 in 1998 and remaining
tax losses of 122,550 are available to be utilized in 1999.
According to the Polish tax regulations, the tax rates in effect in 1998,
1997 and 1996 were 36%, 38% and 40% respectively. The tax rates in 1999 and
2000 are set to be 34% and 32%, respectively.
F-13
<PAGE> 159
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
10. TAXATION (CONTINUED)
Reconciliation of the profit/(loss) before taxation to taxable income is as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Profit/(loss) before taxation.............. 108,999 (131,919) (74,345)
Permanent differences:
Disposal of assets....................... 1,332 --
Taxes not deductible.................. 3,748 1,502 --
Promotion expenses above deductible
limit................................. 3,163 3,183 3,446
Uncollectible receivables................ 3,145 -- --
Depreciation not deductible.............. 1,578 1,149 270
Penalty interest......................... 883 -- --
Other................................. 1,369 3,712 643
-------- -------- --------
15,218 9,546 4,359
Timing differences:
Bad debt provision....................... 89,158 43,714 5,800
GSM license.............................. 61,099 10,064 (1,463)
Depreciation............................. 38,348 3,319 --
Unrealized foreign exchange losses/gains,
net................................... 16,999 29,096 309
Change in accruals for wages............. 5,157 6,350 --
Change in accruals for consulting
expenses.............................. 4,659 1,336 --
Expenses deducted in previous year....... 2,365 -- --
Interest, net............................ 2,309 30,249 --
Change in accruals for advertising
expenses, net......................... (224) (1,428) 1,890
Other expenses........................... (963) 4,181 551
Change in accruals for commissions,
net................................... (1,491) (5,991) 7,490
Change in accruals for leased lines,
net................................... (3,132) 1,338 --
Change in inventory provision............ (3,309) 5,009 2,080
-------- -------- --------
210,975 127,237 16,657
-------- -------- --------
TAXABLE INCOME/(LOSS), INCLUDING:.......... 335,192 4,864 (53,329)
TAXABLE INCOME/(LOSS) IN POLAND............ 334,282 4,590 (53,329)
Less utilization of Polish tax losses
carried forward.......................... (122,550) (4,590) --
-------- -------- --------
Net taxable income/(loss) in Poland........ 211,732 -- (53,329)
Income tax expense in Poland............... 76,223 -- --
======== ======== ========
TAXABLE INCOME IN THE NETHERLANDS.......... 910 274 --
Income tax in the Netherlands.............. 387 114 --
======== ======== ========
</TABLE>
F-14
<PAGE> 160
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
10. TAXATION (CONTINUED)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Deferred tax assets in Poland:
Bad debt provision....................... 44,375 15,845 1,856
Tax losses carry forward................. 41,667 12,088 19,198
Additional book depreciation............. 14,499 -- --
Unrealized foreign exchange loss, net.... 13,562 19,383 117
Accrued interest......................... 10,942 13,288 --
Accrued expenses......................... 4,608 2,426 3,564
Inventory provision...................... 1,285 2,552 790
Other.................................... -- 4,724 2,638
------- ------- ------
130,938 70,306 28,163
Valuation allowance...................... (67,158) (33,199) (1,856)
------- ------- ------
63,780 37,107 26,307
Deferred tax liabilities in Poland:
Book versus tax basis of GSM license..... (63,234) (1,984) (2,670)
Book versus tax basis of fixed assets.... (718) -- --
Unrealized foreign exchange gains........ -- (4,290) --
Other -- tax deferred credits............ -- (85) --
------- ------- ------
(63,952) (6,359) (2,670)
------- ------- ------
Net deferred tax (liability)/asset......... (172) 30,748 23,637
======= ======= ======
</TABLE>
After discussions with the Polish tax authorities, the Company has decided
to change the tax treatment of the cost of its GSM license from
amortization over 15 year period to a cash basis. As a result, the tax
returns for 1996 and 1997 have been re-stated, and the resulting increase
in tax loss carry forward is reflected in the revised deferred tax
computation for 1998.
The increase in valuation allowance results primarily from the increase of
deferred tax asset balances for which tax deductibility is yet uncertain.
11. SHORT-TERM INVESTMENTS
Short term investments at December 31, 1996 consist of short term Polish
Treasury Bills with a maximum maturity of 7 months, acquired by the Company in
December 1996 and disposed of during the first quarter of 1997, at a gain of PLN
73. The treasury Bills are recorded at cost which approximates their market
value at December 31, 1996. Short-term investments at December 31, 1997
consisted of Polish Treasury Bills with maturity of 6 months, recorded at cost,
which approximate their market value at December 31, 1997. Treasury Bills are
freely traded on the secondary market in Poland. The Company sold these Treasury
Bills in January 1998.
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Short-term investments......................... -- 5,084 27,785
</TABLE>
F-15
<PAGE> 161
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
12. DEBTORS AND PREPAYMENTS
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Trade debtors and accrued income............... 356,675 182,530 36,007
VAT and other taxes recoverable from State
Treasury..................................... 85,064 44,380 28,547
Prepaid expenses............................... 9,480 6,441 346
Accounts receivable from shareholders.......... 3,332 2,151 1,138
Other debtors.................................. 1,925 1,503 632
-------- ------- -------
456,476 237,005 66,670
Provision for doubtful debtors................. (117,827) (49,514) (5,800)
-------- ------- -------
338,649 187,491 60,870
======== ======= =======
</TABLE>
Substantially all of the Company's trade debtors are Polish businesses and
individuals. Further, the Company has established a network of dealers within
Poland to distribute its products. The dealers share many economic
characteristics and receivables from each of these dealers present similar risk
to the Company. The increase in State Treasury receivables results from a change
in tax practices, as explained in Note 10. As a result, the Company expects a
future recovery of the taxes paid in installments under previous practices.
13. INVENTORY
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Telephones..................................... 50,462 29,704 21,618
Accessories and other.......................... 29,264 11,694 5,509
------ ------ ------
79,726 41,398 27,127
Inventory provision............................ (3,780) (7,089) (2,080)
------ ------ ------
75,946 34,309 25,047
====== ====== ======
</TABLE>
14. TANGIBLE FIXED ASSETS, NET
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Land and buildings.......................... 79,954 77 --
Plant and equipment......................... 844,729 212,021 30,191
Motor vehicles.............................. 8,254 7,888 6,163
Other fixed assets.......................... 35,678 12,139 1,794
Construction in progress.................... 702,567 528,660 116,764
--------- ------- -------
1,671,182 760,785 154,912
========= ======= =======
</TABLE>
For tangible fixed assets under construction, the Company capitalizes
interest and foreign exchange gains/losses incurred and directly attributable to
the acquisition and construction of the qualifying assets. The financing costs
are capitalized only during the period of construction of the qualifying assets.
During fiscal year ended December 31, 1998, the Company capitalized PLN 22,765
of foreign exchange losses and PLN 4,074 of interest expense. For the
corresponding year ending December 31, 1997, PLN 9,346 of foreign
F-16
<PAGE> 162
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
14. TANGIBLE FIXED ASSETS, NET (CONTINUED)
exchange losses and PLN 1,234 of interest expense were capitalized and for the
period ended December 31, 1996 PLN 672 of foreign exchange losses were
capitalized.
The movement in each period was as follows:
<TABLE>
<CAPTION>
LAND AND PLANT AND MOTOR OTHER FIXED CONSTRUCTION
BUILDINGS EQUIPMENT VEHICLES ASSETS IN PROGRESS TOTAL
--------- --------- -------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
COST
At December 27, 1995................................. -- -- -- -- -- --
Additions............................................ -- 1,695 6,612 2,814 154,659 165,780
Transfers............................................ -- 33,113 -- 318 (37,895) (4,464)
Disposals............................................ -- (4,365) -- (2) -- (4,367)
------ ------- ------ ------ -------- ---------
At December 31, 1996................................. -- 30,443 6,612 3,130 116,764 156,949
------ ------- ------ ------ -------- ---------
DEPRECIATION
At December 27, 1995................................. -- -- -- -- -- --
Charge............................................... -- 354 449 1,338 -- 2,141
Disposals............................................ -- (102) -- (2) -- (104)
------ ------- ------ ------ -------- ---------
At December 31, 1996................................. -- 252 449 1,336 -- 2,037
------ ------- ------ ------ -------- ---------
NET BOOK VALUE AT DECEMBER 31, 1996.................. -- 30,191 6,163 1,794 116,764 154,912
====== ======= ====== ====== ======== =========
COST
At January 1, 1997................................... -- 30,443 6,612 3,130 116,764 156,949
Additions............................................ 77 -- 4,427 942 631,157 636,603
Transfers............................................ -- 205,974 -- 13,287 (219,261) --
Disposals............................................ -- (4,774) (138) (35) -- (4,947)
------ ------- ------ ------ -------- ---------
At December 31, 1997................................. 77 231,643 10,901 17,324 528,660 788,605
------ ------- ------ ------ -------- ---------
DEPRECIATION
At January 1, 1997................................... -- 252 449 1,336 -- 2,037
Charge............................................... -- 20,111 2,587 3,884 -- 26,582
Disposals............................................ -- (741) (23) (35) -- (799)
------ ------- ------ ------ -------- ---------
At December 31, 1997................................. -- 19,622 3,013 5,185 -- 27,820
------ ------- ------ ------ -------- ---------
NET BOOK VALUE AT DECEMBER 31, 1997.................. 77 212,021 7,888 12,139 528,660 760,785
====== ======= ====== ====== ======== =========
COST
At January 1, 1998................................... 77 231,643 10,901 17,324 528,660 788,605
Additions............................................ 80,691 11,377 4,453 2,847 914,276 1,013,644
Transfers............................................ -- 709,360 -- 31,469 (740,369) 460
Disposals............................................ -- (385) (439) (3,110) -- (3,934)
------ ------- ------ ------ -------- ---------
At December 31, 1998................................. 80,768 951,995 14,915 48,530 702,567 1,798,775
------ ------- ------ ------ -------- ---------
DEPRECIATION
At January 1, 1998................................... -- 19,622 3,013 5,185 -- 27,820
Charge............................................... 814 87,741 3,819 9,456 -- 101,830
Disposals............................................ -- (97) (171) (1,789) -- (2,057)
------ ------- ------ ------ -------- ---------
At December 31, 1998................................. 814 107,266 6,661 12,852 -- 127,593
------ ------- ------ ------ -------- ---------
NET BOOK VALUE AT DECEMBER 31, 1998.................. 79,954 844,729 8,254 35,678 702,567 1,671,182
====== ======= ====== ====== ======== =========
</TABLE>
Tangible fixed assets held under capital leases (included in above
schedule):
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
---------------- --------------- ---------------
LAND BUILDING OTHER OTHER
----- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Cost.......................................... 2,383 78,114 645 11,517
Accumulated depreciation...................... -- (814) (34) (856)
----- ------ --- ------
Net........................................... 2,383 77,300 611 10,661
===== ====== === ======
</TABLE>
F-17
<PAGE> 163
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
15. INTANGIBLE FIXED ASSETS, NET
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
GSM license.................................... 593,066 641,854 650,695
Technical drawings and plans................... 8,087 10,982 13,877
Computer software.............................. 36,164 17,750 7,333
Trademark...................................... 174 187 201
Other.......................................... 1,381 4,810 9,151
------- ------- -------
638,872 675,583 681,257
======= ======= =======
</TABLE>
The movement in each period was as follows:
<TABLE>
<CAPTION>
TECHNICAL
GSM DRAWINGS COMPUTER TRADE
LICENSE AND PLANS SOFTWARE MARK OTHER TOTAL
------- --------- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
COST
At December 27, 1995..................................... -- -- -- -- -- --
Additions................................................ 662,093 13,877 3,430 206 10,192 689,798
Transfers................................................ -- -- 4,464 -- -- 4,464
Disposals................................................ -- -- (144) -- -- (144)
------- ------ ------ ------ ------ -------
At December 31, 1996..................................... 662,093 13,877 7,750 206 10,192 694,118
------- ------ ------ ------ ------ -------
AMORTIZATION
At December 27, 1995..................................... -- -- -- -- -- --
Charge................................................... 11,398 -- 420 5 1,041 12,864
Disposals................................................ -- -- (3) -- -- (3)
------- ------ ------ ------ ------ -------
At December 31,1996...................................... 11,398 -- 417 5 1,041 12,861
------- ------ ------ ------ ------ -------
NET BOOK VALUE AT DECEMBER 31, 1996...................... 650,695 13,877 7,333 201 9,151 681,257
======= ====== ====== ====== ====== =======
COST
At January 1, 1997....................................... 662,093 13,877 7,750 206 10,192 694,118
Additions................................................ 38,471 1,713 11,168 -- -- 51,352
Transfers................................................ -- (1,713) 1,713 -- -- --
------- ------ ------ ------ ------ -------
At December 31, 1997..................................... 700,564 13,877 20,631 206 10,192 745,470
------- ------ ------ ------ ------ -------
AMORTIZATION
At January 1, 1997....................................... 11,398 -- 417 5 1,041 12,861
Charge................................................... 47,312 3,435 1,924 14 4,341 57,026
Transfers................................................ -- (540) 540 -- -- --
------- ------ ------ ------ ------ -------
At December 31, 1997..................................... 58,710 2,895 2,881 19 5,382 69,887
------- ------ ------ ------ ------ -------
NET BOOK VALUE AT DECEMBER 31, 1997...................... 641,854 10,982 17,750 187 4,810 675,583
======= ====== ====== ====== ====== =======
COST
At January 1, 1998....................................... 700,564 13,877 20,631 206 10,192 745,470
Additions................................................ -- -- 26,534 -- -- 26,534
Transfers................................................ -- -- (474) -- -- (474)
Disposals................................................ -- -- -- -- -- --
------- ------ ------ ------ ------ -------
At December 31, 1998..................................... 700,564 13,877 46,691 206 10,192 771,530
------- ------ ------ ------ ------ -------
</TABLE>
F-18
<PAGE> 164
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
15. INTANGIBLE FIXED ASSETS, NET (CONTINUED)
<TABLE>
<CAPTION>
TECHNICAL
GSM DRAWINGS COMPUTER TRADE
LICENSE AND PLANS SOFTWARE MARK OTHER TOTAL
------- --------- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
AMORTIZATION
At January 1, 1998....................................... 58,710 2,895 2,881 19 5,382 69,887
Charge................................................... 48,788 2,895 7,660 13 3,429 62,785
Transfers................................................ -- -- (14) -- -- (14)
Disposals................................................ -- -- -- -- -- --
------- ------ ------ ------ ------ -------
At December 31, 1998..................................... 107,498 5,790 10,527 32 8,811 132,658
------- ------ ------ ------ ------ -------
NET BOOK VALUE AT DECEMBER 31, 1998...................... 593,066 8,087 36,164 174 1,381 638,872
======= ====== ====== ====== ====== =======
</TABLE>
Interest capitalized in intangible fixed assets during fiscal year ended
December 31, 1997 amounted to PLN 17,948 (PLN 19,826 in the fiscal year ended
December 31, 1996). No interest was capitalized in intangible fixed assets
during fiscal year ended December 31, 1998.
16. DEFERRED COST
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Notes issuance cost............................ 15,941 17,063 --
Senior debt issuance cost...................... 14,818 -- --
------ ------ ------
30,759 17,063 --
====== ====== ======
</TABLE>
As explained in Note 18, the Company obtained long-term financing by
issuing Discount Notes, in July 1997, and through Citibank loan facility,
"senior debt", signed in December 1997. These debt issuance costs have been
deferred and will be un-amortized over the period of financing (10 and 8 years,
respectively).
17. CURRENT LIABILITIES
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Construction payables.......................... 225,176 -- 11,069
Trade creditors................................ 122,398 20,767 57,652
Accruals....................................... 66,385 63,352 12,126
GSM license liability.......................... 63,419 31,021 7,016
Deferred income................................ 32,602 9,291 1,541
Overdraft facility............................. 24,558 -- --
Amounts due to State Treasury.................. 14,829 5,669 1,252
Accounts payable to shareholders............... 11,939 13,402 29,548
Finance leases payable......................... 9,978 85 2,821
Payroll........................................ 479 235 178
------- ------- -------
571,763 143,822 123,203
======= ======= =======
</TABLE>
In May 1998, the Company entered into a short-term renewable overdraft
agreement with Bank Rozwoju Eksportu S.A.. The terms provide for maximum
borrowings of PLN 30,000 (balance as of December 31, 1998 PLN 4,430) and
interest based on monthly WIBOR plus 0.5% p.a (17.88% as of December 31, 1998).
Additionally, in December 1998, the Company signed a one-year overdraft facility
with Citibank
F-19
<PAGE> 165
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
17. Current liabilities (continued)
(Poland) S.A. The terms provide for amount limit of PLN countervalue of DEM 15
million (balance as of December 31, 1998 PLN 20,128) and interest based on
monthly WIBOR plus 0.5%, as per above.
The Company's construction payables are being financed by both, excess of
operating cash over investing activities and by long-term loan facility. The PLN
225,176 of these payables are intended to be financed by operating cash flow in
1999.
18. LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Long-term Notes............................. 614,993 556,064 --
Construction payables....................... 278,247 590,760 95,462
Loan facility............................... 596,830 -- --
GSM license liability....................... 331,124 351,168 328,599
Finance leases payable...................... 69,024 752 7,875
--------- --------- -------
1,890,218 1,498,744 431,936
========= ========= =======
</TABLE>
On July 1, 1997, PTC International Finance B.V., a wholly-owned subsidiary
of the Company, issued 10 3/4% Senior Subordinated Guaranteed Discount Notes
("Notes"). The Notes are unsecured, subordinated obligations of PTC
International Finance B.V., are limited to an aggregate principal amount at
maturity of approximately USD 253 million and are issued at a discount to their
principal amount at maturity to generate gross proceeds of approximately USD 150
million. The Notes will mature on July 1, 2007. Cash interest does not accrue on
the Notes prior to July 1, 2002. The obligations of PTC International Finance
B.V. under the Notes are fully and unconditionally guaranteed by the Company on
a senior subordinated and unsecured basis pursuant to the Company Guarantee. The
net proceeds from the Notes are loaned to the Company.
The Notes are traded publicly in the United States and their market value
as of December 31, 1998 was 69% of the nominal value (USD 175 million).
Construction payables are liabilities to GSM construction vendors. The
Company began financing these liabilities in 1998 through its loan facility
agreement, discussed below and through operating cash flow. The above balance is
intended to be financed through the long-term loan facility
The fee for the Company's GSM license is denominated in EUR and payable in
installments. These deferred payments have been discounted at 6.78%, which
approximated the market rate for EUR as of the date of acquisition of the
license. The balances payable as of December 31, 1998 are presented below:
<TABLE>
<CAPTION>
EUR'000 EUR'000 PLN'000
MATURITY NOMINAL DISCOUNTED DISCOUNTED
- -------- ------- ---------- ----------
<S> <C> <C> <C>
Due in one year (see Note 17)............................. 15,730 15,496 63,419
Due in year two........................................... 34,320 31,851 130,351
Due in year three......................................... 56,100 49,059 200,773
------- ------ -------
106,150 96,406 394,543
======= ====== =======
</TABLE>
F-20
<PAGE> 166
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
18. LONG-TERM LIABILITIES (CONTINUED)
The balances payable as of December 31, 1997 were:
<TABLE>
<CAPTION>
EUR'000 EUR'000 PLN'000
MATURITY NOMINAL DISCOUNTED DISCOUNTED
- -------- ------- ---------- ----------
<S> <C> <C> <C>
Due in one year (see Note 17)............................. 8,107 7,983 31,021
Due in two to five years.................................. 106,150 90,367 351,168
------- ------ -------
114,257 98,350 382,189
======= ====== =======
</TABLE>
The balances payable as of December 31, 1996 were:
<TABLE>
<CAPTION>
EUR'000 EUR'000 PLN'000
MATURITY NOMINAL DISCOUNTED DISCOUNTED
- -------- ------- ---------- ----------
<S> <C> <C> <C>
Due in one year (see Note 17)............................. 1,980 1,964 7,016
Due in year two........................................... 8,107 7,486 26,737
Due in year three......................................... 15,730 13,628 48,674
Due in year four.......................................... 34,320 27,901 99,652
Due in year five.......................................... 56,100 42,988 153,536
------- ------ -------
116,237.. 93,967 335,615
======= ====== =======
</TABLE>
On December 17, 1997 the Company signed a loan facility agreement with a
consortium of banks organized by Citibank N.A. Subsequently, in 1998 the Company
made drawings of PLN 597 million, which consisted of DM 20 million and PLN 555
million borrowings. The main terms of the agreement are as follows:
Facility limit equivalent of DM 672 million
Interest LIBOR or WIBOR
plus margin of 0.95% p.a. stepping down to 0.40%
p.a.
Commitment fee 0.4%
Collateral pledge of Company's assets, rights and shares
Repayment date (last
installment) December 17, 2005
19. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Special funds............................... 778 373 66
Other provisions............................ 1,333 903 555
----- ----- -----
2,111 1,276 621
===== ===== =====
</TABLE>
20. SHARE CAPITAL
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Allotted, called-up and fully paid:
471,000 ordinary shares of 1,000 PLN
each................................... 471,000 471,000 471,000
======= ======= =======
</TABLE>
F-21
<PAGE> 167
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
21. RELATED PARTY TRANSACTIONS
ELEKTRIM S.A.
Elektrim S.A. is a 34.1% shareholder of the Company. The Company purchased
services from Elektrim S.A. amounting to PLN 11,665 during the twelve months
ended December 31, 1998, PLN 7,934 during the twelve months ended December 31,
1997 and PLN 10,045 during fiscal year ended December 31, 1996 and realized
sales of PLN 259 during the twelve months ended December 31, 1998, PLN 235
during the twelve months ended December 31, 1997 and PLN 75 during fiscal year
ended December 31, 1996. Net payables outstanding were PLN 915 at December 31,
1998, PLN 2,807 at December 31, 1997 and PLN 3,928 at December 31, 1996.
MEDIAONE INTERNATIONAL B.V. (MEDIAONE)
MediaOne International B.V. is a 22.5% shareholder of the Company. The
Company purchased services from MediaOne amounting to PLN 14,382 during the
twelve months ended December 31, 1998, PLN 18,762 in 1997 and PLN 10,232 during
fiscal year ended December 31, 1996. Net payables outstanding were PLN 3,423 at
December 31, 1998, PLN 2,686 at December 31, 1997 and PLN 10,232 at December 31,
1996.
DEUTSCHE TELEKOM MOBILNET GMBH (DETEMOBIL)
DeTeMobil is a 22.5% shareholder of the Company. The Company purchased
services from DeTeMobil amounting to PLN 31,263 during the twelve months ended
December 31, 1998, PLN 49,989 in 1997 and PLN 28,508 during fiscal year ended
December 31, 1996 and realized sales of PLN 14,923 during the twelve months
ended December 31, 1998, PLN 7,765 in 1997 and PLN 1,113 in fiscal year ended
December 31, 1996. Net payables outstanding were PLN 4,269 at December 31, 1998,
PLN 5,758 at December 31, 1997 and PLN 14,250 at December 31, 1996.
BANK ROZWOJU EKSPORTU S.A. ("BRE S.A.")
BRE S.A. is a 3.0% shareholder of the Company. During 1998 the Company
maintained some bank accounts and used the overdraft facility with BRE S.A. The
above described related party transactions were carried primarily at market
prices.
F-22
<PAGE> 168
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
22. FINANCIAL COMMITMENTS
A. FINANCE LEASES (INCLUDED IN LIABILITIES)
On March 25, 1997 the Company entered into a finance lease agreement
relating to its new headquarters building and underlying land. The term of
the lease is 15 years and the Company has a right to acquire the leased
asset at the end of the lease. The Company relocated to its new
headquarters building in second half of 1998. The minimum lease payments
under capital leases are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
------------------------------------ AT DECEMBER 31, AT DECEMBER 31,
FUTURE VALUE INTEREST DISCOUNTED 1997 1996
------------ -------- ---------- --------------- ---------------
PLN PLN PLN
<S> <C> <C> <C> <C> <C>
Due in one year............ 10,600 622 9,978 85 2,821
year two................. 10,600 1,686 8,914 184 2,756
year three............... 10,600 2,639 7,961 241 3,284
year four................ 10,600 3,487 7,113 327 1,835
year five................ 10,600 4,247 6,353 -- --
after year five.......... 119,756 81,073 38,683 -- --
------- ------ ------ --- ------
172,756 93,754 79,002 837 10,696
======= ====== ====== === ======
</TABLE>
The headquarters lease obligation is denominated in USD and payable in PLN.
Its future amount, USD 49,303 thousand, consists of minimum monthly
payments of USD 252 thousand and purchase option of USD 5,689 thousand.
In the three month period ended March 31, 1998 the Company repaid all
remaining liabilities relating to finance leases in existence at December
31, 1997.
B. OPERATING LEASES (NOT INCLUDED IN LIABILITIES)
The minimum annual rentals payable on operating leases are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Operating leases maturity
Due in one year.......................... 1,547 8,411 4,591
Due in two years......................... 1,148 4,826 1,296
Due in three years....................... 5,445 2,796 369
Due in four years........................ 6,450 8,683 2,989
Due in five years........................ 4,578 1,566 2,535
Due after five years..................... 26,952 4,562 4,546
------ ------ ------
46,120 30,844 16,326
====== ====== ======
</TABLE>
Assets under operating leases include primarily network sites, office
space, retail outlets and warehouse.
F-23
<PAGE> 169
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
22. FINANCIAL COMMITMENTS (CONTINUED)
C. CAPITAL EQUIPMENT COMMITMENTS (NOT INCLUDED IN LIABILITIES)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Authorized and contracted.................. 167,396 -- 229,301
Authorized and not contracted.............. 1,138,000 296,390 --
--------- ------- -------
1,305,396 296,390 229,301
========= ======= =======
</TABLE>
These capital equipment commitments are denominated in Deutschemarks and
amount to approximately DM 624 million at December 31, 1998, DM 151 million
at December 31, 1997 and DM 124 million at December 31, 1996.
23. DIVIDEND RESTRICTION
The Company's statutory financial statements are prepared in accordance
with Polish accounting regulations. Dividends may only be distributed from the
net profit reported in the Polish annual statutory financial statements.
24. SUPPLEMENTARY CASH FLOW INFORMATION
Cash and cash equivalents consists of cash on hand, balances deposited with
banks and short-term, highly liquid investments.
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Balances deposited with banks:
Current accounts.......................... 2,958 3,715 500
Term deposits with original maturity of
less then 90 days...................... 2,540 187,547 2,000
Treasury Bills with original maturity of
less then 90 days...................... -- 36,791 --
Social fund cash.......................... 59 39 21
Cash on hand.............................. 138 64 23
----- ------- -------
5,695 228,156 2,544
===== ======= =======
</TABLE>
At December 31, 1998 the Company revalued cash on hand and balances
deposited with banks denominated in foreign currencies. The net result of the
revaluation was PLN 6 of foreign exchange gains.
NON-CASH TRANSACTIONS
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Assets acquired under capital lease..... 80,497 -- 11,517
License acquisition..................... -- -- 284,907
</TABLE>
F-24
<PAGE> 170
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
25. SUPPLEMENTARY INFORMATION TO IAS FINANCIAL STATEMENTS
A reconciliation of the Company's consolidated net profit (loss) under
Polish statutory accounting regulations and International Accounting Standards
is summarized as follow:
<TABLE>
<CAPTION>
NET PROFIT FOR NET LOSS FOR NET LOSS FOR
FISCAL YEAR SHAREHOLDERS' FISCAL YEAR SHAREHOLDERS' FISCAL YEAR SHAREHOLDERS'
ENDED EQUITY AT ENDED EQUITY AT ENDED EQUITY AT
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1998 1997 1997 1996 1996
-------------- ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Polish accounting regulations..... 26,913 289,758 (132,354) 262,845 (75,808) 395,192
Foreign translation difference.... 63 56 -- -- -- --
IAS adjustment for GSM license
amortization.................... 4,520 11,059 5,076 6,539 1,463 1,463
IAS adjustment for GSM license
discount........................ (24,151) (30,582) (6,431) (6,431) -- --
Unrealized foreign exchange
differences..................... 8,610 10,286 1,676 1,676 -- --
Finance lease..................... 2,104 2,104 -- -- -- --
IAS assets adjustment............. 11,732 11,732 -- -- -- --
Deferred tax benefit/(charge)..... (28,322) 2,426 7,111 30,748 23,637 23,637
------- ------- -------- ------- ------- -------
International Accounting
Standards....................... 1,469 296,839 (124,922) 295,377 (50,708) 420,292
======= ======= ======== ======= ======= =======
</TABLE>
The above differences are caused by the following reasons:
- Recognition of the long-term license liability at present value for IAS
purposes, while it was recorded at undiscounted nominal value under
Polish accounting regulations. This accounting results in higher
interest expense under IAS, which is partially offset by a lower
amortization expense and foreign exchange losses.
- Recognition of foreign exchange gains as financial income for IAS
purposes, deferred for PAS purposes.
- Difference in treatment of assets held under finance lease and other
capital assets written off for PAS purposes.
- Implementation of IAS 12 (revised) with retrospective effect concerning
deferred taxes.
26. DIFFERENCES BETWEEN IAS AND U.S. GAAP
The Company's consolidated financial statements are prepared in accordance
with International Accounting Standards, which differ in certain respects from
U.S. GAAP.
The effect of the principal differences between IAS and U.S. GAAP in
relation to the Company's consolidated financial statements are presented below,
with explanations of certain adjustments that affect total consolidated net
result for the periods from January 1, 1998 to December 31, 1998, from January
1, 1997 to December 31, 1997 and December 27, 1995 to December 31, 1996 and
consolidated net assets as of December 31, 1998, December 31, 1997 and December
31, 1996:
F-25
<PAGE> 171
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
26. DIFFERENCES BETWEEN IAS AND U.S. GAAP (CONTINUED)
RECONCILIATION OF CONSOLIDATED NET PROFIT/(LOSS):
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Consolidated net profit/(loss) reported
under IAS............................. 1,469 (124,922) (50,708)
U.S. GAAP adjustments:
(a) Removal of foreign exchange
differences capitalized for IAS.... (22,765) (30,697) (31,554)
(b) Depreciation and amortization of
foreign exchange................... 3,931 2,949 505
(c) Consulting fees capitalized........ 2,738 (2,738) --
(d) Inventory discounts policy......... (3,548) 3,548 --
------- -------- -------
Consolidated net loss under U.S. GAAP... (18,175) (151,860) (81,757)
======= ======== =======
</TABLE>
RECONCILIATION OF CONSOLIDATED NET ASSETS:
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Consolidated net assets reported under
IAS................................... 296,839 295,377 420,292
U.S. GAAP adjustments:
(a) Removal of foreign exchange
differences capitalized for IAS.... (85,016) (62,251) (31,554)
(b) Depreciation and amortization on
above.............................. 7,385 3,454 505
(c) Consulting fees and development
costs capitalized -- net........... -- (2,738) --
(d) Inventory discounts policy......... -- 3,548 --
------- ------- -------
Consolidated net assets under U.S.
GAAP.................................. 219,208 237,390 389,243
======= ======= =======
</TABLE>
(A) REMOVAL OF FOREIGN EXCHANGE DIFFERENCES CAPITALIZED FOR IAS
In accordance with IAS 23, "Borrowing Costs", the Company capitalizes
financing costs, including interest and foreign exchange gains or losses,
into assets under construction.
For tangible fixed assets under construction, the Company capitalizes
interest and foreign exchange gains or losses incurred and directly
attributable to the acquisition and construction of the qualifying assets
that would have been avoided if the expenditure on the qualifying assets
had not been made. The financing costs are capitalized only during the
period of construction of the qualifying assets (see Note 14). As explained
in Note 4.b., the Company capitalized financing costs attributable to the
acquisition of its GSM license, including imputed interest on the related
long-term obligation and foreign exchange losses because the GSM license is
an integral part of the network.
Under Statement of Financial Accounting Standards 52 "Foreign Currency
Translation", however, foreign exchange losses relating to financing
obligations should be included in the statement of operations of the
Company. Consequently, the amounts of foreign exchange differences
capitalized in accordance with IAS 23 in the Company's financial statements
are expensed under U.S. GAAP.
F-26
<PAGE> 172
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
26. DIFFERENCES BETWEEN IAS AND U.S. GAAP (CONTINUED)
(B) DEPRECIATION AND AMORTIZATION
The U.S. GAAP adjustments for depreciation and amortization shown above
represent the amounts of depreciation and amortization charges relating to
capitalized foreign exchanges differences in the Company's IAS financial
statements. Since under U.S. GAAP these foreign exchange differences are
not permitted to be capitalized and are instead expensed, the depreciation
and amortization of these capitalized differences under IAS has been
reversed.
(C) CONSULTING FEES CAPITALIZED
The Company capitalized in 1996 certain consulting fees amounting to PLN
7,258 and relating to structuring its business processes, incurred on a
start-up phase. Following clarifications of the Emerging Issues Task Force
in the United States, the Company has expensed for U.S. GAAP purposes in
1997 the net book value of the above consulting fees previously
capitalized. By December 31, 1998 the entire balance has been un-amortized
for IAS purposes.
(D) INVENTORY DISCOUNTS POLICY
See explanation in Note 5a.
F-27
<PAGE> 173
POLSKA TELEFONIA CYFROWA SP. Z O.O.
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH AND NINE MONTH
PERIODS ENDED
SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
F-28
<PAGE> 174
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(IN THOUSANDS OF PLN)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
NOTES 1999 1998 1999 1998
----- ------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES........................ 5 710,351 421,598 1,813,893 1,107,554
COST OF SALES.................... 6 (408,875) (240,505) (1,170,839) (680,048)
-------- -------- ---------- --------
GROSS MARGIN..................... 301,476 181,093 643,054 427,506
OPERATING EXPENSES............... 6 (180,932) (105,465) (443,048) (275,577)
-------- -------- ---------- --------
OPERATING PROFIT................. 120,544 75,628 200,006 151,929
NON-OPERATING ITEMS
Interest and other financial
income...................... 7 5,081 2,962 11,552 18,142
Interest and other financial
expenses.................... 8 (181,583) (119,229) (372,038) (161,461)
-------- -------- ---------- --------
(LOSS)/INCOME BEFORE TAXATION.... (55,958) (40,639) (160,480) 8,610
TAXATION CHARGE.................. 9 (9,476) (4,753) (35,331) (36,425)
-------- -------- ---------- --------
COMPREHENSIVE NET LOSS........... (65,434) (45,392) (195,811) (27,815)
======== ======== ========== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-29
<PAGE> 175
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS OF PLN)
<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, DECEMBER 31,
NOTES 1999 1998
----- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................ 21 111,948 5,695
Debtors and prepayments.................................. 10 388,683 253,585
Accounts receivable from State Treasury.................. 10 46,033 85,064
Inventory................................................ 11 109,386 75,946
--------- ---------
656,050 420,290
LONG-TERM ASSETS
Tangible fixed assets, net............................... 12 2,418,595 1,671,182
Intangible fixed assets, net............................. 13 986,795 638,872
Deferred cost............................................ 14 30,448 30,759
--------- ---------
3,435,838 2,340,813
--------- ---------
TOTAL ASSETS............................................... 4,091,888 2,761,103
========= =========
CURRENT LIABILITIES........................................ 15 1,239,521 571,763
LONG-TERM LIABILITIES...................................... 16 2,715,334 1,890,218
DEFERRED TAX LIABILITY, NET................................ 9 34,397 172
PROVISIONS FOR LIABILITIES AND CHARGES..................... 17 1,608 2,111
--------- ---------
TOTAL LIABILITIES.......................................... 3,990,860 2,464,264
--------- ---------
SHAREHOLDERS' EQUITY
Share capital............................................ 18 471,000 471,000
Accumulated deficit...................................... (369,972) (174,161)
--------- ---------
101,028 296,839
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................. 4,091,888 2,761,103
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-30
<PAGE> 176
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(IN THOUSANDS OF PLN)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------
(UNAUDITED) (UNAUDITED)
(SEE NOTE 21)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET (LOSS)/INCOME BEFORE TAXATION........................ (160,480) 8,610
ADJUSTMENTS FOR:
Depreciation and amortization............................ 183,200 106,020
Charge to provision for doubtful debtors................. 105,926 57,817
Charge to provision for inventory........................ 3,274 --
Other provisions and special funds....................... (503) 544
Unrealized foreign exchange losses (gains), net.......... 189,352 67,238
Loss (Gain) on sales of tangibles and intangibles........ 407 (55)
Interest expense, net.................................... 159,113 76,362
Other.................................................... 3 (528)
---------- --------
OPERATING CASH FLOWS BEFORE WORKING CAPITAL CHANGES...... 480,292 316,008
(Increase)/decrease in inventory......................... (36,714) 4,855
Increase in debtors, prepayments and deferred cost....... (199,881) (159,547)
Increase in trade payables and accruals.................. 304,063 110,266
---------- --------
CASH FROM OPERATIONS..................................... 547,760 271,582
Interest paid............................................ (116,437) (26,798)
Income taxes paid........................................ (25,549) (62,323)
---------- --------
NET CASH GENERATED FROM OPERATING ACTIVITIES............. 405,774 182,461
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of intangible fixed assets..................... (263,256) (40,954)
Purchases of tangible fixed assets....................... (779,579) (730,193)
Purchases of short-term investments, net................. -- 5,084
Proceeds from sale of equipment and intangibles.......... 111 829
Interest received........................................ 440 8,484
---------- --------
NET CASH USED IN INVESTING ACTIVITIES.................... (1,042,284) (756,750)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings....................... 470,384 338,193
Proceeds from shareholder's loan......................... 296,756 --
Net change in overdraft facility......................... (24,558) 15,306
---------- --------
NET CASH GENERATED FROM FINANCING ACTIVITIES............. 742,582 353,499
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS..... 106,072 (220,790)
EFFECT OF FOREIGN EXCHANGE CHANGES ON CASH AND CASH
EQUIVALENTS............................................ 181 18
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......... 5,695 228,156
---------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............... 111,948 7,384
========== ========
NON CASH TRANSACTIONS
Assets acquired under capital lease and license fee
due.................................................... 305,856 80,497
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-31
<PAGE> 177
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY
FOR THE PERIODS FROM JANUARY 1, 1999 TO SEPTEMBER 30, 1999
AND FROM JANUARY 1, 1998 TO SEPTEMBER 30, 1998
(IN THOUSANDS OF PLN)
<TABLE>
<CAPTION>
CURRENCY
SHARE ACCUMULATED TRANSLATION
CAPITAL DEFICIT ADJUSTMENT TOTAL
------- ----------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1998........................ 471,000 (175,630) 7 295,377
Currency translation adjustment................... -- -- (7) (7)
Net loss for the period........................... -- (27,815) -- (27,815)
------- --------- -------- --------
BALANCE AT SEPTEMBER 30, 1998 (UNAUDITED)......... 471,000 (203,445) -- 267,555
======= ========= ======== ========
BALANCE AT JANUARY 1, 1999........................ 471,000 (174,161) -- 296,839
Net loss for the period........................... -- (195,811) -- (195,811)
------- --------- -------- --------
BALANCE AT SEPTEMBER 30, 1999 (UNAUDITED)......... 471,000 (369,972) -- 101,028
======= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-32
<PAGE> 178
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF PLN)
1. INCORPORATION AND PRINCIPAL ACTIVITIES
Polska Telefonia Cyfrowa Sp. z o.o. (the "Company") was incorporated under
Polish Law as a limited liability company based on a Notarial Act dated
December 20, 1995. The Company was registered in the Regional Court in
Warsaw, XVI Commercial Department on December 27, 1995.
The principal activities of the Company are providing cellular telephone
communication services in accordance with the GSM 900 and 1800 licenses
granted by the Minister of Telecommunications and the sale of cellular
telephones and accessories compatible with its cellular services.
During 1996 the Company signed an interim interconnect agreement with
Telekomunikacja Polska S.A. ("TPSA") on a "bill and keep" basis. On May 22,
1997 the Ministry of Communications issued a decision with respect to new
interconnect arrangements between the Company and TPSA. The decision was
binding for both parties, however, certain terms, including the effective
date, were still to be agreed. The decision defined interconnect,
international and leased-lines settlements with TPSA.
In the course of 1997, TPSA filed in the Supreme Administrative Court an
appeal against the above mentioned decision. In the appeal, it challenges
the entitlement of the Minister to issue the above decision on the basis
that the established interconnect rates are not fair.
On December 9, 1998, the Company signed a framework agreement with TPSA
defining the terms of mutual interconnect arrangements. Notwithstanding the
interconnect frame agreement, TPSA appeal to the Supreme Administrative
Court has not been withdrawn.
2. PRINCIPLES OF CONSOLIDATION
A. GROUP ENTITIES
All intercompany balances and transactions are eliminated in consolidation.
The consolidated financial statements include the financial statements of
Polska Telefonia Cyfrowa Sp. z o.o. and its wholly-owned subsidiary, PTC
International Finance B.V.
On June 17, 1997, PTC International Finance B.V. was incorporated under the
laws of the Netherlands for the purpose of issuing long-term Notes (see
Note 16). The Company has acquired 40 fully-paid shares with a par value of
1,000 Netherlands Guilders each, issued by PTC International Finance B.V.
PTC International Finance B.V. has no subsidiaries of its own.
B. REPORTING CURRENCY
The Company primarily generates and expends cash through its operating
activities in Polish zffioty ("PLN"). Additionally, all of the receivables
and the large part of its short-term liabilities are PLN denominated.
Therefore, Management has designated the PLN as the functional currency of
the Company.
The accompanying consolidated financial statements are reported in
thousands of PLN.
3. ACCOUNTING STANDARDS IN POLAND
The Company maintains its books of account in accordance with accounting
principles and practices employed by enterprises in Poland as required by
Polish accounting regulations. The accompanying financial statements
reflect certain adjustments not reflected in the Company's books to present
these statements in accordance with standards issued by the International
Accounting Standards Committee. These adjustments and their effect on
earnings for the three month and nine month periods ended September 30,
1999 and September 30, 1998 are shown in Note 23 to these Financial
Statements.
F-33
<PAGE> 179
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
3. ACCOUNTING STANDARDS IN POLAND (CONTINUED)
The differences between International Accounting Standards ("IAS") and
generally accepted accounting principles in the United States ("U.S. GAAP")
and their effect on net results for the three months and nine months
periods ended September 30, 1999 and September 30, 1998 have been presented
in Note 24 to these Financial Statements.
In Management's opinion, the financial statements for the nine months ended
September 30, 1999 and 1998 include all adjustments necessary for a fair
statement of the results for the period. All such adjustments are of
normal, recurring nature.
4. PRINCIPAL ACCOUNTING POLICIES
A. TANGIBLE FIXED ASSETS
Tangible fixed assets are shown at historical cost less accumulated
depreciation.
Depreciation is calculated using the straight-line method over the
estimated useful life of the asset. The following depreciation rates have
been applied:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES IN YEARS
---------------------
<S> <C>
Leasehold improvements...................................... Lease term
Buildings................................................... 40
Plant and equipment......................................... 3.3 - 25
Motor vehicles.............................................. 3.3 - 8
Other....................................................... 5 - 8
</TABLE>
B. INTANGIBLE FIXED ASSETS
LICENSE
The Company has acquired from the Polish State, represented by the Ministry
of Communications, a license to provide telecommunication services
according to ETSI/GSM standard, including a permit to install and use
network equipment and to use its allocation of ETSI/GSM frequencies ("the
GSM 900 license"). The GSM 900 license was acquired on February 23, 1996
and has been valued at the present value of the payments due to the State.
For the period of development of the GSM 900 system, the cost of interest
and foreign exchange losses were capitalized in the cost of the asset. This
development period terminated during the third quarter of 1997.
The GSM 900 license is un-amortized over the period of its validity, i.e.,
15 years on a straight-line basis.
On August 26, 1999 the Ministry of Communications granted the Company a GSM
1800 license to operate 48 channels on the 1800 MHz band for 15 years
commencing March 1, 2000 ("the GSM 1800 license"). The GSM 1800 license has
been valued at the present value of the payments due plus the cost of
interest and foreign exchange losses capitalized during the development
period.
OTHER INTANGIBLE FIXED ASSETS
Other intangible assets are stated at cost less accumulated amortization.
Amortization is calculated using the straight-line method over the
estimated useful life of the asset. The following amortization rates have
been applied:
F-34
<PAGE> 180
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
4. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
<TABLE>
<CAPTION>
ANNUAL RATE
IN %
------------
<S> <C>
Technical drawings and plans................................ 20.0%
Computer software........................................... 10.0 - 50.0%
Trademarks.................................................. 6.7%
Other intangible assets..................................... 25.0 - 50.0%
</TABLE>
C. DEBTORS
Amounts due from debtors are shown net of provisions for doubtful accounts.
The provisions are based on specific amounts due where realization is
unlikely and on a general basis, calculated using historic collection
experience.
D. INVENTORIES
Inventories are stated at the lower of cost and net realizable value. Cost
is determined principally under the average method. Provisions are set for
obsolete, slow moving and damaged inventory and are deducted from the
related inventory balances.
E. SPECIAL FUNDS
Special funds consist primarily of the social fund. The social fund is an
employer's obligation based on a government mandated calculation based on
number of employees and the monthly minimum wage in Poland. The amounts
calculated under this formula must be used for the benefits of the
employees.
F. FOREIGN CURRENCY
Transactions denominated in foreign currencies are recorded in the local
currency (the Polish Zloty) at actual exchange rates prevailing at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are reported at the rates of exchange prevailing at the end of
the period. Any gain or loss arising from a change in exchange rates
subsequent to the date of the transaction is recorded in the statement of
operations as a foreign exchange gain or loss, included in non-operating
items in the statement of operations.
G. VACATION PAY
Vacation pay is accrued when earned by employees.
H. TAXATION
The income tax charge is based on profit for the period and takes into
account deferred taxation. Deferred taxation is calculated using the
liability method. Under the liability method the expected tax effects of
temporary differences are determined using enacted tax rates and reported
either as liabilities for taxes payable or assets representing advance
payment of future taxes. Temporary differences are the differences between
the carrying amount of an asset or liability in the balance sheet and its
taxable base.
Deferred tax assets are recognized for all deductible temporary differences
to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences can be utilised.
F-35
<PAGE> 181
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
4. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
I. NET SALES
Net sales consists of the value of sales (excluding value-added tax) of
goods and services in the normal course of business but excludes
extraordinary disposals of inventory and other assets.
Revenue is recognized when services are provided or goods are shipped out.
Sales allowances are accounted in the same period when the related portion
of revenue is recognized.
J. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments approximates the
reported carrying amounts, except for long-term Notes, as disclosed in Note
16.
K. USE OF ESTIMATES
Preparation of financial statements requires Management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
5. NET SALES
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Service revenues and fees................... 653,242 379,650 1,647,637 980,143
Sales of telephones and accessories......... 57,109 41,948 166,256 127,411
------- ------- --------- ---------
710,351 421,598 1,813,893 1,107,554
======= ======= ========= =========
</TABLE>
The Company operates in one segment (providing cellular telecommunication
services and the ancillary sale of cellular telephones and accessories) and
in one market (the Republic of Poland).
6. COSTS AND EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cost of sales:
Cost of services sold....................... 248,734 158,622 642,345 425,867
Cost of sales of telephones and
accessories............................... 160,141 81,883 528,494 254,181
------- ------- --------- -------
408,875 240,505 1,170,839 680,048
Operating expenses:
Selling and distribution costs.............. 136,741 75,700 330,013 193,626
Administration and other operating cost..... 44,191 29,765 113,035 81,951
------- ------- --------- -------
180,932 105,465 443,048 275,577
------- ------- --------- -------
588,807 345,970 1,613,887 955,625
======= ======= ========= =======
</TABLE>
F-36
<PAGE> 182
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
6. COSTS AND EXPENSES (CONTINUED)
The following costs and expenses were included in cost of sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Merchandise sold............................ 159,290 81,883 525,220 254,181
Depreciation and amortization............... 58,450 35,354 162,640 90,819
Other external services..................... 50,180 30,472 119,535 87,658
Commissions................................. 46,627 22,693 114,943 75,355
Interconnect................................ 34,972 20,131 89,529 51,157
Leased lines................................ 19,921 24,420 67,736 62,630
Roaming..................................... 27,773 15,352 57,561 31,225
Wages and salaries.......................... 6,227 3,043 18,360 9,211
Materials and energy........................ 3,410 3,223 6,916 5,425
Social security and other benefits.......... 1,833 2,582 5,249 8,006
Taxes and other charges..................... 1,399 1,632 3,870 4,381
Charge to inventory provision............... 851 -- 3,274 --
Other....................................... (2,058) (280) (3,994) --
------- ------- --------- -------
408,875 240,505 1,170,839 680,048
======= ======= ========= =======
</TABLE>
The following costs and expenses were included in selling and distribution
costs:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Advertising costs........................... 48,490 25,545 121,633 70,626
Charge to doubtful debtors provision........ 46,386 24,455 105,926 57,817
Wages and salaries.......................... 19,377 7,888 48,541 21,209
External services........................... 10,098 8,107 21,444 20,266
Social security and other benefits.......... 4,318 4,503 11,990 11,588
Depreciation and amortization............... 2,743 1,871 7,773 5,066
Materials and energy........................ 2,083 1,711 5,626 3,652
Taxes and other charges..................... 2,430 950 5,587 1,916
Other....................................... 816 670 1,493 1,486
------- ------- ------- -------
136,741 75,700 330,013 193,626
======= ======= ======= =======
</TABLE>
F-37
<PAGE> 183
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
6. COSTS AND EXPENSES (CONTINUED)
The following costs and expenses were included in administration costs:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
External services........................... 18,752 14,157 51,423 39,631
Wages and salaries.......................... 10,040 4,844 27,214 14,198
Depreciation and amortization............... 5,146 4,410 12,787 10,135
Social security and other benefits.......... 2,669 2,771 6,757 7,697
Materials and energy........................ 1,631 1,619 3,647 4,163
Taxes and other charges..................... 982 494 3,862 4,102
Other....................................... 4,971 1,470 7,345 2,025
------ ------ ------- ------
44,191 29,765 113,035 81,951
====== ====== ======= ======
</TABLE>
7. INTEREST AND OTHER FINANCIAL INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Foreign exchange gains...................... 2,322 1,786 8,353 9,063
Interest income............................. 2,759 976 3,199 8,250
Other financial income...................... -- 200 -- 829
----- ----- ------ ------
5,081 2,962 11,552 18,142
===== ===== ====== ======
</TABLE>
8. INTEREST AND OTHER FINANCIAL EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest expense............................ 58,924 30,922 162,312 84,612
Foreign exchange losses..................... 122,659 88,123 209,726 76,075
Other financial expense..................... -- 184 -- 774
------- ------- ------- -------
181,583 119,229 372,038 161,461
======= ======= ======= =======
</TABLE>
F-38
<PAGE> 184
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
9. TAXATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Polish current tax benefit/(charge)......... 16,788 (30,276) (571) (67,808)
Polish deferred tax benefit/(charge)........ (8,494) 36,831 11,690 47,245
Foreign current tax charge.................. (206) (113) (535) (278)
Change in valuation allowance............... (17,564) (11,195) (45,915) (15,584)
------- ------- ------- -------
Tax charge.................................. (9,476) (4,753) (35,331) (36,425)
======= ======= ======= =======
</TABLE>
Tax losses for the period from December 27, 1995 to December 31, 1996 can
be offset with future taxable income in three equal installments during the
three years following the loss. The unused portion of a tax loss
installment expires. The 1996 tax losses were being utilized as follows:
PLN 58,006 in 1997, PLN 122,550 in 1998 and the remaining PLN 122,550 is
available to be utilized in 1999.
According to the Polish tax regulations, the tax rates in effect in 1999,
1998 and 1997 were 34%, 36% and 38%, respectively. The tax rate in 2000 is
set to be 32%.
Reconciliation of the profit/(loss) before taxation to taxable income is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Profit/(loss) before taxation............... (55,958) (40,639) (160,480) 8,610
Tax rate.................................... 34% 36% 34% 36%
------- ------- -------- -------
Tax benefit/(charge) using statutory rate... 19,026 14,630 54,563 (3,100)
Permanent differences..................... (11,504) (8,061) (41,517) (13,141)
Polish losses for which no tax benefits
were provided.......................... (4,051) -- (4,051) --
Change in temporary differences for which
realization is not probable............ (17,564) (11,196) (48,351) (15,585)
Effect of different tax rate in foreign
entity................................. (38) (5) (101) (41)
Change in tax rates....................... 4,655 (121) 4,126 (372)
------- ------- -------- -------
Tax benefit/(charge)........................ (9,476) (4,753) (35,331) (36,425)
======= ======= ======== =======
</TABLE>
F-39
<PAGE> 185
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
9. TAXATION (CONTINUED)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Deferred tax assets in Poland:
Unrealized foreign exchange loss, net................... 59,877 13,562
Bad debt provision...................................... 47,116 44,375
Tax losses carry forward................................ 41,667 41,667
Accrued expenses........................................ 25,282 4,608
Book versus tax basis of fixed assets................... 22,366 14,499
Accrued interest........................................ 12,158 10,942
Accrued advertising..................................... 3,488 --
Inventory provision..................................... 2,398 1,285
-------- -------
214,352 130,938
Temporary differences for which realization is not
probable ("valuation allowance")........................ (113,073) (67,158)
-------- -------
101,279 63,780
Deferred tax liabilities in Poland:
Book versus tax basis of GSM licenses................... (125,530) (63,234)
Book versus tax basis of fixed assets................... (8,342) (718)
Accrued revenues........................................ (1,804) --
-------- -------
(135,676) (63,952)
-------- -------
Net deferred tax liability................................ (34,397) (172)
======== =======
</TABLE>
The increase in valuation allowance results primarily from the increase of
unrealized foreign exchange losses on Long-term Notes and bad debt
provision for which tax deductibility is yet uncertain.
10. DEBTORS AND PREPAYMENTS
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Trade debtors and accrued income.......................... 514,939 356,675
Corporate Income Tax and other taxes recoverable from
State Treasury.......................................... 46,033 85,064
Prepaid expenses.......................................... 23,340 9,480
Accounts receivable from shareholders..................... -- 3,332
Other debtors............................................. 2,478 1,925
-------- --------
586,790 456,476
Provision for doubtful debtors............................ (152,074) (117,827)
-------- --------
434,716 338,649
======== ========
</TABLE>
Substantially all of the Company's trade debtors are Polish businesses and
individuals. Further, the Company has established a network of dealers
within Poland to distribute its products. The dealers share many economic
characteristics and receivables from each of these dealers present similar
risk to the Company.
F-40
<PAGE> 186
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
11. INVENTORY
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Telephones................................................ 76,406 50,462
Accessories and other..................................... 40,034 29,264
------- ------
116,440 79,726
Inventory provision....................................... (7,054) (3,780)
------- ------
109,386 75,946
======= ======
</TABLE>
12. TANGIBLE FIXED ASSETS, NET
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Land and buildings........................................ 197,935 79,954
Plant and equipment....................................... 1,294,254 844,729
Motor vehicles............................................ 10,618 8,254
Other fixed assets........................................ 48,179 35,678
Construction in progress.................................. 867,609 702,567
--------- ---------
2,418,595 1,671,182
========= =========
</TABLE>
For tangible fixed assets under construction, the Company capitalizes
interest and foreign exchange gains/losses incurred and directly
attributable to the acquisition and construction of the qualifying assets.
The financing costs are capitalized only during the period of construction
of the qualifying assets. During the nine month period ended September 30,
1999, the Company capitalized PLN 37,474 of net foreign exchange losses and
2,040 of interest expense (PLN 50,502 foreign exchange losses and PLN 2,040
of interest expense during three months ended September 30, 1999). For the
corresponding period ending September 30, 1998, PLN 30,794 of foreign
exchange gains and PLN 4,074 of interest expense were capitalized (PLN
27,153 and PLN 1,369, respectively during three months ended September 30,
1998).
F-41
<PAGE> 187
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
12. TANGIBLE FIXED ASSETS, NET (CONTINUED)
The movement in each period was as follows:
<TABLE>
<CAPTION>
LAND AND PLANT AND MOTOR OTHER FIXED CONSTRUCTION
BUILDINGS EQUIPMENT VEHICLES ASSETS IN PROGRESS TOTAL
--------- --------- -------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
COST
At January 1, 1998............................. 77 231,643 10,901 17,324 528,660 788,605
Additions...................................... 80,691 11,377 4,453 2,847 914,276 1,013,644
Transfers...................................... -- 709,360 -- 31,469 (740,369) 460
Disposals...................................... -- (385) (439) (3,110) -- (3,934)
------- --------- ------ ------ -------- ---------
At December 31, 1998........................... 80,768 951,995 14,915 48,530 702,567 1,798,775
------- --------- ------ ------ -------- ---------
DEPRECIATION
At January 1, 1998............................. -- 19,622 3,013 5,185 -- 27,820
Charge......................................... 814 87,741 3,819 9,456 -- 101,830
Disposals...................................... -- (97) (171) (1,789) -- (2,057)
------- --------- ------ ------ -------- ---------
At December 31, 1998........................... 814 107,266 6,661 12,852 -- 127,593
------- --------- ------ ------ -------- ---------
NET BOOK VALUE AT DECEMBER 31, 1998............ 79,954 844,729 8,254 35,678 702,567 1,671,182
======= ========= ====== ====== ======== =========
COST
At January 1, 1999............................. 80,768 951,995 14,915 48,530 702,567 1,798,775
Additions...................................... 120,042 9,336 6,114 22,047 727,129 884,668
Transfers...................................... -- 561,681 -- -- (561,681) --
Disposals...................................... -- -- (395) (736) (406) (1,537)
------- --------- ------ ------ -------- ---------
At September 30, 1999.......................... 200,810 1,523,012 20,634 69,841 867,609 2,681,906
------- --------- ------ ------ -------- ---------
DEPRECIATION
At January 1, 1999............................. 814 107,266 6,661 12,852 -- 127,593
Charge......................................... 2,061 121,492 3,641 9,543 -- 136,737
Disposals...................................... -- -- (286) (733) -- (1,019)
------- --------- ------ ------ -------- ---------
At September 30, 1999.......................... 2,875 228.758 10,016 21,662 -- 263,311
------- --------- ------ ------ -------- ---------
NET BOOK VALUE AT SEPTEMBER 30, 1999
(UNAUDITED)................................... 197,935 1,294,254 10,618 48,179 867,609 2,418,595
======= ========= ====== ====== ======== =========
</TABLE>
Tangible fixed assets held under capital leases (included in above
schedule):
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ----------------
LAND BUILDING LAND BUILDING
----- -------- ----- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cost.................................................. 6,293 194,167 2,383 78,114
Accumulated depreciation.............................. -- (2,875) -- (814)
----- ------- ----- ------
Net................................................... 6,293 191,292 2,383 77,300
===== ======= ===== ======
</TABLE>
13. INTANGIBLE FIXED ASSETS, NET
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
GSM licenses.............................................. 950,824 593,066
Technical drawings and plans.............................. 5,916 8,087
Computer software......................................... 29,029 36,164
Trademark................................................. 164 174
Other..................................................... 862 1,381
------- -------
986,795 638,872
======= =======
</TABLE>
F-42
<PAGE> 188
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
13. INTANGIBLE FIXED ASSETS, NET (CONTINUED)
The movement in each period was as follows:
<TABLE>
<CAPTION>
TECHNICAL
GSM DRAWINGS COMPUTER TRADE
LICENSES AND PLANS SOFTWARE MARK OTHER TOTAL
--------- --------- -------- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
COST
At January 1, 1998............................. 700,564 13,877 20,631 206 10,192 745,470
Additions...................................... -- -- 26,534 -- -- 26,534
Transfers...................................... -- -- (474) -- -- (474)
--------- ------ ------ --- ------ ---------
At December 31, 1998........................... 700,564 13,877 46,691 206 10,192 771,530
--------- ------ ------ --- ------ ---------
AMORTIZATION
At January 1, 1998............................. 58,710 2,895 2,881 19 5,382 69,887
Charge......................................... 48,788 2,895 7,660 13 3,429 62,785
Transfers...................................... -- -- (14) -- -- (14)
--------- ------ ------ --- ------ ---------
At December 31, 1998........................... 107,498 5,790 10,527 32 8,811 132,658
--------- ------ ------ --- ------ ---------
NET BOOK VALUE AT DECEMBER 31, 1998............ 593,066 8,087 36,164 174 1,381 638,872
========= ====== ====== === ====== =========
COST
At January 1, 1999............................. 700,564 13,877 46,691 206 10,192 771,530
Additions...................................... 394,317 -- 69 -- -- 394,386
Transfers...................................... -- -- -- -- -- --
--------- ------ ------ --- ------ ---------
At September 30, 1999.......................... 1,094,881 13,877 46,760 206 10,192 1,165,916
--------- ------ ------ --- ------ ---------
AMORTIZATION
At January 1, 1999............................. 107,498 5,790 10,527 32 8,811 132,658
Charge......................................... 36,559 2,171 7,204 10 519 46,463
Transfers...................................... -- -- -- -- -- --
--------- ------ ------ --- ------ ---------
At September 30, 1999.......................... 144,057 7,961 17,731 42 9,330 179,121
--------- ------ ------ --- ------ ---------
NET BOOK VALUE AT SEPTEMBER 30, 1999
(UNAUDITED).................................... 950,824 5,916 29,029 164 862 986,795
========= ====== ====== === ====== =========
</TABLE>
During the three months and nine months ended September 30, 1999 the
Company capitalized PLN 2,901 of foreign exchange losses and PLN 1,494 of
interest expenses on intangible fixed assets. No financial cost/expenses
was capitalized during the three months and nine months ended September 30,
1998.
14. DEFERRED COSTS
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Notes issuance cost....................................... 14,456 15,941
Senior debt issuance cost................................. 13,101 14,818
Other..................................................... 2,891 --
------ ------
30,448 30,759
====== ======
</TABLE>
As explained in Note 16, the Company obtained long-term financing by
issuing Discount Notes, in July 1997, and through Citibank loan facility
("Senior debt"), signed in December 1997. These debt issuance costs have
been deferred and are un-amortized over the period of financing (10 and 8
years, respectively).
F-43
<PAGE> 189
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
15. CURRENT LIABILITIES
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Construction payables..................................... 507,784 225,176
Trade creditors........................................... 288,759 122,398
GSM licenses liabilities.................................. 214,241 63,419
Accruals.................................................. 111,058 66,385
Deferred income........................................... 58,526 32,602
Amounts due to State Treasury............................. 23,900 14,829
Overdraft facility........................................ -- 24,558
Finance leases payable.................................... 27,988 9,978
Accounts payable to shareholders.......................... 6,723 11,939
Payroll................................................... 542 479
--------- -------
1,239,521 571,763
========= =======
</TABLE>
In May 1998, the Company entered into a short-term renewable overdraft
agreement with Bank Rozwoju Eksportu S.A. The terms provided for maximum
borrowings of PLN 30,000 thousand (balance as of December 31, 1998 PLN
4,430) and interest based on monthly WIBOR plus 0.5% p.a. (17.88% as of
December 31, 1998). Additionally, in December 1998, the Company signed a
one-year overdraft facility with Citibank. The terms provided for maximum
borrowings of PLN equivalent of DEM 15,000 thousand and interest based on
average monthly WIBOR for the last month plus 0.5% p.a. (balance as of
December 31, 1998 PLN 20,128). No borrowings were outstanding as of
September 30, 1999.
16. LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Loan facility........................................... 1,087,155 596,830
Long-term Notes......................................... 781,332 614,993
Construction payables................................... -- 278,247
GSM and DCS license liability........................... 344,308 331,124
Finance leases payable.................................. 189,910 69,024
Shareholders loan....................................... 312,629 --
--------- ---------
2,715,334 1,890,218
========= =========
</TABLE>
On July 1, 1997, PTC International Finance B.V., a wholly-owned subsidiary
of the Company, issued 10 3/4% Senior Subordinated Guaranteed Discount
Notes ("Notes"). The Notes are unsecured, subordinated obligations of PTC
International Finance B.V., are limited to an aggregate principal amount at
maturity of approximately USD 253 million (PLN 1,041 million as of
September 30, 1999) and are issued at a discount to their principal amount
at maturity to generate gross proceeds of approximately USD 150 million
(PLN 493 million at historical exchange rate). The Notes will mature on
July 1, 2007. Cash interest does not accrue on the Notes prior to July 1,
2002. The obligations of PTC International Finance B.V. under the Notes are
fully and unconditionally guaranteed by the Company on a senior
subordinated and unsecured basis pursuant to the Company Guarantee. The net
proceeds from the Notes are loaned to the Company.
F-44
<PAGE> 190
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
16. LONG-TERM LIABILITIES (CONTINUED)
The Notes are traded publicly in the United States and their market value
as of September 30, 1999 was 69% of the nominal value (USD 175 million or
PLN 720 million as of September 30, 1999) whilst the carrying amount is PLN
781 million.
Construction payables are liabilities to GSM construction vendors. The
Company began financing these liabilities in 1998 through its loan facility
agreement, discussed below and through operating cash flow. The above
December 31, 1998 balance was to be financed through the long-term loan
facility and was hence classified as long-term. However, at September 30,
1999 the loan facility available was no longer sufficient to ensure that
these would be settled through the facility. Therefore, all construction
payables at September 30, 1999 were classified as short-term.
The fees for the Company's GSM 900 and 1800 licenses are denominated in EUR
and payable in installments. These deferred payments have been discounted
at 6.78% (GSM 900 license from 1996) and at 9.52% (GSM 1800 license from
1999), which approximated the market rate for EUR as of the date of
acquisition of the license. The unaudited balances payable as of September
30, 1999 are presented below:
<TABLE>
<CAPTION>
EUR'000 EUR'000 PLN'000
MATURITY NOMINAL DISCOUNTED DISCOUNTED
-------- ------- ---------- ----------
<S> <C> <C> <C>
Due in one year (see Note 15)............................ 51,035 48,716 214,241
Due in year two.......................................... 72,815 65,458 287,862
Due in year three........................................ 16,716 12,835 56,446
------- ------- -------
140,566 127,009 558,549
======= ======= =======
</TABLE>
The balances payable as of December 31, 1998 were:
<TABLE>
<CAPTION>
EUR'000 EUR'000 PLN'000
MATURITY NOMINAL DISCOUNTED DISCOUNTED
-------- ------- ---------- ----------
<S> <C> <C> <C>
Due in one year (see Note 15)............................ 15,730 15,496 63,419
Due in two to five years................................. 90,420 80,910 331,124
------- ------ -------
106,150 96,406 394,543
======= ====== =======
</TABLE>
On December 17, 1997 the Company signed a loan facility agreement with a
consortium of banks organized by Citibank N.A. Subsequently, the Company
made drawings of PLN 1,087 million, which consisted of DM 230 million
(equivalent of PLN 517 million as of September, 1999) and PLN 570 million
(equivalent of DM 254 million as of September 30, 1999) borrowings. The
main terms of the agreement are as follows:
Facility limit equivalent of DM 672 million
Interest LIBOR or WIBOR
plus margin of 0.95% p.a. stepping down to
0.40% p.a.
Commitment fee 0.375%
Collateral pledge of Company's assets, rights and shares
Repayment date (last
installment) December 17, 2005
In August 1999, the Company's operating shareholders (Elektrim S.A.,
DeTeMobil and MediaOne) extended USD 75 million (PLN 309 million as of
September 30, 1999) in subordinated loans as follows:
F-45
<PAGE> 191
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
16. LONG-TERM LIABILITIES (CONTINUED)
Elektrim S.A., equivalent of USD 40 million, DeTeMobil, USD 17.5 million;
and MediaOne, USD 17.5 million. Each shareholder loan bears an interest
rate of 12.5% compounded semi-annually on June 17 and December 17, and a
repayment date for principal amounts and accrued interest is June 19, 2006.
17. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Social fund............................................... 1,608 778
Other provisions.......................................... -- 1,333
----- -----
1,608 2,111
===== =====
</TABLE>
The social fund is an employer's obligation based on a mandated calculation
based on the number of employees and the monthly minimum wage in Poland.
The amounts calculated under this formula must be used for the benefits of
the employees.
18. SHARE CAPITAL
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Allotted, called-up and fully paid:
471,000 ordinary shares of 1,000 PLN each............... 471,000 471,000
======= =======
</TABLE>
19. FINANCE LEASE
On March 25, 1997 the Company entered into a finance lease agreement
relating to its new headquarters building and underlying land. The term of
the lease is 15 years and the Company has a right to acquire the leased
asset at the end of the lease. The Company relocated to its new
headquarters buildings in two stages, in second half of 1998 and in mid
1999.
The headquarters lease obligation, consisting of two buildings, first
occupied in 1998 and second in August 1999, is denominated in USD and
payable in PLN. The nominal value of future lease payments is USD 110.1
million (PLN 453 million as of September 30, 1999). This consists of USD
47.7 million and 62.4 million for the 1st and 2nd buildings, respectively.
This consists of combined minimum monthly payments of USD 598.8 thousand
(PLN 2,464 thousand as of September 30, 1999) and the combined purchase
options of USD 11.8 million (PLN 48.5 million as of September 30, 1999)
that is broken down as USD 5.7 million and 6.1 million for the 1st and 2nd
buildings, respectively.
Annually, the Company's lease liabilities are changed based on the U.S.
consumer price index ("CPI"). In 1999, this resulted in an increase in
minimum monthly payments of only USD 4.3 thousand (PLN 17.7 thousand as of
September 30, 1999).
F-46
<PAGE> 192
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
20. DIVIDEND RESTRICTION
The Company's statutory financial statements are prepared in accordance
with Polish accounting regulations. Dividends may only be distributed from
the net profit reported in the Polish annual statutory financial
statements. As of 30 September 1999, the Company has no net profit
available for distribution.
21. SUPPLEMENTARY CASH FLOW INFORMATION
Cash and cash equivalents consists of cash on hand, balances deposited with
banks and short-term, highly liquid investments.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Balances deposited with banks:
Current accounts........................................ 29,217 2,958
Term deposits with original maturity of less than 90
days................................................. 81,171 2,540
Social fund cash........................................ 1,123 59
Cash on hand.............................................. 437 138
------- -----
111,948 5,695
======= =====
</TABLE>
At September 30, 1999 the Company revalued cash on hand and balances
deposited with banks denominated in foreign currencies. The net result of
the revaluation was PLN 181 of foreign exchange losses.
22. FUTURE FINANCING
As of September 30, 1999 the Company had negative current assets and
obligations and commitments exceeding the available financing sources. The
Company is planning to issue additional long-term notes during the fourth
quarter of 1999 in order to secure financing for its obligations and
commitments. The issuance of these notes requires certain waivers from the
current Company lenders. There is no guarantee that the financing will be
obtained or the waivers will be obtained. Meeting the Company's current
obligations and commitments is dependent on successful completion of the
intended issue of long-term notes, as discussed above, or achievement of
alternative financing.
F-47
<PAGE> 193
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
23. SUPPLEMENTARY INFORMATION TO IAS FINANCIAL STATEMENTS
A reconciliation of the Company's consolidated net profit (loss) under
Polish statutory accounting regulations and International Accounting
Standards is summarized as follows:
<TABLE>
<CAPTION>
NET LOSS FOR NET LOSS FOR
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Polish Accounting Regulations....... (61,762) (23,397) (176,153) 13,820
Foreign translation difference...... (472) -- (1,784) --
IAS adjustment for GSM license
amortization...................... 1,141 1,140 3,422 3,380
IAS adjustment for GSM license
discount.......................... (5,341) (6,033) (17,060) (17,973)
Unrealized foreign exchange
differences....................... (11,938) (14,070) (4,227) 3,454
Finance lease....................... 1,561 (4,229) 450 (4,229)
IAS assets adjustment............... (864) -- (5,512) --
Deferred tax benefit/(charge)....... 12,241 1,197 5,053 (26,267)
------- ------- -------- -------
International Accounting
Standards......................... (65,434) (45,392) (195,811) (27,815)
======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY AT
----------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
Polish accounting Regulations............................... 113,706 289,758
Foreign translation difference.............................. (1,829) 56
IAS adjustment for GSM License amortization................. 14,481 11,059
IAS adjustment for GSM License discount..................... (47,642) (30,582)
Unrealized foreign exchange differences..................... 6,059 10,286
Finance lease............................................... 2,554 2,104
IAS assets adjustment....................................... 6,220 11,732
Deferred tax benefit/(charge)............................... 7,479 2,426
------- -------
International Accounting Standards.......................... 101,028 296,839
======= =======
</TABLE>
The above differences are caused by the following reasons:
- Recognition of the long-term license liabilities at present value for
IAS purposes, while they were recorded at undiscounted nominal value
under Polish accounting regulations. This accounting results in higher
interest expense under IAS, which is partially offset by lower
amortization expense (for the first license) and foreign exchange
losses.
- Reversal of unrealized foreign exchange gains recognized in 1998 as
financial income for IAS purposes but deferred for PAS purposes.
- Difference in treatment of assets held under finance lease and other
capital assets written off for PAS purposes.
- Adjustment to deferred tax on temporary differences in preceding
adjustments.
F-48
<PAGE> 194
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
24. DIFFERENCES BETWEEN IAS AND U.S. GAAP
The Company's consolidated financial statements are prepared in accordance
with International Accounting Standards, which differ in certain respects
from U.S. GAAP.
The effect of the principal differences between IAS and U.S. GAAP in
relation to the Company's consolidated financial statements are presented
below, with explanations of certain adjustments that affect total
consolidated net result for the periods from January 1, 1999 to September
30, 1999 and from January 1, 1998 to September 30, 1998 and consolidated
net assets as of September 30, 1999 and December 31, 1998:
RECONCILIATION OF CONSOLIDATED NET PROFIT/(LOSS):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Consolidated net profit/(loss)
reported under IAS................ (65,434) (45,392) (195,811) (27,815)
U.S. GAAP adjustments:
(a) Removal of foreign exchange
differences capitalized for
IAS............................ (45,479) (34,436) (40,375) (30,795)
(b) Depreciation and amortization
of foreign exchange............ 1,596 952 4,459 2,748
(c) Development and start-up cost
capitalized.................... 896 16 (6,779) --
(d) Amortization of consulting fees
capitalized.................... -- 915 -- 2,739
-------- ------- -------- -------
Consolidated net profit/(loss) under
U.S. GAAP......................... (108,421) (77,945) (238,506) (53,123)
======== ======= ======== =======
</TABLE>
RECONCILIATION OF CONSOLIDATED NET ASSETS:
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1999 1998
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
Consolidated net assets reported under IAS................ 101,028 296,839
U.S. GAAP adjustments:
(a) Removal of foreign exchange differences capitalized
for IAS.............................................. (125,391) (85,016)
(b) Depreciation and amortization on above............... 11,844 7,385
(c) Development and start-up costs capitalized -- net.... (6,779) --
-------- -------
Consolidated net assets under U.S. GAAP................... (19,298) 219,208
======== =======
</TABLE>
(A) REMOVAL OF FOREIGN EXCHANGE DIFFERENCES CAPITALIZED FOR IAS
In accordance with IAS 23, "Borrowing Costs", the Company capitalizes
financing costs, including interest and foreign exchange gains or losses,
into assets under construction.
For tangible fixed assets under construction, the Company capitalizes
interest and foreign exchange gains or losses incurred and directly
attributable to the acquisition and construction of the qualifying assets
F-49
<PAGE> 195
POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF PLN)
24. DIFFERENCES BETWEEN IAS AND U.S. GAAP (CONTINUED)
that would have been avoided if the expenditure on the qualifying assets
had not been made. The financing costs are capitalized only during the
period of construction of the qualifying assets (see Note 12). As explained
in Note 4.b., the Company capitalized financing costs attributable to the
acquisition of its GSM 900 and 1800 licenses, including interest on the
related long-term obligation and foreign exchange losses because the GSM
900 and 1800 licenses are integral parts of the network.
Under Statement of Financial Accounting Standards 52 "Foreign Currency
Translation", however, foreign exchange losses relating to financing
obligations should be included in the statement of operations of the
Company. Consequently, the amounts of foreign exchange differences
capitalized in accordance with IAS 23 in the Company's financial statements
are expensed under U.S. GAAP.
(B) DEPRECIATION AND AMORTIZATION
The U.S. GAAP adjustments for depreciation and amortization shown above
represent the amounts of depreciation and amortization charges relating to
capitalized foreign exchange differences in the Company's IAS financial
statements. Since under U.S. GAAP these foreign exchange differences are
not permitted to be capitalized and are instead expensed, the depreciation
and amortization of these capitalized differences under IAS has been
reversed.
(C) DEVELOPMENT AND START-UP COSTS CAPITALIZED
The Company capitalized in 1996 certain start up costs amounting to PLN
16,811. Following the issuance of SOP 98-5 in the United States, the
Company has expensed for U.S. GAAP purposes in 1999 the net book value of
the above costs previously capitalized.
F-50
<PAGE> 196
LOGO
LOGO
OFFER FOR ALL OUTSTANDING
11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE 2009
IN EXCHANGE FOR
11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE 2009
PTC INTERNATIONAL FINANCE II S.A.
IRREVOCABLY AND UNCONDITIONALLY GUARANTEED
ON A SENIOR SUBORDINATED BASIS AS TO THE PAYMENT OF
PRINCIPAL, PREMIUM, INTEREST AND ADDITIONAL AMOUNTS, IF ANY, BY
POLSKA TELEFONIA CYFROWA SP. Z O.O.
MARCH 10, 2000
<PAGE> 197
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 198
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Formation Deed contains no provisions under which any member of our
Supervisory Board or our Management Board or officers is indemnified in any
manner against any liability which he may incur in his capacity as such.
However, Article 11 of our Formation Deed provides that approval at a
Shareholders Meeting of reports by our Management Board and our Supervisory
Board and approval of the year-end balance sheet and the profit and loss
statement for the previous fiscal year that may exonerate the members of our
Management Board and the members of our Supervisory Board from liability for the
performance of their respective duties in the financial year concerned. Under
Polish law, this discharge is not absolute and would not be effective as to any
matters not disclosed to our shareholders.
Certain officers and members of our Supervisory Board and our Management
Board are, to a limited extent, insured under insurance policies of DeTeMobil,
MediaOne and Elektrim against damages resulting from their conduct when acting
in their capacities as such.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<C> <S>
3.1 English translation of the Formation Deed of Polska
Telefonia Cyfrowa Sp. z o.o. (incorporated by reference to
Exhibit 3.1 of the registrant's Registration Statement on
Form F-4 (File No. 333-7668)).
3.2 Notarial Deed of Incorporation of the PTC International
Finance II S.A. and English translation (incorporated by
reference to Exhibit 3.2 of the registrant's Registration
Statement on Form F-4 (File No. 333-7668)).
4.1 Form of Indenture, dated as of November 23, 1999, among
Polska Telefonia Cyfrowa Sp. z o.o., PTC International
Finance II S.A., PTC International Finance (Holdings) B.V.
and State Street Bank and Trust Company, as Trustee, in
respect of PTC International Finance II S.A.'s 11 1/4%
Senior Subordinated Guaranteed Notes due December 1, 2009.
4.2 Form of 11 1/4% Senior Subordinated Guaranteed Note due
2009.
4.3 Form of Guarantee by Polska Telefonia Cyfrowa Sp. z o.o. of
the 11 1/4% Senior Subordinated Guaranteed Notes due 2009
(included in Exhibit 4.2).
4.4 Form of Guarantee by PTC International Finance (Holding)
B.V. of the 11 1/4% Senior Subordinated Guaranteed Notes due
2009 (included in Exhibit 4.2).
4.5 Indenture, dated as of July 1, 1997, between Polska
Telefonia Cyfrowa Sp. z o.o., PTC International Finance B.V.
and The Bank of New York, as Trustee, in respect of the
10 3/4% Senior Subordinated Guaranteed Discount Notes due
July 1, 2007 (incorporated by reference to Exhibit 4 of the
registrant's Registration Statement on Form F-4 (File No.
333-7668)).
4.6 Form of 10 3/4% Senior Subordinated Guaranteed Discount Note
due July 2007 (included in Exhibit 4.5).
4.7 Form of Guarantee by Polska Telefonia Cyfrowa Sp. z o.o. of
the 10 3/4% Senior Subordinated Guaranteed Discount Note due
2007 (included in Exhibit 4.5).
5.1 Opinion of Clifford Chance, Netherlands counsel to PTC
International Finance (Holding) B.V., as to the validity of
the notes and the guarantees relating thereto.
5.2 Opinion of Clifford Chance, U.S. counsel to PTC
International Finance II S.A., Polska Telefonia Cyfrowa Sp.
z o.o., and, PTC International Finance (Holding) B.V. as to
the validity of the notes and the guarantees relating
thereto.
5.3 Opinion of Clifford Chance, Polish counsel to Polska
Telefonia Cyfrowa Sp. z o.o., as to the validity of its
guarantee relating to the notes.
5.4 Opinion of Faltz & Kremer, Luxembourg counsel to PTC
International Finance II S.A. as to the validity of the
notes.
</TABLE>
II-1
<PAGE> 199
<TABLE>
<C> <S>
10.1 Shareholders Agreement, dated December 21, 1995, as amended
by Amendment No. 1 dated March 11, 1997, between and among
Elektrim S.A., Polpager Sp. z o.o., MediaOne International
B.V., DeTeMobil Deutsche Telekom MobilNet GmbH,
Elektrim-Autoinvest S.A. and Kulczyk Holding S.A. relating
to Polska Telefonia Cyfrowa Sp. z o.o. (incorporated by
reference to Exhibit 10.1 of registrant's Registration
Statement submitted on Form F-4 (File No. 333-7668)).
10.2 Project Outline Agreement, dated April 14, 1997, between
Polska Telefonia Cyfrowa Sp. z o.o. and MediaOne
International B.V. (incorporated by reference to Exhibit
10.2 of registrant's Registration Statement submitted on
Form F-4 (File No. 333-7668)).
10.3 Framework Agreement, dated December 13, 1996, between Polska
Telefonia Cyfrowa Sp. z o.o. and MediaOne International B.V.
(incorporated by reference to Exhibit 10.3 of registrant's
Registration Statement submitted on Form F-4 (File No.
333-7668)).
10.4 Implementation Agreement (Contract to Project Outline
Agreement), dated April 14, 1997, between Polska Telefonia
Cyfrowa Sp. z o.o. and MediaOne International B.V.
(incorporated by reference to Exhibit 10.4 of registrant's
Registration Statement submitted on Form F-4 (File No.
333-7668)).
10.5 Framework Agreement for Services, dated July 6, 1996,
between Polska Telefonia Cyfrowa Sp. z o.o. and DeTeMobil
Deutsche Telekom MobilNet GmbH. (incorporated by reference
to Exhibit 10.5 of registrant's Registration Statement
submitted on Form F-4 (File No. 333-7668)).
10.6 Framework Agreement for Secondments, dated November 10,
1996, between Polska Telefonia Cyfrowa Sp. z o.o. and
DeTeMobil Deutsche Telekom MobilNet GmbH. (incorporated by
reference to Exhibit 10.6 of registrant's Registration
Statement submitted on Form F-4 (File No. 333-7668)).
10.7 Service Agreement, dated May 17, 1996, and amendment on May
28, 1996, between Polska Telefonia Cyfrowa Sp. z o.o. and
Elektrim S.A. (incorporated by reference to Exhibit 10.7 of
registrant's Registration Statement submitted on Form F-4
(File No. 333-7668)).
10.8 English translation of Service Agreement, dated October 28,
1996, between Polska Telefonia Cyfrowa Sp. z o.o. and
Elektrim S.A. (incorporated by reference to Exhibit 10.8 of
registrant's Registration Statement submitted on Form F-4
(File No. 333-7668)).
10.9 Amendment No. 1 to the Indenture, dated November 19, 1999,
by and among PTC International Finance B.V., Polska
Telefonia Cyfrowa Sp. z o.o. and The Bank of New York as
agent.
10.10 Form of Waiver Letter, dated November 23, 1999, executed in
connection with to the Bank Credit Facility by and among
Polska Telefonia Cyfrowa Sp. z o.o. and ABN Amro Bank N.V.,
Citibank N.A., Dresdner Bank AG, ABN Bank (Polska) S.A.,
Bank Prezemyslowo-Handlowy S.A., Bank Rozwoju Eksportu S.A.,
Citibank (Poland) S.A., BNP-Dresdner (Polska) S.A., ING Bank
N.V., Warsaw Branch and Wielkopolski Bank Kredytowy, as
arrangers, the other lenders party thereto, and Citibank
(Poland) S.A., Citibank N.A., and Citibank International PLC
as agents.
10.11 Term Loan Facility, dated June 11, 1997, by and among Polska
Telefonia Cyfrowa Sp. z o.o. and ABN Amro Bank N.V.,
Citibank N.A., Dresdner Bank AG, ABN Bank (Polska) S.A.,
Bank Prezemyslowo-Handlowy S.A., Bank Rozwoju Eksportu S.A.,
Citibank (Poland) S.A., BNP-Dresdner (Polska) S.A., ING Bank
N.V., Warsaw Branch and Wielkopolski Bank Kredytowy, as
arrangers, the lenders party thereto, and Citibank (Poland)
S.A., Citibank N.A., and Citibank International PLC as
agents (incorporated by reference to Exhibit 10.9 of
registrant's Registration Statement submitted on Form F-4
(File No. 333-7668)).
10.12 Commitment Letter, dated June 12, 1997, by and among Polska
Telefonia Cyfrowa Sp. z o.o. and ABN Amro Bank N.V.,
Citibank N.A., Dresdner Bank AG, ABN Bank (Polska) S.A.,
Bank Prezemyslowo-Handlowy S.A., Bank Rozwoju Eksportu S.A.,
Citibank (Poland) S.A., BNP-Dresdner (Polska) S.A., ING Bank
N.V., Warsaw Branch and Wielkopolski Bank Kredytowy, as
arrangers, the lenders party thereto, and Citibank (Poland)
S.A., Citibank N.A., and Citibank International PLC as
agents (incorporated by reference to Exhibit 10.10 of
registrant's Registration Statement submitted on Form F-4
(File No. 333-7668)).
</TABLE>
II-2
<PAGE> 200
<TABLE>
<C> <S>
10.13 Syndicated Loan Facility Agreement, dated December 16, 1996,
by and among Polska Telefonia Cyfrowa Sp. z o.o. and ABN
Amro Bank N.V., Citibank N.A., Dresdner Bank AG, ABN Bank
(Polska) S.A., Bank Prezemyslowo-Handlowy S.A., Bank Rozwoju
Eksportu S.A., Citibank (Poland) S.A., BNP-Dresdner (Polska)
S.A., ING Bank N.V., Warsaw Branch and Wielkopolski Bank
Kredytowy, as arrangers, the lenders party thereto, and
Citibank (Poland) S.A., Citibank N.A., and Citibank
International PLC as agents (incorporated by reference to
Exhibit 10.11 of registrant's Registration Statement
submitted on Form F-4 (File No. 333-7668)).
10.14 Registration Agreement, dated June 24, 1997, between PTC
International Finance B.V., Polska Telefonia Cyfrowa Sp. z
o.o. and Salomon Brothers Inc. and Citicorp Securities,
Inc., as representatives of the Initial Purchasers named
herein. (incorporated by reference to Exhibit 10.12 of
registrant's Registration Statement submitted on Form F-4
(File No. 333-7668)).
10.15 Form of Registration Rights Agreement, dated November 23,
1999, by and among Polska Telefonia Cyfrowa Sp. z o.o. and
PTC International Finance II S.A., PTC International Finance
(Holding) B.V., Merrill Lynch International and Salomon
Smith Barney.
10.16 Shareholder Loan Agreement, dated August 24, 1999, by and
among Polska Telefonia Cyfrowa Sp. z o.o., Elektrim,
DeTeMobil and MediaOne.
10.17 Purchase Agreement, dated November 16, 1999, by and among
Polska Telefonia Cyfrowa Sp. z o.o., PTC International
Finance II S.A., PTC International Finance (Holding) B.V.,
and Merrill Lynch International and Salomon Smith Barney.
21. Subsidiaries of registrants.
23.1 Consent of Arthur Andersen Sp. z o.o.
23.2 Consent of Clifford Chance, Netherlands Counsel (included in
Exhibit 5.1).
23.3 Consent of Clifford Chance, U.S. Counsel (included in
Exhibit 5.2).
23.4 Consent of Clifford Chance, Polish counsel (included in
Exhibit 5.3).
23.5 Consent of Faltz & Kremer, Luxembourg counsel (included in
Exhibit 5.4).
24.1 Power of Attorney of Polska Telefonia Cyfrowa Sp. z o.o.,
PTC International Finance (Holding) B.V. and PTC
International Finance S.A. (included on the relevant
signature page).
25.1 Statement of eligibility of trustee on Form T-1 (in
connection with the Dollar Notes).
25.2 Statement of eligibility of trustee on Form T-1 (in
connection with the Euro Notes).
99.1 Letter of Transmittal.
</TABLE>
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
(b) Each of the undersigned registrants hereby undertakes: (i) to respond
to requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11 or 13 of Form F-4, within one
business day of receipt of such request, and to send the incorporated
documents by first-class mail or other equally prompt means; and (ii) to
arrange or provide for a
II-3
<PAGE> 201
facility in the U.S. for the purpose of responding to such requests. The
undertaking in subparagraph (i) above includes information contained in
documents filed subsequent to the effective date of this Registration
Statement through the date of responding to the request.
(c) Each of the undersigned registrants hereby undertakes to supply by
means of a post-effective amendment all information concerning the
exchange offer, that was not the subject of and included in this
Registration Statement when it becomes effective.
II-4
<PAGE> 202
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Warsaw, Poland on
March 10, 2000.
PTC INTERNATIONAL FINANCE (HOLDING)
B.V.
By: /s/ KARIM KHOJA
------------------------------------
Name: Karim Khoja
Authorized Signatory
By: /s/ BOGUSLAW KULAKOWSKI
------------------------------------
Name: Boguslaw Kulakowski
Authorized Signatory
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Boguslaw Kulakowski, Karim Khoja, Wilhelm
Stuckemann and Ryszard Pospieszynski acting in one of the following
combinations: (i) Boguslaw Kulakowski and Karim Khoja, acting together; (ii)
Boguslaw Kulakowski and Wilhelm Stuckemann, acting together; (iii) Ryszard
Pospieszynski and Karim Khoja, acting together; and (iv) Ryszard Pospieszynski
and Wilhelm Stuckemann, acting together, his true and lawful attorneys-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to do any and all things
and execute any and all instruments that such attorneys may deem necessary or
advisable under the Securities Act of 1933, as amended (the "Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission in
connection with the registration under the Act of the 11 1/4% Senior
Subordinated Guaranteed Notes due December 1, 2009 of PTC International Finance
II, S.A. and PTC International Finance (Holding) B.V.'s guarantee of such notes,
and any securities or Blue Sky law of any of the states of the United States of
America in order to effect the registrations or qualification (or exemption
therefrom) of the said securities for issue, offer, sale or trade under the Blue
Sky or other securities laws of any of such states and in connection therewith
to execute, acknowledge, verify, deliver, file and cause to be published
applications, reports, consents to service of process, appointments of attorneys
to receive service of process and other papers and instruments which may be
required under such laws, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign his name in his
capacity as Managing Director or Authorized Representative in the United States
of PTC International (Holding) B.V., as the case may be, this Registration
Statement and/or such other form or forms as may be appropriate to be filed with
the Commission or under or in connection with any Blue Sky law or other
securities laws of any state of the United States of America or with such other
regulatory bodies and agencies as any of them may deem appropriate in respect of
the 11 1/4% Senior Subordinated Guaranteed Notes due December 1, 2009, to any
and all amendments, including post-effective amendments, to this Registration
Statement and to any and all instruments and documents filed as part of or in
connection with this Registration Statement.
II-5
<PAGE> 203
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons, in the
capacities indicated on March 10, 2000.
ABN AMRO TRUST COMPANY (NEDERLAND) B.V.
In its capacity as sole Managing Director of PTC International Finance (Holding)
B.V.
By: /s/ N.S. VAN DER WERFF
----------------------------------
Name: N.S. van der Werff
Title: Proxyholder
By: /s/ R.W.M. KLUITENBERG
----------------------------------
Name: R.W.M. Kluitenberg
Title: Proxyholder
/s/ DONALD J. PUGLISI
- --------------------------------------------------------- Authorized
Representative in the United States
Donald J. Puglisi
II-6
<PAGE> 204
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Warsaw,
Poland on March 10, 2000.
POLSKA TELEFONIA CYFROWA SP. z o.o.
By: /s/ KARIM KHOJA
------------------------------------
Name: Karim Khoja
Title: Authorized Signatory
By: /s/ BOGUSLAW KULAKOWSKI
------------------------------------
Name: Boguslaw Kulakowski
Title: Authorized Signatory
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Boguslaw Kulakowski, Karim Khoja, Wilhelm
Stuckemann and Ryszard Pospieszynski acting in one of the following
combinations: (i) Boguslaw Kulakowski and Karim Khoja, acting together; (ii)
Boguslaw Kulakowski and Wilhelm Stuckemann, acting together; (iii) Ryszard
Pospieszynski and Karim Khoja, acting together; and (iv) Ryszard Pospieszynski
and Wilhelm Stuckemann, acting together, his true and lawful attorneys-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to do any and all things
and execute any and all instruments that such attorneys may deem necessary or
advisable under the Securities Act of 1933, as amended (the "Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission in
connection with the registration under the Act of the 11 1/4% Senior
Subordinated Guaranteed Notes due December 1, 2009 of PTC International Finance
II, S.A. and Polska Telefonia Cyfrowa Sp. z o.o.'s guarantee of such notes, and
any securities or Blue Sky law of any of the states of the United States of
America in order to effect the registrations or qualification (or exemption
therefrom) of the said securities for issue, offer, sale or trade under the Blue
Sky or other securities laws of any of such states and in connection therewith
to execute, acknowledge, verify, deliver, file and cause to be published
applications, reports, consents to service of process, appointments of attorneys
to receive service of process and other papers and instruments which may be
required under such laws, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign his name in his
capacity as Officer, [Management Board Member] or Authorized Representative in
the United States of Polska Telefonia Cyfrowa Sp. z o.o., as the case may be,
this Registration Statement and/or such other form or forms as may be
appropriate to be filed with the Commission or under or in connection with any
Blue Sky law or other securities laws of any state of the United States of
America or with such other regulatory bodies and agencies as any of them may
deem appropriate in respect of the 11 1/4% Senior Subordinated Guaranteed Notes
due December 1, 2009, to any and all amendments, including post-effective
amendments, to this Registration Statement and to any and all instruments and
documents filed as part of or in connection with this Registration Statement.
II-7
<PAGE> 205
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Power of Attorney has been signed by the following persons, in the
capacities indicated on March 10, 2000.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ PIOTR MROCZKOWSKI Chairman
- ---------------------------------------------------
Piotr Mroczkowski
/s/ MORITZ GERKE Deputy Chairman
- ---------------------------------------------------
Moritz Gerke
/s/ JACEK WALCZYKOWSKI Secretary
- ---------------------------------------------------
Jacek Walczykowski
/s/ JAN KOLODZICJCZAK Board Member
- ---------------------------------------------------
Jan Kolodzicjczak
/s/ STEVE BOYD Board Member
- ---------------------------------------------------
Steve Boyd
Board Member
- ---------------------------------------------------
Michael Gunther
/s/ WILLIAM MORRIS Board Member
- ---------------------------------------------------
William Morris
/s/ JAN WAGA Board Member
- ---------------------------------------------------
Jan Waga
/s/ ANDRZEJ WOJCIK Board Member
- ---------------------------------------------------
Andrzej Wojcik
/s/ BOGUSLAW KULSKOWSKI Director General (Chief Executive Officer)
- --------------------------------------------------- Member of the Management Board
Boguslaw Kulskowski
/s/ WOJCIECH PLOSKI Director of Strategy. Marketing and Sales
- --------------------------------------------------- Member of the Management Board
Wojciech Ploski
/s/ WILHELM STACKEMANN Director of Network Operations
- --------------------------------------------------- Member of the Management Board
Wilhelm Stackemann
/s/ STANISLEW MAJEWSKI Director of Finance
- --------------------------------------------------- (Principal Financial Officer)
Stanislew Majewski
</TABLE>
II-8
<PAGE> 206
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ RYSZARD POSPIESZYNSKI Director of Administration
- --------------------------------------------------- Member of the Management Board
Ryszard Pospieszynski
/s/ BRENT MUCKRIDGE Financial Controller
- ---------------------------------------------------
Brent Muckridge
/s/ DONALD J. PUGLISI Authorized Representative in the United States
- ---------------------------------------------------
Donald J. Puglisi
</TABLE>
II-9
<PAGE> 207
SIGNATURES
Pursuant to the requirements of the Securities Act, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Warsaw,
Poland on March 10, 2000.
PTC INTERNATIONAL FINANCE II S.A.
By: /s/ KARIM KHOJA
------------------------------------
Name: Karim Khoja
Title: Authorized Signatory
By: /s/ BOGUSLAW KULAKOWSKI
------------------------------------
Name: Boguslaw Kulakowski
Title: Authorized Signatory
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Boguslaw Kulakowski, Karim Khoja, Wilhelm
Stuckemann and Ryszard Pospieszynski acting in one of the following
combinations: (i) Boguslaw Kulakowski and Karim Khoja, acting together; (ii)
Boguslaw Kulakowski and Wilhelm Stuckemann, acting together; (iii) Ryszard
Pospieszynski and Karim Khoja, acting together; and (iv) Ryszard Pospieszynski
and Wilhelm Stuckemann, acting together, his true and lawful attorneys-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to do any and all things
and execute any and all instruments that such attorneys may deem necessary or
advisable under the Securities Act of 1933, as amended (the "Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission in
connection with the registration under the Act of the 11 1/4% Senior
Subordinated Guaranteed Notes due December 1, 2009 of PTC International Finance
II, S.A. and any securities or Blue Sky law of any of the states of the United
States of America in order to effect the registrations or qualification (or
exemption therefrom) of the said securities for issue, offer, sale or trade
under the Blue Sky or other securities laws of any of such states and in
connection therewith to execute, acknowledge, verify, deliver, file and cause to
be published applications, reports, consents to service of process, appointments
of attorneys to receive service of process and other papers and instruments
which may be required under such laws, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign his
name in his capacity as Managing Director or Authorized Representative in the
United States of PTC International II S.A., as the case may be, this
Registration Statement and/or such other form or forms as may be appropriate to
be filed with the Commission or under or in connection with any Blue Sky law or
other securities laws of any state of the United States of America or with such
other regulatory bodies and agencies as any of them may deem appropriate in
respect of the 11 1/4% Senior Subordinated Guaranteed Notes due December 1,
2009, to any and all amendments, including post-effective amendments, to this
Registration Statement and to any and all instruments and documents filed as
part of or in connection with this Registration Statement.
II-10
<PAGE> 208
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Power of Attorney has been signed by the following persons, in the capacities
indicated on March 10, 2000.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ YVES SCHMIT Company Director
- ---------------------------------------------------
Yves Schmit
/s/ CARINE BITTLES Company Director
- ---------------------------------------------------
Carine Bittles
/s/ KOEN DE VLEESCHAUWER Company Director
- ---------------------------------------------------
Koen de Vleeschauwer
/s/ DONALD J. PUGLISI Authorized Representative in the United States
- ---------------------------------------------------
Donald J. Puglisi
</TABLE>
II-11
<PAGE> 1
EXHIBIT 4.1
FORM OF INDENTURE
INDENTURE dated as of November 23, 1999, among PTC INTERNATIONAL FINANCE II
S.A., a corporation organized under the laws of Luxembourg (the "Issuer"), PTC
INTERNATIONAL FINANCE (HOLDING) B.V, a corporation organized under the laws of
The Netherlands ("Holdings"), POLSKA TELEFONIA CYFROWA SP. Z O.O., a corporation
organized under the laws of Poland (the "Guarantor") and STATE STREET BANK AND
TRUST COMPANY, as Trustee (the "Trustee"). This Indenture is principally
administered by the Trustee at 225 Asylum Street, Hartford, Connecticut 06103.
RECITALS OF THE ISSUER
The Issuer has duly authorized the issuance of $150,000,00 principal
aggregate amount its 11 1/4% Senior Subordinated Guaranteed Notes due December
1, 2009 (the "Dollar Notes") and if and when issued in exchange for the Dollar
Notes, the Issuer's 11 1/4% Senior Subordinated Guaranteed Notes due December 1,
2009 (the "Exchange Notes", and together with the Dollar Notes, the "Notes") of
substantially the tenor and amount hereinafter set forth. To provide, among
other things, for the authentication, delivery and administration thereof, the
Issuer, Holdings and the Guarantor have duly authorized the execution and
delivery of this Indenture.
All things necessary to make the Notes, when executed and delivered by the
Issuer and authenticated and delivered by the Trustee as provided in this
Indenture, the valid binding and legal obligations of the Issuer, to make each
of the Notes Guarantees (as defined below), when executed and delivered by the
Guarantor or Holdings, as the case may be, the valid, binding and legal
obligation of the Guarantor or Holdings, as the case may be, and to make this
Indenture a valid agreement of the Issuer, Holdings and the Guarantor, in
accordance with their and its terms, have been done.
NOW THEREFORE, THE INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually covenanted and agreed, for the equal and
rateable benefit of all the respective Holders from time to time of the Notes:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 DEFINITIONS.
"Additional Amounts" means additional amounts to be paid by the Issuer,
Holdings or the Guarantor under the Notes, the Notes Guarantees or the
Intercompany Receivables, as the case may be, in an amount calculated so that
the net amount received by each Holder or the Issuer under the Intercompany
Receivables, as the case may be, including Additional Amounts, after withholding
or deducting any amount for or on account of Taxes, will not be less than the
amount that any such holder or the Issuer would have received if such Taxes were
not required to be so withheld or deducted.
"Additional Asset" means (a) any Property (other than Debt and Capital
Stock) used in a Telecommunications Business, as determined in good faith by the
Management Board and certified with an Officer's Certificate; (b) Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Guarantor or another Restricted Subsidiary; or (c)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however, that, in the case of clauses (b)
and (c), such Restricted Subsidiary is primarily engaged in a Telecommunications
Business as determined in good faith by the Management Board and certified with
an Officer's Certificate.
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"Adjusted Cash Flow" means, for any period, the Cash Flow for each fiscal
quarter (and any shorter period) during such period, translated into U.S.
Dollars at the Dollar/Zloty Exchange Rate applicable during each such quarter
(or shorter period).
"Adjusted Consolidated Net Worth" means the sum of (i) each equity
investment (other than investments in Disqualified Stock) in the Guarantor,
translated into U.S. Dollars at the Dollar/Zloty Exchange Rate at the time of
each such investment plus (ii) Consolidated Net Income for each full fiscal
quarter (or shorter period) from the formation of the Guarantor to the date of
calculation, translated into U.S. Dollars at the Dollar/Zloty Exchange Rate
applicable during each such quarter (or shorter period) minus (iii) any
dividends, distributions or payments that would be Restricted Payments under
clause (a) or (b) of the definition of "Restricted Payments", translated into
U.S. Dollars at the Dollar/Zloty Exchange Rate applicable at the time of such
dividend, distribution or payment.
"Adjusted Foreign Debt FX Losses" means, for any period, Consolidated
Foreign Debt FX Losses for each fiscal quarter (and any shorter period) during
such period, translated into U.S. Dollars at the Dollar/Zloty Exchange Rate
applicable during each such quarter (or shorter period).
"Adjusted Interest Expense" means, for any period, Consolidated Interest
Expense for each fiscal quarter (and any shorter period) during such period,
translated into U.S. Dollars at the Dollar/Zloty Exchange Rate applicable during
each such quarter (or shorter period).
"Affiliate" of any specified Person means (a) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (b) any other Person who is a director or
officer (i) of such specified Person, (ii) of any Subsidiary of such specified
Person or (iii) of any Person described in clause (a) above. For the purposes of
this definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of Section 4.13 and Section 4.12 only, "Affiliate" shall
also mean any beneficial owner of shares representing 10% or more of the total
voting power of the Voting Stock (on a fully diluted basis) of the Guarantor or
of rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence of this definition.
"Asset Sale" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by the Guarantor or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction(each referred to for the purposes of this
definition as a "disposition"), other than individual isolated transactions not
in excess of $250,000 each, of (i) any shares of Capital Stock of a Restricted
Subsidiary (other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Guarantor or a Restricted
Subsidiary), (ii) all or substantially all the assets of any division or line of
business of the Guarantor or any Restricted Subsidiary or (iii) any other assets
of the Guarantor or any Restricted Subsidiary outside of the ordinary course of
business of the Guarantor or such Restricted Subsidiary (other than, in the case
of (i), (ii) and (iii) above, (w) a disposition of short-term investments,
inventory, receivables, or other current assets, (x) a disposition governed by
the provisions described in Section 5.01, (y) a disposition by a Restricted
Subsidiary to the Guarantor or by the Guarantor or a Restricted Subsidiary to a
Wholly Owned Subsidiary or (z) a disposition that constitutes a Restricted
Payment permitted by Section 4.10).
"Attributable Debt" means Debt deemed to be incurred in respect of a Sale
and Leaseback Transaction and shall be, at the date of determination, the
greater of (i) the Fair Market Value of the Property subject to such Sale and
Leaseback Transaction and (ii) the present value (discounted at the interest
rate borne by the Notes, compounded annually), of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale and Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to any
Debt or Preferred Stock, the quotient obtained by dividing (a) the sum of the
product of the numbers of years (rounded to the nearest one-twelfth of one year)
from the date of determination to the dates of each successive scheduled
principal payment
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of such Debt or redemption or similar payment with respect to such Preferred
Stock multiplied by the amount of such payment by (b) the sum of all such
payments.
"Bank Credit Facility" means the senior syndicated loan facility agreement
entered into by the Guarantor with a syndicate of banks or other financial
institutions and each Senior Finance Document referred to therein, as they may
be amended, modified, supplemented, replaced, renewed, extended or restated from
time to time.
"Bank Debt" means Senior Debt under or in respect of the Bank Credit
Facility and, following the payment in full of the Bank Credit Facility, Senior
Debt under or in respect of a Senior Debt financing facility (including debt
securities) outstanding or committed in a principal amount of at least $10
million that is designated by the Guarantor from time to time in a notice to the
Trustee signed by the Representative of the immediately preceding facility
constituting the Bank Debt as constituting the "Bank Debt".
"Bankruptcy Law" means Title 11, United States Code, or any similar Federal
or state law for the supervision or relief of debtors, or any analogous law of
any other nation or legal jurisdiction or any political subdivision thereof or
therein.
"Board Resolution" means a copy of a resolution certified by an Officer to
have been duly adopted by the Management Board or the Supervisory Board, as the
context may require, and to be in full force and effect on the date of such
certification, and which is delivered to the Trustee.
"Business Day" means any day (other than a Saturday or Sunday) which is not
a day on which banking institutions in the cities of Warsaw, Poland, Amsterdam,
The Netherlands, London, England, Boston, Massachusetts, Hartford, Connecticut,
Luxembourg or New York, New York are authorized or obligated by law to close for
business.
"Capital Expenditure Debt" means Debt (including Capital Lease Obligations)
Incurred by the Guarantor or a Restricted Subsidiary to finance a capital
expenditure related to the Telecommunications Business so long as (a) such
capital expenditure is or should be included as an addition to "Tangible Fixed
Assets or Intangible Fixed Assets, at cost" in accordance with IAS, (b) such
Debt is Incurred within 180 days of the date such capital expenditure is made
and (c) such debt does not exceed the fair market value of the assets acquired
or constructed.
"Capital Lease Obligations" means Debt represented by obligations under a
lease that is required to be capitalized for financial reporting purposes in
accordance with IAS; and the amount of such Debt shall be the capitalized amount
of such obligations determined in accordance with IAS; and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty. For purposes of Section 4.15, a
Capital Lease Obligation shall be deemed secured by a Lien on the Property being
leased.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of corporate stock, partnership interests
or any other participation, right, warrant, option or other interest in the
nature of an equity interest in such Person, but excluding any debt security
convertible or exchangeable into such equity interest; provided, however, that
"Capital Stock" shall not include Disqualified Stock.
"Capital Stock Sale Proceeds" means the aggregate Net Cash Proceeds
received by the Guarantor from the issue or sale (other than to a Subsidiary or
an employee stock ownership plan or trust established by the Guarantor or any
Subsidiary) by the Guarantor of any class of its Capital Stock (other than
Disqualified Stock) after the Issue Date, including Capital Stock issued upon
conversion of convertible debt and upon the exercise of options, warrants or
rights to purchase Capital Stock.
"Cash Flow" means, for any period, the sum of (w) Consolidated Net Income,
plus (x) Consolidated Interest Expense, plus (y), to the extent deducted in
calculating such Consolidated Net Income for such period, (i) all income tax
expense of the Guarantor and its consolidated Restricted Subsidiaries, (ii)
depreciation expense of the Guarantor and its consolidated Restricted
Subsidiaries, (iii) amortization expense of the Guarantor and its consolidated
Restricted Subsidiaries (excluding amortization expense attributable to a
prepaid cash item that was paid in a prior period), (iv) Consolidated Foreign
Debt FX Losses and (v) all other non-cash charges of the Guarantor and its
consolidated Restricted Subsidiaries (excluding any such non-cash charge to the
extent that it
<PAGE> 4
represents an accrual of or reserve for cash expenditures in any future period),
minus (z) all non-cash items added in calculating such Consolidated Net Income
for such period, all determined in accordance with IAS consistently applied.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
Restricted Subsidiary shall be added to Consolidated Net Income to compute Cash
Flow only to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income and
only if a corresponding amount would be permitted at the date of determination
to be dividended to the Guarantor by such Restricted Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of (x) any of the following events
and (y) a Rating Decline:
(a) (i) if any "Person" or "group" (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision
to either of the foregoing, including any group acting for the
purpose of acquiring, holding, voting or disposing of notes within
the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than
any one or more of the Permitted Holders, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act, except that
a Person will be deemed to have "beneficial ownership" of all shares
that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly
or indirectly, of 50% or more of the total voting power of all
classes of the Voting Stock of the Guarantor;
(b) the sale, assignment, lease, conveyance, disposition or transfer,
directly or indirectly, of all or substantially all the assets of the
Guarantor (other than a transfer of such assets as an entirety or
virtually as an entirety to a Wholly Owned Subsidiary or one or more
Permitted Holders) shall have occurred, or the Guarantor amalgamates,
consolidates or merges with or into any other Person (other than one
or more Permitted Holders) or any other Person (other than one or
more Permitted Holders) amalgamates, consolidates or merges with or
into the Guarantor, in any such event pursuant to a transaction in
which the outstanding Voting Stock of the Guarantor is reclassified
into or exchanged for cash, notes or other Property, other than any
such transaction where (a) the outstanding Voting Stock of the
Guarantor is reclassified into or exchanged for Voting Stock of the
surviving corporation and (b) no Person or group (other than any one
or more of the Permitted Holders) (as defined in clause (a) above)
owns, directly or indirectly, 50% or more of the total voting power
of all classes of Voting Stock of such surviving corporation
immediately after such transaction; or
(c) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Supervisory Board (together
with any new directors whose election or appointment by such board
was approved, or confirmed as acceptable for purposes of this
provision, by a vote of 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved or
confirmed) cease for any reason to constitute a majority of the
Supervisory Board then in office;
provided, however, that (i) the grant by any holder of shares of the Guarantor
or any Subsidiary of a security interest in such shares to secure Senior Debt
and (ii) the exercise by the holders of such Senior Debt of their rights and
remedies in respect thereof shall not constitute a Change of Control hereunder
as long as, in the case of clause (ii), any transferee of shares of the
Guarantor is a Permitted Holder or such transfer does not otherwise constitute a
Change of Control.
"Collateral" has the meaning given to such term in the Dollar Escrow
Agreement.
"Consolidated Capital Ratio" means, as of any date, the ratio of (x) the
aggregate
consolidated principal amount of Debt of the Guarantor and its Restricted
Subsidiaries then outstanding to (y) Adjusted Consolidated Net Worth.
<PAGE> 5
"Consolidated Current Liabilities" means, as of any date of determination,
the aggregate amount of liabilities of the Guarantor and its consolidated
Restricted Subsidiaries which may properly be classified as current liabilities
(including taxes accrued as estimated), on a consolidated basis, after
eliminating (a) all intercompany items between the Guarantor and any Restricted
Subsidiary and (b) all current maturities of long-term Debt, all as determined
in accordance with IAS consistently applied.
"Consolidated Foreign Debt FX Losses" means, for any period, all losses or
expenses of the Guarantor and its Consolidated Restricted Subsidiaries reflected
in the consolidated statement of operations in respect of Debt of the Guarantor
or a Restricted Subsidiary that is denominated in a currency other than the
Polish Zloty to the extent that such loss or expense is due to a decline in the
value of the Polish Zloty against such foreign currency and is deducted in
calculating Consolidated Net Income for such period.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Guarantor and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
Incurred by the Guarantor or its Restricted Subsidiaries, (i) interest expense
attributable to capital leases and one-third of the rental expense attributable
to operating leases, (ii) amortization of debt discount and debt issuance cost,
(iii) capitalized interest, (iv) non-cash interest expenses, (v) accrued
interest, (vi) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, (vii) net costs
associated with Hedging Obligations (including amortization of fees), (viii)
Preferred Stock dividends in respect of all Preferred Stock held by Persons
other than the Guarantor or a Wholly Owned Subsidiary, (ix) interest Incurred in
connection with Investments in discontinued operations, (x) interest accruing on
any Debt of any other Person to the extent such Debt is Guaranteed by the
Guarantor or any Restricted Subsidiary and (xi) the cash contributions to any
employee stock ownership plan or similar trust to the extent such contributions
are used by such plan or trust to pay interest or fees to any Person (other than
the Guarantor) in connection with Debt Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Guarantor and its consolidated Subsidiaries; provided, however, that there
shall not be included in Consolidated Net Income (a) any net income (loss) of
any Person if such Person is not a Restricted Subsidiary, except that, (i)
subject to the exclusion contained in clause (d) below, the Guarantor's equity
in the net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash distributed by such
Person during such period to the Guarantor or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in clause
(c) below), and (ii) the Guarantor's equity in a net loss of any such Person for
such period shall be included in determining such Consolidated Net Income, (b)
any net income (loss) of any Person acquired by the Guarantor or a Subsidiary of
such Person in a pooling of interests transaction for any period prior to the
date of such acquisition, (c) any net income (loss) of any Restricted Subsidiary
if such Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions, directly or indirectly, to
the Guarantor, except that (i) subject to the exclusion contained in clause (d)
below, the Guarantor's equity in the net income of any such Restricted
Subsidiary for such period shall be included in Consolidated Net Income up to
the aggregate amount of cash distributed by such Restricted Subsidiary during
such period to the Guarantor or another Restricted Subsidiary as a dividend
(subject, in the case of a dividend or other distribution to another Restricted
Subsidiary, to the limitation contained in this clause (c)) and (ii) the
Guarantor's equity in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income, (d) any
gain (but not loss) realized upon the sale or other disposition of any Property
of the Guarantor or its consolidated Subsidiaries (including pursuant to any
Sale and Leaseback Transaction) which is not sold or otherwise disposed of in
the ordinary course of business, (e) any extraordinary gain or loss and (f) the
cumulative effect of a change in accounting principles.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the sum of the amounts that would appear on a consolidated balance sheet of the
Guarantor and its consolidated Restricted Subsidiaries as the total assets (less
accumulated depreciation and amortization, allowances for doubtful receivables,
other applicable reserves and other properly deductible items) of the Guarantor
and its consolidated Restricted Subsidiaries, determined on a consolidated basis
in accordance with IAS consistently applied, and after deducting therefrom
Consolidated Current Liabilities and, to the extent otherwise included, the
amounts of (without duplication):
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(a) the excess of cost over fair market value of assets or businesses acquired;
(b) any revaluation or other write-up in book value of assets subsequent to the
last day of the fiscal quarter of the Guarantor immediately preceding the Issue
Date as a result of a change in the method of valuation in accordance with IAS;
(c) unamortized debt discount and expenses and other unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names, copyrights,
licenses, organization or developmental expenses and other intangible items; (d)
minority interests in consolidated Subsidiaries held by Persons other than the
Guarantor or a Restricted Subsidiary; (e) treasury stock; (f) cash set aside and
held in a sinking or other analogous fund established for the purpose of
redemption or other retirement of Capital Stock to the extent such obligation is
not reflected in Consolidated Current Liabilities; and (g) Investments in and
assets of Unrestricted Subsidiaries.
"Corporate Trust Office" means the principal corporate trust office of the
Trustee, at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Indenture is located
at Fifth Floor, 2 Avenue de LaFayette, Boston. Massachusetts, USA, 02111-1724.
"Currency Exchange Protection Agreement" means, in respect of a Person, any
foreign exchange contract, currency swap agreement, currency option or other
similar agreement or arrangement designed to protect such Person against
fluctuations in currency exchange rates.
"Custodian" means any receiver, trustee, assignee, liquidator, custodian,
administrator or similar official under any Bankruptcy Law.
"Debt" means, with respect to any Person on any date of determination
(without duplication), (i) the principal of and premium (if any) in respect of
(A) debt of such Person for money borrowed and (B) debt evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable; (ii) all Capital Lease Obligations of such
Person and all Attributable Debt in respect of Sale and Leaseback Transactions
entered into by such Person; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of Property, the principal component of
all conditional sale obligations of such Person and all obligations of such
Person under any title retention agreement (but excluding trade accounts payable
or accrued expenses arising in the ordinary course of business); (iv) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the tenth Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock or, with respect to any Restricted
Subsidiary of such Person, any Preferred Stock of such Restricted Subsidiary
(but excluding, in each case, any accrued dividends); (vi) all obligations of
the type referred to in clauses (i) through (v) of other Persons and all
dividends of other Persons for the payment of which, in either case, such Person
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee, other than an obligation owed,
or dividends payable, to the Guarantor or a Restricted Subsidiary; (vii) all
obligations (other than an obligation owed to the Guarantor or a Restricted
Subsidiary) of the type referred to in clauses (i) through (vi) of other Persons
secured by any Lien on any Property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such Property or assets or the amount of
the obligation so secured and (viii) to the extent not otherwise included in
this definition, Net Payment Obligations under Hedging Obligations of such
Person. With respect to clauses (ii) and (iv) above, the amount of Debt of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described in such clauses plus the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Depositary" means DTC until a successor Depositary, if any, shall have
become such pursuant to this Indenture, and thereafter Depositary shall mean or
include each Person who is then a Depositary hereunder.
<PAGE> 7
"Designated Senior Debt" means Senior Debt under or in respect of the Bank
Credit Facility and each other Senior Debt facility outstanding or committed in
a principal amount of at least $20.0 million.
"Disqualified Stock" means, with respect to any Person, Redeemable Stock of
such Person that is owned other than by the Guarantor or another Restricted
Subsidiary as to which the maturity, mandatory redemption, conversion or
exchange (other than a conversion or exchange into Subordinated Obligations of
the Guarantor or a Restricted Subsidiary) or redemption at the option of the
holder thereof occurs, or may occur, on or prior to the first anniversary of the
Stated Maturity of the Notes; provided, however, that Redeemable Stock in such
Person that would not otherwise be characterized as Disqualified Stock under
this definition shall not constitute Disqualified Stock if such Redeemable Stock
is convertible or exchangeable into Debt solely at the option of the issuer
thereof.
"DM Equivalent" means, with respect to any monetary amount in a currency
other than Deutschmark, at any time for the determination thereof, the amount of
Deutschmark obtained by converting such currency involved in such computation
into Deutschmark at the spot mid-rate for Deutschmark against the applicable
foreign currency as quoted by Deutsche Bundesbank at approximately 13:00
(Frankfurt time) and which appears on the Reuters Money News System Page FXGF
(or such information service as may replace such system, or if such system or
its replacement is not replaced, such internationally recognized system as the
Trustee may select) on the date two Business Days prior to such determination.
"Dollar Escrow Account" means the escrow account established with the
Trustee for the Dollar Notes pursuant to the terms of the Dollar Escrow
Agreement for the deposit of a portion of the proceeds from the sale of the
Dollar Notes.
"Dollar Escrow Agreement" means the Escrow Agreement, dated as of the date
of the Indenture for the Dollar Notes, made by Holdings in favor of the Trustee
for the Dollar Notes.
"Dollar/Zloty Exchange Rate" means the U.S. Dollar/Polish Zloty exchange
rate published by the National Bank of Poland at the end of the trading day in
Warsaw on the date of determination or, in the case of a period, the average of
such exchange rates so published on each day during such period.
"Dollar Notes" has the meaning stated in the first recital of this
Indenture.
"DTC" means The Depository Trust Company or its nominee.
"Escrow Accounts" means the Euro Escrow Account and the Dollar Escrow
Account.
"Escrow Agreements" means the Euro Escrow Agreement and the Dollar Escrow
Agreement.
"Euro Escrow Account" means the account established with the Trustee for
the Euro Notes pursuant to the terms of the Euro Escrow Agreement for the
deposit of a portion of the proceeds from the sale of the Euro Notes.
"Euro Escrow Agreement" means the Escrow Agreement, dated as of the date of
the Indenture for the Euro Notes, made by Holdings in favor of the Trustee for
the Euro Notes.
"Euro Notes" means the Issuer's 11 1/4% Senior Subordinated Guaranteed
Notes due December 1, 2009 denominated in Euros.
"Euro Notes Holdings Guarantee" means Holdings' Guarantee of the
obligations of the Issuer under the Euro Notes and the Indenture for the Euro
Notes.
"Euro Notes Parent Guarantee" means the Guarantor's Guarantee of the
obligations of the Issuer under the Euro Notes and the indenture for the Euro
Notes.
"European Government Securities" means securities that are direct and
unconditional obligations of the German government meeting the requirements of
the Euro Escrow Agreement.
"Event of Default" has the meaning set forth in Section 6.01.
"Euroclear" means Morgan Guaranty Trust Company of New York (Brussels
office) as operator of the Euroclear System.
<PAGE> 8
"Exchange Act" means the United States Securities and Exchange Act of 1934,
as amended from time to time.
"Exchange Notes" has the meaning stated in the first recital of this
Indenture.
"Exchange Offer" means the exchange offer that may be pursuant to the
Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Existing Notes" means the 10 3/4% Senior Subordinated Guaranteed Discount
Notes due July 1, 2007 issued by PTC International Finance B.V., a Wholly Owned
Subsidiary of the Guarantor.
"Existing Notes Guarantee" means the Guarantor's Guarantee of PTC
International Finance B.V.'s obligations under the Existing Notes and the
indenture for the Existing Notes.
"Fair Market Value" means, with respect to any Property or asset, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided, (a) if such Property or asset has a
Fair Market Value of $5.0 million or less, by any Officer or (b) if such
Property or asset has a Fair Market Value in excess of $5.0 million, by a
majority of the Management Board and evidenced by a Board Resolution, dated
within 30 days of the relevant transaction, delivered to the Trustee.
"GSM 900 License" means the GSM 900 license awarded by the Polish Ministry
of Communications to the Guarantor in February 1996.
"GSM 1800 License" means the GSM 1800 license awarded by the Polish
Ministry of Communications to the Guarantor in August 1999.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of assuring in any
other manner a creditor or other obligee of such other Person against loss in
respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include (a) endorsements for collection or deposit in the
ordinary course of business or (b) a contractual commitment by one Person to
invest in another Person for so long as such Investment is reasonably expected
to constitute a Permitted Investment under clause (b) of the definition of
Permitted Investments. The term "Guarantee" used as a verb has a corresponding
meaning.
"Guarantor" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the Parent Guarantee.
"Hedging Obligations" of any Person means any obligation of such Person
pursuant to any Interest Rate Protection Agreement, Currency Exchange Protection
Agreement or any other similar agreement or arrangement.
"Holder" means the Person in whose name a Note is registered on the
Registrar's books.
"Holdings Guarantee" means the obligations of Holdings pursuant to its
Guarantee of the Issuer's obligations under the Notes and this Indenture.
"IAS" means accounting principles issued by the International Accounting
Standards Committee from time to time.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by merger, conversion, exchange or otherwise), extend,
assume, Guarantee or become liable in respect of such Debt or other obligation
or the recording, as required pursuant to IAS or otherwise, of any such Debt or
<PAGE> 9
obligation on the balance sheet of such Person (and "Incurrence", "Incurred",
"Incurrable" and "Incurring" shall have meanings correlative to the foregoing);
provided, however, that a change in IAS that results in an obligation of such
Person that exists at such time, and is not theretofore classified as Debt,
becoming Debt shall not be deemed an Incurrence of such Debt; provided further,
that solely for purposes of determining compliance with Section 4.09 and Section
4.16, amortization of debt discount shall not be deemed to be the Incurrence of
Debt, provided that in the case of Debt sold at a discount, the amount of such
Debt Incurred shall at all times be the aggregate principal amount at Stated
Maturity.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental indenture following
the effectiveness of a registration
statement under the Securities Act covering the Notes, the provisions of the TIA
that will thereafter be deemed to be a part of and govern this instrument, and
any such supplemental indenture, respectively.
"Independent Appraiser" means an investment banking firm of national
standing or any third party appraiser of national standing; provided, however,
that such firm or appraiser is not an Affiliate of the Guarantor.
"Initial Purchasers" means, collectively, Salomon Brothers International
Limited and Merrill Lynch International.
"Intercompany Receivables" means the obligations of the Guarantor and, if
applicable, any Restricted Subsidiary to the Issuer in respect of the loans by
the Issuer to the Guarantor and any such Restricted Subsidiary of the proceeds
of the Notes.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes.
"Interest Rate Protection Agreement" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect against fluctuations in interest
rates.
"Investment" by any Person means any direct or indirect loan (other than
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of such Person), advance or other
extension of credit or capital contribution (by means of transfers of cash or
other Property to others or payments for Property or services for the account or
use of others, or otherwise) to, or Incurrence of a Guarantee of any obligation
of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidence of Debt issued by, any other Person. For purposes
of the definition of "Restricted Payment" and Section 4.10, "Investment" shall
include the portion (proportionate to the Guarantor's equity interest in such
Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the
Guarantor at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Guarantor shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if
positive) equal to (x) the net amount of the Guarantor's "Investment" in such
Subsidiary through the date of such redesignation less (y) the portion
(proportionate to the Guarantor's equity interest in such Subsidiary) of the
Fair Market Value of the net assets of such Subsidiary at the time of such
redesignation. In determining the amount of any Investment made by transfer of
any Property other than cash, such Property shall be valued at its Fair Market
Value at the time of such Investment.
"Issue Date" means the date on which the Notes are initially issued.
"Issuer" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"Issuer Guarantees" means all obligations of the Issuer under or in respect
of its Guarantees of the obligations of the Guarantor and its Subsidiaries under
(i) the Bank Credit Facility, (ii) Hedging Obligations that constitute Permitted
Debt and (iii) other Senior Debt of the Guarantor in respect of which such
Guarantees may
<PAGE> 10
be provided at the option of the Issuer, as such Guarantees may be amended,
modified, supplemented, replaced, renewed, extended or restated from time to
time.
"Issuer Order" means a written order signed in the name of the Issuer by
any Person authorized by a resolution of the board of managing directors of the
Issuer.
"Lien" means, with respect to any Property of any Person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority,
ograniczone prawo rzeczowe ("limited property right") or other security
agreement or preferential arrangement of any kind or nature whatsoever, whether
consensual or statutory on or with respect to such Property (including any
Capital Lease Obligation, conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing or any
Sale and Leaseback Transaction).
"Loan Document" means any credit agreement, letter of credit, related
guarantee, related security agreement or related security trust deed.
"Management Board" means the Management Board of the Guarantor or any
committee thereof duly authorized to act on behalf of such Board.
"Minutes of Use" means, for any period with respect to incoming and
outgoing calls, the aggregate amount of time billed to all subscribers to the
Guarantor's systems for such period.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Cash" from an Asset Sale means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to such
Properties or received in any other noncash form) in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state, provincial, foreign and local taxes required
to be accrued as a liability under IAS, as a consequence of such Asset Sale,
(ii) all payments made on any Debt which is secured by any Property subject to
such Asset Sale, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such Property, or which must by its terms,
or in order to obtain a necessary consent to such Asset Sale, or by applicable
law be repaid out of the proceeds from such Asset Sale, (iii) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Sale and (iv) the
deduction of appropriate amounts provided by the seller as a reserve, in
accordance with IAS, against any liabilities associated with the Property
disposed in such Asset Sale and retained by the Guarantor or any Restricted
Subsidiary after such Asset Sale.
"Net Cash Proceeds" means, with respect to any issuance or sale of Capital
Stock, the cash proceeds of such issuance or sale, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Net Payment Obligations" means, at any time, the net amount that a Person
would be required to pay to a counterparty upon the consensual termination at
such time of all Hedging Obligations to which such Person is a party.
"Notch" means any change in gradation (+ and - for S&P; l, 2 and 3 for
Moody's) with respect to Rating Categories.
"Notes Guarantees" means the Parent Guarantee and the Holdings Guarantee.
"Officer" means the general director or the director of finance of the
Guarantor or any other member of the Management Board or the Supervisory Board.
<PAGE> 11
"Officer's Certificate" means a certificate signed by an Officer, in the
case of the Guarantor, or a managing director of the Issuer or any Person
authorized by a resolution of the board of managing directors of the Issuer, and
in each case delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Guarantor or the Trustee.
"Parent Guarantee" means the obligations of the Guarantor pursuant to its
Guarantee of the Issuer's obligations under the Notes and this Indenture.
"Paying Agent" means the Paying Agent, any successor thereof, and any other
Person (including the Issuer or the Guarantor acting as Paying Agent, except
that for purposes of Article 8, the Paying Agent shall not be the Issuer or a
Subsidiary of the Guarantor or an Affiliate of any of them) authorized by the
Issuer to pay the principal of (and premium, if any) or interest (including
Special Interest, if any) and Additional Amounts, if any, on any Notes on behalf
of the Issuer.
"Permitted Debt" has the meaning given to such term in Section 4.09.
"Permitted Holders" means (i) U S WEST International B.V. ("U S West"),
Deutsche Telekom MobilNet GmbH ("DeTeMobil") and Elektrim S.A. ("Elektrim") or
any Person of which the foregoing "beneficially owns" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) voting securities representing at least
66 2/3% of the total voting power of all classes of Voting Stock of such Person
(exclusive of any matters as to which class voting rights exist) or any Person
that "beneficially owns" voting securities representing at least 66 2/3% of the
total voting power of all classes of Voting Stock of U S West or DeTeMobil or
Elektrim, (ii) any international telecom company with (a) substantial experience
in mobile telecommunications operations, (b) a long-term debt rating by Moody's
of at least Baa3 or by S&P of at least BBB-, or a comparable credit rating by
another internationally recognized rating agency and (c) consolidated revenues
for its most recent full fiscal year of at least $1 billion or the equivalent in
another currency and (iii) any corporation (or other entity) which owns all of
the outstanding Capital Stock of the Guarantor if such entity acquires such
ownership in a transaction in which the owners of all of the Capital Stock of
the Guarantor immediately prior to such transaction acquire proportionate
ownership of all of the Capital Stock (or similar equity ownership interest) of
such entity (or any parent organization which owns all of the outstanding
Capital Stock (or similar equity ownership interest) of such entity).
"Permitted Investment" means an Investment by the Guarantor or any
Restricted Subsidiary in (a) (i) the form of loans or advances to the Guarantor
or (ii) a Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary; provided, however, that the primary
business of such Restricted Subsidiary is a Telecommunications Business; (b)
another Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Guarantor or a Restricted Subsidiary; provided, however, that
such Person's primary business is a Telecommunications Business; (c) Temporary
Cash Investments; (d) receivables owing to the Guarantor or any Restricted
Subsidiary, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Guarantor or any such Restricted Subsidiary deems reasonable under the
circumstances; (e) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(f) loans and advances to employees made in the ordinary course of business
consistent with past practices of the Guarantor or such Restricted Subsidiary,
as the case may be, provided that such loans and advances do not exceed $1.0
million at any one time outstanding; (g) stock, obligations or securities
received in settlement of debts created in the ordinary course of business and
owing to the Guarantor or any Restricted Subsidiary or in satisfaction of
judgments; (h) any Person to the extent such Investment represents the non-cash
portion of the consideration received in connection with an Asset Sale
consummated in compliance with Section 4.12; and (i) in addition to Investments
described in clauses (a) through (h) of this definition of "Permitted
Investments", Investments valued at Fair Market Value at the time made not to
exceed $10.0 million outstanding at any one time in the aggregate.
<PAGE> 12
"Permitted Liens" means
(a) Liens securing Senior Debt;
(b) Liens on the Property of the Guarantor or any Restricted Subsidiary
existing on the Issue Date, including with respect to the Escrow
Accounts;
(c) Liens to secure Debt permitted to be Incurred under clause (iii) of
paragraph (b) of Section 4.09 or under paragraph (b) of Section 4.16;
(d) Liens for taxes, assessments or governmental charges, duties or
levies on the Property of the Guarantor or any Restricted Subsidiary
if the same shall not at the time be delinquent or thereafter can be
paid without penalty, or are being contested in good faith and by
appropriate proceedings promptly instituted and diligently conducted;
provided that any reserve or other appropriate provision that shall
be required in conformity with IAS shall have been made therefor;
(e) Liens imposed by law, such as carriers', warehousemen's, mechanics'
and landlord's Liens and other similar Liens on the Property of the
Guarantor or any Restricted Subsidiary arising in the ordinary course
of business and securing payment of obligations which are not more
than 60 days past due or are being contested in good faith and by
appropriate proceedings;
(f) Liens on the Property of the Guarantor or any Restricted Subsidiary
Incurred in the ordinary course of business to secure performance of
obligations with respect to statutory or regulatory requirements,
performance or return-of-money bonds, surety bonds or other
obligations of a like nature and Incurred in a manner consistent with
industry practice, in each case, which are not incurred in connection
with the borrowing of money, the obtaining of advances or credit or
the payment of the deferred purchase price of Property and which do
not in the aggregate impair in any material respect the use of
Property in the operation of the business of the Guarantor and its
Restricted Subsidiaries taken as a whole;
(g) Liens on Property at the time the Guarantor or any Restricted
Subsidiary acquired such Property, including any acquisition by means
of a merger or consolidation with or into the Guarantor or any
Restricted Subsidiary; provided, however, that such Lien shall not
have been Incurred in anticipation or in connection with such
transaction or series of transactions pursuant to which such Property
was acquired by the Guarantor or any Restricted Subsidiary;
(h) pledges or deposits by the Guarantor or any Restricted Subsidiary
under workmen's compensation laws, unemployment insurance laws or
similar legislation, good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Debt) or leases to
which the Guarantor or any Restricted Subsidiary is a party, deposits
to secure public or statutory obligations of the Guarantor, and
deposits for the payment of rent, in each case Incurred in the
ordinary course of business;
(i) Liens on the Property of a Person at the time such Person becomes a
Restricted Subsidiary; provided, however, that any such Lien may not
extend to any other Property of the Guarantor or any other Restricted
Subsidiary which is not a direct Subsidiary of such Person; provided
further, however, that any such Lien was not Incurred in anticipation
of or in connection with the transaction or series of transactions
pursuant to which such Person became a Restricted Subsidiary;
(j) utility easements, building or zoning restrictions and such other
encumbrances or charges against real Property and defects of title as
are of a nature generally existing with respect to properties of a
similar character;
(k) Liens on the Property of the Guarantor or any Restricted Subsidiary
to secure any extension, renewal, refinancing, replacement or
refunding (or successive extensions, renewals, refinancings,
replacements or refundings), in whole or in part, of any Debt secured
by Liens referred to in any of clauses (a), (b), (c), (g) or (i);
provided, however, that any such Lien will be limited to all or part
of the same Property that secured the original Lien (plus
improvements on such Property) and the aggregate principal amount of
Debt that is secured by such Lien will not be increased to an amount
greater than the sum of (A) the outstanding principal amount, or, if
greater, the committed amount, of the Debt secured by
<PAGE> 13
Liens described under clauses (a), (b), (c), (g) or (i) at the time the
original Lien became a Permitted Lien under the Indenture and (B) an
amount necessary to pay any premiums, fees and other expenses incurred
by the Guarantor in connection with such refinancing, refunding,
extension, renewal or replacement; or
(l) Liens on the Property of any Unrestricted Subsidiary;
(m) Liens in favor of the Guarantor or any Restricted Subsidiary;
(n) Liens on the Property of the Guarantor or any Restricted Subsidiary
pursuant to conditional sale or title retention agreements;
(o) Liens on the Property of the Guarantor or any Restricted Subsidiary
relating to judgements being contested in good faith by the Guarantor
or any Restricted Subsidiary;
(p) Liens on the Property of the Guarantor or any Restricted Subsidiary
pursuant to good faith contract deposits;
(q) Liens on Property of the Guarantor or any Restricted Subsidiary
arising as a result of immaterial leases of such Property to other
Persons;
(r) any Lien securing Debt of the Guarantor or any Restricted Subsidiary,
provided that the Lien only extends to cash or other current assets
to be used by the Guarantor or such Restricted Subsidiary to make
payments of interest (and other obligations) on such Debt; or
(s) extensions or renewals of Liens permitted by clause (a) through (r)
above.
"Person" means any individual, corporation, company (including any limited
liability company), partnership, joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Pledged Securities" has the meaning given to such term in the Dollar
Escrow Agreement.
"Polish Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the Republic of
Poland (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the Republic of Poland is pledged.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to the payment of
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person over shares of any other class of
Capital Stock issued by such Person.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms hereof, a calculation performed in accordance with
Article II of Regulation S-X promulgated under the Securities Act, as
interpreted in good faith by the Management Board after consultation with the
independent certified public accountants of the Guarantor, or otherwise a
calculation made in good faith by the Management Board after consultation with
the independent certified public accountants of the Guarantor, as the case may
be.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including Capital Stock in, and other securities of, any other
Person. For purposes of any calculation required pursuant to the Indenture, the
value of any Property shall be its Fair Market Value.
"Public Equity Offering" means a bona fide public offering to a substantial
number of offerees of ordinary shares of the Guarantor with aggregate net
proceeds to the Guarantor of not less than $100.0 million.
"Qualified Debt Offering" means an Incurrence by the Guarantor or a
Restricted Subsidiary of Debt to banks or other financial institutions or
pursuant to a domestic note offering in Poland in an aggregate principal
<PAGE> 14
amount that, when taken together with Debt outstanding under the Bank Credit
Facility and Refinancing Debt Incurred in respect thereof, does not exceed, and
with maturities that would not result in amounts exceeding, the amounts of Debt
permitted under Section 4.09(b)(ii) or clause (a) of Section 4.16.
"QIB" means a "Qualified Institutional Buyer" as defined under Rule 144A.
"Rating Agency" means S&P and Moody's.
"Rating Categories" means (i) with respect to S&P, any of the following
categories AAA, AA, A, BBB, BB, B, CCC, CC or C; and (ii) with respect to
Moody's, any of the following categories Aaa, Aa, A, Baa, Ba, B, Caa, Ca or C.
"Rating Date" means the date which is the earlier of (x) 120 days prior to
the occurrence of the event specified in clauses (a), (b) or (c) of the
definition of a Change of Control and (y) the date of the first public
announcement of the possibility of such event.
"Rating Decline" means the occurrence on any date within the 90-day period
following the occurrence of an event specified in clauses (a), (b) or (c) of the
definition of a Change of Control (which period shall be extended so long as
during such period the rating of the Notes is under publicly announced
consideration for possible downgrade by a Rating Agency) of either of the
following events (i) either Rating Agency shall lower its rating on the Notes at
least two Notches below the rating of the Notes by such Rating Agency on the
Rating Date or (ii) either Rating Agency shall withdraw its rating of the Notes.
In determining how many Notches the rating of the Notes has decreased, gradation
with respect to Rating Categories will be taken in account (e.g. with respect to
S&P, a decline in a rating from BB+ to BB, or from BB- to B+, will constitute a
decrease of one Notch).
"Record Date" for the interest payable on any Interest Payment Date means
the May 15 or November 15 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date.
"Redeemable Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (ii) is or may
become redeemable or repurchaseable at the option of the holder thereof, in
whole or in part, or (iii) is convertible or exchangeable for Debt or
Disqualified Stock.
"Redemption Price" means the price to redeem a Note, expressed as a
percentage of the principal amount of maturity set forth in the Notes under
"Optional Redemption", "Optional Tax Redemption", or "Redemption at Option of
Holders", as applicable.
"Refinancing Debt" means any Debt that renews, extends, repays,
substitutes, refinances or replaces (collectively, "refinances", "refinanced"
and "refinancing" shall have correlative meanings) any Debt, including any
successive refinancings so long as (a) such Debt is in an aggregate principal or
commitment amount (or if Incurred with original issue discount, an aggregate
issue price) not in excess of the sum of (i) the aggregate principal or
commitment amount (or if Incurred with original issue discount, the aggregate
accreted value) then outstanding or in effect, respectively, of the Debt being
refinanced and (ii) an amount necessary to pay any fees and expenses, including
premiums and defeasance costs, related to such refinancing, and (b) in the case
of Subordinated Obligations, (i) the Average Life of such Debt is equal to or
greater than the Average Life of the Debt being refinanced, (ii) the Stated
Maturity of such Debt is no earlier than the Stated Maturity of the Debt being
refinanced, and (iii) such Debt is subordinated in right of payment to Senior
Debt or the Notes to at least the same extent, if any, as the Debt being
refinanced; provided that Refinancing Debt shall not include Debt of the
Guarantor or a Restricted Subsidiary that refinances Debt of an Unrestricted
Subsidiary.
"Registered Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Registrar" means State Street Bank and Trust Company and any successor
registrar.
"Registration Rights Agreement" means the Registration Rights Agreement
relating to the Notes dated November 23, 1999, among the Issuer, the Guarantor
and the Initial Purchasers.
<PAGE> 15
"Regulation S" means Regulation S under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"Representative" means the trustee, agent or representative expressly
authorized to act in such capacity, if any, for any Senior Debt or, if no such
Person is so authorized, the holders of such Senior Debt.
"Representative of the Bank Debt" means the trustee, agent or
representative expressly authorized to act in such capacity, if any, for any
Bank Debt or, if no such Person is so authorized, the holders of such Bank Debt.
"Restricted Payment" means (a) any dividend or other payment or
distribution (whether made in cash, Property or securities) declared or paid on
or with respect to any shares of Capital Stock of the Guarantor or Capital Stock
of any Restricted Subsidiary except for any dividend or distribution which is
made solely to the Guarantor or a Restricted Subsidiary (and, if such Restricted
Subsidiary is not a Wholly Owned Subsidiary, to the other shareholders of such
Restricted Subsidiary on a pro rata basis) or dividends or distributions payable
solely in shares of Capital Stock (other than Redeemable Stock) of the
Guarantor; (b) a payment made by the Guarantor or any Restricted Subsidiary to
purchase, redeem, acquire or retire any Capital Stock of the Guarantor or a
Restricted Subsidiary held by Persons other than the Guarantor or any Wholly
Owned Subsidiary; (c) a payment made by the Guarantor or any Restricted
Subsidiary to redeem, repurchase, defease or otherwise acquire or retire for
value, prior to any scheduled maturity, scheduled sinking fund or mandatory
redemption payment, any Subordinated Obligation (other than the purchase,
repurchase, or other acquisition of any Subordinated Obligation purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
make any payment on, redeem, repurchase or defease or otherwise acquire or
retire for value the Shareholders Loans; or (d) an Investment (other than
Permitted Investments) in any Person.
"Restricted Subsidiary" means (a) any Subsidiary of the Guarantor on or
after the Issue Date unless such Subsidiary shall have been designated an
Unrestricted Subsidiary as permitted or required pursuant to Section 4.20 and
(b) an Unrestricted Subsidiary which is redesignated as a Restricted Subsidiary
as permitted pursuant to Section 4.20.
"Rule 144" means Rule 144 under the Securities Act (including any successor
regulation thereto), as it may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., and its successors.
"Sale and Leaseback Transaction" means an arrangement relating to Property
now owned or hereafter acquired whereby the Guarantor or a Restricted Subsidiary
transfers such Property to a Person and the Guarantor or a Restricted Subsidiary
leases it from such Person.
"Scheduled Reductions" shall mean the following amounts on the following
dates: (a) DM 50,400,000 on each January 1 and July 1 from January 1, 2002
through July 1, 2003 and (b) DM 67,200,000 on each January 1 and July 1 from
January 1, 2004 through January 1, 2007.
"SEC" means the United States Securities and Exchange Commission.
"Secured Debt" means any Debt of the Guarantor secured by a Lien.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Senior Debt" means Senior Debt of the Guarantor and Senior Debt of the
Issuer.
"Senior Debt of the Guarantor" means the principal of (and premium, if
any), interest (including interest following the filing of any petition in
bankruptcy or for reorganization relating to the Guarantor or the Issuer,
whether or not such claim for post-petition interest is an allowed claim in such
proceeding) on, reimbursements, indemnification, margin payments, fees and other
amounts payable under or in respect of (i) the Bank Credit Facility, (ii)
refinancings and refundings in whole or in part of the Bank Credit Facility
(including successive refinancings and refundings), (iii) Hedging Obligations
that constitute Permitted Debt and (iv) other Debt of the
<PAGE> 16
Guarantor for borrowed money (including, without limitation Capital Lease
Obligations and long-term financing provided by vendors of capital equipment)
that does not by its terms expressly provide that it is subordinated in right of
payment to any other Debt of the Guarantor.
"Senior Debt of the Issuer" means all obligations of the Issuer under or in
respect of (i) the Issuer Guarantees, (ii) refinancings and refundings in whole
or in part of the Issuer Guarantees (including successive refinancings and
refundings) and (iii) other Debt of the Issuer for borrowed money that does not
by its terms expressly provide that it is subordinated in right of payment to
any other Debt of the Issuer.
"Senior Subordinated Debt" means Senior Subordinated Debt of the Issuer and
Senior Subordinated Debt of the Guarantor.
"Senior Subordinated Debt of the Guarantor" means Debt of the Guarantor
that specifically provides that such Debt is to rank equally with the
obligations of the Guarantor under the Parent Guarantee, the Euro Notes Parent
Guarantee and the Existing Notes Guarantee and does not by its terms expressly
provide that it is subordinated to any other obligation of the Guarantor which
is not Senior Debt of the Guarantor.
"Senior Subordinated Debt of the Issuer" means Debt of the Issuer that
specifically provides that such Debt is to rank equally with the obligations of
the Issuer under the Notes and the Euro Notes and does not by its terms
expressly provide that it is subordinated to any other obligation of the Issuer
which is not Senior Debt of the Issuer.
"Shareholders' Agreement" means the agreement among the Guarantor,
Elektrim, U S West, DeTeMobil and certain other shareholders of the Guarantor
dated December 2, 1995, as amended on March 11, 1997.
"Shareholders Loans" means the loans made to the Guarantor by each of
Elektrim S.A., DeTeMobil Deutsche Telekom Mobil Net GmGH and Media One
International B.V., each dated August 24, 1999, and any refinancings thereof.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) as of the end of
such fiscal year, was the owner of more than 15% of the consolidated assets of
the Guarantor and its Restricted Subsidiaries, or (ii) for the most recent
fiscal year of the Guarantor, accounted for more than 15% of EBITDA, all as set
forth on the most recently available consolidated financial statements of the
Guarantor.
"Special Interest" means the Special Interest as defined in the form of
Dollar Note attached hereto as Exhibit A.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such note
at the option of the holder thereof upon the happening of any contingency beyond
the control of the issuer unless such contingency has occurred).
"Subordinated Obligation" means any Debt of the Guarantor or the Issuer
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment, in the case of Debt of the Guarantor,
to the Guarantor's obligations under the Parent Guarantee, the Euro Notes Parent
Guarantee, the Existing Notes Guarantee and, in the case of the Issuer, to the
Notes, in each case pursuant to a written agreement to that effect.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (a) in the case of a corporation, of which at
least 50% of the total voting power of the Voting Stock is held by such
first-named Person or any of its Subsidiaries and such first-named Person or any
of its Subsidiaries has the power to direct the management, policies and affairs
thereof; or (b) in the case of a partnership, joint venture, association, or
other business entity, with respect to which such first-named Person or any of
its Subsidiaries has the power to direct or cause the
<PAGE> 17
direction of the management and policies of such entity by contract or otherwise
if in accordance with IAS such entity is consolidated with the first-named
Person for financial statement purposes.
"Supervisory Board" means the Supervisory Board of the Guarantor or any
committee thereof duly authorized to act on behalf of such Board.
"Telecommunications Business" means the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased transmission facilities, (ii) constructing, creating, developing
or marketing communications related network equipment, software and other
devices for use in a telecommunications business or (iii) evaluating,
participating or pursuing any other activity or opportunity that is primarily
related to those identified in (i) or (ii) above.
"Telecommunications License" means each of the GSM 900 License and the GSM
1800 License.
"Temporary Cash Investments" means any of the following: (a) Investments in
U.S. Government Securities or Polish Government Obligations maturing within 90
days of the date of acquisition thereof, (b) Investments in time deposit
accounts, certificates of deposit and money market deposits maturing within 90
days of the date of acquisition thereof issued by Citibank (Poland) S.A., BRE
S.A. or a bank or trust company which is organized under the laws of the United
States of America or any state thereof or any country recognized by the United
States of America having capital, surplus and undivided profits aggregating in
excess of $500,000,000 and whose long-term debt is rated "A-3" or higher
according to Moody's or "A-" or higher according to S&P (or a similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)), (c) repurchase obligations
with a term of not more than 7 days for underlying notes of the types described
in clause (a) entered into with a bank meeting the qualifications described in
clause (b) above, and (d) Investments in commercial paper, maturing not more
than 90 days after the date of acquisition, issued by a corporation (other than
an Affiliate of the Guarantor) organized and in existence under the laws of the
United States of America or a member country of the European Union with a rating
at the time as of which any Investment therein is made of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P (or a similar
equivalent rating by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act)).
"TIA" means the United States Trust Indenture Act of 1939 as in effect on
the date hereof; provided, however, that in the event the Trust Indenture Act of
1939 is amended after such date, "TIA" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939, as so amended.
"Trustee" means the party named as such in this Indenture until a successor
replaces it in accordance with the provisions of this Indenture and, thereafter,
means the successor.
"Trust Officer" means, when used with respect to the Trustee, any vice
president, assistant vice president or trust officer in the corporate trust
administration of the Trustee or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above-designated
officers, and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"UMTS License" means any license awarded by the Polish Ministry of
Communications, or a successor governmental entity to operate a Universal Mobile
Telecommunications System.
"Unrestricted Subsidiary" means (a) any Subsidiary of the Guarantor in
existence on the Issue Date (other than the Issuer) that is designated as an
Unrestricted Subsidiary; (b) any Subsidiary of an Unrestricted Subsidiary; and
(c) any Subsidiary of the Guarantor that is designated after the Issue Date as
an Unrestricted Subsidiary as permitted pursuant to Section 4.20 and not
thereafter redesignated as a Restricted Subsidiary as permitted pursuant
thereto.
"U.S. Dollar Equivalent" means, with respect to any monetary amount in a
currency other than U.S. Dollars, at any time for the determination thereof, the
amount of U.S. Dollars obtained by converting such foreign currency involved in
such computation into U.S. Dollars at the spot rate for the purchase of U.S.
Dollars with the applicable foreign currency as published in the Wall Street
Journal in the "Exchange Rates" column under the heading "Currency Trading" on
the date two Business Days prior to such determination.
<PAGE> 18
"U.S. Government Securities" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all
of the Voting Stock of which (except directors' qualifying shares) is at the
time owned, directly or indirectly, by the Guarantor and its other Wholly Owned
Subsidiaries.
SECTION 1.02 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
- ---- ----------
<S> <C>
"Act"....................................................... 13.15
"Affiliate Transaction"..................................... 4.13
"Authorized Agent".......................................... 13.1
"Asset Sale Offer".......................................... 4.12
"Change of Control Offer"................................... 4.14
"Change of Control Purchase Price".......................... 4.14
"Commencement Date"......................................... 3.08(b)
"Guarantor's Authorized Agent".............................. 13.09
"covenant defeasance option"................................ 8.01(b)
"Defaulted Interest"........................................ 2.11
"DTC Security Holder"....................................... 2.01
"Event of Default".......................................... 6.01
"Excess Proceeds"........................................... 4.12
"Global Notes".............................................. 2.01(c)
"legal defeasance option"................................... 8.01(b)
"Legal Holiday"............................................. 13.07
"Notice of Default"......................................... 6.01
"Offer Amount".............................................. 3.08(b)
"Obligations"............................................... 11.01
"Participants".............................................. 2.01(c)
"pay the Notes"............................................. 10.03
"Payment Blockage Notice"................................... 10.03
"Payment Blockage Period"................................... 10.03
"Permitted Debt"............................................ 4.09(b)
"Purchase Agreement"........................................ 2.01(b)
"Purchase Date"............................................. 3.08(b)
"Refinanced Debt"........................................... 4.09(d)
"Regulation S Global Note".................................. 2.01(b)
"Restricted Global Note".................................... 2.01(b)
"Restricted Payment"........................................ 4.01
"Security Register"......................................... 2.03
"Surviving Person".......................................... 5.01(a)
"Taxes"..................................................... 4.18
"Tender Period"............................................. 3.08(b)
"U.S. Exchange Global Note"................................. 2.01(b)
</TABLE>
<PAGE> 19
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Upon the earlier of the effectiveness of the Exchange Offer Registration
Statement and the Shelf Registration Statement, this Indenture shall become
subject to the mandatory provisions of the TIA, which are incorporated by
reference in and will be made a part of this Indenture. The following TIA terms
used in this Indenture have the following meanings:
"indenture notes" means the Notes.
"indenture note holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture notes means the Issuer, Holdings and the
Guarantor.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings assigned to them by such definitions.
SECTION 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with IAS;
(3) "or" is not exclusive;
(4) "including" or "include" means including or include without
limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured or unguaranteed Debt shall not be deemed to be subordinate
or junior to secured or guaranteed Debt merely by virtue of its
nature as unsecured or unguaranteed Debt;
(7) the principal amount of any noninterest bearing or other discount
note at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with IAS;
(8) the principal amount of any Preferred Stock shall be the greater of
(i) the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with
respect to such Preferred Stock;
(9) for purposes of the covenants and definitions set forth in this
Indenture, amounts stated in U.S. dollars shall be deemed to include
both U.S. dollars and U.S. Dollar Equivalents and amounts stated in
Deutschmark ("DM") shall be deemed to include both DM and DM
Equivalents;
(10) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other Subdivision; and
(11) an Event of Default shall be deemed not to be continuing when the
event that caused such Event of Default could occur without causing a
Default or an Event of Default.
ARTICLE 2
THE NOTES
SECTION 2.01 FORM AND TERMS. The Dollar Notes, the Notes Guarantees and
the Trustee's certificate of authentication shall be substantially in the form
of Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. The Exchange Notes, the Guarantees thereof and the Trustee's
certificate of
<PAGE> 20
authentication thereon shall be substantially in the form of Exhibit B, which is
hereby incorporated in and expressly made a part of this Indenture. The Notes
may have notations, legends or endorsements required by law, securities exchange
rule and agreements to which the Issuer, Holdings or the Guarantor is subject,
if any (provided that any such notation, legend or endorsement is in a form
acceptable to the Guarantor). The Issuer, Holdings or the Guarantor shall
furnish any such legend not contained in Exhibit A or Exhibit B to the Trustee
in writing. Each Note shall be dated the date of its authentication.
The Notes shall be known and designated as the 11 1/4% Senior Subordinated
Guaranteed Notes due 2009 of the Issuer. The Notes will be senior subordinated
obligations of the Issuer and will be limited to an aggregate principal amount
at maturity of $150,000,000. The Stated Maturity of the Notes shall be December
1, 2009. From November 23, 1999, or from the most recent interest payment date
to which interest has been paid or provided for, cash interest on the Notes will
accrue at 11 1/4% per year, payable semiannually on June 1 and December 1 of
each year, beginning on June 1, 2000, to the Person in whose name the Notes (or
any predecessor Note) is registered at the close of business on the preceding
May 15 or November 15, as the case may be.
(a) Payment. The principal of the Notes shall be payable at the
Corporate Trust Office of State Street Bank and Trust Company and,
subject to any fiscal or other laws and regulations applicable
thereto, at the specified offices of any other Paying Agent appointed
by the Issuer. Subject to Section 2.09(b), payment of principal of
and interest on the Notes shall be made by the Issuer, Holdings or
the Guarantor in United States dollars in immediately available funds
to the Depositary or its nominee, as the case may be, as the sole
registered holder of the Restricted Global Note and the Regulation S
Global Note; provided, however, that payment of interest may be made
at the option of the Issuer by check mailed to the Holder. The amount
of payments in respect of interest on each Interest Payment Date
shall correspond to the aggregate principal amount of Notes
represented by the Regulation S Global Note and the Restricted Global
Note, as established by the Registrar at the close of business on the
relevant Record Date. Payments of principal shall be made upon
surrender of the Regulation S Global Note and the Restricted Global
Note to the Paying Agent.
All payments made by the Issuer or the Guarantor to, or to the order of,
the holder of the Regulation S Global Note, the Restricted Global Note
and, if and when issued, the U.S. Exchange Global Note, respectively,
shall discharge the liability of the Guarantor under the Notes to the
extent of the sums so paid.
(b) Dollar Notes. The Notes are being offered and sold by the Issuer and
the Guarantor pursuant to a Purchase Agreement, dated November 23,
1999, among the Issuer, the Guarantor, Holdings and the Initial
Purchasers (the "Purchase Agreement").
Dollar Notes offered and sold in reliance on Regulation S, as provided in
the Purchase Agreement, shall be issued initially in the form of one or
more global Notes in fully registered form without interest coupons
substantially in the form of Exhibit A hereto, with such applicable
legends as are provided in Exhibit A hereto, except as otherwise
permitted herein (the "Regulation S Global Note"), which shall be
deposited on behalf of the purchasers of the Dollar Notes represented
thereby with the Trustee, at its office in New York, as custodian for the
Depositary, and registered in the name of the Depositary or its nominee,
as the case may be, for the accounts of designated agents holding on
behalf of Euroclear or Cedel, duly executed by the Issuer and
authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the Regulation S Global Note may from time to time be
increased or decreased by adjustments made by the Registrar on the
Security Register, as hereinafter provided.
Notes offered and sold to QIBs in reliance on Rule 144A as provided in
the Purchase Agreement, shall be issued initially in the form of one or
more permanent Global Notes in fully registered form without interest
coupons substantially in the form of Exhibit A hereto, with such
applicable legends as are provided in Exhibit A hereto, except as
otherwise permitted herein (the "Restricted Global Note"), which shall be
deposited on behalf of the purchasers of the Notes represented thereby
with the Trustee, at its office in New York, as custodian for the
Depositary, and registered in the name of the Depositary, or its nominee,
as the case may be, duly executed by the Issuer and authenticated by the
<PAGE> 21
Trustee as hereinafter provided. The aggregate principal amount of the
Restricted Global Note may from time to time be increased or decreased
by adjustments made by the Registrar on the Security Register, as
hereinafter provided.
If and when issued, Exchange Notes offered to holders of the Dollar
Notes, as provided in the Registration Rights Agreement, shall be issued
initially in the form of one or more permanent Global Notes in fully
registered form without interest coupons substantially in the form of
Exhibit B hereto, with such applicable legends as are provided in Exhibit
B hereto, except as otherwise permitted herein (the "U.S. Exchange Global
Note"), which shall be deposited on behalf of the holders of the Exchange
Notes represented thereby with the Trustee, at its New York office, as
custodian for the Depositary, and registered in the name of the
Depositary, or its nominee, as the case may be, duly executed by the
Issuer and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the U.S. Exchange Global Note may from time
to time be increased or decreased by adjustments made by the Registrar on
the Security Register, as hereinafter provided.
(c) Book-Entry Provisions. This Section 2.01(c) shall apply to the
Regulation S Global Note, the Restricted Global Note and, if and when
issued, the U.S. Exchange Global Note (collectively, the "Global
Notes") deposited with or on behalf of the Depositary.
Members of, or participants in, the Depositary ("Participants") shall
have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depositary or by the Trustee as the custodian of
the Depositary or under such Global Note, and the Depositary or its
nominee may be treated by the Issuer, Holdings, the Guarantor, the
Trustee and any agent of the Issuer, Holdings, the Guarantor or the
Trustee as the sole owner of such Global Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Issuer, Holdings, the Guarantor, the Trustee or any agent of the
Issuer, Holdings, the Guarantor or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Participants, the
operation of customary practices of such Depositary governing the
exercise of the rights of a Holder of a beneficial interest in any Global
Note.
Subject to the provisions of Section 2.09(b), the registered Holder of a
Global Note may grant proxies and otherwise authorize any Person,
including Participants and Persons that may hold interests through
Participants, and account holders of Euroclear or Cedel, and Persons that
may hold interests through such account holders, to take any action which
a Holder is entitled to take under this Indenture or the Notes.
Except as provided in Section 2.09 owners of a beneficial interest in
Global Notes will not be entitled to receive physical delivery of
certificated Notes.
(d) Cessation of Restrictions. Upon the consummation of a Registered
Exchange Offer, the requirements that any Dollar Note remaining
outstanding (i) be issued in global form shall continue to apply,
subject to Section 2.09, and (ii) contain the legends set forth in
Exhibit A hereto shall continue to apply.
Any Exchange Note issued in respect of any Note shall bear only the
legends set forth in Exhibit B hereto. After a transfer of any Note
pursuant to a Shelf Registration Statement, the requirement that any Note
be issued in global form shall continue to apply, subject to Section
2.09, but all requirements pertaining to legends on such Note as set
forth in Exhibit A hereto shall cease to apply (provided, however, that
such Note shall bear the legends set forth in Exhibit B hereto),
beneficial interests in such Note shall be reflected in the U.S. Exchange
Global Note and the provisions relating to the payment of Special
Interest on such Note shall cease to apply.
SECTION 2.02 EXECUTION AND AUTHENTICATION. An authorized director or
executive officer shall sign the Notes for the Issuer by manual or facsimile
signature.
If an authorized director or executive officer whose signature is on a Note
no longer holds that office at the time the Trustee authenticates the Note, the
Note shall be valid nevertheless.
<PAGE> 22
A Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose until an authorized signatory of the Trustee
manually signs the certificate of authentication, substantially in the form
provided in Exhibit A and Exhibit B hereto, on the Note. The signature shall be
conclusive evidence that the Note has been authenticated under this Indenture.
Pursuant to an Issuer Order, the Issuer shall execute and the Trustee shall
authenticate (1) Dollar Notes (including one or more Global Notes in accordance
with Section 2.01(c)) for original issue up to an aggregate principal amount
stated in paragraph 6 of the Dollar Notes and (2) Exchange Notes for issue only
in a Registered Exchange Offer, pursuant to the Registration Rights Agreement,
for Dollar Notes up to a like principal amount. The aggregate principal amount
of Notes outstanding shall not exceed the amount set forth herein except as
provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Issuer to authenticate the Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Notes whenever the Trustee
may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as any Registrar, Paying Agent or agent for service of notices and
demands.
SECTION 2.03 REGISTRAR, SECURITY REGISTER AND PAYING AGENT. Subject to
any applicable laws and regulations, the Issuer shall cause the Registrar to
keep a register (the "Security Register") at its Corporate Trust Office in
which, subject to such reasonable regulations it may prescribe, the Issuer shall
provide for the registration of ownership, exchange, and transfer of the Notes.
Such registration in the Security Register shall be conclusive evidence of the
ownership of Notes. Included in the books and records for the Notes shall be
notations as to whether such Notes have been paid, exchanged or transferred,
canceled, lost, stolen, mutilated or destroyed and whether such Notes have been
replaced. In the case of the replacement of any of the Notes, the Registrar
shall keep a record of the Note so replaced and the Note issued in replacement
thereof. In the case of the cancellation of any of the Notes, the Registrar
shall keep a record of the Note so canceled and the date on which such Note was
canceled.
The Issuer shall maintain an office or agency within the City and State of
New York where Notes may be presented for payment to the Paying Agent. The
Issuer and the Guarantor will at all times maintain a Paying Agent in Luxembourg
as long as the Notes may be listed on the Luxembourg Stock Exchange. The Issuer
may have one or more Co-Registrars and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent.
The Issuer shall enter into an appropriate agency agreement with any Paying
Agent or Co-Registrar not a party to this Indenture, which, following the
effectiveness of a Registration Statement pursuant to the Registration Rights
Agreement, shall incorporate the terms of the TIA. The agreement shall implement
the provisions of this Indenture that relate to such agent. The Issuer shall
notify the Trustee of the name and address of any such agent. Initially, State
Street Bank and Trust Company will act as Paying Agent and Registrar. If the
Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall act as
such and shall be entitled to appropriate compensation therefor pursuant to
Section 7.07. The Issuer or any of its Wholly Owned Subsidiaries incorporated in
the United States may act as Paying Agent, Registrar, Co-Registrar or transfer
agent.
SECTION 2.04 DENOMINATIONS. The Notes shall be issued without coupons and
only in denominations of $1,000 or any integral multiple thereof.
SECTION 2.05 HOLDER LISTS. The Registrar shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of Holders. If the Trustee is not the Registrar, the Issuer
shall furnish to the Trustee, in writing no later than the Record Date for each
Interest Payment Date and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Holders.
SECTION 2.06 TRANSFER AND EXCHANGE. Where Notes are presented to the
Registrar or a Co-Registrar with a request to register a transfer or to exchange
them for an equal principal amount of Notes of other
<PAGE> 23
denominations, the Registrar shall register the transfer or make the exchange in
accordance with the requirements of this Section 2.06. To permit registrations
of transfers and exchanges, the Issuer shall execute and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes, of any authorized denominations and of a
like aggregate principal amount, at the Registrar's request. No service charge
shall be made for any registration of transfer or exchange of Notes (except as
otherwise expressly permitted herein), but the Issuer may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection with any such registration of transfer or exchange of Notes (other
than any such transfer tax or similar governmental charge payable upon exchanges
pursuant to Sections 2.09, 3.06 or 9.05) or in accordance with an Asset Sale
Offer pursuant to Section 4.12 or Change of Control Offer pursuant to Section
4.14, not involving a transfer.
Upon presentation for exchange or transfer of any Note at the office of the
Registrar as permitted by the terms of this Indenture and by any legend
appearing on such Note, such Note shall be exchanged or transferred upon the
Security Register and one or more new Notes shall be authenticated and issued in
the name of the Holder (in the case of exchanges only) or the transferee, as the
case may be. No exchange or transfer of a Note shall be effective under this
Indenture unless and until such Note has been registered in the name of such
Person in the Security Register. Furthermore, the exchange or transfer of any
Note shall not be effective under this Indenture unless the request for such
exchange or transfer is made by the Holder or by a duly authorized attorney-
in-fact at the office of the Registrar.
Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Guarantor or the Registrar) be duly
endorsed, or be accompanied by a written instrument or transfer, in form
satisfactory to the Issuer and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer evidencing the same indebtedness,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
In the event that the Issuer delivers to the Trustee a copy of an Officer's
Certificate certifying that a registration statement under the Securities Act
with respect to the Registered Exchange Offer, or a Shelf Registration Statement
has been declared effective by the SEC and that the Issuer has offered Exchange
Notes to the Holders in accordance with the Registered Exchange Offer or that
Notes have been offered pursuant to such Shelf Registration Statement, the
Trustee shall exchange or issue upon transfer, as the case may be, upon request
of any Holder, such Holder's Notes for (i) in the case of a Registered Exchange
Offer, Exchange Notes upon the terms set forth in the Registered Exchange Offer
or (ii) in the case of a transfer pursuant to a Shelf Registration Statement,
Notes that comply with the requirements applicable following such a transfer as
set forth in Section 2.01(d).
The Issuer shall not be required (i) to issue, register the transfer of or
exchange any Note during a period beginning at the opening of 15 Business Days
before the day of the mailing of a notice of redemption of Notes selected for
redemption under Section 3.02 and ending at the close of business on the day of
such mailing, or (ii) to register the transfer of or exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
(a) Notwithstanding any provision to the contrary herein, so long as a
Global Note remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Note, in whole or in part, or of
any beneficial interest therein, shall only be made in accordance
with Section 2.01(c) and this Section 2.06(a); provided, however,
that a beneficial interest in a Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial
interest in the same Global Note in accordance with the transfer
restrictions set forth in the restricted note legend on the Note, if
any.
(i) Except for transfers or exchanges made in accordance with any of
clauses (ii), (iii), (iv) or (v) of this Section 2.06(a),
transfers of a Global Note shall be limited to transfers of such
Global Note in whole, but not in part, to nominees of the
Depositary or to a successor of the Depositary or such successor's
nominee.
<PAGE> 24
(ii) Restricted Global Note to Regulation S Global Note. If a holder
of a beneficial interest in the Restricted Global Note deposited
with the Depositary or the Trustee as custodian for the
Depositary wishes at any time to exchange its interest in such
Restricted Global Note for an interest in the Regulation S Global
Note, or to transfer its interest in such Restricted Global Note
to a Person who is required to take delivery thereof in the form
of an interest in the Regulation S Global Note, such holder may,
subject to the rules and procedures of the Depositary, exchange
or cause the exchange of such interest for an equivalent
beneficial interest in the Regulation S Global Note only in
accordance with this clause (ii). Upon receipt by the Registrar
at its office in The City of New York of (A) written instructions
given by or on behalf of the Depositary in accordance with the
rules and procedures of the Depositary directing the Registrar to
credit or cause to be credited an interest in the Regulation S
Global Note in an amount equal to the interest in the Restricted
Global Note to be exchanged, (B) a written order given in
accordance with the rules and procedures of the Depositary
containing information regarding the participant account of the
Depositary and the Euroclear or Cedel account to be credited with
such increase, (C) a certificate in the form of Exhibit C
attached hereto given by the holder of such beneficial interest
stating that the transfer of such interest has been made in
compliance with the transfer restrictions applicable to the
Global Notes and (1) pursuant to and in accordance with
Regulation S or (2) that the Note being transferred is being
transferred in a transaction permitted by Rule 144 and, (D) such
opinion of counsel as the Issuer or the Trustee may reasonably
request to ensure that the requested transfer or exchange is
being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act,
then the Registrar shall instruct the Depositary to reduce or
cause to be reduced the principal amount of the Restricted Global
Note and to increase or cause to be increased the principal
amount of the Regulation S Global Note by the aggregate principal
amount of the interest in the Restricted Global Note to be
exchanged.
(iii) Regulation S Global Note to Restricted Global Note. If the
holder of a beneficial interest in the Regulation S Global Note
at any time wishes to transfer such interest to a Person who
wishes to take delivery thereof in the form of a beneficial
interest in the Restricted Global Note, such transfer may be
effected, subject to the rules and procedures of the Depositary,
only in accordance with this clause (iii). Upon receipt by the
Registrar of (A) written instructions given by or on behalf of
the Depositary in accordance with the rules and procedures of the
Depositary directing the Registrar to credit or cause to be
credited an interest in the Restricted Global Note in a specified
principal amount and to cause to be debited an interest in the
Regulation S Global Note, (B) a certificate in the form of
Exhibit D hereto given by the holder of such beneficial interest
stating that the transfer of such interest has been made in
compliance with the transfer restrictions applicable to the
Global Notes and stating that (1) the Person transferring such
Interest reasonably believes that the Person acquiring such
interest is a QIB and is obtaining such interest in a transaction
meeting the requirements of Rule 144A or (2) that the Person
transferring such interest is relying on an exemption other than
Rule 144A from the registration requirements of the Securities
Act and, (C) such opinion of counsel as the Issuer or the Trustee
may reasonably request to ensure that the requested transfer or
exchange is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirement of the
Securities Act, then the Registrar shall instruct the Depositary
to reduce or cause to be reduced the principal amount of the
Regulation S Global Note and to increase or cause to be increased
the principal amount of the Restricted Global Note by the
aggregate principal amount of the interest in the Regulation S
Global Note to be exchanged.
(iv) U.S. Exchange Global Note to Regulation S Global Note. Following
the earlier of the consummation of the Exchange Offer or the
transfer of an Note pursuant to a Shelf Registration Statement
that results in beneficial interests in such Note being reflected
in the U.S. Global Exchange Note, if the holder of a beneficial
interest in the U.S. Exchange Global Note at any time wishes to
transfer such interest to a Person who wishes to take delivery
thereof in the form of a beneficial interest in the Regulation S
Global Note, such transfer may be effected, subject to
<PAGE> 25
the rules and procedures of the Depositary only in accordance with
this clause (iv). Upon receipt by the Registrar of written
instructions given by or on behalf of the Depositary in accordance
with the rules and procedures of the Depositary directing the
Registrar to credit or cause to be credited an interest in the
Regulation S Global Note in a specified principal amount and to
cause to be debited an interest in the U.S. Exchange Global Note,
then the Registrar shall instruct the Depositary to reduce or cause
to be reduced the principal amount of the U.S. Exchange Global Note
and to increase or cause to be increased the principal amount of
the Regulation S Global Note by the aggregate principal amount of
the interest in the U.S. Exchange Global Note to be exchanged.
(v) Regulation S Global Note to U.S. Exchange Global Note. Following
the earlier of the consummation of the Exchange Offer or the
transfer of an Note pursuant to a Shelf Registration Statement
that results in beneficial interests in such Note being reflected
in the U.S. Global Exchange Note, if the holder of a beneficial
interest in the Regulation S Global Note at any time wishes to
transfer such interest to a Person who wishes to take delivery
thereof in the form of a beneficial interest in the U.S. Exchange
Global Note, such transfer may be effected, subject to the rules
and procedures of the Depositary, only in accordance with this
clause (v). Upon receipt by the Registrar of written instructions
given by or on behalf of the Depositary in accordance with the
rules and procedures of the Depositary directing the Registrar to
credit or cause to be credited an interest in the U.S. Exchange
Global Note in a specified principal amount and to cause to be
debited an interest in the Regulation S Global Note, then the
Registrar shall instruct the Depositary to reduce or cause to be
reduced the principal amount of the Regulation S Global Note and
to increase or cause to be increased the principal amount of the
U.S. Exchange Global Note by the aggregate principal amount of the
interest in the Regulation S Global Note to be exchanged.
(vi) Other Exchanges. In the event that a Global Note is exchanged for
Notes in certificated, registered form pursuant to Section 2.09,
prior to the consummation of a Registered Exchange Offer or the
effectiveness of a Shelf Registration Statement with respect to
such Notes, such Notes may be exchanged only in accordance with
such procedures as are substantially consistent with the
provisions of clauses (ii) and (iii) above (including the
certification requirements intended to ensure that such transfers
comply with Rule 144A or Regulation S under the Securities Act, as
the case may be) and such other procedures as may from time to
time be adopted by the Guarantor.
(b) Except in connection with a Registered Exchange Offer or a Shelf
Registration Statement contemplated by and in accordance with the
terms of the Registration Rights Agreement, if Notes are issued upon
the transfer, exchange or replacement of Notes bearing the restricted
notes legend set forth in Exhibit A hereto, the Notes so issued shall
bear the restricted notes legend, and a request to remove such
restricted notes legend on Notes will not be honored unless there is
delivered to the Issuer such satisfactory evidence, which may include
an Opinion of Counsel licensed to practice law in the State of New
York, as may be reasonably required by the Issuer, that neither the
legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions
of Rule 144A or Rule 144(k) under the Securities Act. Upon provision
of such satisfactory evidence, the Trustee, at the direction of the
Issuer, shall authenticate and deliver Notes that do not bear the
legend.
(c) The Trustee shall have no responsibility for any actions taken or not
taken by the Depositary.
SECTION 2.07 REPLACEMENT NOTES. If a mutilated certificated Note is
surrendered to the Registrar or if the Holder of a Note claims that the Note has
been lost, destroyed or wrongfully taken, the Issuer shall issue and the Trustee
shall authenticate a replacement Note in such form as the Note mutilated, lost,
destroyed or wrongfully taken if the Holder satisfies any other reasonable
requirements of the Trustee or the Issuer. If required by the Trustee or the
Issuer, such Holder shall furnish an indemnity bond sufficient in the judgment
of the Issuer and the Trustee to protect the Issuer, the Trustee, the Paying
Agent, the Registrar and any Co-Registrar, and any
<PAGE> 26
authenticating agent from any loss which any of them may suffer if a Note is
replaced. The Issuer and the Trustee may charge the Holder for their expenses in
replacing a Note.
Every replacement Note shall be an additional obligation of the Issuer.
SECTION 2.08 OUTSTANDING NOTES. Notes outstanding at any time are all
Notes authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation and those described in this Section 2.08 as not
outstanding. A Note does not cease to be outstanding because the Guarantor or an
Affiliate of the Issuer holds the Note.
If a Note is replaced pursuant to Section 2.07, it ceases to be outstanding
unless the Trustee and the Issuer receive proof satisfactory to them that the
replaced Note is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date money sufficient to pay all
principal and interest payable on that date with respect to the Notes (or
portions thereof) to be redeemed or maturing, as the case may be, and the Paying
Agent is not prohibited from paying such money to the Holders on that date
pursuant to the terms of this Indenture, then on and after that date such Notes
(or portions thereof) cease to be outstanding and interest on them ceases to
accrue.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction or consent or any amendment, modification
or other change to this Indenture, Notes owned by the Issuer or by an Affiliate
of the Issuer shall be disregarded and treated as if they were not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent or any amendment,
modification or other change to this Indenture, only Notes which the Trustee
knows are so owned shall be so disregarded. Notes so owned which have been
pledged in good faith shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgees right so to act with respect to the
Notes and that the pledgee is not the Issuer or an Affiliate of the Issuer.
SECTION 2.09 CERTIFICATED NOTES.
(a) A Global Note deposited with the Depositary or with the Trustee as
custodian for the Depositary pursuant to Section 2.01 shall be
transferred to the beneficial owners thereof in the form of
certificated Notes only if such transfer complies with Section 2.06
and (i) the Depositary notifies the Issuer that it is unwilling or
unable to continue as Depositary for such Global Note or if at any
time such Depositary ceases to be a "clearing agency" registered
under the Exchange Act and a successor depositary is not appointed by
the Issuer within 90 days of such notice, (ii) the Issuer, at its
option, executes and delivers to the Trustee a notice that such
Global Note shall be so transferable, registrable and exchangeable
and such shall be registrable, or (iii) an Event of Default, or an
event which after notice or lapse of time or both would be an Event
of Default, has occurred and is continuing with respect to the Notes.
(b) Any Global Note that is transferable to the beneficial owners thereof
in the form of certificated Notes pursuant to this Section 2.09 shall
be surrendered by the Depositary to the Registrar, to be so
transferred, in whole or from time to time in part, without charge,
and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Note, an equal aggregate principal amount
at maturity of Notes of authorized denominations in the form of
certificated Notes. Any portion of a Global Note transferred or
exchanged pursuant to this Section 2.09 shall be executed,
authenticated and delivered only in registered form in denominations
of $1,000 and any integral multiple thereof and registered in such
names as the Depositary shall direct. Subject to the foregoing, a
Global Note is not exchangeable except for a Global Note of like
denomination to be registered in the name of the Depositary or its
nominee. In the event that a Global Note becomes exchangeable for
certificated Notes, payment of principal, any repurchase price, any
premium, and interest on the certificated Notes will be payable, and
the transfer of the certificated Notes will be registrable, at the
office or agency of the Issuer maintained for such purposes in
accordance with Section 2.03. Prior to the cessation of transfer
restrictions applicable to the Notes in accordance with Section
2.01(d), such
<PAGE> 27
certificated Notes shall bear the legends set forth in Exhibit A hereto
(unless the Issuer determines otherwise in accordance with applicable
law).
(c) In the event of the occurrence of any of the events specified in
Section 2.09(a), the Issuer will promptly make available to the
Trustee a reasonable supply of certificated Notes in definitive,
fully registered form without interest coupons.
SECTION 2.10 CANCELLATION. The Issuer at any time may deliver Notes to
the Trustee for cancellation. The Registrar and the Paying Agent shall forward
to the Trustee any Notes surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel and may destroy
(subject to the record retention requirements of the Exchange Act and the
Trustee's retention policy) all Notes surrendered for registration of transfer,
exchange, payment or cancellation and deliver a certificate of such destruction
to the Issuer if such Notes are destroyed, unless the Issuer directs the Trustee
to deliver canceled Notes to the Issuer. The Issuer may not issue new Notes to
replace Notes it has redeemed, paid or delivered to the Trustee for
cancellation.
SECTION 2.11 DEFAULTED INTEREST. Any interest on any Note which is
payable, but is not punctually paid or duly provided for, on the dates and in
the manner provided in the Notes and this Indenture (all such interest herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant record date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Guarantor, at its election in each case,
as provided in clause (i) or (ii) below:
(i) The Issuer may elect to make payment of any Defaulted Interest to the
Persons in whose names the Notes are registered at the close of
business on special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Issuer
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Note and the date of the
proposed payment, and at the same time the Issuer may deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest; or shall make
arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. In addition, the
Issuer shall fix a special record date for the payment of such
Defaulted Interest, such date to be not more than 15 days and not
less than 10 days prior to the proposed payment date and not less
than 15 days after the receipt by the Trustee of the notice of the
proposed payment date. The Issuer shall promptly but, in any event,
not less than 15 days prior to the special record date, notify the
Trustee of such special record date and, in the name and at the
expense of the Issuer, the Trustee shall cause notice of the proposed
payment date of such Defaulted Interest and the special record date
therefor to be mailed first-class, postage prepaid to each Holder of
Notes as such Holder's address appears in the Security Register, not
less than 10 days prior to such special record date. Notice of the
proposed payment date of such Defaulted Interest and the special
record date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Notes are registered
at the close of business on such special record date and shall no
longer be payable pursuant to clause (ii) below.
(ii) The Issuer may make payment of any Defaulted Interest on the Notes
in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon
such notice as may be required by such exchange, if, after notice
given by the Issuer to the Trustee of the proposed payment date
pursuant to this clause, such manner of payment shall be deemed
reasonably practicable.
Subject to the foregoing provisions of this Section 2.11, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
SECTION 2.12 RECORD DATE. The Issuer may set a record date for purposes
of determining the identity of Holders entitled to vote or to consent to any
action by vote or consent authorized or permitted by Sections 6.04
<PAGE> 28
and 6.05. Unless this Indenture provides otherwise, such record date shall be
the later of 30 days prior to the first solicitation of such consent or the date
of the most recent list of Holders furnished to the Trustee pursuant to Section
2.05 prior to such solicitation.
SECTION 2.13 COMPUTATION OF INTEREST. Interest on the Notes shall be
computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE 3
REDEMPTION; OFFERS TO PURCHASE
SECTION 3.01 NOTICES TO TRUSTEE. If the Issuer elects to redeem Notes
pursuant to paragraph 7 or 8 of the Dollar Notes or paragraph 6 or 7 of the
Exchange Notes, it shall notify the Trustee in writing of the redemption date,
the principal amount of Notes to be redeemed and the paragraph of the Notes
pursuant to which the redemption will occur.
The Issuer shall give each notice to the Trustee provided for in this
Section 3.01 in writing at least 10 days before the date notice is mailed to the
Holders of Notes pursuant to Section 3.03 unless the Trustee consents to a
shorter period. Such notice shall be accompanied by an Officer's Certificate and
an Opinion of Counsel from the Guarantor or the Issuer to the effect that such
redemption will comply with the conditions herein. If fewer than all the Notes
are to be redeemed, the record date relating to such redemption shall be
selected by the Issuer and given to the Trustee, which record date shall be not
less than 15 days after the date of notice to the Trustee.
SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED. If fewer than all the
Notes are to be redeemed at any time, the Trustee shall select the Notes to be
redeemed pro rata or by lot or by a method that complies with applicable legal
and securities exchange requirements as certified in an Officer's Certificate or
Opinion of Counsel delivered to the Trustee, if any, and that the Trustee in its
sole discretion considers fair and appropriate and in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances,
provided that no Notes of less than $1,000 principal amount at maturity shall be
redeemed in part. The Trustee shall make the selection from outstanding Notes
not previously called for redemption. Notes and portions of them the Trustee
selects shall be in amounts of $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Guarantor promptly of the Notes or portions of Notes to be redeemed.
SECTION 3.03 NOTICE OF REDEMPTION. At least 30 days but not more than 60
days before a date for redemption of Notes, the Issuer or the Guarantor shall
mail a notice of redemption by first-class mail to each Holder of Notes to be
redeemed and shall comply with the publication provisions relating to such
notice in accordance with Section 14.02.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price plus accrued interest (if any);
(5) if any Global Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date, upon surrender of such Global Note, the principal
amount of the Global Note will be reduced on the Security Register,
adjusting the principal amount thereof to be equal to the unredeemed
portion;
(6) if any certificated Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the
redemption date, upon surrender of such certificated Note, a new
<PAGE> 29
certificated Note or certificated Notes in principal amount equal to the
unredeemed portion will be issued;
(7) if fewer than all the outstanding Notes are to be redeemed, the
identification and principal amounts of the particular Notes to be
redeemed;
(8) that, unless the Issuer and the Guarantor default in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on the
Notes (or portion thereof) called for redemption shall cease to
accrue on and after the redemption date;
(9) the paragraph of the Notes pursuant to which the Notes called for
redemption are being redeemed; and
(10) that no representation is made as to the correctness or accuracy of
the CUSIP, ISIN or CINS number, if any, listed in such notice or
printed on the Notes.
At the Issuer's or the Guarantor's written request, the Trustee shall give
the notice of redemption in the Issuer's name and at the Issuer's expense. In
such event, the Issuer shall provide the Trustee with the information required
by this Section 3.03.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION. Once a notice of redemption
is mailed, Notes called for redemption become due and payable on the redemption
date and at the redemption price stated in the notice. Upon surrender to the
Paying Agent, such Notes shall be paid at the redemption price stated in the
notice, plus accrued interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
related Interest Payment Date). Failure to give notice or any defect in the
notice to any Holder shall not affect the validity of the notice to any other
Holder.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE. On the Business Day prior to
the redemption date, the Issuer or the Guarantor shall deposit with the Paying
Agent (or, if the Issuer, the Guarantor (if possible under applicable law) or a
Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust)
a sum in same day funds sufficient to pay the redemption price of and accrued
interest (subject to the right of Holders of record on the relevant record date
to receive interest due on the related Interest Payment Date) on all Notes to be
redeemed on that date other than Notes or portions of Notes called for
redemption which have been delivered by the Issuer to the Trustee for
cancellation.
SECTION 3.06 NOTES REDEEMED IN PART. Upon surrender of a Global Note that
is redeemed in part, the Paying Agent shall forward such Global Note to the
Trustee who shall make a notation on the Security Register to reduce the
principal amount of such Global Note to an amount equal to the unredeemed
portion of the Global Note surrendered; provided that each such Global Note
shall be in a principal amount at maturity of $1,000 or an integral multiple
thereof. Upon surrender and cancellation of a certificated Note that is redeemed
in part, the Issuer shall execute and the Trustee shall authenticate for the
Holder (at the Issuer's expense) a new Note equal in principal amount to the
unredeemed portion of the Note surrendered and canceled; provided that each such
certificated Note shall be in a principal amount at maturity of $1,000 or an
integral multiple thereof.
SECTION 3.07 OPTIONAL REDEMPTION. The Issuer may redeem all or any
portion of the Notes, upon the terms and at the redemption prices set forth in
each of the Notes. Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06.
SECTION 3.08 ASSET SALE OFFER AND CHANGE OF CONTROL OFFER.
(a) In the event that, pursuant to Section 4.12 or 4.14, the Issuer or
the Guarantor shall commence an Asset Sale Offer or Change of Control
Offer to all Holders of the Notes to purchase Notes, the Issuer or
the Guarantor shall follow the procedures in this Section 3.08.
(b) The Asset Sale Offer or the Change of Control Offer, as the case may
be, shall remain open for a period specified by the Issuer or the
Guarantor, which shall be no less than 30 calendar days and no more
than 60 calendar days following its commencement (which occurs on the
date that the notice
<PAGE> 30
pursuant to Section 3.08(e) is mailed) (the "Commencement Date") (as
determined in accordance with Section 4.12 or 4.14, as the case may be),
except to the extent that a longer notice period is required by
applicable law (the "Tender Period"). Upon the expiration of the Tender
Period (the "Purchase Date"), the Issuer or the Guarantor shall purchase
the principal amount of Notes required to be purchased pursuant to
Section 4.12 or 4.14 (the "Offer Amount") or, if less than the Offer
Amount has been tendered, all Notes timely and otherwise properly
tendered in response to the Asset Sale Offer or the Change of Control
Offer, as the case may be, and not withdrawn in accordance with the
procedures set forth in this Section 3.08.
(c) If the Purchase Date is on or after a Record Date and on or before
the related Interest Payment Date, any accrued interest will be paid
to the Holder in whose name such Note is registered at the close of
business on such Record Date, and no additional interest will be
payable to Holders with respect to Notes tendered pursuant to the
Asset Sale Offer or the Change of Control Offer, as the case may be.
(d) The Issuer or the Guarantor shall provide the Trustee with notice of
the Asset Sale Offer or the Change of Control Offer, as the case may
be, at least 10 days before the Commencement Date. Prior to the
Commencement Date of any Asset Sale Offer or Change of Control Offer,
the Issuer or the Guarantor shall furnish to the Trustee an Officer's
Certificate and an Opinion of Counsel stating that all conditions
precedent to such Asset Sale Offer or Change of Control Offer
contained in this Indenture have been met.
(e) Within the time period specified in Section 4.12(c) if the Issuer
becomes obligated to make an Asset Sale Offer, or within the time
period specified in Section 4.14(a) following a Change of Control,
the Issuer or the Guarantor or the Trustee (in the name of and at the
written request of and expense of the Issuer or the Guarantor) shall
cause a notice of the Change of Control Offer to be sent at least
once to the Dow Jones News Service or similar business news service
in the United States and shall send, by first-class mail, with a copy
to the Trustee, a notice to each of the Holders and shall comply with
the publication provisions relating to such notice in accordance with
Section 14.02, and shall state:
(i) that the Asset Sale Offer or the Change of Control Offer is being
made pursuant to this Section 3.08 and, as applicable, Section
4.12 or 4.14, the length of time the Asset Sale Offer or the
Change of Control Offer will remain open and that, in the case of
a Change of Control Offer, all Notes timely and otherwise properly
tendered will be accepted for payment, and that, in the case of an
Asset Sale Offer, the Notes timely and otherwise properly tendered
will be accepted for payment subject to clause (viii) of this
Section 3.08(e);
(ii) the Offer Amount, the purchase price (as determined in accordance
with Section 4.12 or 4.14) and the Purchase Date which shall be,
subject to any contrary requirements of applicable law, a
Business Day no earlier than 30 days nor later than 60 days from
the date notice of such Offer is mailed;
(iii) that any Note or portion thereof not tendered or accepted for
payment will continue to accrue interest;
(iv) the aggregate principal amount of Notes (or portions thereof) to
be purchased;
(v) that, unless the Issuer and the Guarantor default in the payment
of the purchase price, all Notes or portions thereof accepted for
payment pursuant to the Asset Sale Offer or the Change of Control
Offer shall cease to accrue interest after the Purchase Date;
(vi) that Holders electing to have any Notes or portions thereof
purchased pursuant to an Asset Sale Offer or Change of Control
Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the third Business
Day preceding the Purchase Date;
(vii) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the
second Business Day preceding the Purchase Date or such
<PAGE> 31
longer period as may be required by law, a letter, telegram or
facsimile transmission (receipt of which is confirmed and promptly
followed by a letter) setting forth the name of the Holder, the
principal amount of the Note or portion thereof the Holder
delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Note or portion thereof
purchased;
(viii) that, in the case of an Asset Sale Offer, if the aggregate
principal amount of Notes and Euro Notes (together with accrued
interest, if any, thereon) surrendered by Holders exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes and
Euro Notes to be purchased on a pro rata basis as provided in
Section 3.02;
(ix) that the Holder of a Global Note whose Global Note is purchased
only in part will have the principal amount of its Global Note
reduced on the Security Register, which principal amount of such
Global Note will be adjusted by the Registrar to equal the
unpurchased portion of the Global Note surrendered, which
unpurchased portion must be equal to $ 1,000 in principal amount
at maturity or an integral multiple thereof and that Holders of
any certificated Notes whose certificated Notes are being
purchased only in part will be issued new certificated Notes equal
in principal amount to the unpurchased portion of the certificated
Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount at maturity or an integral multiple
thereof;
(x) a description, in the case of a Change of Control Offer, of the
transaction or transactions constituting such Change of Control;
and
(xi) the procedures that the Holders of Notes must follow in order to
tender their Notes (or a portion thereof) for payment.
In addition, the notice shall, to the extent required by Section 4.08
and permitted by applicable law, be accompanied by a copy of the
information regarding the Guarantor and its Subsidiaries which is
required to be contained in the most recent quarterly report required to
be filed with the SEC or furnished to the Trustee pursuant to Section
4.08 or annual report (including any financial statements or other
information required to be included or incorporated by reference
therein) and any reports on Form 6-K (or any successor form) which the
Guarantor has filed with the SEC or furnished to the Trustee pursuant to
Section 4.08 since the date of such quarterly report or annual report,
as the case may be, on or prior to the date of the notice. The notice
shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Asset Sale Offer or the Change
of Control Offer, as the case may be. If the Issuer or the Guarantor
requests the Trustee to furnish such information to the Holders, the
Issuer or the Guarantor shall provide the Trustee with the information
required by this Section 3.08(e) within a reasonable time prior to the
expiration of the relevant time periods specified in the first sentence
of this Section 3.08(e).
(f) On the Purchase Date, the Issuer or the Guarantor shall, to the
extent lawful, (i) accept for payment the Notes or portions thereof
tendered pursuant to the Asset Sale Offer or the Change of Control
Offer, (ii) irrevocably deposit with the Paying Agent in immediately
available funds an amount equal to the Offer Amount to be held for
payment in accordance with the terms of this Section 3.08, (iii)
deliver or cause the Depositary or the Paying Agents to deliver to
the Trustee the Notes so accepted and (iv) deliver to the Trustee an
Officer's Certificate stating that such Notes or portions thereof
have been accepted for payment in accordance with the terms of this
Section 3.08. On the Purchase Date, the Paying Agent shall promptly
cause the principal amount of any Global Note so tendered to be
reduced on the Security Register in an amount equal to any
unpurchased portion of such Global Note, which unpurchased portion
must be equal to $1,000 in principal amount at maturity or an
integral multiple thereof, and shall promptly authenticate and mail
or deliver to each tendering Holder of a certificated Note, if any, a
new certificated Note equal in principal amount to any unpurchased
portion of the certificated Note surrendered, which unpurchased
portion must be equal to $1,000 in principal amount at maturity or an
integral multiple thereof. The Depositary, the Paying Agent, the
Issuer or the Guarantor, as the case may be, shall promptly (but in
any case not later than ten (10) calendar days
<PAGE> 32
after the Purchase Date) mail or deliver to each tendering Holder an
amount equal to the purchase price of the Notes tendered by such Holder
and accepted for purchase in accordance with this Section 3.08. Any
Notes not so accepted shall be promptly mailed or delivered by or on
behalf of the Issuer to the Holder thereof. The Issuer or the Guarantor
will publicly announce in a newspaper of general circulation in The City
of New York, New York, the results of the Asset Sale Offer or the Change
of Control Offer on the Purchase Date.
(g) The Issuer and the Guarantor, as appropriate, shall comply with the
requirements of Rule 13e-4 and Rule 14e-1 of Regulation 14E under the
Exchange Act and any other U.S., Luxembourg, Dutch and Polish
securities laws and regulations to the extent applicable in
connection with the repurchase of the Notes with respect to the Asset
Sale Offer or the Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the
Asset Sale Offer or Change of Control Offer, each of the Issuer and
the Guarantor will comply with such provisions and will not be deemed
to have breached its obligations under Section 4.12 and Section 4.14
by virtue thereof. The Asset Sale Offer or the Change of Control
Offer shall include all instructions and materials necessary to
enable such Holders to tender their Notes.
ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF NOTES. The Issuer or the Guarantor shall promptly
pay the principal of, premium, if any, interest (including Special Interest, if
any), and Additional Amounts, if any, on the Notes on the dates and in the
manner provided in the Notes and in this Indenture. Principal and Interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds, in accordance with this Indenture, money sufficient to pay all
principal and interest then due. The Issuer shall provide to the Trustee not
later than one Business Day prior to any payment date a sum sufficient to make
payments hereunder.
The Issuer or the Guarantor shall pay interest on overdue principal at the
rate specified therefor in the Notes. It shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY. The Issuer and the
Guarantor will maintain in The City of New York, New York, an office or agency
where Notes may be presented or surrendered for payment, where Notes may be
surrendered for transfer or exchange and where notices and demands to or upon
the Issuer or the Guarantor in respect of the Notes and this Indenture may be
served. The office of State Street Bank and Trust Company, N.A. at 61 Broadway,
15th Floor, New York, New York, 10006 shall be such office or agency, unless the
Issuer or the Guarantor shall designate and maintain some other office or agency
for one or more of such purposes. The Issuer or the Guarantor will give prompt
written notice to the Trustee of any change in the location of any such office
or agency. If at any time the Issuer or the Guarantor shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and each of the Issuer
and the Guarantor hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Issuer or the Guarantor may also from time to time designate one or
more other offices or agencies (in or outside of The City of New York) where the
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Issuer or the
Guarantor of its obligation to maintain an office or agency in The City of New
York for such purposes. The Issuer and the Guarantor will give prompt written
notice to the Trustee of any such designation or rescission and any change in
the location of any such other office or agency.
SECTION 4.03 MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST. If either the
Issuer or the Guarantor shall at any time act as Paying Agent, it will, on or
before each due date of the principal of, premium, if any, interest (including
Special Interest, if any), or Additional Amounts, if any, on any of the Notes,
segregate and
<PAGE> 33
hold in trust (with respect to the Guarantor, if possible under applicable law)
for the benefit of the Persons entitled thereto a sum sufficient to pay the
principal of, premium, if any, interest (including Special Interest, if any), or
Additional Amounts, if any, so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Issuer shall have one or more Paying Agents for the Notes, it
will, on or before each due date of the principal of, premium, if any, interest
(including Special Interest, if any), or Additional Amounts, if any, on, any
Notes, deposit with a Paying Agent a sum sufficient to pay the principal,
premium, if any, interest or Additional Amounts, if any, so becoming due, such
sum to be held in trust for the benefit of the Persons entitled to such
principal, premium, interest or Additional Amounts, and (unless such Paying
Agent is the Trustee) the Issuer will promptly notify the Trustee of such action
or any failure so to act.
The Issuer shall cause the Paying Agent (if other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 4.03,
that such Paying Agent will:
(i) hold all sums held by it for the payment of the principal of,
premium, if any, interest (including Special Interest, if any), or
Additional Amounts, if any, on the Notes in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(ii) give the Trustee notice of any default by the Guarantor (or any
other obligor upon the Notes) in the making of any payment of
principal, premium, if any, interest (including Special Interest, if
any), or Additional Amounts, if any; and
(iii) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Issuer or the Guarantor may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Issuer or the Guarantor or such Paying Agent, such sums to be
held by the Trustee upon the same trusts as those upon which such sums were held
by the Issuer or the Guarantor or such Paying Agent; and, upon such payment by
any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Issuer or the Guarantor (if possible under applicable law) in trust for the
payment of the principal of premium, if any, interest (including Special
Interest, if any), or Additional Amounts, if any, on any Note and remaining
unclaimed for three years after such principal, premium or interest or
Additional Amounts has become due and payable shall be paid to the Issuer and
the Guarantor or (if then held by the Issuer and the Guarantor) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Issuer and the Guarantor for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Issuer or the Guarantor as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Issuer or the Guarantor cause to be published once, in a leading
daily newspaper printed in the English language and of general circulation in
New York, New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Issuer or the Guarantor.
SECTION 4.04 CORPORATE EXISTENCE. Subject to Article 5, each of the
Issuer and the Guarantor shall do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and the
rights (charter and statutory) and franchises of the Issuer and the Guarantor
and each Subsidiary; provided, however, that the Issuer and the Guarantor shall
not be required to preserve any such right or franchise if the Supervisory Board
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Issuer and the Guarantor and its and their
Subsidiaries as a whole and that the loss thereof is not disadvantageous in any
material respect to the Holders.
<PAGE> 34
SECTION 4.05 MAINTENANCE OF PROPERTIES. The Guarantor shall cause all
properties owned by it or any Restricted Subsidiary or used or held for use in
the conduct of its business or the business of any Restricted Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Guarantor may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 4.05 shall prevent the Guarantor
from discontinuing the maintenance of any such properties if such discontinuance
is, in the judgment of the Guarantor, desirable in the conduct of the business
of the Guarantor and the Restricted Subsidiaries as a whole and not
disadvantageous in any material respect to the Holders.
SECTION 4.06 INSURANCE. The Guarantor shall maintain, and shall cause its
Restricted Subsidiaries to maintain, insurance with carriers believed by the
Guarantor to be responsible, against such risks and in such amounts, and with
such deductibles, retentions, self-insured amounts and coinsurance provisions,
as the Guarantor believes are customarily carried by similar businesses, of
similar size, including as appropriate general liability, property and casualty
loss and interruption of business insurance.
SECTION 4.07 STATEMENT AS TO COMPLIANCE.
(a) the Guarantor shall deliver to the Trustee, within 120 days after the
end of each fiscal year, an Officer's Certificate stating that in the
course of the performance by the signer of its duties as an officer
of the Guarantor he would normally have knowledge of any Default and
whether or not the signer knows of any Default that occurred during
such period and if any specifying such Default, its status and what
action the Guarantor is taking or proposed to take with respect
thereto. For purposes of this Section 4.07(a), such compliance shall
be determined without regard to any period of grace or requirement of
notice under this Indenture. The Guarantor also shall comply with TIA
sec. 314(a)(4).
(b) When any Default has occurred and is continuing under this Indenture,
or if the trustee of, or the holder of, any other evidence of Debt of
the Guarantor or any Subsidiary outstanding in a principal amount of
$10 million or more gives any notice stating that it is a Notice of
Default or takes any other action to accelerate such Debt or enforce
any note therefor, the Guarantor shall deliver to the Trustee within
five Business Days by registered or certified mail or by telegram or
facsimile transmission an Officer's Certificate specifying such
event, notice or other action, its status and what action the
Guarantor is taking or proposes to take with respect thereto.
SECTION 4.08 SEC REPORTS.
(a) Prior to the consummation of the Exchange Offer or the effectiveness
of a Shelf Registration Statement, the Guarantor and the Issuer shall
make available, upon request, to any Holder of Notes or prospective
investor and securities analyst in the United States the information
specified in Rule 144A(d)(4), unless the Guarantor is subject to
Section 13 or 15(d) of the Exchange Act at or prior to the time of
such request.
(b) If the Issuer or the Guarantor is subject to Section 13 or 15(d) of
the Exchange Act, the Issuer or the Guarantor, as appropriate, shall
file with the Trustee and provide Holders of Notes, within 15 days
after filing with, or furnishing to, the SEC, which filing shall be
made electronically and shall be made in a form prescribed by the SEC
to allow it to be available via the SEC's Internet site at
http.//www.sec.gov, or any successor electronic medium to such site,
copies of their respective annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe) which
the Guarantor or the Issuer is required to file with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act or is required to furnish
to the SEC pursuant to this Indenture.
(c) Notwithstanding that the Guarantor or the Issuer may not be required
to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act or otherwise report on an annual and
quarterly basis on forms provided for such annual and quarterly
reporting pursuant to rules and
<PAGE> 35
regulations promulgated by the SEC, the Guarantor shall continue to file
with, or furnish to, which filing shall be made electronically and shall
be made in a form prescribed by the SEC to allow it to be available via
the SEC's Internet site at http://www.sec.gov, the SEC and provide the
Trustee and holders of Notes: (i) within 90 days after the end of each
fiscal year (or such shorter period as the SEC may in the future
prescribe), annual reports on Form 20-F (or any successor form)
containing the information required to be contained therein (or required
in such successor form), (ii) within 45 days after the end of each of
the first three fiscal quarters of each fiscal year (or such shorter
period as the SEC may in the future prescribe), reports on Form 6-K (or
any successor form) containing substantially the same information
required to be contained in Form 10-Q (or required in any successor
form) and (iii) promptly from time to time after the occurrence of an
event required to be therein reported, such other reports on Form 6-K
(or any successor form) containing substantially the same information
required to be contained in Form 8-K (or any successor form).
SECTION 4.09 LIMITATION ON GUARANTOR DEBT.
(a) The Guarantor will not, directly or indirectly, Incur any Debt other
than Permitted Debt unless after giving pro forma effect to the
Incurrence of such Debt and any other Debt Incurred or repaid since
the date of the most recently available quarterly or annual balance
sheet and the receipt and application of the proceeds thereof, no
Event of Default would occur as a consequence of such Incurrence or
be continuing following such Incurrence and either (i) the ratio of
(A) the aggregate consolidated principal amount of Debt of the
Guarantor and its Restricted Subsidiaries outstanding as of the most
recent available quarterly or annual balance sheet, after giving pro
forma effect to the Incurrence of such Debt and any other Debt
Incurred or repaid since such balance sheet date and the receipt and
application of the proceeds thereof, to (B) Adjusted Cash Flow for
the four full fiscal quarters next preceding the Incurrence of such
Debt for which consolidated financial statements are available,
determined on a pro forma basis as if any such Debt had been Incurred
and the proceeds thereof had been applied at the beginning of such
four fiscal quarters, would be less than 5.0 to 1.0 or (ii) the
Consolidated Capital Ratio as of the most recent available quarterly
or annual balance sheet, after giving pro forma effect to the
Incurrence of such Debt and any other Debt Incurred or repaid since
such balance sheet date and the receipt and application of the
proceeds thereof, is less than 2.0 to 1.0.
(b) "Permitted Debt" is defined as follows:
(i) Debt Incurred pursuant to the Parent Guarantees, the Existing
Notes Guarantee, the Notes, the Euro Notes, the Euro Notes Parent
Guarantee, the Euro Notes Holdings Guarantee and the Intercompany
Receivables, and Refinancing Debt Incurred in respect thereof;
(ii) Debt Incurred under the Bank Credit Facility and any Qualified
Debt Offering and Refinancing Debt Incurred in respect thereof,
provided that the aggregate principal amount of all such Debt
under the Bank Credit Facility and any Qualified Debt Offering
and Refinancing Debt Incurred in respect thereof, together with
all Debt of Restricted Subsidiaries Incurred under the Bank
Credit Facility and any Qualified Debt Offering and Refinancing
Debt Incurred in respect thereof, at any one time outstanding
does not exceed DM 760 million, which amount shall be permanently
reduced by the amount of (A) Scheduled Reductions and (B)
repayments pursuant to the provisions of the Bank Credit Facility
relating to the proceeds of Asset Sales not reinvested; provided,
however, that the total reductions pursuant to (A) and (B) above
shall not exceed DM 672 million;
(iii) Debt Incurred in respect of Capital Expenditure Debt and
Refinancing Debt Incurred in respect thereof, provided that (i)
the aggregate principal amount of such Debt does not exceed the
Fair Market Value (on the date of such Incurrence) of the
property or assets acquired or constructed (including the cost of
design, development, construction, installation and integration
thereof), (ii) the property or assets acquired or constructed are
used in a Telecommunications Business and (iii) the aggregate
principal amount outstanding of all Debt Incurred under this
clause (b)(iii) and under clause (b) of Section 4.16 does not
exceed an amount equal to
<PAGE> 36
(w) $250.0 million plus (x) an amount equal to $30 million for each
million persons resident in the coverage area of the GSM 1800
License, plus (y) an amount equal to (i) if the Guarantor or any
Subsidiary acquires a UMTS License, $40 million for each million
persons resident in the coverage area of such UMTS License for the
development of UMTS service minus (ii) the aggregate principal
amount of debt Incurred pursuant to the immediately preceding
clause (x), plus (z), if Minutes of Use exceed an average of 383
million per month for any four months in a consecutive six-month
period through December 31, 2001, $3 for each such excess Minute of
Use;
(iv) that percentage of Debt of the Guarantor owing to and held by any
Restricted Subsidiary that is equal to the percentage of the
Guarantor's direct or indirect ownership interest in such
Restricted Subsidiary; provided, however, that (x) any subsequent
issue or transfer of Capital Stock or other event that results in
a reduction in the Guarantor's direct or indirect ownership
interest in such Restricted Subsidiary or (y) any subsequent
transfer of such Debt (except to the Guarantor or a Wholly Owned
Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Debt by the Guarantor in the following amounts:
(A) in the case of (x) above the full amount of such Debt if such
Restricted Subsidiary does not remain a Restricted Subsidiary and
otherwise the percentage of such Debt equal to the percentage
reduction in the Guarantor's direct or indirect ownership interest
in such Restricted Subsidiary; and (B) in the case of (y) above,
the full amount of such Debt if it is not transferred to a
Restricted Subsidiary and otherwise a percentage of such Debt
equal to (X) the percentage of the Guarantor's direct or indirect
ownership interest in the Restricted Subsidiary that previously
held such Debt less (Y) the percentage of the Guarantor's indirect
ownership interest in the Restricted Subsidiary to which such Debt
is transferred;
(v) Debt (other than Debt permitted by clauses (i) to (iv) or (viii)
to (ix) of this definition) in an aggregate principal amount
outstanding at any time not to exceed $25.0 million;
(vi) Debt under Interest Rate Protection Agreements entered into by the
Guarantor for the purpose of limiting interest rate risk in
respect of Debt of the Guarantor or a Restricted Subsidiary in the
ordinary course of the financial management of the Guarantor and
not for speculative purposes;
(vii) Debt under Currency Exchange Protection Agreements, provided that
such Currency Exchange Protection Agreements were entered into by
the Guarantor for the purpose of limiting currency exchange rate
risks directly related to transactions entered into in the
ordinary course of business and not for speculative purposes;
(viii) Debt in connection with one or more standby letters of credit or
performance bonds issued in the ordinary course of business or
pursuant to self-insurance obligations and not in connection with
the borrowing of money or the obtaining of advances or credit;
and
(ix) Debt outstanding on the Issue Date and listed on Schedule I to
this Indenture, and Refinancing Debt Incurred in respect thereof.
(c) For purposes of determining the outstanding principal amount of any
particular Debt Incurred pursuant to this Section 4.09, (i) Debt
permitted by this Section 4.09 need not be permitted solely by
reference to one provision permitting such Debt but may be permitted
in part by one such provision and in part by one or more other
provisions of this Section permitting such Debt, (ii) in the event
that Debt or any portion thereof meets the criteria of more than one
of the types of Debt described in this Section, the Guarantor, in its
sole discretion, may classify or from time to time reclassify such
Debt and shall only be required to include the amount of such Debt in
one of such types and (iii) such amount shall be calculated without
duplication (including without double counting the amount of any
Guarantee of Debt otherwise permitted to be incurred hereunder).
(d) For purposes of determining whether the principal amount of any
Refinancing Debt permitted by this Section 4.09 does not, in the
event it is issued in a currency different from the currency in which
the Debt being refunded or refinanced or paid at maturity
("Refinanced Debt") was issued, exceed the
<PAGE> 37
principal amount of the Refinanced Debt, the rate to be used shall
be-the spot rate for the purchase of the currency of the Refinanced Debt
with the currency of the Refinancing Debt as published in the Wall
Street Journal in the "Exchange Rates" column under the heading
"Currency Trading" on the date two Business Days prior to such
determination.
SECTION 4.10 LIMITATION ON RESTRICTED PAYMENTS. The Guarantor will not
make, and will not permit any Restricted Subsidiary to make, directly or
indirectly, any Restricted Payment if at the time of, and after giving effect
to, such proposed Restricted Payment,
(a) a Default or an Event of Default shall have occurred and be
continuing;
(b) the Guarantor could not Incur at least $1.00 of additional Debt
pursuant to clauses (i) or (ii) of paragraph (a) of Section 4.09; or
(c) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made since the Issue Date (the amount
of any Restricted Payment, if made other than in cash, to be based
upon Fair Market Value) would exceed an amount equal to the sum of:
(i) the remainder of (x) Adjusted Cash Flow for the period (treated as
one accounting period) from the Issue Date to the end of the
Guarantor's most recent fiscal quarter ending at least 45 days
prior to the date of such proposed Restricted Payment less (y) the
product of 1.75 times the sum of (x) Adjusted Interest Expense
plus (y) Adjusted Foreign Debt FX Losses for such period;
(ii) Capital Stock Sale Proceeds;
(iii) the amount by which Debt (other than Subordinated Obligations) of
the Guarantor or any Restricted Subsidiary is reduced on the
Guarantor's balance sheet upon the conversion or exchange (other
than by a Subsidiary) subsequent to the Issue Date of any Debt of
the Guarantor or any Restricted Subsidiary convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of
the Guarantor (less the amount of any cash or other Property
distributed by the Guarantor or any Restricted Subsidiary upon
such conversion or exchange);
(iv) an amount equal to the sum of (i) the net reduction in Investments
in Unrestricted Subsidiaries resulting from dividends, repayments
of loans or advances or other transfers of assets, in each case to
the Guarantor or any Restricted Subsidiary from Unrestricted
Subsidiaries, and (ii) the portion (proportionate to the
Guarantor's equity interest in such Subsidiary) of the Fair Market
Value of the net assets of an Unrestricted Subsidiary at the time
such Unrestricted Subsidiary is designated a Restricted
Subsidiary; provided, however, that the foregoing sum shall not
exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously made (and treated as a Restricted Payment)
by the Guarantor or any Restricted Subsidiary in such Unrestricted
Subsidiary; and
(v) $10.0 million.
Notwithstanding the foregoing limitation, the Guarantor may:
(a) pay dividends on its Capital Stock within 60 days of the declaration
thereof if, on said declaration date, such dividends could have been
paid in compliance with the Indenture; provided, however, that at the
time of such payment of such dividend, no Default or Event of Default
shall have occurred and be continuing (or result therefrom); provided
further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
(b) redeem, repurchase, defease, acquire or retire for value, any
Subordinated Obligation with the proceeds of any Refinancing Debt;
provided,however, that such redemption, repurchase, defeasance or
other acquisition or retirement for value shall be excluded in the
calculation of the amount of Restricted Payments; and
(c) acquire, redeem or retire Capital Stock of the Guarantor or
Subordinated Obligations of the Guarantor made by exchange for, or
out of the proceeds of the substantially concurrent sale of, Capital
Stock of
<PAGE> 38
the Guarantor (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary of the Guarantor or an employee
stock ownership plan or to a trust established by the Guarantor or any
of its Subsidiaries for the benefit of their employees); provided,
however, that (A) such acquisition, redemption or retirement shall be
excluded in the calculation of the amount of Restricted Payments and (B)
the Net Cash Proceeds from such sale shall be excluded from the
calculation of the amount of Capital Stock Sale Proceeds.
SECTION 4.11 LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Guarantor will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to:
(a) pay dividends, in cash or otherwise, or make any other distributions
on or in respect of its Capital Stock or any other interest in or
participation in or measured by its profits, or pay any Debt or other
obligation owed, to the Guarantor or a Restricted Subsidiary;
(b) make any loans or advances to the Guarantor or a Restricted
Subsidiary; or
(c) transfer any of its property or assets to the Guarantor or a
Restricted Subsidiary.
The foregoing limitation shall not apply:
(A) to encumbrances and restrictions:
(i) in existence under or by reason of any agreements (not otherwise
described in clause (A) (iii) below) in effect on the Issue Date;
(ii) relating to Debt of a Restricted Subsidiary and existing at such
Restricted Subsidiary at the time it became a Restricted
Subsidiary if such encumbrance or restriction was not created in
connection with or in anticipation of the transaction or series
of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the
Guarantor;
(iii) set forth in the Bank Credit Facility;
(iv) applicable to a Restricted Subsidiary that is contained in an
agreement or instrument governing or relating to Senior Debt,
provided that the provisions of such agreement do not prevent
(other than following an event of default on such Senior Debt) the
payment of interest and mandatory payment or mandatory prepayment
of principal pursuant to the terms of this Indenture and the
Notes, but provided further that such agreement may nevertheless
contain customary net worth, leverage, invested capital and other
financial covenants, customary covenants regarding the merger of
or sale of all or any substantial part of the assets of the
Guarantor or any Restricted Subsidiary, customary restrictions on
transactions with Affiliates, and customary subordination
provisions governing Debt owed to the Guarantor or any Restricted
Subsidiary; or
(v) which result from the renewal, refinancing, extension or amendment
of an agreement referred to in clauses (A)(i), (ii) or (iii) above
or in clauses (B)(i) or (ii) below, provided, such encumbrance or
restriction is no less favorable in any material respect, taken as
a whole, to the Holders of Notes than those under the agreement
evidencing the Debt so renewed, refinanced, extended or amended,
as determined in good faith by the Management Board and evidenced
by a Board Resolution; and
(B) with respect only to clause (c) of this Section 4.11, to:
(i) any encumbrance or restriction relating to Debt that is permitted
to be Incurred pursuant to the provisions described in Section
4.09 or Section 4.16 and secured pursuant to the provisions of
Section 4.15;
<PAGE> 39
(ii) any encumbrance or restriction in connection with an acquisition
of Property, so long as such encumbrance or restriction relates
solely to the Property so acquired and was not created in
connection with or in anticipation of such acquisition;
(iii) customary provisions of leases and customary provisions in other
agreements that restrict assignment of such agreements or rights
thereunder;
(iv) customary restrictions contained in asset sale agreements limiting
the transfer of such Property pending the closing of such sale;
(v) any encumbrance or restriction existing by reason of a customary
merger or acquisition agreement for the purchase or acquisition of
the stock or assets of the Guarantor or any of its Subsidiaries by
another Person;
(vi) customary restrictions contained in operating leases for real
property and restricting only the transfer of such real property
or effective only upon the occurrence and during the continuance
of a default in the payment of rent;
(vii) any encumbrance or restriction arising as the result of applicable
law or regulation; or
(viii) any restriction or encumbrance that may be imposed by
governmental licenses, franchises or permits.
SECTION 4.12 LIMITATION ON ASSET SALES.
(a) The Guarantor shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Sale
after the Issue Date unless:
(i) the Guarantor or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the Property subject to such
Asset Sale;
(ii) at least 75% of the consideration paid to the Guarantor or such
Restricted Subsidiary in connection with such Asset Sale is in
the form of cash or cash equivalents; and
(iii) the Guarantor delivers an Officer's Certificate to the Trustee
certifying that such Asset Sale complies with clauses (i) and
(ii) above.
(b) The Net Available Cash (or any portion thereof) from Asset Sales may
be applied by the Guarantor or a Restricted Subsidiary, to the extent
the Guarantor or such Restricted Subsidiary elects:
(i) to prepay, repay or purchase Senior Debt of the Guarantor or Debt
of a Restricted Subsidiary (excluding Debt owed to the Guarantor
or an Affiliate of the Guarantor and Preferred Stock of a
Restricted Subsidiary); or
(ii) to reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with
Net Available Cash received by the Guarantor or another
Restricted Subsidiary);
provided, however, that in connection with any prepayment, repayment or
purchase of Debt pursuant to clause (b)(i) above, the Guarantor or such
Restricted Subsidiary shall retire such Debt and shall cause the related
revolving or term loan commitment (if any) to be permanently reduced by an
amount equal to the principal amount so prepaid, repaid or purchased with
the further effect (if applicable) contemplated by clause (ii) of the
definition of "Permitted Debt".
(c) Any Net Available Cash from an Asset Sale not applied in accordance
with paragraph (b) of this Section 4.12 within twelve months from the
date of the receipt of such Net Available Cash shall constitute
"Excess Proceeds". Within five Business Days from the date the
aggregate amount of Excess Proceeds exceeds $10.0 million (taking
into account income earned on such Excess Proceeds, if any), the
Guarantor, directly or through the Issuer, will be required to make
an offer (the "Asset Sale Offer") to purchase the Notes and the Euro
Notes, which offer shall be in the amount of the
<PAGE> 40
Excess Proceeds, at a purchase price equal to 100% of the principal
amount thereof plus accrued and unpaid interest thereon, if any
(including Special Interest, if any), to the Purchase Date (as defined
below) in accordance with the procedures (including prorating in the
event of oversubscription) set forth in Sections 3.02 and 3.08. To the
extent that any portion of the amount of Net Available Cash remains
after compliance with such procedures and provided that all Holders of
Notes have been given the opportunity to tender their Notes for purchase
as described in Section 3.08, the Guarantor or such Restricted
Subsidiary may use such remaining amount for general corporate purposes
and the amount of Excess Proceeds will be reset to zero.
The Issuer and the Guarantor, as appropriate, will comply with the
requirements of Rule 13e-4 and rule 14e-1 of Regulation 14E of the
Exchange Act and any other U.S., Luxembourg, Dutch or Polish securities
laws or regulations in connection with the repurchase of Notes described
in this Section 4.12. To the extent that the provisions of any securities
laws or regulations conflict with the repurchase offer, each of the
Issuer and the Guarantor will comply with such provisions and will not be
deemed to have breached its obligations under this Section 4.12.
SECTION 4.13 TRANSACTIONS WITH AFFILIATES. The Guarantor will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, conduct
any business, enter into or permit to exist any transaction or series of related
transactions (including the purchase, sale, transfer, assignment, lease,
conveyance or exchange of any Property or the rendering of any service) with any
Affiliate of the Guarantor (an "Affiliate Transaction") unless (a) the terms of
such Affiliate Transaction are (i) set forth in writing and (ii) no less
favorable in any material respect, taken as a whole, to the Guarantor or such
Restricted Subsidiary, as the case may be, than those that could be obtained in
a comparable arm's-length transaction with a Person that is not an Affiliate of
the Guarantor or such Restricted Subsidiary, as determined in good faith by any
Officer, (b) with respect to an Affiliate Transaction involving aggregate
payments or the transfer of assets or provision of services, in each case having
a value in excess of $5.0 million, (x) the Supervisory Board (including a
majority of the disinterested members of the Supervisory Board) approves such
Affiliate Transaction and, in its good faith judgment, believes that such
Affiliate Transaction complies with clause (a)(ii) of this paragraph as
evidenced by a Board Resolution and (y) with respect to those transactions
having a value in excess of $10.0 million, the Guarantor obtains and provides to
the Trustee a written opinion from an Independent Appraiser to the effect that
such Affiliate Transaction is fair, from a financial point of view, to the
Guarantor.
Notwithstanding the foregoing limitation, the Guarantor may enter into or
suffer to exist the following:
(i) any transaction or series of transactions between the Guarantor and a
Restricted Subsidiary or between Restricted Subsidiaries;
(ii) any Restricted Payment permitted to be made pursuant to Section
4.10;
(iii) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans
approved by the Supervisory Board;
(iv) the payment of reasonable fees and provision of reasonable
indemnities to directors and consultants of the Guarantor and its
Restricted Subsidiaries who are not employees of the Guarantor or its
Restricted Subsidiaries;
(v) loans and advances to employees made in the ordinary course of
business and consistent with past practice of the Guarantor or such
Restricted Subsidiary, as the case may be, provided, that such loans
and advances do not exceed $1.0 million in the aggregate at any one
time outstanding;
(vi) transactions pursuant to the Existing Notes, Notes, the Registration
Rights Agreement, the Intercompany Receivables or the Shareholders'
Agreement;
(vii) transactions between the Guarantor and its Subsidiaries entered into
in connection with the Bank Credit Facility;
<PAGE> 41
(viii) agreements in existence on the Issue Date and any renewal thereof,
provided that any such renewal is on terms no less favorable in any
material respect, taken as a whole, than the terms of any such
existing agreement and provided that the Guarantor will not, and
will not permit any Restricted Subsidiary to, amend, modify or in
any way alter the terms of any existing Affiliate agreements in a
manner materially adverse to the holders of the Notes;
(ix) contracts that have been awarded to an Affiliate pursuant to which
the Affiliate has granted the Guarantor "most favored terms" pursuant
to a competitive bid, provided that the Guarantor certifies to the
Trustee that such contract complies with this subsection;
(x) agreements relating to the offer and sale of Capital Stock of the
Guarantor that the Management Board determines in good faith to be
customary for such an offer and sale;
(xi) any employment agreement or employment arrangement entered into by
the Guarantor or any Restricted Subsidiary in the ordinary course of
business that is consistent with industry practice or approved by a
majority of the disinterested members of the Supervisory Board; and
(xii) any guarantee or grant of collateral by the Guarantor or a Restricted
Subsidiary in connection with Senior Debt.
SECTION 4.14 CHANGE OF CONTROL.
(a) If a Change of Control occurs, then, subject to compliance with the
requirements of paragraph (b) of this Section 4.14, the Issuer or the
Guarantor shall, within 60 days after the occurrence of such Change
of Control, commence an offer to purchase the Notes (the "Change of
Control Offer"), at a purchase price equal to 101% of the principal
amount thereof, plus any accrued and unpaid interest thereon, if any,
to the purchase date (such price, together with such interest, the
"Change of Control Purchase Price") pursuant to the procedures set
forth in Section 3.08.
(b) In the event that at the time of a Change of Control the terms of any
Senior Debt restrict or prohibit the repurchase of Notes as described
in the foregoing paragraph, then prior to the mailing of the Change
of Control notice to Holders of the Notes but in any event within 30
days following such Change of Control, the Guarantor will (i) repay,
or cause to be repaid in full and terminate all commitments under
such Senior Debt or, if such Senior Debt is not, by its terms, then
repayable or prepayable, to offer to repay in full such Senior Debt
and to repay or cause to be repaid such Senior Debt of each lender
who has accepted such offer or (ii) obtain the requisite consent
under the agreements governing such Senior Debt to permit the
repurchase of the Notes as described in this Section 4.14 and Section
3.08.
SECTION 4.15 LIMITATION ON LIENS. The Guarantor will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, Incur any Lien
(other than Permitted Liens) upon any of its Property, including any shares of
Capital Stock or Debt of any Restricted Subsidiary, whether owned at the Issue
Date or thereafter acquired, or any interest therein or any income or profits
therefrom, or assign or otherwise convey any right to receive income thereon
unless it has made or will make effective provision whereby the Notes will be
secured by such Lien equally and ratably with (or prior to) all other Debt of
the Guarantor or any Restricted Subsidiary secured by such Lien (subject to
applicable priorities of payment); provided, however, that the Guarantor may
Incur other Liens to secure Debt as long as the amount of outstanding Debt
secured by Liens Incurred pursuant to this proviso does not exceed 5% of
Consolidated Net Tangible Assets, as determined based on the consolidated
balance sheet of the Guarantor as of the end of the most recent fiscal quarter
ending at least 45 days prior thereto.
SECTION 4.16 LIMITATION ON DEBT AND PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES. The Guarantor shall not permit any Restricted Subsidiary to,
directly or indirectly, Incur any Debt or Preferred Stock except:
(a) Debt Incurred under the Bank Credit Facility and any Qualified Debt
Offering and Refinancing Debt Incurred in respect thereof, provided
that the aggregate principal amount of all such Debt under the
<PAGE> 42
Bank Credit Facility and any Qualified Debt Offering and Refinancing
Debt Incurred in respect thereof, together with all Debt of the
Guarantor Incurred under the Bank Credit Facility and any Qualified Debt
Offering and Refinancing Debt Incurred in respect thereof, at any one
time outstanding does not exceed DM 760 million, which amount shall be
permanently reduced by the amount of (A) Scheduled Reductions and (B)
repayments pursuant to the provisions of the Bank Credit Facility
relating to the proceeds of Asset Sales not reinvested; provided,
however, that the total reductions pursuant to (A) and (B) above shall
not exceed DM 672 million;
(b) Debt Incurred in respect of Capital Expenditure Debt and Refinancing
Debt Incurred in respect thereof, provided that (i) the aggregate
principal amount of such Debt does not exceed the Fair Market Value
of the property or assets acquired or constructed (including the cost
of design, development, construction, installation or integration),
(ii) the property or assets acquired or constructed are used in a
Telecommunications Business and (iii) the aggregate principal amount
outstanding of all Debt Incurred under this clause (b) and under
clause (b)(iii) of Section 4.09 does not exceed (w) $250.0 million
plus (x) an amount equal to $30 million for each million persons
resident in the coverage area of the GSM 1800 License, plus (y) an
amount equal to (i) if the Guarantor or any Subsidiary acquires a
UMTS License, $40 million for each million persons resident in the
coverage area of such UMTS License for the development of UMTS
services minus (ii) the aggregate principal amount of Debt Incurred
pursuant to the immediately preceding clause (x), plus (z), if
Minutes of Use exceed an average of 383 million per month for any
four months in a consecutive six-month period through December 31,
2001, $3 for each such excess Minute of Use;
(c) that percentage of Debt of a Restricted Subsidiary owing to and held
by any Restricted Subsidiary that is equal to the percentage of the
Guarantor's direct or indirect ownership interest in such Restricted
Subsidiary; provided, however, that (x) any subsequent issue or
transfer of Capital Stock or other event that results in a reduction
in the Guarantor's direct or indirect ownership interest in such
Restricted Subsidiary or (y) any subsequent transfer of such Debt
(except to the Guarantor or a Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the Incurrence of such Debt by
the issuer thereof in the following amounts: (A) in the case of (x)
the full amount of such Debt if such Restricted Subsidiary does not
remain a Restricted Subsidiary and otherwise the percentage of such
Debt equal to the percentage reduction in the Guarantor's direct or
indirect ownership interest in such Restricted Subsidiary; and (B) in
the case of (y), the full amount of such Debt if it is not
transferred to a Restricted Subsidiary and otherwise a percentage of
such Debt equal to (X) the percentage of the Guarantor's direct or
indirect ownership interest in the Restricted Subsidiary that
previously held such Debt less (Y) the percentage of the Guarantor's
indirect ownership interest in the Restricted Subsidiary to which
such Debt is transferred;
(d) Debt of a Restricted Subsidiary Incurred and outstanding on or prior
to the date on which such Restricted Subsidiary was acquired by the
Guarantor or otherwise became a Restricted Subsidiary (other than
Debt Incurred as consideration in, or to provide all or any portion
of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Subsidiary or was otherwise acquired
by the Guarantor), provided, however, that at the time such
Restricted Subsidiary is acquired or otherwise became a Restricted
Subsidiary of the Guarantor, the Guarantor would have been able to
Incur $1.00 of additional Debt pursuant to clauses (i) or (ii) of
paragraph (a) of Section 4.09;
(e) Debt under Interest Rate Protection Agreements entered into by such
Restricted Subsidiary for the purpose of limiting interest rate risk
in respect of Debt of the Guarantor or a Restricted Subsidiary in the
ordinary course of the financial management of such Restricted
Subsidiary and not for speculative purposes;
(f) Debt under Currency Exchange Protection Agreements, provided that
such Currency Exchange Protection Agreements were entered into by
such Restricted Subsidiary for the purpose of limiting currency
exchange rate risks directly related to transactions entered into in
the ordinary course of business and not for speculative purposes;
<PAGE> 43
(g) Debt in connection with one or more standby letters of credit or
performance bonds issued in the ordinary course of business or
pursuant to self-insurance obligations and, in each case, not in
connection with the borrowing of money or the obtaining of advances
or credit;
(h) Debt or Preferred Stock outstanding on the Issue Date and listed on a
Schedule I to this Indenture;
(i) Debt Incurred pursuant to this Indenture, the Holdings Guarantee, the
Euro Notes Holdings Guarantee or the Issuer Guarantees; and
(j) Refinancing Debt Incurred in respect of Debt Incurred pursuant to the
provisions of clauses (d), (h), and (i) of this Section 4.16.
(k) For purposes of determining the outstanding principal amount of any
particular Debt Incurred pursuant to this Section 4.16, (i) Debt
permitted by this Section 4.16 need not be permitted solely by
reference to one provision permitting such Debt but may be permitted
in part by one such provision and in part by one or more other
provisions of this Section permitting such Debt, (ii) in the event
that Debt or any portion thereof meets the criteria of more than one
of the types of Debt described in this Section, the Guarantor, in its
sole discretion, may classify or from time to time reclassify such
Debt and shall only be required to include the amount of such Debt in
one of such types and (iii) such amount shall be calculated without
duplication (including without double counting the amount of any
Guarantee of Debt otherwise permitted to be incurred hereunder).
(l) For purposes of determining whether the principal amount of any
Refinancing Debt permitted by this Section 4.16 does not, in the
event it is issued in a currency different from the currency in which
the Debt being refunded or refinanced or paid at maturity
("Refinanced Debt") was issued, exceed the principal amount of the
Refinanced Debt, the rate to be used shall be the spot rate for the
purchase of the currency of the Refinanced Debt with the currency of
the Refinancing Debt as published in the Wall Street Journal in the
"Exchange Rates" column under the heading "Currency Trading" on the
date two Business Days prior to such determination.
SECTION 4.17 LIMITATION ON LAYERED DEBT. Neither the Guarantor nor the
Issuer will, directly or indirectly, Incur any Debt if such Debt provides by its
terms that it is subordinate or junior in ranking to any Senior Debt of the
Issuer or Senior Debt of the Guarantor, as the case may be, unless such Debt is
Senior Subordinated Debt or is expressly subordinated in right of payment to
Senior Subordinated Debt provided, however, that nothing herein shall apply to
(i) intercreditor agreements among creditors of the Guarantor or the Issuer but
to which neither the Guarantor nor the Issuer is a party or (ii) agreements
relating to priorities of payment or rights in respect of collateral among the
Guarantor, the Issuer and the banks or other financial institutions party to the
Bank Credit Facility (or any Refinancing Indebtedness in respect thereof) and
any related Hedging Obligations.
SECTION 4.18 ADDITIONAL AMOUNTS. All payments made by the Issuer, under
or with respect to the Notes, and by the Guarantor and Holdings, under or with
respect to the Notes Guarantees, will be made free and clear of and without
withholding or deduction for or on account of any present or future tax, duty,
levy, impost, assessment or other governmental charge imposed or levied by or on
behalf of the government of Luxembourg, The Netherlands or Poland or any
political subdivision or taxing authority or agency thereof or therein
(hereinafter "Taxes") unless the Issuer, Holdings or the Guarantor, as the case
may be, is required to withhold or deduct Taxes by law or by the interpretation
or administration thereof. If the Issuer, Holdings or the Guarantor is so
required to withhold or deduct any amount for or on account of Taxes from any
payment made under or with respect to the Notes or the Notes Guarantees,
respectively, the Issuer, Holdings or the Guarantor will pay such Additional
Amounts as may be necessary so that the net amount received by each Holder
(including Additional Amounts) after such withholding or deduction will not be
less than the amount such Holder would have received if such Taxes had not been
required to be withheld or deducted; provided, however, that the foregoing
obligation to pay Additional Amounts does not apply to (a) any Taxes that would
not have been so imposed but for the existence of any present or former
connection between the relevant Holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of power over the relevant
Holder, if the relevant Holder is an
<PAGE> 44
estate, nominee, trust or corporation) and Luxembourg, The Netherlands or Poland
or any political subdivision or taxing authority or agency thereof or therein
(other than the mere receipt of such payment or the ownership or holding outside
of Luxembourg, The Netherlands or Poland of such Note); (b) any estate,
inheritance, gift, sales, excise, transfer, personal property tax or similar
tax, assessment or governmental charge; or (c) any Taxes payable otherwise than
by deduction or withholding from payments of principal of (or premium, if any,
on) or interest on such Note; nor will Additional Amounts be paid (i) if the
payment could have been made without such deduction or withholding if the
beneficiary of the payment had presented the Note for payment within 30 days
after the date on which such payment or such Note became due and payable or the
date on which payment thereof is duly provided for, whichever is later, except
to the extent that the Holder would have been entitled to Additional Amounts had
the Note been presented on the last day of such 30-day period, or (ii) with
respect to any payment of principal of (or premium, if any, on) or interest on
such Note to any Holder who is a fiduciary or partnership or any Person other
than the sole beneficial owner of such payment, to the extent that a beneficiary
or settlor with respect to such fiduciary, a member of such a partnership or the
beneficial owner of such payment would not have been entitled to the Additional
Amounts had such beneficiary, settlor, member or beneficial owner been the
actual Holder of such Note. The foregoing provisions shall survive any
termination or discharge of the Indenture and shall apply mutatis mutandis to
any jurisdiction in which any successor Person to the Issuer, Holdings or the
Guarantor is organized or any political subdivision or taxing authority or
agency thereof or therein.
SECTION 4.19 FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee
(but without imposing any obligation on the Trustee to make any such request),
the Issuer and the Guarantor shall execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture; provided, however, that no such
instrument or act shall adversely affect the rights or interests under this
Indenture of the holders of Senior Debt without their consent.
SECTION 4.20 RESTRICTED AND UNRESTRICTED SUBSIDIARIES.
(a) The Management Board may designate or redesignate any Subsidiary of
the Guarantor or any Restricted Subsidiary to be an Unrestricted
Subsidiary if:
(i) the Subsidiary to be so designated does not own any Capital Stock,
Redeemable Stock or Debt of, or own or hold any Lien on any
property or assets of, the Guarantor or any other Restricted
Subsidiary;
(ii) the Subsidiary to be so designated is not obligated by any Debt,
Lien or other obligation that, if in default, would result (with
the passage of time or notice or otherwise) in a default on any
Debt of the Guarantor or any Restricted Subsidiary; and
(iii) either (A) the Subsidiary to be so designated has total assets of
$1,000 or less or (B) such designation is effective immediately
upon such Subsidiary becoming a Subsidiary of the Guarantor or of
a Restricted Subsidiary.
Unless so designated as an Unrestricted Subsidiary, any Person that
becomes a Subsidiary of the Guarantor or of any Restricted Subsidiary
will be classified as a Restricted Subsidiary.
Except as provided in this clause (a), no Restricted Subsidiary may be
redesignated as an Unrestricted Subsidiary. Any such designation by the
Management Board will be evidenced to the Trustee by promptly filing
with the Trustee a copy of the Board Resolution giving effect to such
designation and an Officer's Certificate certifying that such
designation complies with the foregoing provisions.
(b) The Guarantor shall not, and shall not permit any Unrestricted
Subsidiary to, take any action or enter into any transaction or
series of transactions that would result in a Person becoming a
Restricted Subsidiary (whether through an acquisition, the
redesignation of an Unrestricted Subsidiary or otherwise) unless
after giving effect to such action, transaction or series of
transactions, on a pro forma basis:
(i) the Guarantor could Incur at least $1.00 of additional Debt
pursuant to clauses (i) or (ii) of paragraph (a) of Section 4.09;
<PAGE> 45
(ii) such Restricted Subsidiary could then Incur pursuant to Section
4.09 all Debt as to which it is obligated at such time; and
(iii) no Default or Event of Default would occur or be continuing.
SECTION 4.21 THE SUBSIDIARIES. The Guarantor shall ensure that the
Issuer, Holdings and PTC International Finance B.V. each remains a Wholly Owned
Subsidiary; provided, however, that nothing herein shall limit (i) the ability
of the Guarantor or Holdings to grant a security interest in the shares of the
Issuer to secure Senior Debt, (ii) the rights of the holders of such Senior Debt
to exercise their rights and remedies in respect thereof as long as the
Surviving Person meets the requirements set forth in (a) and (b) of Section 5.01
or (iii) a voluntary dissolution of the Issuer or merger of the Issuer into
Holdings, or Holdings into the Guarantor, solely for the purpose of permitting
Holdings or the Guarantor to assume all obligations in respect of the Notes as
if it were the direct obligor with respect thereto and in which all the assets
of the Issuer are transferred to Holdings or in which all of the assets of
Holdings are transferred to the Guarantor and no material payment or
distribution is made to creditors.
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.01 CONSOLIDATION, MERGER OR SALE OF ASSETS.
(a) Neither the Guarantor nor the Issuer nor Holdings shall merge or
consolidate with or into any other entity or sell, transfer, assign,
lease, convey or otherwise dispose of all or substantially all of its
Property in any one transaction or series of transactions (other than
a merger, amalgamation or consolidation of a Restricted Subsidiary
(including the Issuer and Holdings) into, or the transfer of all or
any portion of the assets and liabilities of a Restricted Subsidiary
to, the Guarantor or Holdings (with respect to the Issuer only))
unless, in the case of the Guarantor: (i) the Guarantor shall be the
surviving Person (the "Surviving Person") or the Surviving Person (if
other than the Guarantor) formed by such consolidation or merger or
the Person to which such sale, transfer, assignment, lease,
conveyance or disposition is made shall be a corporation organized
and existing under the laws of Poland, the United States of America
or a state thereof or the District of Columbia, Germany, France, The
Netherlands, Luxembourg or the United Kingdom; (ii) the Surviving
Person (if other than the Guarantor) expressly assumes, by
supplemental indenture in form satisfactory to the Trustee, executed
and delivered to the Trustee by such Surviving Person, the due and
punctual payment of the obligations of the Guarantor under the Parent
Guarantee and the due and punctual performance and observance of all
the covenants and conditions of the Indenture to be performed by the
Guarantor; (iii) in the case of a sale, transfer, assignment, lease,
conveyance or other disposition of all or substantially all of the
Guarantor's Property, such Property shall have been transferred as an
entirety or substantially as an entirety to one Person; (iv)
immediately before and after giving effect to such transaction or
series of transactions on a pro forma basis (and treating any Debt
which becomes, or is anticipated to become, an obligation of the
Surviving Person or any Restricted Subsidiary as a result of such
transaction or series of transactions as having been Incurred by the
Surviving Person or such Restricted Subsidiary at the time of such
transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing; (v) immediately after
giving effect to such transaction or series of transactions on a pro
forma basis (and treating any Debt which becomes, or is anticipated
to become, an obligation of the Surviving Person or any Restricted
Subsidiary as a result of such transaction or series of transactions
as having been Incurred by the Surviving Person or such Restricted
Subsidiary at the time of such transaction or series of
transactions), the Guarantor or the Surviving Person, as the case may
be, would be able to Incur at least $1.00 of additional Debt under
clauses (i) or (ii) of paragraph (a) of Section 4.09; and (vi) in
connection with any consolidation, merger, transfer or other
transaction contemplated by this provision, the Guarantor shall
deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, transfer
<PAGE> 46
or other transaction and the supplemental indenture in respect thereto
comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been
complied with; provided, however, that in the case of any merger,
amalgamation or consolidation permitted above, the first priority
security interests in the Escrow Account in favor of the Trustee shall
be preserved and in connection with any merger of the Issuer into
Holdings, the Holdings Guarantees shall remain in full force and effect
and Holdings shall assume by supplemental indentures all obligations of
the Issuer under this Indenture and provided further, however, that the
provisions of clauses (iv) and (v) shall not apply to a reorganization
of the Guarantor, effected for the purpose of converting the Guarantor
to a spolka akcyjna (a joint stock company) in which the holders of the
Guarantor's Capital Stock before and after such reorganization remain
unchanged.
(b) A Surviving Person (other than the Guarantor) satisfying the
requirements of clause (a) above will succeed to, and be substituted
for, and may exercise every right and power of the Guarantor under
this Indenture, and the predecessor Guarantor (except in the case of
a lease) will be released from the obligation to pay the principal
of, and premium, if any, and interest on, the Notes.
(c) Nothing in this Section 5.01 shall prevent any Restricted Subsidiary
from consolidating with, merging into or transferring all or part of
its properties and assets to the Guarantor or any other Restricted
Subsidiary.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT. Subject to the immediately following
paragraph, an "Event of Default" occurs if:
(i) the Issuer and the Guarantor fail to make any payment of interest
(including Special Interest, if any) and Additional Amounts, if any,
on any Note when the same shall become due and payable, whether or
not such payments shall be prohibited as described under Section
10.03, and such failure continues for a period of 30 days, provided,
however, that the failure to make any of the first five scheduled
interest payments on the Notes will constitute an Event of Default
with no cure or grace period;
(ii) the Issuer and the Guarantor (A) fail to make the payment of the
principal or premium, if any, on any Note when the same becomes due
and payable at its Stated Maturity, upon declaration, redemption,
acceleration, required purchase or otherwise, whether or not such
payments shall be prohibited as described under Article 10 or (B)
fail to redeem or purchase the Notes when required pursuant to this
Indenture or the Notes, whether or not such redemption or purchase
shall be prohibited as described under Article 10;
(iii) the Issuer and the Guarantor fail to make or consummate a Change of
Control Offer described in Section 4.14 or to comply with the
provisions described in Section 4.10;
(iv) the Issuer or the Guarantor fails to comply with any of their
respective covenants in the Notes or this Indenture (other than those
specified in clauses (i), (ii) and (iii)) above and such failure
continues for a period of 60 days after the notice specified below;
(v) Debt for borrowed money of the Guarantor or any Restricted Subsidiary
is not paid within any applicable grace period after final maturity
in effect from time to time or is accelerated by the holders thereof
and the total amount of such Debt unpaid or accelerated exceeds $15.0
million or its equivalent at the time;
(vi) any judgment or decree aggregating in an uninsured amount in excess
of $15.0 million or its equivalent at the time is rendered against
the Guarantor or any Restricted Subsidiary and there is a period of
60 days following the entry of such judgment or decree during which
such judgment or decree is not discharged, waived or the execution
thereof stayed and such default continues for ten days after the
notice specified below;
<PAGE> 47
(vii) the Issuer, the Guarantor or any Significant Subsidiary pursuant to
or within the meaning of any Bankruptcy Law (A) commences a voluntary
insolvency proceeding, (B) consents to the entry of an order for
relief against it in an involuntary insolvency proceeding, (C)
consents to the appointment of a Custodian or official receiver of it
or for any substantial part of its property, or (D) makes a general
assignment for the benefit of its creditors; or takes any equivalent
action under any foreign laws relating to insolvency or laws having a
similar effect for creditors; provided, however, that the dissolution
of a Restricted Subsidiary and the assumption by the Guarantor of all
its obligations, including (in the case of the Issuer) the
obligations on the Notes, together with the transfer of all the
assets of such Restricted Subsidiary to the Guarantor or (other than
in the case of the Issuer) another Restricted Subsidiary, shall not
constitute an Event of Default under this subsection (vii);
(viii) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (A) is for relief against the Issuer, the
Guarantor or any Significant Subsidiary in an involuntary insolvency
proceeding; (B) appoints a Custodian or official receiver of the
Issuer, the Guarantor or any Significant Subsidiary or for any
substantial part of its property; or (C) orders the involuntary
winding up or liquidation of the Issuer, the Guarantor or any
Significant Subsidiary; or any equivalent relief is granted under
any foreign laws relating to insolvency and the order or decree
remains unstayed and in effect for 90 days;
(ix) any of the Telecommunications Licenses of the Guarantor is revoked,
terminated or suspended or otherwise ceases to be effective,
resulting in the cessation or suspension of operations for a period
of more than 180 days of the cellular communication business of the
Guarantor;
(x) either of the Note Guarantees for any reason shall not be or shall
cease to be, or shall for any reason be asserted in writing by any
Guarantor, Holdings or the Issuer not to be, in full force and effect
and enforceable in accordance with its terms, except to the extent
contemplated by the Indenture and the Notes Guarantees; or
(xi) the Dollar Escrow Agreement becomes, or the Guarantor or Holdings
asserts or acknowledges in writing that the Dollar Escrow Agreement
is, invalid and unenforceable, otherwise than in accordance with its
terms.
A Default under clause (iv) or (vi) above will not be an Event of Default
until the Trustee or the Holders of at least 25% in aggregate principal amount
of the Notes then outstanding notify the Guarantor of the Default and the
Guarantor does not cure such Default within the time specified after receipt of
such notice. Such notice must specify the Default, demand that it be remedied
and state that such notice is a "Notice of Default".
The Guarantor will deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any event which, with the giving of notice and the lapse of time, would become
an Event of Default under clause (iv), (v) or (vi) above, its status and what
action the Guarantor is taking or proposes to take with respect thereto.
SECTION 6.02 ACCELERATION. If an Event of Default (other than an Event of
Default specified in clause (vii) or (viii) of Section 6.01) occurs and is
continuing, the Trustee, by notice to the Guarantor, or the holders of at least
25% in aggregate principal amount of the Notes then outstanding by notice to the
Guarantor and the Trustee, may declare the principal of premium if any, and
accrued interest on all Notes to be due and payable. Upon such a declaration,
such principal premium and interest will be due and payable immediately;
provided, however, that so long as any Bank Debt or any commitment therefor is
outstanding, any such notice or declaration shall not become effective until ten
Business Days after such notice is delivered to the Representative of the Bank
Debt; and provided further that if such Event of Default is no longer continuing
at the end of such ten Business Day period, such notice or declaration shall be
deemed rescinded and of no further force or effect. If an Event of Default
specified in clause (vii) or (viii) of Section 6.01 occurs, the principal amount
of and interest on all the Notes will ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holders. The Holders of a majority in principal amount of the Notes by
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpayment of principal or
<PAGE> 48
interest that has become due solely because of acceleration. No such rescission
will affect any subsequent Default or impair any right consequent thereto. The
Guarantor shall notify the Trustee of the name, address, facsimile number and
telephone number of the Representative promptly upon the request of the Trustee
and of any successor thereto or change thereof.
SECTION 6.03 OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. All available remedies are cumulative
to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS. The Holders of a majority in
aggregate principal amount of the Notes by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of, premium, if any or interest on a Note or (ii) a Default in respect
of a provision that cannot be amended without the consent of each Holder
affected. When a Default is waived, it is deemed cured, but no such waiver will
extend to any subsequent or other Default or impair any consequent right.
SECTION 6.05 CONTROL BY MAJORITY. The Holders of a majority in aggregate
principal amount of the Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or that
the Trustee determines is unduly prejudicial to the rights of other Holders or
would involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction. Prior to taking any action under this
Indenture, other than under Article 10, the Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
SECTION 6.06 LIMITATION ON SUITS. A Holder of Notes may not pursue any
remedy with respect to this Indenture or the Notes unless:
(i) such Holder gives to the Trustee written notice of a continuing Event
of Default;
(ii) the Holders of at least 50% in aggregate principal amount of the
Notes then outstanding make a written request to the Trustee to
pursue the remedy;
(iii) such Holder or Holders offer to the Trustee reasonable security or
indemnity satisfactory to the Trustee against any loss, liability or
expense;
(iv) the Trustee does not comply with the request within 179 days after
receipt of the request and the offer of such security or indemnity;
(v) the Holders of a majority in principal amount of the Notes do not
give the Trustee a written direction inconsistent with the request
during such 179-day period; and
(vi) in any event, such Holder shall request that any judgment be paid to
the Trustee as agent for such Holder.
A Holder may not use this Indenture to prejudice the rights of any other
Holder or to obtain a preference or priority over another Holder.
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal of and interest on the Notes held by such Holder, on or after the
respective due dates expressed in the Notes, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
<PAGE> 49
SECTION 6.08 COLLECTION SUIT BY TRUSTEE. If an Event of Default in
payment of interest or principal specified in Section 6.01(i) or (ii) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Guarantor for the whole amount or principal and
interest remaining unpaid (together with interest on such unpaid interest to the
extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Holders allowed in any
judicial proceedings relative to the Issuer or the Guarantor, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders at their direction in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the trustee under Section 7.07.
SECTION 6.10 PRIORITIES. If the Trustee collects any money or property
pursuant to this Article 6, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to the holders of Senior Debt to the extent required pursuant to
Article 10;
THIRD: to Holders for amounts due and unpaid on the Notes for principal
and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for
principal and interest, respectively; and
FOURTH: to the Guarantor.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section. At least 15 days before such record date, the
Guarantor shall mail to each Holder and the Trustee a notice that states the
record date, the payment date and amount to be paid.
SECTION 6.11 UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in aggregate principal amount of the Notes.
SECTION 6.12 RESERVATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every such case, subject to any determination in such proceeding, the Issuer,
the Guarantor, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 6.13 RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided
with respect to the replacement or payment of mutilated, destroyed, lost or
stolen Notes in Section 2.07, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
<PAGE> 50
SECTION 6.14 DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder of any Note to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article Six or by law to the Trustee or to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing of which a
Trust Officer of the Trustee has actual knowledge, the Trustee shall
exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their
exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default of which a Trust
Officer of the Trustee has actual knowledge: (1) the Trustee
undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against
the Trustee; and (2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine
the certificates and opinions to determine whether they conform to
the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts
stated therein).
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own wilful
misconduct, except that: (1) this paragraph does not limit the effect
of paragraph (b) of this Section 7.01; (2) the Trustee shall not be
liable for any error of judgment made in good faith by a Trust
Officer unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and (3) the Trustee shall not be
liable with respect to any action it takes or omits to take in good
faith in accordance with a direction received by it pursuant to
Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section
7.01.
(e) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuer or the
Guarantor.
(f) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any
of its rights or powers, if it shall have reasonable grounds to
believe that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section 7.01 and to the
provisions of the TIA.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
<PAGE> 51
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel, such opinion to be
prepared at the Issuer's or the Guarantor's expense. The Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on the Officer's Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does
not constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the advice
or opinion of such counsel with respect to legal matters relating to
this Indenture and the Notes shall be full and complete authorization
and protection from liability in respect to any action taken, omitted
or suffered by it hereunder in good faith and in accordance with the
advice or opinion of its counsel.
(f) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(g) the Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Trust Officer has actual knowledge thereof
or unless written notice of any event which is in fact such a default
is received by the Trustee at the Corporate Trust Office of the
Trustee, and such notice references the Notes, this Indenture and the
specific Default or Event of Default.
(h) The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any
transfer or any interest in any Note (including any transfers between
or among Participants or beneficial owners of interests in any Global
Note) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so
if and when expressly required by the terms of, this Indenture or an
Issuer Order, and to examine the same to determine substantial
compliance as to form with the express requirements.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual
or any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Guarantor or its Affiliates with the same rights it would have if
it were not Trustee. Any Paying Agent, Registrar, Co-Registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04 TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this
Indenture, the Notes, the Escrow Agreements or the Escrow Accounts, it shall not
be accountable for the Issuer's or the Guarantor's use of the proceeds from the
Notes, and it shall not be responsible for any statement in the Notes other than
the Trustee's certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS. If a Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each Holder notice
of the Default within 90 days after it occurs. Except in the case of a Default
in payment of principal of or interest on
any Note (including payments pursuant to the mandatory redemption provisions of
such Note, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Holders.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after May 15
of each year commencing with the first May 15 after the Issue Date, the Trustee
shall transmit to the Holders, in the manner and to the extent provided in TIA
sec. 313(c), a brief report dated as of such May 15, if required by TIA sec.
313(a). The Trustee also shall comply with TIA sec. 313(b).
<PAGE> 52
A copy of each report at the time of its mailing to Holders shall be filed
with the SEC and each securities exchange (if any) on which the Notes are
listed. The Guarantor agrees to notify the Trustee whenever the Notes become
listed on any securities exchange and of any delisting thereof.
SECTION 7.07 COMPENSATION AND INDEMNITY. The Guarantor shall pay to the
Trustee from time to time such compensation for its services as the Guarantor
and the Trustee shall agree. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Guarantor shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and out-of-pocket expenses of the Trustee's agents and counsel. The
Guarantor shall indemnify the Trustee against any and all loss, liability or
expense (including attorneys' fees) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder. The
Trustee shall notify the Guarantor promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Guarantor shall not relieve
the Guarantor of its obligations hereunder. The Guarantor shall defend the claim
and the Trustee shall cooperate in such defense. The Trustee may have separate
counsel and the Guarantor shall pay the fees and expenses of such counsel. The
Guarantor need not pay for any settlement made without its consent. The
Guarantor need not reimburse any expense or indemnify against any loss,
liability or expense incurred by the Trustee through the Trustee's own wilful
misconduct, negligence or bad faith.
To secure the Guarantor's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of and interest on Notes under Article 8 or otherwise.
The Guarantor's payment obligations pursuant to this Section 7.07 shall
survive the discharge of this Indenture and the resignation or removal of the
Trustee. When the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.01(vii) or (viii) with respect to the Issuer, the
Guarantor, or any Significant Subsidiary, the expenses are intended to
constitute expenses of administration under Bankruptcy Law.
SECTION 7.08 REPLACEMENT OF TRUSTEE. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.08. The Trustee may resign at any time by so notifying the Guarantor. The
Holders of a majority in principal amount of
the Notes may remove the Trustee by so notifying the Trustee, the Issuer and the
Guarantor. The Issuer or the Guarantor shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or its
property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of the Trustee for any reason, the Issuer or the Guarantor shall promptly
appoint a successor Trustee. Within one year after the successor Trustee takes
office, the Holders of a majority in the principal amount of the Notes may
appoint a successor Trustee to replace the Trustee appointed by the Issuer or
the Guarantor.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuer and the Guarantor. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the lien provided for
in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer, the
Guarantor or the Holders of at least 25% in principal amount of the Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
<PAGE> 53
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Guarantor's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
SECTION 7.10 ELIGIBILITY: DISQUALIFICATION. The Trustee shall at all
times satisfy the requirements of TIA sec. 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. No obligor upon the Notes or Person
directly controlling, controlled by, or under common control with such obligor
shall serve as Trustee upon the Notes. The Trustee shall comply with TIA sec.
310(b); provided, however, that there shall be excluded from the operation of
TIA sec. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other notes of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA sec.
310(b)(1) are met.
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST GUARANTOR. The
Trustee shall comply with TIA sec. 311(a), excluding any creditor relationship
listed in TIA sec. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA sec. 311(a) to the extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01 DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE.
(a) When (i) the Issuer delivers to the Trustee all outstanding Notes
(other than Notes replaced pursuant to Section 2.07) for cancellation
or (ii) all outstanding Notes have become due and payable and the
Issuer, Holdings or the Guarantor has irrevocably deposited with the
Trustee funds sufficient to pay at maturity or upon redemption all
outstanding Notes, including interest thereon (other than Notes
replaced pursuant to Section 2.07), and in either case the Issuer,
Holdings or the Guarantor has paid all other sums payable hereunder,
then this Indenture shall, subject to Sections 8.01(c), and 8.06,
cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Issuer
accompanied by an Opinion of Counsel and an Officer's Certificate
certifying that all conditions precedent to such satisfaction and
discharge have occurred, at the cost and expense of the Issuer,
Holdings or the Guarantor, as the case may be.
(b) Subject to Sections 8.01(c), 8.02 and 8.06, the Issuer at any time
may terminate (i) all its obligations under the Notes and this
Indenture and the obligations of the Guarantor and Holdings under the
Notes Guarantees ("legal defeasance option") or (ii) the respective
obligations of the Issuer, Holdings and the Guarantor under Sections
4.02 through 4.22 and 5.01 (other than the covenant to comply with
TIA sec. 314(a)(4) to the extent the obligations thereunder cannot be
terminated) and the related operation of Section 6.01(iii), (iv),
(v), (vi) and (ix) (other than any remaining obligations under
<PAGE> 54
TIA sec. 314(a)(4) and with respect to Section 6.01(iv) only with
respect to the Issuer's and the Guarantor's obligations under Sections
4.02 through 4.22) (other than the covenant to comply with TIA sec.
314(a)(4) to the extent the obligations thereunder cannot be terminated)
("covenant defeasance option"). The Issuer may exercise its legal
defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
If the Issuer exercises its legal defeasance option, payment of the
defeased Notes may not be accelerated because of an Event of Default. If
the Issuer exercises its covenant defeasance option, payment of the
Notes may not be accelerated because of an Event of Default specified in
Section 6.01(iii), (iv), (v), (vi) or (ix) (other than any Event of
Default occurring because of any remaining obligations under TIA sec.
314 (a)(4) or as a result of the violation of any covenant referred to
in Section 6.01(iv) that is not subject to the covenant defeasance
option).
Upon satisfaction of the conditions set forth herein and upon request of
the Issuer or the Guarantor, the Trustee shall acknowledge in writing
the discharge of those obligations that the Issuer, Holdings and the
Guarantor terminate.
(c) Notwithstanding clauses (a) and (b) above, the Issuers and the
Guarantor's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07,
7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes have
been paid in full. Thereafter, the Guarantor's obligations in
Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02 CONDITIONS TO DEFEASANCE. The Issuer may exercise its legal
defeasance option or its covenant defeasance option only if:
(a) the Issuer or the Guarantor irrevocably deposits in trust with the
Trustee cash in United States dollars or U.S. Government Securities
for the payment of principal of and interest on the Notes to maturity
or redemption, as the case may be;
(b) the Issuer or the Guarantor delivers to the Trustee a certificate
from a nationally recognized firm of independent certified public
accountants expressing such firm's opinion that the payments of
principal and interest when due and without reinvestment will provide
cash at such times and in such amounts as will be sufficient to pay
principal and interest when due on all the Notes to maturity or
redemption, as the case may be;
(c) 184 days pass after the deposit is made and during the 184-day period
no Default specified in Section 6.01(vii) or (viii) with respect to
the Guarantor occurs which is continuing at the end of the period;
(d) the deposit does not constitute a default under any other agreement
binding on the Guarantor and is not prohibited by Article 10;
(e) the Issuer or the Guarantor delivers to the Trustee an Opinion of
Counsel to the effect that the trust resulting from the deposit does
not constitute, or is qualified as, a regulated investment company
under the U.S. Investment Company Act of 1940;
(f) in the case of the legal defeasance option, the Issuer or the
Guarantor shall have delivered to the Trustee (i) an Opinion of
Counsel stating that either (A) the Issuer or the Guarantor has
received from the U.S. Internal Revenue Service a ruling, or (B)
since the date of this Indenture there has been a change in the
applicable U.S. Federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the Notes will not recognize income, gain or loss for
U.S. Federal income tax purposes as a result of such defeasance and
will be subject to U.S. Federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if
such defeasance had not occurred and (ii) an Opinion of Counsel in
each of Luxembourg, The Netherlands, France, Germany and the United
Kingdom to the effect that the Holders of the Notes will not
recognize income, gain or loss for Luxembourg, Dutch, French, German
or United Kingdom tax purposes as a result of such covenant
defeasance and will be subject to Luxembourg, Dutch, French and
German and United Kingdom tax on the same amounts, in the same
<PAGE> 55
manner and at the same times as would have been the case if such
covenant defeasance had not occurred;
(g) in the case of the covenant defeasance option, the Issuer or the
Guarantor shall have delivered to the Trustee (i) an Opinion of
Counsel to the effect that the Holders of the Notes will not
recognize income, gain or loss for U.S. Federal income tax purposes
as a result of such covenant defeasance and will be subject to U.S.
Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance
had not occurred and (ii) an Opinion of Counsel in each of
Luxembourg, The Netherlands, France, Germany and the United Kingdom
to the effect that the Holders of the Notes will not recognize
income, gain or loss for Luxembourg, French, Dutch, German or United
Kingdom tax purposes as a result of such covenant defeasance and will
be subject to Luxembourg, French, Dutch, German and United Kingdom
tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not
occurred; and
(h) the Issuer or the Guarantor shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that all
conditions precedent to the defeasance and discharge of the Notes as
contemplated by this Article 8 have been complied with.
Before or after a deposit, the Guarantor may make arrangements
satisfactory to the Trustee for the redemption of Notes at a future date
in accordance with Article 3.
SECTION 8.03 APPLICATION OF TRUST MONEY. The Trustee shall hold in trust
cash or U.S. Government Securities deposited with it pursuant to this Article 8.
It shall apply the deposited cash or U.S. Government Securities through the
Paying Agent and in accordance with this Indenture to the payment of principal
of and interest on the Notes.
SECTION 8.04 REPAYMENT TO GUARANTOR. Anything in this Article 8 to the
contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from
time to time upon Issuer Order any cash or U.S. Government Securities held by it
as provided in Section 8.02 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance, as applicable, in accordance with this Article Eight.
SECTION 8.05 INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Issuer or the
Guarantor shall pay and shall indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against deposited U.S. Government Securities
or the principal and interest received on such U.S. Government Securities.
SECTION 8.06 REINSTATEMENT. If the Trustee or Paying Agent is unable to
apply cash or U.S. Government Securities in accordance with this Article 8 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Issuer's and the Guarantor's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to this Article 8 until such time as the Trustee or any such
Paying Agent is permitted to apply all such cash or U.S. Government Securities
in accordance with this Article 8.
ARTICLE 9
AMENDMENTS
SECTION 9.01 WITHOUT CONSENT OF HOLDERS. The Issuer, Holdings, the
Guarantor and the Trustee may amend or supplement this Indenture or the Notes
without notice to or consent of any Holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
<PAGE> 56
(3) to provide for the assumption in compliance with this Indenture by a
Successor Issuer of the obligations of the Issuer, or a Successor
Guarantor of the obligations of the Guarantor, under this Indenture;
(4) to add Guarantees with respect to the Notes or to secure the Notes;
(5) to add to the covenants of the Issuer or the Guarantor for the
benefit of the Holders or to surrender any right or power herein
conferred upon the Issuer or the Guarantor;
(6) to comply with any requirement of the SEC in connection with
qualifying this Indenture under the TIA;
(7) to make any change that does not adversely affect the rights of any
Holder; or
(8) to make any change to the provisions described under Article 10 that
would limit or terminate the benefits available to any holder of
Senior Debt under such provisions.
An amendment under this Section 9.01 may not make any change that adversely
affects the rights under Article 10 of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt or any group or
representative thereof authorized to give a consent that would be binding on all
the holders of such Senior Debt consent to such change.
After an amendment under this Section 9.01 becomes effective, the Guarantor
shall mail to Holders a notice briefly describing such amendment. The failure to
give such notice to all Holders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section 9.01.
SECTION 9.02 WITH CONSENT OF HOLDERS. The Issuer, the Guarantor and the
Trustee may amend or supplement this Indenture or the Notes without notice to
any Holder but with the written consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding and any existing
default or compliance with any provisions may be waived with the consent of the
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding. However, without the consent of each Holder of an outstanding Note,
an amendment may not:
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on any
Note;
(3) reduce the principal of or extend the Stated Maturity of any Note;
(4) reduce the premium payable upon the redemption of any Note or change
the time or times at which any Note may or shall be redeemed in
accordance with Article 3;
(5) make any Note payable in money other than that stated in the Note;
(6) impair the right of any Holder of Notes to institute suit for the
enforcement of any payment on or with respect to any Notes;
(7) release any security that may have been granted in respect of the
Notes;
(8) make any change to the provisions described under Article 10 that
adversely affects the rights of any Holder of Notes under such
provisions; or
(9) modify any provisions of the Dollar Escrow Agreement.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.
An amendment under this Section 9.02 may not make any change that adversely
affects the rights under Article 10 of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent that would be binding on all
the holders of such Senior Debt) consent to such change.
<PAGE> 57
After an amendment under this Section 9.02 becomes effective, the Issuer
shall mail to Holders a notice briefly describing such amendment. The failure to
give such notice to all Holders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section 9.02.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to this
Indenture or the Notes shall be set forth in a supplemental indenture that,
following consummation of the Exchange Offer or the effectiveness of the Shelf
Registration Statement, complies with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A consent to
an amendment or a waiver by a Holder of a Note shall bind the Holder and every
subsequent Holder of that Note or portion of the Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent or waiver
is not made on the Note. However, any such Holder or subsequent Holder may
revoke the consent or waiver as to such Holder's Note or portion of the Note if
the Trustee receives the notice of revocation before the date the amendment or
waiver becomes effective. After an amendment or waiver becomes effective, it
shall bind every Holder.
The Issuer may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to give their consent or take any
other action described above or required or permitted to be taken pursuant to
this Indenture. If a record date is fixed, then notwithstanding the immediately
preceding paragraph, those Persons who were Holders at such record date (or
their duly designated proxies), and only those Persons, shall be entitled to
give such consent or to revoke any consent previously given or to take any such
action, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 120 days after
such record date.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES. If an amendment changes
the terms of a Note, the Issuer or Trustee may require the Holder of the Note to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Note regarding the changed terms and return it to the Holder. Alternatively, if
the Issuer so determines, the Issuer in exchange for the Note shall issue and
the Trustee shall authenticate a new Note that reflects the changed terms.
Failure to make the appropriate notation or to issue a new Note shall not affect
the validity of such amendment.
SECTION 9.06 TRUSTEE PROTECTED. The Trustee shall sign any amendment
authorized pursuant to this Article 9 if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may but need not sign it. In signing any amendment the Trustee shall be
entitled to receive indemnity reasonably satisfactory to it and to receive, and
(subject to Section 7.01) shall be fully protected in relying upon, an Officer's
Certificate and an Opinion of Counsel stating that such (i) amendment is
authorized or permitted by this Indenture, including without limitation a
statement in such Officer's Certificate and Opinion of Counsel that such
amendment does not adversely affect the rights of any Holder of Notes, and that
all conditions precedent to the execution, delivery and performance of such
amendment have been satisfied; (ii) the Issuer and the Guarantor have all
necessary corporate power and authority to execute and deliver the amendment and
that the execution, delivery and performance of such amendment has been duly
authorized by all necessary corporate action; (iii) the execution, delivery and
performance of the amendment do not conflict with, or result in the breach of or
constitute a default under any of the terms, conditions or provisions of (a)
this Indenture, (b) the Memorandum or Articles of Incorporation or By-Laws of
the Issuer or the Guarantor, (c) any law or regulation applicable to the Issuer
or the Guarantor, (d) any material order, writ, injunction or decree of any
court or governmental instrumentality applicable to the Issuer or the Guarantor
or (e) any material agreement or instrument to which the Issuer or the Guarantor
is subject; (iv) such amendment has been duly and validly executed and delivered
by the Issuer and the Guarantor, and this Indenture together with such amendment
constitutes a valid and binding obligation of the Issuer and the Guarantor
enforceable against the Issuer and the Guarantor in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and general equitable principles; and (v) this Indenture together with
such amendment complies with the TIA.
<PAGE> 58
SECTION 9.07 PAYMENT FOR CONSENT. None of the Issuer, Holdings, the
Guarantor nor any Affiliate of the Issuer, Holdings or the Guarantor shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Notes unless such consideration is offered to be paid to all Holders that
so consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE. Each of the Issuer, Holdings and
the Guarantor agrees, and each Holder by accepting a Note and the related Parent
Guarantee agrees, that (i) the Notes are subordinated in right of payment, to
the extent and in the manner provided in this Article 10, to the prior payment
in full of all Senior Debt, (ii) the Parent Guarantee is subordinated in right
of payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full of the Bank Debt and other Senior Debt of the Guarantor
and (iii) the subordination is for the benefit of and enforceable by the
holders, with respect to (i) above, of the Senior Debt and with respect to (ii)
above, of the Bank Debt and other Senior Debt of the Guarantor. For all purposes
of this Indenture, Senior Debt shall not be considered to have been paid in full
until the termination or expiration of all commitments to lend or otherwise
provide financing with respect to Senior Debt and the payment in full in cash of
all Senior Debt in accordance with its terms. References in this Article 10 to
payment of interest on the Notes shall include payment of Special Interest, and
references to payment of other amounts on the Notes shall include Additional
Amounts. All provisions of this Article 10 shall be subject to Section 10.12.
SECTION 10.02 LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment or
distribution to creditors of the Issuer or the Guarantor upon a total or partial
liquidation, dissolution or winding up of the Issuer (other than a voluntary
dissolution of the Issuer or merger of the Issuer into Holdings or the Guarantor
solely for the purpose of permitting Holdings or the Guarantor to assume all
obligations in respect of the Notes as if it were the direct obligor with
respect thereto and in which all the assets of the Issuer are transferred to
Holdings or the Guarantor and no material payment or distribution is made to
creditors) or the Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Issuer or the Guarantor or
their respective Property, or in an assignment for the benefit of creditors or
any marshaling of the Issuer's or the Guarantor's assets and liabilities, the
holders of Senior Debt will be entitled to receive payment in full of the Senior
Debt before the Holders of the Notes are entitled to receive any payment or
distribution of any kind or character, whether in cash, Property or securities
(including any payment or distribution that may be payable or deliverable by
reason of the payment of any other Debt of the Issuer or the Guarantor that is
subordinated to the payment of the Notes), of principal of, or premium, if any,
or interest on, or other amounts payable under or in respect of the Notes or the
Parent Guarantee, including on account of any purchase or other acquisition of
Notes by the Issuer or the Guarantor. In addition, until the Senior Debt is paid
in full, any payment or distribution pursuant to this Section 10.02 to which
Holders of the Notes would be entitled either directly or pursuant to the Parent
Guarantee but for the subordination provisions of this Indenture will be made
directly to holders of the Senior Debt or their Representatives. In the event
that, notwithstanding the foregoing, the Trustee or the Holder of any Note
receives any payment or distribution before all the Senior Debt is paid in full,
then such payment or distribution will be required to be held in trust by the
Trustee (to the extent a Trust Officer of the Trustee has actual knowledge that
such payment or distribution is prohibited) or such Holder for the benefit of,
and paid over or delivered forthwith to, the holders of the Senior Debt or their
Representatives for application to (in the case of cash), or as collateral for
(in the case of non-cash property or securities), the payment or prepayment of
all Senior Debt until all Senior Debt shall have been paid in full.
SECTION 10.03 DEFAULT ON DESIGNATED SENIOR DEBT. Neither the Issuer nor
the Guarantor may make any payment or distribution in respect of principal of,
or premium, if any, or interest on, or other amounts payable under or in respect
of the Notes or the Parent Guarantee or make any deposit with respect to legal
or covenant defeasance, and neither may repurchase, redeem or otherwise retire
the Notes pursuant to a Change of Control or
<PAGE> 59
otherwise (collectively, pay the Notes), if (a) any principal, interest, premium
or other amounts payable in respect of any Designated Senior Debt is not paid
when due or (b) any other default under any Designated Senior Debt occurs and
the maturity of such Designated Senior Debt is accelerated in accordance with
its terms, unless, in either case, (i) the default has been cured or waived and
any such acceleration has been rescinded or (ii) such Designated Senior Debt has
been paid in full; provided, however, that the Issuer or the Guarantor may pay
the Notes without regard to the foregoing if the Issuer or the Guarantor and the
Trustee receive written notice approving such payment from the Representative of
such Designated Senior Debt. During the continuance of any default (other than a
default described in clause (a) or (b) of the preceding sentence) with respect
to any Designated Senior Debt, including any event that, with notice or lapse of
time, or both, would become an event of default, neither the Issuer nor the
Guarantor may pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Issuer or the Guarantor of written notice of
such default from the Representative of the Bank Debt specifying an election to
effect a Payment Blockage Period (a "Payment Blockage Notice") and ending 179
days thereafter (unless earlier terminated (i) by written notice to the Trustee
and the Issuer or the Guarantor from the Representative of the Bank Debt, (ii)
because no defaults under any Designated Senior Debt are continuing or (iii)
because all Designated Senior Debt has been repaid in full) and at which time
such Payment Blockage Notice shall no longer be deemed to exist. Notwithstanding
the provisions described in the immediately preceding sentence, unless the
holders of any Designated Senior Debt or the Representative of such holders have
accelerated the maturity of such Designated Senior Debt and not rescinded such
acceleration, the Issuer or the Guarantor may (unless otherwise prohibited as
described in the first sentence of this Section 10.03 or in Section 10.02)
resume payments on the Notes after the end of such Payment Blockage Period. Not
more than one Payment Blockage Notice with respect to all issues of Designated
Senior Debt may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to one or more issues of Designated Senior Debt
during such period.
If notwithstanding the provisions of the preceding paragraph, any direct or
indirect payment or distribution on account of principal of, or premium, if any,
or interest on or other amounts payable under or in respect of the Notes or the
Parent Guarantee or any acquisition, repurchase, redemption, retirement or
defeasance of any of the Notes shall be made at a time when such payment or
distribution is prohibited by such provisions, such payment or distribution
shall be held in trust by the Trustee and each Holder of a Note, as the case may
be, for the benefit of, and paid over or delivered forthwith to, the holders of
Senior Debt or their Representatives for application to (in the case of cash),
or as collateral for (in the case of non-cash property or securities), the
payment or prepayment of all Senior Debt until all Senior Debt shall have been
paid in full.
SECTION 10.04 ACCELERATION OF PAYMENT OF NOTES. If payment of the Notes
is declared to be accelerated because of an Event of Default, the Issuer, the
Guarantor or the Trustee shall promptly notify the holders of the Senior Debt
(or their Representatives) of the declaration. If any Bank Debt is outstanding,
neither the Issuer nor the Guarantor may pay the Notes until ten Business days
after the Representative of the Bank Debt receives notice of such acceleration
and, thereafter, may pay the Notes only if such declaration remains effective
under Section 6.02 and this Article 10 otherwise permits payments at that time.
SECTION 10.05 SUBROGATION. After all Senior Debt is paid in full and
until the Notes are paid in full, Holders shall be subrogated to the rights of
the holders of Senior Debt to receive distributions applicable to Senior Debt. A
distribution made under Article 10 to holders of Senior Debt which otherwise
would have been made to Holders is not, as between the Issuer and Holders, a
payment by the Issuer on Senior Debt or, as between the Guarantor and Holders, a
payment by the Guarantor on Senior Debt.
SECTION 10.06 RELATIVE RIGHTS. This Article 10 defines the relative
rights of Holders and holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Issuer or the Guarantor, as the case may be,
and the Holders, the obligation of the Issuer or the Guarantor, as
the case may be, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their
terms; or
<PAGE> 60
(2) prevent the Trustee or any Holder from exercising its available
remedies upon a Default, subject to the rights of holders of Senior
Debt to receive distributions otherwise payable to Holders.
SECTION 10.07 SUBORDINATION MAY NOT BE IMPAIRED BY ISSUER OR
GUARANTOR. No right of any holder of Senior Debt to enforce the subordination
of the Notes or the Parent Guarantee shall be impaired by any act or failure to
act by the Issuer or the Guarantor or by the failure by either of them to comply
with this Indenture.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Notes, without
incurring responsibility to the Holders of the Notes and without impairing or
releasing the subordination provided in this Article 10 or the obligations
hereunder of the Holders of the Notes to the holders of Senior Debt, do any one
or more of the following: (i) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt or any instrument, evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (iii) release any Person liable in any manner for the
payment of Senior Debt; and (iv) exercise or refrain from exercising any rights
against the Issuer, the Guarantor and any other Person.
The provisions of this Article 10 shall continue to be effective, or be
reinstated, if at any time any payment in respect of any Senior Debt is
rescinded or must otherwise be restored or returned by the holders of such
Senior Debt in any bankruptcy proceeding or otherwise, all as though such
payment had not been made.
SECTION 10.08 RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding Section
10.03, the Trustee or Paying Agent may continue to make payments on the Notes
and shall not be charged with knowledge of the existence of facts that would
prohibit the making of any such payments unless, not less than two Business Days
prior to the date of such payment, a Trust Officer of the Trustee receives
notice satisfactory to it that payments may not be made under this Article 10.
The Issuer, the Guarantor, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Debt may give the notice. Notwithstanding
the foregoing, nothing in this Section 10.08 shall relieve the Holders of the
Notes from their obligations under this Article 10.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. The Registrar and
co-registrar and the Paying Agent may do the same with like rights. The Trustee
shall be entitled to all the rights set forth in this Article 10 with respect to
any Senior Debt which may at any time be held by it, to the same extent as any
other holder of Senior Debt; and nothing in Article 7 shall deprive the Trustee
of any of its rights as such holder. Nothing in this Article 10 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.09 DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a
distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to their Representatives (if any).
SECTION 10.10 SUBORDINATION NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Notes by
reason of any provision in this Article 10 shall not be construed as preventing
the occurrence of a Default. Nothing in this Article 10 shall have any effect on
the right of the Holders or the Trustee to accelerate the maturity of the Notes
in accordance with the terms of Section 6.02; provided that, upon such
acceleration, the payment of principal of, or premium, if any, or interest on or
other amounts payable under or in respect of the Notes or the Parent Guarantee
or any acquisition, repurchase, redemption, retirement, defeasance of any of the
Notes shall be subordinated to the payment in full of Senior Debt in accordance
with the terms of this Article 10.
SECTION 10.11 TRUST MONEYS NOT SUBORDINATED. Notwithstanding anything
contained in this Article 10 to the contrary, so long as at the time of any
deposit pursuant to Article 8, no default with respect to any Senior Debt,
including any event that, with notice or lapse of time, or both, would become an
event of
<PAGE> 61
default, shall have occurred and be continuing or shall be caused by such
deposit, payments from cash or the proceeds of U.S. Government Securities held
in trust under Article 8 by the Trustee for the payment of principal of and
interest on the Notes shall not be subordinated to the prior payment of any
Senior Debt or subject to the restrictions set forth in this Article 10, and
none of the Holders shall be obligated to pay over any such amount to the Issuer
or the Guarantor or any holder of Senior Debt or any other creditor of the
Issuer or the Guarantor unless and until the Issuer's and the Guarantor's
obligations under this Indenture and the Notes are reinstated pursuant to
Section 8.06.
SECTION 10.12 TRUSTEE ENTITLED TO RELY. Upon any payment or distribution
pursuant to this Article 10, the Trustee and the Holders shall be entitled to
rely (i) upon any order or decree of a court of competent jurisdiction in which
any proceedings of the nature referred to in Section 10.02 are pending or (ii)
upon the Representatives for the holders of Senior Debt for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Debt and other Debt of the Issuer or the
Guarantor, as the case may be, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 10. Without limiting the generality of the foregoing, the
Trustee and the Holders shall, unless otherwise ordered by a court of competent
jurisdiction, allocate such payments or distributions ratably to the holders of
Senior Debt in accordance with the U.S. Dollar Equivalent amount of their
claims, determined as of the date on which the Trustee or the Holders received
the amount being paid or distributed. In the event that the Trustee determines,
in good faith, that evidence is required with respect to the right of any Person
as a holder of Senior Debt to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 10, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.13 TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder by
accepting a Note authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Holders and the holders of Senior Debt as provided in
this Article 10 and appoints the Trustee as attorney-in-fact for any and all
such purposes. In the event that the Trustee or the Holders of any Notes fail to
present a claim in respect of the Notes in any proceeding referred to in Section
6.09 on or before the 30th day prior to the expiration of any period for doing
so, the Representative of the Bank Debt may present such claim in the name of
and on behalf of the Trustee and such Holders, as the case may be, and the
Trustee agrees to cooperate in all respects with such action.
SECTION 10.14 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Debt and shall not be liable to any such holders if it shall in good faith
mistakenly pay over or distribute to Holders, the Issuer or the Guarantor or any
other Person, money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10 or otherwise, except if such payment or
distribution is made as a result of the gross negligence or willful misconduct
of the Trustee.
SECTION 10.15 RELIANCE BY HOLDERS OF SENIOR DEBT ON SUBORDINATION
PROVISIONS. Each Holder by accepting a Note acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Debt, whether such Senior Debt
was created or acquired before or after the issuance of the Notes, to acquire
and continue to hold, or to continue to hold, such Senior Debt and such holder
of Senior Debt shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Debt.
SECTION 10.16 PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in this
Article 10 or elsewhere in this Indenture or in any of the Notes shall prevent
the Guarantor, at any time except during the pendency of any proceeding
specified in Section 10.02 or under the circumstances described in Section
10.03, from making payments on the Notes.
<PAGE> 62
ARTICLE 11
GUARANTEES
SECTION 11.01 GUARANTEES. The Guarantor and Holdings each hereby
unconditionally and irrevocably guarantee (the Parent Guarantee made by the
Guarantor being on an unsecured senior subordinated basis) to each Holder and to
the Trustee and its successors and assigns (a) the full and punctual payment of
principal of, premium, if any, and interest on the Notes when due, whether at
maturity, by acceleration, by redemption or otherwise, and all other monetary
obligations of the Issuer under this Indenture and the Notes (including
obligations to the Trustee and the obligations to pay Special Interest, if any,
and Additional Amounts, if any) and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Issuer under this
Indenture and the Notes (all the foregoing being hereinafter collectively called
the "Obligations"). The Guarantor and Holdings each further agrees that the
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from the Guarantor or Holdings and that the Guarantor and
Holdings will remain bound under this Article 11 notwithstanding any extension
or renewal of any Obligation. Notwithstanding the foregoing, Holdings' liability
under the Holdings Guarantee and any rights and remedies of the Trustee or any
Holder against Holdings in respect of the Obligations shall be limited to any
rights such parties have to proceed against the Collateral.
The Guarantor and Holdings each waives presentation to, demand of, payment
from and protest to the Issuer, the Guarantor or Holdings of any of the
Obligations and also waives notice of protest for nonpayment. The Guarantor and
Holdings each waives notice of any default under the Notes or the Obligations.
The obligations of the Guarantor and Holdings hereunder shall not be affected by
(a) the failure of any Holder or the Trustee to assert any claim or demand or to
enforce any right or remedy against the Issuer, the Guarantor or Holdings or any
other Person under this Indenture, the Notes or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Notes or any other agreement; (d) the release of any note held by
any Holder or the Trustee for the Obligations or any of them; (e) the failure of
any Holder or Trustee to exercise any right or remedy against any other
guarantor of the Obligations; or (f) any change in the ownership of the
Guarantor, Holdings or the Issuer.
The Guarantor agrees that the Parent Guarantee and Holdings agrees that the
Holdings Guarantee each constitutes a guarantee of payment, performance and
compliance when due (and not a guarantee of collection) and waives any right to
require that any resort be had by any Holder or the Trustee to any note held for
payment of the Obligations.
The Parent Guarantee is, to the extent and in the manner set forth in
Article 10, subordinated and subject in right of payment to the prior payment in
full of the principal of, premium, if any, and interest on and other amounts
payable under or in respect of all Senior Debt of the Guarantor and the Parent
Guarantee is made subject to such provisions of this Indenture.
The obligations of the Guarantor and Holdings hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability for the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of the Guarantor or Holdings herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Notes or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Obligations, or by any other act or thing
which may or might in any manner or to any extent vary the risk of the Guarantor
or Holdings or would otherwise operate as a discharge of the Guarantor or
Holdings as a matter of law or equity.
The Guarantor agrees that the Parent Guarantee and Holdings agrees that the
Holdings Guarantee shall each continue to be effective or be reinstated, as the
case may be, if at any time payment, or any part thereof, of principal of or
interest on any Obligation is rescinded or must otherwise be restored by any
Holder or the Trustee upon the bankruptcy or reorganization of the Issuer,
Holdings or the Guarantor or otherwise.
<PAGE> 63
In furtherance of the foregoing and not in limitation of any other right
which any Holder or the Trustee has at law or in equity against the Guarantor or
Holdings by virtue hereof, upon the failure of the Issuer to pay the principal
of or interest on any Obligation when and as the same shall become due, whether
at maturity, by acceleration, by redemption or otherwise, or to perform or
comply with any other Obligation, each of the Guarantor and Holdings hereby
promises to and will, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid principal amount of such Obligations, (ii) accrued
and unpaid interest on such obligations (but only to the extent not prohibited
by law) and (iii) all other monetary Obligations of the Issuer to the Holders
and the Trustee.
Each of the Guarantor and Holdings agrees that it shall not be entitled to
any right of subrogation in relation to the Holders in respect of any
Obligations guaranteed hereby until payment in full of all Obligations. Each of
the Guarantor and Holdings further agrees that, as between it, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Section 6.02 for
the purposes of the Notes Guarantees herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Section 6.02, such Obligations
(whether or not due and payable) shall forthwith become due and payable by the
Guarantor and Holdings for the purposes of and subject to this Section.
Each of the Guarantor and Holdings also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.
SECTION 11.02 LIMITATION ON LIABILITY. Any term or provision of this
Indenture to the contrary notwithstanding (i) the maximum, aggregate amount of
the Obligations guaranteed hereunder by the Guarantor and Holdings shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to the Guarantor or Holdings, as the case may be,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer and (ii) Holdings' liability in respect of its guarantee made hereunder
and any rights and remedies of the Trustee or any Holder against Holdings in
respect of the Obligations shall be limited to any rights such parties have to
proceed against the Collateral.
SECTION 11.03 SUCCESSORS AND ASSIGNS. This Article 11 shall be binding
upon the Guarantor and Holdings and each of their successors and assigns and
shall enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Notes shall automatically extend to and be vested in such
transferee or assigns, all subject to the terms and conditions of this
Indenture.
SECTION 11.04 NO WAIVER. Neither a failure nor a delay on the part of
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 11 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and are not exclusive of any
other rights, remedies or benefits which either may have under this Article 11
at law, in equity, by statute or otherwise.
SECTION 11.05 MODIFICATION. No modification, amendment or waiver of any
provision of this Article 11, nor the consent to any departure by the Guarantor
or Holdings therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given;
provided, however, that no such modification, amendment or waiver shall
adversely affect the rights or interests under this Indenture of the holders of
Senior Debt without their prior written consent. No notice to or demand on the
Guarantor or Holdings in any case shall entitle the Guarantor or Holdings to any
other or further notice or demand in the same, similar or other circumstance.
<PAGE> 64
ARTICLE 12
SECURITY
SECTION 12.01. SECURITY.
(a) On the Closing Date, Holdings shall (i) enter into the Dollar Escrow
Agreement and comply with the terms and provisions thereof and (ii)
purchase or cause to be purchased the Pledged Securities to be
pledged to the Trustee for the benefit of the Holders in such amount
with such maturity as will be sufficient upon receipt of scheduled
interest and/or principal payments on such Pledged Securities, in the
opinion of a nationally recognized firm of independent public
accountants selected by the Guarantor, to provide for payment in full
of the first five scheduled interest payments (excluding Additional
Amounts) due on the Notes. The Pledged Securities shall be pledged by
Holdings to the Trustee for the benefit of the Holders, deposited in
the Escrow Account on the Issue Date and shall be held by the Trustee
in the Escrow Account pending disposition pursuant to the Dollar
Escrow Agreement.
(b) Each Holder, by its acceptance of a Note, consents and agrees to the
terms of the Dollar Escrow Agreement (including, without limitation,
the provisions providing for foreclosure and release of the Pledged
Securities and the Collateral) as the same may be in effect or may be
amended from time to time in accordance with its terms, and
authorizes and directs the Trustee to enter into the Dollar Escrow
Agreement and to perform its respective obligations and exercise its
respective rights thereunder in accordance therewith. Holdings will
do or cause to be done all such acts and things as may be necessary,
or as may be required by the provisions of the Dollar Escrow
Agreement, to assure and confirm to the Trustee the security interest
in the Pledged Securities and the other Collateral contemplated
hereby, by the Dollar Escrow Agreement or any part thereof, as from
time to time constituted, so as to render the same available for the
security and benefit of this Indenture and of the Notes secured
hereby, according to the intent and purposes herein and therein
expressed. Holdings shall take, or cause to be taken, any and all
actions reasonably required to cause the Dollar Escrow Agreement to
create and maintain, as security for the obligations of Holdings
under its Guarantee provided for in Article 11, valid and enforceable
first priority liens in and on all the Pledged Securities and the
other Collateral, in favor of the Trustee, superior to and prior to
the rights of third Persons and subject to no other Liens.
(c) The release of any Pledged Securities or other Collateral pursuant to
the Dollar Escrow Agreement will not be deemed to impair the security
under this Indenture in contravention of the provisions hereof if and
to the extent the Pledged Securities or other Collateral are released
pursuant to this Indenture and the Dollar Escrow Agreement. To the
extent applicable, Holdings shall cause TIA Section 314(d) relating
to the release of property or securities from the Lien and security
interest of the Dollar Escrow Agreement and relating to the
substitution therefor of any property or securities to be subjected
to the Lien and security interest of the Dollar Escrow Agreement to
be complied with. Any certificate or opinion required by TIA Section
314(d) may be made by an officer of Holdings, except in cases where
TIA Section 314(d) requires that such certificate or opinion be made
by an independent Person, which Person shall be an independent
engineer, appraiser or other expert selected by Holdings.
(d) Holdings shall cause TIA Section 314(b), relating to opinions of
counsel regarding the Lien under the Dollar Escrow Agreement, to be
complied with. The Trustee may, to the extent permitted by Section
7.02, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such instruments.
(e) The Trustee may, in its sole discretion and without the consent of
the Holders, on behalf of the Holders, take all reasonable actions in
accordance with the Dollar Escrow Agreement necessary or appropriate
in order to (i) enforce any of the terms of the Dollar Escrow
Agreement and (ii) collect and receive any and all amounts payable in
respect of the obligations of Holdings thereunder. The Trustee shall
have power to institute and to maintain such suits and proceedings as
the Trustee may
<PAGE> 65
reasonably deem expedient to preserve or protect its interests and the
interests of the Holders in the Pledged Securities and the Collateral
(including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such
enactment, rule or order would impair the security interest hereunder or
be prejudicial to the interests of the Holders or of the Trustee).
ARTICLE 13
HOLDERS' MEETINGS
SECTION 13.01 PURPOSES OF MEETINGS. A meeting of the Holders may be
called at any time from time to time pursuant to this Article 13 for any of the
following purposes:
(1) to give any notice to the Issuer, Holding or the Guarantor or to the
Trustee, or to give any directions to the Trustee, or to consent to
the waiving of any Default hereunder and its consequences, or to take
any other action authorized to be taken by Holders pursuant to
Article 9;
(2) to remove the Trustee and appoint a successor trustee pursuant to
Article 7; or
(3) to consent to the execution of an indenture supplemental hereto
pursuant to Section 9.02.
SECTION 13.02 PLACE OF MEETINGS. Meetings of Holders may be held at such
place or places as the Trustee or, in case of its failure to act, the Issuer,
the Guarantor or the Holders calling the meeting, shall from time to time
determine.
SECTION 13.03 CALL AND NOTICE OF MEETINGS.
(a) The Trustee may at any time (upon not less than 21 days' notice) call
a meeting of Holders to be held at such time and at such place in The
City of New York, New York or in such other city as determined by the
Trustee pursuant to Section 13.02. Notice of every meeting of
Holders, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting, shall
be mailed to each Holder and published in the manner contemplated by
Section 14.02.
(b) In case at any time the Guarantor, pursuant to a Board Resolution of
the Management Board, or the Holders of at least 10% in aggregate
principal amount at maturity of the Notes then outstanding, shall
have requested the Trustee to call a meeting of the Holders, by
written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have
made the first giving of the notice of such meeting within 20 days
after receipt of such request, then the Guarantor or the Holders of
Notes in the amount above specified may determine the time (not less
than 21 days after notice is given) and the place in The City of New
York, New York or in such other city as determined by the Guarantor
or the Holders pursuant to Section 13.02 for such meeting and may
call such meeting to take any action authorized in Section 13.01 by
giving notice thereof as provided in Section 13.03(a).
SECTION 13.04 VOTING AT MEETINGS. To be entitled to vote at any meeting
of Holders, a Person shall be (i) a Holder or (ii) a Person appointed by an
instrument in writing as proxy for a Holder or Holders by such Holder or
Holders. The only Persons who shall be entitled to be present or to speak at any
meeting of Holders shall be the Person so entitled to vote at such meeting and
their counsel and any representatives of the Trustee and its counsel and any
representatives of the Guarantor and its counsel.
SECTION 13.05 VOTING RIGHTS, CONDUCT AND ADJOURNMENT.
(a) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any
meeting of Holders in regard to proof of the holding of Notes and of
the appointment of proxies and in regard to the appointment and
duties of inspectors of
<PAGE> 66
votes, the submission and examination of proxies, certificates and other
evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall deem appropriate. Except as otherwise
permitted or required by any such regulations, the holding of Notes
shall be proved in the manner specified in Section 2.03 and the
appointment of any proxy shall be proved in such manner as is deemed
appropriate by the Trustee or by having the signature of the Person
executing the proxy witnessed or guaranteed by any bank, banker or trust
company customarily authorized to certify to the holding of a note such
as a Global Note.
(b) At any meeting of Holders, the presence of Persons holding or
representing Notes in an aggregate principal amount at maturity
sufficient under the appropriate provision of this Indenture to take
action upon the business for the transaction of which such meeting
was called shall constitute a quorum. Subject to any required
aggregate principal amount at maturity of Notes required for the
taking of any action pursuant to Article 9, in no event shall less
than a majority of the votes given by Persons holding or representing
Notes at any meeting of Holders be sufficient to approve an action.
Any meeting of Holders duly called pursuant to Section 13.03 may be
adjourned from time to time by vote of the Holders (or proxies for
the Holders) of a majority of the Notes represented at the meeting
and entitled to vote, whether or not a quorum shall be present; and
the meeting may be held as so adjourned without further notice. No
action at a meeting of Holders shall be effective unless approved by
Persons holding or representing Notes in the aggregate principal
amount at maturity required by the provision of this Indenture
pursuant to which such action is being taken.
(c) At any meeting of Holders, each Holder or proxy shall be entitled to
one vote for each $1,000 aggregate principal amount at maturity of
outstanding Notes held or represented.
SECTION 13.06 REVOCATION OF CONSENT BY HOLDERS. At any time prior to (but
not after) the evidencing to the Trustee of the taking of any action at a
meeting of Holders by the Holders of the percentage in aggregate principal
amount at maturity of the Notes specified in this Indenture in connection with
such action, any Holder of a Note the serial number of which is included in the
Notes the Holders of which have consented to such action may, by filing written
notice with the Trustee at its principal corporate trust office and upon proof
of holding as provided herein, revoke such consent so far as concerns such Note.
Except as aforesaid, any such consent given by the Holder of any Note shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of such Note and of any Note issued in exchange therefor, in lieu thereof or
upon transfer thereof, irrespective of whether or not any notation in regard
thereto is made upon such Note. Any action taken by the Holders of the
percentage in aggregate principal amount at maturity of the Notes specified in
this Indenture in connection with such action shall be conclusively binding upon
the Issuer, the Guarantor, the Trustee and the Holders of all the Notes.
ARTICLE 14
MISCELLANEOUS
SECTION 14.01 TRUST INDENTURE ACT CONTROLS. If and to the extent that any
provision of this Indenture limits, qualifies or conflicts with the duties
imposed by, or with another provision (an incorporated provision") included in
this Indenture by operation of, sec.sec. 310 to 318, inclusive, of the TIA, such
imposed duties or incorporated provision shall control.
<PAGE> 67
SECTION 14.02 NOTICES. Any notice or communication shall be in writing
and delivered in person or mailed by first class mail addressed as follows:
if to the Issuer or the Guarantor:
in care of
Polska Telefonia Cyfrowa Sp. z o.o.
Al. Jerozolimskie 181
02-222 Warsaw, Poland
Telephone: 48-22-699-6250
Facsimile: 48-22-699-6239
Attention: Treasury Manager
if to the Trustee:
State Street Bank and Trust Company
225 Asylum Street
Hartford
Connecticut 06103
Telephone: (860) 244-1808
Facsimile: (860) 244-1889
Attention: Corporate Trust Administration
The Issuer, the Guarantor or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
All communications delivered to the Trustee shall be deemed effective when
received.
SECTION 14.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders may
communicate pursuant to TIA sec. 312(b) with other Holders with respect to their
rights under this Indenture or the Notes. The Issuer, Holdings, the Guarantor,
the Trustee, the Registrar and anyone else shall have the protection of TIA
312(c).
SECTION 14.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon
any request or application by the Issuer or the Guarantor to the Trustee to take
or refrain from taking any action under this Indenture, the Issuer or the
Guarantor, as the case may be, shall furnish to the Trustee:
(1) an Officer's Certificate in form reasonably satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel in form reasonably satisfactory to the Trustee
stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 14.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
<PAGE> 68
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he or she has
made such examination or investigation as is necessary to enable him
or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such individual,
such covenant or condition has been complied with.
SECTION 14.06 RULES BY TRUSTEE. Paying Agent and Registrar. The Trustee
may make reasonable rules for action by or a meeting of Holders. The Registrar
and the Paying Agent may make reasonable rules for their functions.
SECTION 14.07 LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a Sunday
or a day on which banking institutions are not required to be open in Boston,
Massachusetts, Hartford, Connecticut, Amsterdam, the Netherlands, Warsaw,
Poland, Luxembourg or The City of New York, New York. If an Interest Payment
Date or other payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a Record Date is a Legal Holiday, the Record Date shall
not be affected.
SECTION 14.08 GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 14.09 JURISDICTION. The Issuer, Holdings and the Guarantor agree
that any suit, action or proceeding against the Issuer, Holdings or the
Guarantor brought by any Holder or the Trustee arising out of or based upon this
Indenture, the Notes or the Notes Guarantees may be instituted in any state or
Federal court in the Borough of Manhattan, The City of New York, New York, and
any appellate court from any thereof, and each of them irrevocably submits to
the non-exclusive jurisdiction of such courts in any suit, action or proceeding.
The Issuer, Holdings and the Guarantor irrevocably waive, to the fullest extent
permitted by law, any objection to any suit, action, or proceeding that may be
brought in connection with this Indenture, the Notes or the Notes Guarantees,
including such actions, suits or proceedings relating to securities laws of the
United States of America or any state thereof, in such courts whether on the
grounds of venue, residence or domicile or on the ground that any such suit,
action or proceeding has been brought in an inconvenient forum. The Issuer,
Holdings and the Guarantor agree that final judgment in any such suit, action or
proceeding brought in such court shall be conclusive and binding upon the
Issuer, Holdings or the Guarantor, as the case may be, and may be enforced in
any court to the jurisdiction of which the Issuer, Holdings or the Guarantor, as
the case may be, is subject by a suit upon such judgment; provided that service
of process is effected upon the Issuer, Holdings or the Guarantor, as the case
may be, in the manner provided by this Indenture. Each of the Issuer, Holdings
and the Guarantor has appointed CT Corporation System, with offices on the date
hereof at 111 Eighth Avenue, New York, New York, 10011, as its authorized agent
(the "Authorized Agent"), upon whom process may be served in any suit, action or
proceeding arising out of or based upon this Indenture, the Notes or the Notes
Guarantees or the transactions contemplated herein which may be instituted in
any state or Federal court in the Borough of Manhattan, The City of New York,
New York, by any Holder or the Trustee, and expressly accepts the non-exclusive
jurisdiction of any such court in respect of any such suit, action or
proceeding. Each of the Issuer, Holdings and the Guarantor hereby represents and
warrants that the Authorized Agent has accepted such appointment and has agreed
to act as said agent for service of process, and the Issuer, Holdings and the
Guarantor agree to take any and all action, including the filing of any and all
documents that may be necessary to continue such respective appointment in full
force and effect as aforesaid. Service of process upon the Authorized Agent
shall be deemed, in every respect, effective service of process upon the Issuer,
Holdings and the Guarantor. Notwithstanding the foregoing, any action involving
the Issuer, Holdings or the Guarantor arising out of or based upon this
Indenture, the Notes or
<PAGE> 69
the Notes Guarantees may be instituted by any Holder or the Trustee in any court
of competent jurisdiction in Luxembourg, Poland or The Netherlands, as the case
may be.
SECTION 14.10 NO RECOURSE AGAINST OTHERS. A director, officer, employee
or stockholder, as such, of the Issuer, Holdings or the Guarantor shall not have
any liability for any obligations of the Issuer, Holdings or the Guarantor under
the Notes, this Indenture or the Notes Guarantees or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Note, each Holder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Notes.
SECTION 14.11 SUCCESSORS. All agreements of the Issuer, Holdings or the
Guarantor in this Indenture and the Notes shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 14.12 MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 14.13 TABLE OF CONTENTS, CROSS-REFERENCE SHEET AND HEADINGS. The
table of contents, cross-reference sheet and headings of the Articles and
Sections of this Indenture have been inserted for convenience of reference only,
are not intended to be considered a part hereof and shall not modify or restrict
any of the terms or provisions hereof.
SECTION 14.14 SEVERABILITY. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 14.15 ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in
person or by agent duly appointed, such action shall become effective
when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Issuer, Holdings and
the Guarantor. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are sometimes referred to in
this Section 14.15 as the "Act" of Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose
of this Indenture and conclusive in favor of the Trustee, the Issuer,
Holdings and the Guarantor, if made in the manner provided in this
Section 14.15.
(b) The fact and the date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgements of deeds,
certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof or by a signature guarantee
by a member of a signature guarantee program acceptable to the
Trustee. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate, affidavit or
signature guarantee shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument
or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems
sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note, and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done
by the Trustee, the Issuer or the Guarantor in reliance thereon,
whether or not notation of such action is made upon such Note.
<PAGE> 70
(d) If the Issuer or the Guarantor shall solicit from the Holders any
request, demand, authorization, direction, notice, consent, waiver or
other Act, the Issuer or the Guarantor may, at its option, by or
pursuant to a Board Resolution of the Management Board, fix in
advance a record date for the determination of Holders entitled to
give such request, demand, authorization, direction, notice, consent,
waiver or other Act, but neither the Issuer nor the Guarantor shall
have any obligation to do so. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or
other Act may be given before or after such record date, but only the
Holders of record at the close of business on such record date shall
be deemed to be Holders for the purposes of determining whether
Holders of the requisite aggregate principal amount at maturity of
outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or
other Act, and for that purpose, the number of Notes outstanding
shall be computed as of such record date; provided, that no such
authorization, agreement or consent by the Holders on such record
date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than six
months after such record date.
<PAGE> 71
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
PTC INTERNATIONAL FINANCE II S.A.,
as Issuer
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
PTC INTERNATIONAL FINANCE (HOLDING)
B.V.
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
POLSKA TELEFONIA CYFROWA SP. Z O.O.,
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee,
By:
--------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.2
[FORM OF FACE OF INITIAL NOTE]
[If Regulation S Global Note -- CUSIP Number L78029 AA0/ISIN Number USL 78029
AA03]
[If Restricted Global Note -- CUSIP Number 693645 AA1/ISIN Number US693645 AA15]
No.
[Include if Global Note -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
[Include if Global Note -- TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED
TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "U.S. SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS
NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT. THE HOLDER OF THIS NOTE BY
ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE,
PRIOR TO THE DATE WHICH IS 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS
THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) ONLY (A) TO THE ISSUER,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE U.S. SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE U.S. SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT, OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE U.S. SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (1) PURSUANT TO CLAUSE (E) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (2) IN EACH OF THE FOREGOING CASES, TO REQUIRE
THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
THIS NOTE MAY NOT BE OFFERED OR SOLD, WHETHER DIRECTLY OR INDIRECTLY, AS
PART OF ITS INITIAL DISTRIBUTION OR AT ANY TIME THEREAFTER, TO ANY INDIVIDUAL OR
LEGAL ENTITY ANYWHERE IN THE WORLD OTHER THAN TO INDIVIDUALS OR LEGAL ENTITIES
WHO OR WHICH TRADE OR INVEST IN NOTES IN THE CONDUCT OF THEIR PROFESSION OR
BUSINESS
<PAGE> 2
WITHIN THE MEANING OF THE EXEMPTION REGULATION OF 21 DECEMBER 1995 (AS AMENDED)
ISSUED PURSUANT TO THE NETHERLANDS' SECURITIES MARKET SUPERVISION ACT 1995 (WET
TOEZICHT EFFECTENVERKEER) (WHICH INCLUDES BANKS, BROKERS, SECURITIES
INSTITUTIONS, INSURANCE COMPANIES, PENSION FUNDS, INVESTMENT INSTITUTIONS, OTHER
INSTITUTIONAL INVESTORS AND OTHER PARTIES, INCLUDING TREASURY DEPARTMENTS OF
COMMERCIAL ENTERPRISES AND FINANCE COMPANIES OF GROUPS, WHICH ARE REGULARLY
ACTIVE IN THE FINANCIAL MARKETS IN A PROFESSIONAL MANNER). THE RESTRICTIONS IN
THIS PARAGRAPH SHALL CEASE TO APPLY FROM THE DATE ON WHICH THE SECURITIES BOARD
OF THE NETHERLANDS ( STICHTING TOEZICHT EFFECTENVERKEER) SHALL HAVE GRANTED A
DISPENSATION ON THE OFFERING PURSUANT TO THE EXCHANGE OFFER REGISTRATION
STATEMENT (AS DEFINED HEREIN) OR SHELF REGISTRATION STATEMENT (AS DEFINED
HEREIN), AS THE CASE MAY BE, DECLARED EFFECTIVE BY THE U.S. SECURITIES AND
EXCHANGE COMMISSION.
11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE 2009
PTC International Finance II S.A., a societe anonyme (limited liability
company) under the laws of Luxembourg, for value received promises to pay to
Cede & Co. or registered assigns the principal sum as indicated on the Security
Register (as defined in the Indenture referred to on the reverse hereof) on
December 1, 2009.
From November 23, 1999, or from the most recent interest payment date to
which interest has been paid or provided for, cash interest on this Note will
accrue at 11 1/4% payable semiannually on June 1 and December 1 of each year,
beginning on June 1, 2000, to the Person in whose name this Note (or any
predecessor Note) is registered at the close of business on the preceding May 15
or November 15 as the case may be.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE
OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature of an authorized
signatory, this Note shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof and to the provisions of the Indenture, which provisions
shall for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, PTC International Finance II S.A., has caused this Note
to be signed manually or by facsimile by its duly authorized signatory.
Dated: November 23, 1999
PTC INTERNATIONAL FINANCE II S.A.,
By:
--------------------------------------
Name:
Title: Authorized Signatory
By:
--------------------------------------
Name:
Title: Authorized Signatory
<PAGE> 3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY,
as Trustee, certifies that this is one of the Notes referred to in the
Indenture.
By:
- --------------------------------------
Authorized Officer
<PAGE> 4
[FORM OF REVERSE SIDE OF INITIAL NOTE]
11 1/4% Senior Subordinated Guaranteed Notes Due 2009
1. INTEREST
PTC International Finance II S.A., a societe anonyme (limited liability
company) under the laws of Luxembourg (such company, and its successors and
assigns under the Indenture hereinafter referred to, being herein called the
"Issuer"), for value received promises to pay interest on the principal amount
of this Note from November 23, 1999, at the rate per annum shown above. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The
Issuer will pay interest on overdue principal at the interest rate borne by the
Notes compounded semiannually, and it shall pay interest on overdue installments
of interest at the same rate compounded semiannually to the extent lawful. Any
interest paid on this Note shall be increased to the extent necessary to pay
Additional Amounts and Special Interest as set forth in this Note.
2. SPECIAL INTEREST
The Holder of this Note is entitled to the benefits of the Registration
Rights Agreement dated November 23, 1999, among the Issuer, Polska Telefonia
Cyfrowa Sp. z o.o. (the "Guarantor") and the Initial Purchasers (the
"Registration Rights Agreement").
In the event that (a) the Exchange Offer Registration Statement (as defined
in the Registration Rights Agreement) is not filed with the U.S. Securities and
Exchange Commission (or the Exchange Offer Registration Statement is not
submitted to the Securities Board of The Netherlands (the "Securities Board"))
on or prior to the 90th calendar day following the date of original issuance of
the Notes, (b) the Exchange Offer Registration Statement is not declared
effective prior to the 150th day following the date of original issuance of the
Notes or (c) the Exchange Offer is not consummated or a Shelf Registration
Statement (as defined in the Registration Rights Agreement) with respect to the
Notes is not declared effective (or the Securities Board does not grant a
dispensation with respect to such Shelf Registration Statement) on or prior to
the 180th day following the date of original issuance of the Notes (each event
referred to in clauses (a) through (c) above, a "Registration Default"),
interest shall accrue (in addition to the stated interest on the Notes) from and
including the next day following such Registration Default. In each case such
additional interest (the "Special Interest") shall be payable in cash
semiannually in arrears each June 1 and December 1 of each year, commencing on
the first such date following any Registration Default, at a rate per annum
equal to 0.50% of the principal amount of the Notes (determined daily) with
respect to the first 90-day period following such Registration Default. Such
amount of Special Interest will increase by an additional 0.50% per annum to a
maximum of 1.50% per annum for each subsequent 90-day period until such
Registration Default has been cured. Upon the cure of any Registration Default
Special Interest with respect to such default shall cease to accrue from the
date of the filing, effectiveness or consummation that cured such default, as
the case may be, if the Issuer and Guarantor are otherwise in compliance with
this paragraph. However, if, after any such Special Interest ceases to accrue, a
different Registration Default occurs, Special Interest will again accrue as
described.
In the event that a Shelf Registration Statement is declared effective
pursuant to the Registration Rights Agreement, if the Guarantor fails to keep
such Shelf Registration Statement continuously effective for the period required
by the Registration Rights Agreement, then from such time as the Shelf
Registration Statement is no longer effective until the earlier of (i) the date
that the Shelf Registration Statement is again deemed effective, (ii) the date
that is the second anniversary of the date (the "Effective Date") such Shelf
Registration Statement is declared effective (or, in the case of a Shelf
Registration Statement filed at the request of an Initial Purchaser, the first
anniversary of the Effective Date) or (iii) the date as of which all of the
Notes are sold pursuant to the Shelf Registration Statement, Special Interest
shall accrue at a rate per annum equal to 0.50% of the principal amount of the
Notes (determined daily)(to be increased to 1.00% if when and for so long as the
Shelf Registration Statement is no longer effective for 45 days or more) and
shall be payable in cash semiannually in arrears each June 1 and December 1.
<PAGE> 5
During any 365-day period, the Issuer and the Guarantor shall have the
ability to suspend the availability of a Shelf Registration Statement for up to
two periods of up to 45 consecutive days (except for the consecutive 45-day
period immediately prior to maturity of the Notes), but no more than an
aggregate 60 days during any 365-day period, if any event occurs as a result of
which it shall be necessary, in the good faith determination of the Management
Board of the Guarantor, to amend the Shelf Registration Statement or amend or
supplement any prospectus or prospectus supplement thereunder in order that each
such document not include any untrue statement of fact or omit to state a
material fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made.
3. ADDITIONAL AMOUNTS
All payments made by the Issuer, under or with respect to this Note, and by
the Guarantor and Holdings under or with respect to the Notes Guarantees, shall
be made free and clear of and without withholding or deduction, for or on
account of any present or future tax, duty, levy, impost, assessment or other
governmental charge imposed or levied by or on behalf of the government of
Luxembourg, The Netherlands or Poland or any political subdivision or taxing
authority or agency thereof or therein (hereinafter "Taxes") unless the Issuer,
Holdings or the Guarantor, as the case may be, is required to withhold or deduct
Taxes by law or by the interpretation or administration thereof. If the Issuer,
Holdings or the Guarantor is so required to withhold or deduct any amount for or
on account of Taxes from any payment made under or with respect to this Note or
the Notes Guarantees, respectively, the Issuer, Holdings or the Guarantor will
pay such additional amounts ("Additional Amounts") as may be necessary so that
the net amount received by each Holder (including Additional Amounts) after such
withholding or deduction will not be less than the amount such Holder would have
received if such Taxes had not been required to be withheld or deducted;
provided, however, that the foregoing obligation to pay Additional Amounts does
not apply to (a) any Taxes that would not have been so imposed but for the
existence of any present or former connection between the relevant Holder (or
between a fiduciary, settlor, beneficiary, member or shareholder of, or
possessor of power over the relevant Holder, if the relevant Holder is an
estate, nominee, trust or corporation) and Luxembourg, The Netherlands or Poland
or any political subdivision or taxing authority or agency thereof or therein
(other than the mere receipt of such payment or the ownership or holding outside
of Luxembourg, The Netherlands or Poland of such Note); (b) any estate,
inheritance, gift, sales, excise, transfer, personal property tax or similar
tax, assessment or governmental charge; or (c) any Taxes payable otherwise than
by deduction or withholding from payments of principal of (or premium, if any,
on) or interest on such Note; nor will Additional Amounts be paid (i) if the
payment could have been made without such deduction or withholding if the
beneficiary of the payment had presented the Note for payment within 30 days
after the date on which such payment or such Note became due and payable or the
date on which payment thereof is duly provided for, whichever is later, except
to the extent that the Holder would have been entitled to Additional Amounts had
the Note been presented on the last day of such 30-day period, or (ii) with
respect to any payment of principal of (or premium, if any, on) or interest on
such Note to any Holder who is a fiduciary or partnership or any Person other
than the sole beneficial owner of such payment, to the extent that a beneficiary
or settlor with respect to such fiduciary, a member of such a partnership or the
beneficial owner of such payment would not have been entitled to the Additional
Amounts had such beneficiary, settlor, member or beneficial owner been the
actual Holder of such Note. The foregoing provisions shall survive any
termination or discharge of the Indenture and shall apply mutatis mutandis to
any jurisdiction in which any successor Person to the Issuer, Holdings or the
Guarantor is organized or any political subdivision or taxing authority or
agency thereof or therein.
4. METHOD OF PAYMENT
The Issuer shall pay interest on this Note (except defaulted interest) to
the persons who are registered Holders of this Note at the close of business on
the Record Date for the next Interest Payment Date even if this Note is canceled
after the Record Date and on or before the Interest Payment Date. The Issuer
shall pay principal and interest in money of the United States in immediately
available funds that at the time of payment is legal tender for payment of
public and private debts; provided, however, that payment of interest may be
made at the option of the Issuer by check mailed to the Holder.
<PAGE> 6
The amount of payments in respect of interest on each Interest Payment Date
to each Holder shall correspond to the aggregate principal amount of Notes
represented by the Regulation S Global Note and the Restricted Global Note, as
established by the Registrar at the close of business on the relevant Record
Date. Payments of principal shall be made upon surrender of the Regulation S
Global Note and the Restricted Global Note to the Paying Agent.
[If certificated Note -- Payment of the principal of, premium, if any, and
interest on any certificated Note will be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Register or, if
so required by applicable law, at the office or agency of the Paying Agent;
provided that notwithstanding the foregoing, a Holder of Notes of $1,000,000 or
more in aggregate principal amount of the Notes may elect to receive payments of
any interest on the Notes (other than at maturity) by electronic transfer of
same-day funds to an account maintained by such Holder of Notes if appropriate
wire transfer instructions are received by the Paying Agent not less than 15
calendar days prior to such payment. Unless such designation is revoked, and
provided such Holder of Notes continues to hold $1,000,000 or more in aggregate
principal amount of the Notes, any such designation made by such Holder of Notes
with respect to such certificated Notes will remain in effect with respect to
any future payments with respect to such Notes payable to such Holder of Notes.]
5. PAYING AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company or one of its affiliates
will act as Paying Agent and Registrar. The Issuer and the Guarantor may appoint
and change any Paying Agent, Registrar or Co-Registrar without prior notice. The
Guarantor or any of its Wholly Owned Subsidiaries incorporated in the United
States may act as Paying Agent, Registrar or Co-Registrar.
6. INDENTURE
The Issuer issued the Notes under an indenture dated as of November 23,
1999 ("the Indenture"), among the Issuer, the Guarantor, Holdings and State
Street Bank and Trust Company, as trustee (the "Trustee"). The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the U.S. Trust Indenture Act of 1939 as in effect on the date of
the Indenture and, to the extent required by any amendment after such date, as
so amended (the "U.S. Trust Indenture Act"). Terms defined in the Indenture and
not defined herein have the meanings ascribed thereto in the Indenture. The
Notes are subject to all such terms, and Holders of the Notes are referred to
the Indenture and the U.S. Trust Indenture Act for a statement of those terms.
The Notes are unsecured senior subordinated obligations of the Issuer and
are limited to an aggregate principal amount at maturity of $150,000,000
(subject to Section 2.07 of the Indenture). The Indenture imposes certain
limitations on the Issuer, the Guarantor, Holdings and their affiliates,
including, without limitation, limitations on the incurrence of indebtedness and
issuance of preferred stock, the payment of dividends and other payment
restrictions affecting the Guarantor and its subsidiaries, the sale of assets,
transactions with and among affiliates of the Guarantor, Change of Control and
Liens.
7. OPTIONAL REDEMPTION
The Notes will not be redeemable at the option of the Issuer prior to
December 1, 2004, except as described in paragraph 8 below and in the next
paragraph. On and after such date, the Notes will be redeemable at the option of
the Issuer, in whole or in part, on not less than 30 days' nor more than 60
days' notice, in amounts of US$1,000 or integral multiples thereof at the
following redemption prices (expressed as percentages of principal amount at
maturity), plus accrued and unpaid interest (if any) to the redemption date, if
redeemed during the 12-month period beginning on the dates indicated below
(subject to the right of holders of record on the relevant Record Dates to
receive interest due):
<PAGE> 7
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
December 1, 2004............................................ 105.625%
December 1, 2005............................................ 103.750%
December 1, 2006............................................ 101.875%
December 1, 2007 and thereafter............................. 100.000%
</TABLE>
In the event that, prior to December 1, 2002, the Guarantor receives
proceeds from the sale of its common stock in one or more Public Equity
Offerings, the Issuer may, at its election, use all or a portion of such
proceeds, upon receipt of such proceeds or portion thereof from the Guarantor in
prepayment of the Intercompany Receivables, to redeem up to a maximum of 35% of
the initial aggregate principal amount of the Notes at a Redemption Price equal
to 111.25% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any (including Special Interest, if any), and Additional Amounts, if
any, to the redemption date (subject to the right of Holders of record on the
relevant Record Date to receive interest due on the relevant Interest Payment
Date); provided, however, that (a) after giving effect to any such redemption,
at least 60% of the original principal amount at maturity of the Notes remains
outstanding and (b) the Issuer has received an equivalent amount of proceeds as
prepayment of Intercompany Receivables. Any such redemption shall be made within
75 days of the closing of a Public Equity Offering upon not less than 30 nor
more than 60 days' notice mailed to each Holder of Notes being redeemed and
otherwise in accordance with the procedures set forth in the Indenture.
8. OPTIONAL TAX REDEMPTION
This Note may also be redeemed, as a whole but not in part, at the election
of the Issuer, upon not less than 30 nor more than 60 days notice delivered to
each Holder of Notes in accordance with the procedures set forth in the
Indenture, at the Redemption Price equal to 100% of their principal amount, plus
interest accrued and unpaid to the redemption date, if any (including Special
Interest, if any), if, as a result of any amendment to, or change in, the laws
(or any rules or regulations thereunder) of Luxembourg, The Netherlands or
Poland or any political subdivision or taxing authority thereof or therein (or,
in the case of Additional Amounts payable by a successor Person to the Issuer,
Holdings or the Guarantor, of the jurisdiction in which such successor Person is
organized or any political subdivision or taxing authority thereof or therein),
or any amendment to or change in any official interpretation or application of
such laws or rules or regulations or any execution of or amendment to any treaty
affecting taxation to which Luxembourg, The Netherlands or Poland (or any
political subdivision or taxing authority thereof or therein; or any other
relevant jurisdiction or political subdivision or taxing authority) is a party,
which amendment or change or execution is effective on or after the date of the
Indenture (or, in the case of Additional Amounts payable by a successor Person
to the Issuer, Holdings or the Guarantor, the date on which such successor
Person became such pursuant to applicable provisions of the Indenture), either
the Issuer with respect to the Notes or the Guarantor or Holdings with respect
to the Notes Guarantees or the Notes has become or will become obligated to pay
Additional Amounts (as described above in Paragraph 3), or the Guarantor or
Holdings has become or will become obligated to pay similar Additional Amounts
with respect to the Intercompany Receivables, on the next date on which any
amount would be payable with respect to the Notes or the Intercompany
Receivables, as the case may be, and such obligation cannot be avoided by the
use of reasonable measures available to the Issuer, Holdings or the Guarantor as
the case may be; provided, however, that (1) no such notice of redemption may be
given earlier than 90 days prior to the earliest date on which the Issuer,
Holdings or the Guarantor, as the case may be, would be obligated to pay such
Additional Amounts were a payment in respect of the Notes or the Notes
Guarantees then due, and (2) at the time such notice of redemption is given,
such obligation to pay such Additional Amounts remains in effect. Immediately
prior to the mailing of any notice of redemption pursuant to this paragraph, the
Issuer shall deliver to the Trustee a certificate stating that the Issuer is
entitled to effect such redemption and setting forth a statement of facts
showing that the conditions precedent to the right of the Issuer so to redeem
have occurred.
9. NOTICE OF REDEMPTION
Notice of redemption will be mailed first-class postage prepaid at least 30
days but not more than 60 days before the redemption date to the Holder of this
Note to be redeemed at the addresses contained in the Security Register. If this
Note is in a denomination larger than $1,000 of principal amount at maturity it
may be redeemed
<PAGE> 8
in part but only in integral multiples of $1,000 at maturity. In the event of a
redemption of less than all of the Securities, the Notes for redemption will be
chosen by the Trustee in accordance with the Indenture. If this Note is redeemed
subsequent to a Record Date with respect to any Interest Payment Date specified
above, then any accrued interest will be paid to the Holder of this Note at the
close of business on such Record Date. If money sufficient to pay the redemption
price of and accrued interest on all Notes (or portions thereof) to be redeemed
on the redemption date is deposited with the applicable Paying Agent on or
before the redemption date and certain other conditions are satisfied, on and
after such date interest ceases to accrue on such Notes (or such portions
thereof) called for redemption.
10. REPURCHASE AT THE OPTION OF HOLDERS
If a Change of Control occurs (as defined in the Indenture), the Issuer
shall be required to offer to purchase on the Purchase Date all or any part of
(equal to $1,000 or an integral multiple thereof) this Note at a purchase price
equal to 101% of the principal amount hereof, plus any accrued and unpaid
interest hereon, if any, to the Purchase Date, which date shall be no earlier
than 30 days nor later than 60 days from the date notice of such offer is
mailed, other than as required by law. The Issuer shall purchase all Notes
properly and timely tendered in the Change of Control Offer and not withdrawn in
accordance with the procedures set forth in such notice. The Change of Control
Offer will state, among other things, the procedures that Holders of the Notes
must follow to accept the Change of Control Offer. The Guarantor and Holdings
will advance to the Issuer as a prepayment under the Intercompany Receivables an
amount of funds sufficient to consummate the Change of Control Offer, and the
Issuer's obligation to repurchase the Notes upon a Change of Control will be
guaranteed on a subordinated basis by the Guarantor pursuant to the Parent
Guarantees.
Within five Business Days from the date the aggregate amount of Excess
Proceeds exceeds $10.0 million (taking into account income earned on such Excess
Proceeds, if any), the Guarantor, directly or through the Issuer, shall be
required to make an offer to purchase the Notes and the Euro Notes, which offer
shall be in the amount of the Excess Proceeds, at a redemption price equal to
100% of the principal amount thereof plus accrued and unpaid interest thereon,
if any (including Special Interest, if any), to the Purchase Date.
11. DENOMINATIONS
The Notes are in denominations of $1,000 and integral multiples of $1,000
of principal amount at maturity. The transfer of Notes may be registered, and
Notes may be exchanged, as provided in the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture.
12. UNCLAIMED MONEY
All moneys paid by the Issuer, Holdings or the Guarantor to the Trustee or
a Paying Agent for the payment of the principal of, or premium, if any, or
interest on, any Notes that remain unclaimed at the end of two years after such
principal, premium or interest has become due and payable may be repaid to the
Issuer, Holdings or the Guarantor, subject to applicable law, and the Holder of
such Note thereafter may look only to the Issuer, Holdings or the Guarantor for
payment thereof.
13. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Issuer at any time may terminate some or
all of its obligations and the obligations of the Guarantor and Holdings under
the Notes, the Indenture and the Notes Guarantees if the Issuer irrevocably
deposits with the Trustee money or U.S. Government Securities for the payment of
principal and interest on the Notes to redemption or maturity, as the case may
be.
14. AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions set forth in the Indenture, the Indenture may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the relevant Notes then outstanding
and any existing default or compliance with any provisions may be waived with
the consent of the
<PAGE> 9
Holders of at least a majority in aggregate principal amount of the relevant
Notes then outstanding. However, without the consent of each Holder of an
outstanding Note, no amendment may, among other things, (i) reduce the amount of
Notes whose Holders must consent to an amendment, (ii) reduce the rate of or
extend the time for payment of interest on any Note, (iii) reduce the principal
of or extend the Stated Maturity of any Note, (iv) reduce the premium payable
upon the redemption of any Note or change the time or times at which any Note
may or shall be redeemed, (v) make any Note payable in money other than that
stated in the Note, (vi) impair the right of any Holder of Notes to institute
suit for the enforcement of any payment on or with respect to any Notes, (vii)
release any security that may have been granted in respect of the Notes, (viii)
make any change to the provisions described in Article 10 of the Indenture that
adversely affects the rights of any Holder of Notes under such provisions, or
(ix) modify any of the provisions of the Dollar Escrow Agreement.
Without the consent of any Holder of the Notes, the Issuer, the Guarantor
and the Trustee may, among other things, amend or supplement the Indenture to
cure any ambiguity, omission, defect or inconsistency, to provide for the
assumption by a Successor Issuer of the obligations of the Issuer, or a
Successor Company of the obligations of the Guarantor, under the Indenture and
this Note, to add Guarantees with respect to the Notes or to secure the Notes,
to add to the covenants of the Issuer or the Guarantor for the benefit of the
Holders of the Notes or to surrender any right or power conferred upon the
Issuer or the Guarantor, to make any change that does not adversely affect the
rights of any Holder of the Notes, to make any change to the provisions
described in Article 10 of the Indenture that would limit or terminate the
benefits available to any holder of Senior Debt under such provisions or to
comply with any requirement of the SEC in connection with the qualification of
the Indenture under the U.S Trust Indenture Act. Any amendment pursuant to the
preceding paragraph and this paragraph may not make any change that adversely
affects the rights under the provisions described in Article 10 of the Indenture
of any holder of Senior Debt then outstanding unless the holders of such Senior
Debt (or any group or representative thereof authorized to give a consent that
would be binding on all the holders of such Senior Debt) consent to such change.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Guarantor is
required to mail to each registered holder of the relevant Notes at his address
appearing in the Security Register a notice briefly describing such amendment.
However, the failure to give such notice to all holders of the Notes, or any
defect therein, will not impair or affect the validity of the amendment.
15. DEFAULTS AND REMEDIES
The Notes have the Events of Default as set forth in Section 6.01 of the
Indenture. If an Event of Default occurs and is continuing, the Trustee, by
notice to the Guarantor, or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding by notice to the Guarantor and the Trustee,
subject to certain limitations, may declare all the Notes to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
and shall result in the Notes being due and payable immediately upon the
occurrence of such Events of Default.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Notes may direct the Trustee in its exercise of any trust or power. The Holders
of a majority in aggregate principal amount of the Notes then outstanding by
written notice to the Trustee may rescind any acceleration and its consequence
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of
principal, premium, if any, or interest that has become due solely because of
such acceleration. The above description of Events of Default and remedies is
qualified by reference, and subject in its entirety, to the more complete
description thereof contained in the Indenture.
<PAGE> 10
16. TRUSTEE DEALINGS WITH THE ISSUER
Subject to certain limitations imposed by the U.S. Trust Indenture Act, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with and collect
obligations owed to it by the Issuer, the Guarantor or any of their or its
Affiliates with the same rights it would have if it were not Trustee. Any Paying
Agent, Registrar or Co-registrar may do the same with like rights.
17. NO RECOURSE AGAINST OTHERS
A director, officer, employee, or stockholder, as such, of the Issuer,
Holdings or the Guarantor shall not have any liability for any obligations of
the Issuer, Holdings or the Guarantor under the Notes, the Indenture or the
Notes Guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. By accepting a Note, each Holder shall waive and
release all such liability. The waiver and release are part of the consideration
for the issue of the Notes.
18. AUTHENTICATION
This Note shall not be valid until an authorized officer of the Trustee (or
an authenticating agent) manually signs the certificate of authentication on the
other side of this Note.
19. GOVERNING LAW
THE NOTES AND THE INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
The Issuer or the Guarantor will furnish to any Holder of Notes upon
written request and without charge to the Holder of Notes a copy of the
Indenture which has in it the text of this Note in larger type. Requests may be
made to:
PTC International Finance II S.A.
in care of Polska Telefonia Cyfrowa Sp. z o.o.
Al. Jerozolimskie 181
02-222 Warsaw, Poland
Telephone: 48-22-699-6250
Facsimile: 48-22-699-6239
Attention: Treasury Manager
<PAGE> 11
PARENT
GUARANTEE
For value received, the Guarantor, as principal obligor and not merely as
surety, hereby unconditionally and irrevocably guarantees on an unsecured senior
subordinated basis to the Holder of this Note and to the Trustee and its
successors and assigns (a) the full and punctual payment of principal of,
premium, if any, and interest on this Note when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Issuer under the Indenture (including, without limitation, obligations to
the Trustee and the obligations to pay Special Interest, if any, and Additional
Amounts, if any) and the Notes and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Issuer under the
Indenture and the Notes (all the foregoing being hereinafter collectively called
the "Obligations"). The Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
the Guarantor, and that the Guarantor will remain bound by Article 11 of the
Indenture notwithstanding any extension or renewal of any Obligation.
The obligations of the Guarantor to the Holder of this Note and to the
Trustee pursuant to this Guarantee and the Indenture (including, without
limitation, the provisions relating to submission to jurisdiction and
appointment of CT Corporation System set forth in the Indenture) are expressly
set forth in the Indenture to which reference is hereby made for the precise
terms of such obligations. This Guarantee shall be governed by, and construed in
accordance with, with the laws of the State of New York.
This Guarantee is dated the date of the Note upon which it is endorsed.
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed.
POLSKA TELEFONIA CYFROWA SP. Z O.O.
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
<PAGE> 12
HOLDINGS
GUARANTEE
For value received, Holdings, as principal obligor and not merely as
surety, hereby unconditionally and irrevocably guarantees on a senior
subordinated basis to the Holder of this Note and to the Trustee and its
successors and assigns (a) the full and punctual payment of principal of,
premium, if any, and interest on this Note when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Issuer under the Indenture (including, without limitation, obligations to
the Trustee and the obligations to pay Special Interest, if any, and Additional
Amounts, if any) and the Notes and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Issuer under the
Indenture and the Notes (all the foregoing being hereinafter collectively called
the "Obligations"). Holdings further agrees that the Obligations may be extended
or renewed, in whole or in part, without notice or further assent from Holdings,
and that the Holdings will remain bound by Article 11 of the Indenture
notwithstanding any extension or renewal of any Obligation. The obligations of
Holdings under this Guarantee are secured pursuant to the Escrow and Security
Agreement dated November 23, 1999 (as amended or modified from time to time, the
"Escrow Agreement") made by Holdings in favor of the Trustee for the benefit of
the Holders of the Notes. Notwithstanding the foregoing or anything to the
contrary set forth in Article 11 of the Indenture, Holdings' liability under
this Guarantee and any rights and remedies of the Trustee or any Holder against
Holdings in respect of the Obligations shall be limited to any rights such
parties have to proceed against the Collateral (as defined in the Escrow
Agreement).
The obligations of Holdings to the Holder of this Note and to the Trustee
pursuant to this Guarantee and the Indenture (including, without limitation, the
provisions relating to submission to jurisdiction and appointment of CT
Corporation System set forth in the Indenture) are expressly set forth in the
Indenture to which reference is hereby made for the precise terms of such
obligations. This Guarantee shall be governed by, and construed in accordance
with, with the laws of the State of New York.
This Guarantee is dated the date of the Note upon which it is endorsed.
IN WITNESS WHEREOF, Holdings has caused this Guarantee to be duly executed.
PTC INTERNATIONAL FINANCE (HOLDINGS)
B.V.
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
<PAGE> 13
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
- ---------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and postal code)
and irrevocably appoint agent to transfer
this Note on the books of the Issuer. The agent may substitute another to act
for him.
Your Signature:
- --------------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
- --------------------------------------------------------------------------------
(Participant in a recognized signature guarantee medallion program)
Date: ____________________________
Certifying Signature: 2
Signature Guarantee:
- --------------------------------------------------------------------------------
(Participant in a recognized signature guarantee medallion program)
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is 40 days after the later of the
date of original issuance of such Notes and the last date, if any, on which such
Notes were owned by the Issuer or any Affiliate of the Issuer, the undersigned
confirms that such Notes are being transferred in accordance with the transfer
restrictions set forth in such Notes and:
CHECK ONE BOX BELOW
(1) [ ] to the Issuer; or
(2) [ ] pursuant to and in compliance with Rule 144A under the U.S.
Securities Act 1933; or,
(3) [ ] pursuant to and in compliance with Regulation S under the U.S.
Securities Act of 1933; or
(4) [ ] pursuant to another available exemption from the registration
requirements of the U.S. Securities Act of 1933; or
(5) [ ] pursuant to an effective registration statement under the U.S.
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Notes evidenced by this certificate in the name of any person other than
the registered Holder thereof; provided, however, that if box (2) is checked, by
executing this form, the Transferor is deemed to have certified that such Notes
are being transferred to a person it reasonably believes is a "qualified
institutional buyer" as defined in Rule 144A under the U.S. Securities Act of
1933 who has received notice that such transfer is being made in reliance on
Rule 144A, if box (3) is checked, by executing this form, the Transferor is
deemed to have certified that such transfer is made pursuant to an offer and
sale that occurred outside the United States in compliance with Regulation S
under the U.S. Securities Act, and if box (4)is checked, the Trustee may
require, prior to registering any such transfer of the Notes such legal
opinions, certifications and other information as the Issuer has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from or in a transaction not subject to, the registration requirements of the
U.S. Securities Act of 1933.
<PAGE> 14
Signature
- --------------------------------------------------------------------------------
Signature Guarantee:
- --------------------------------------------------------------------------------
(Participant in a recognized signature guarantee medallion program)
Date: ____________________________
Certifying Signature: 3
Signature Guarantee:
- --------------------------------------------------------------------------------
(Participant in a recognized signature guarantee medallion program)
<PAGE> 15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note or a portion thereof repurchased
pursuant to Sections 3.08 and 4.12 or 4.14 of the Indenture, check the box: [ ]
If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased:
Your signature:
- --------------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Date: ____________________________
Certifying Signature: 4
Signature Guarantee:
- --------------------------------------------------------------------------------
(Participant in a recognized signature guarantee medallion program)
<PAGE> 1
[LETTERHEAD OF CLIFFORD CHANCE LIMITED LIABILITY PARTNERSHIP]
Exhibit 5.1
10 March, 2000
PTC International Finance (Holding) B.V.
Strawinskylaan 3105
1077 ZX Amsterdam
The Netherlands
Dear Sirs,
We have acted as legal counsel in The Netherlands to PTC International Finance
(Holding) B.V. of Strawinskylaan 3105, 1077 ZX Amsterdam, The Netherlands (the
"Company") for the sole purpose of rendering a legal opinion as to certain
matters of Netherlands law in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of the US$
150,000,000 11 1/4 per cent Senior Subordinated Guaranteed Notes due 2009 and of
EUR 300,000,000 11 1/4 per cent Senior Subordinated Guaranteed Notes due 2009
(together the "New Notes") of PTC International Finance S.A. (the "Issuer") and
the offer (the "Exchange Offer") by the Issuer to exchange the New Notes for its
unregistered US$ 150,000,000 11 1/4 per cent. Senior Subordinated Guaranteed
Notes due December 1, 2009 and its EUR 300,000,000 11 1/4 per cent. Senior
Subordinated Guaranteed Notes due December 1, 2009 (the "Old Notes").
The obligations of the Issuer under the New Notes will be fully and
unconditionally guaranteed by Polska Telefonia Cyfrowa Sp. z o.o. (the "Parent")
and the Company on a subordinated basis.
We are rendering this legal opinion at your specific request. Capitalized terms
used herein without definition shall, unless the context otherwise requires,
have the same meanings ascribed to them in the New Notes. Headings in this
opinion are for ease of reference only and shall not affect the interpretation
hereof.
In arriving at the opinions expressed below we have examined and relied upon
the following documents:
(a) a copy of an official extract (uinreksel) dated 21 February 2000 from
the Commercial
<PAGE> 2
-2-
Register of the Amsterdam Chamber of Commerce (the "Chamber") relating to
the registration of the Company under number 34123262 and confirmed to us
by the Chamber by telephone at the time and date hereof to have remained
unaltered since such date;
(b) a copy of the deed of incorporation (akte van oprichting) of the Company
dated 5 November 1999 as subsequently amended on 12 November 1999
containing the Company's articles of association (statuten) which are its
currently effective articles of association according to the extract
referred to in (a) above;
(c) a copy of an official extract (uinreksel) dated 23 November 1999 from the
Chamber relating to the registration of ABN AMRO Trust Company (Nederland)
B.V. ("AA Trust") under number 33232905 which lists, inter alia, Mr.
Hendrik Justus Wirix and Ms. Eugeny Hermina Cornelia Maria Vroom as
proxyholders, each authorized to represent jointly with any managing
director or any other proxyholder of AA Trust;
(d) a copy of the deed of incorporation (akte van oprichting) of AA Trust dated
27 August 1991 containing AA Trust's articles of association (statuten)
which were the effective articles of association on 23 November 1999;
(e) a faxed copy of an executed indenture dated 23 November 1999 between the
Company, the Issuer, the Parent and State Street Bank and Trust Company as
Trustee (the "Trustee") in relation to the US$ 500,000,000 11 1/4 per cent,
unregistered senior subordinated guaranteed notes (the "Dollar Notes") (the
"Dollar Indenture");
(f) a faxed copy of an executed indenture dated 23 November 1999 between the
Company, the Issuer, the Parent and the Trustee in relation to the EUR
300,000,000 11 1/4 per cent senior subordinated guaranteed notes (the
"Euro Notes" and together with the Dollar Notes, the "Notes") (the "Euro
Indenture" and together with the Dollar Indenture, the "Indentures"); the
Indentures and the Notes contain the Company's limited recourse
subordinated guarantee of the Notes (the "Guarantees" and each a
"Guarantee");
(g) a draft of the registration statement on Form F-4 (the "Registration
Statement") dated 2 March 2000 including a prospectus (the "Prospectus")
relating to the New Notes and the Indentures, a copy of which was submitted
by us to the Dutch Securities Board (Stichting Toezicht Effectenverkeer,
hereinafter "STE"); and
(h) a faxed copy of a confirmation dated 23 November 1999 from the Parent in
its capacity as the Company's sole shareholder (the "Shareholder's
Confirmation").
In examining and in describing the documents listed above and in giving this
opinion we have, with your permission, assumed:
<PAGE> 3
-3-
(i) the genuineness of all signatures on all documents or on the originals
thereof;
(ii) the authenticity and completeness of all documents submitted as originals
and the conformity of copy, faxed or specimen documents to the originals
thereof;
(iii) the power, capacity (corporate and other) and authority of all parties
(other than the Company) to enter into and perform their obligations
under the Indentures and the New Notes, the legal capacity
(handelingsbekwaamheid) of all individuals who have signed or will sign
documents or who have given confirmations on which we have expressed
reliance (including those individuals acting on the Company's behalf) and
that the Indentures and the New Notes and all other agreements and
documents relating thereto have been or will be (where appropriate) duly
authorised, executed and delivered by all parties thereto (other than the
Company) and create valid and legally binding obligations for all such
parties as a matter of applicable law (if other than Netherlands law and
the chosen governing law of the New Notes and the Indentures);
(iv) that each party to any document (other than the Company) is duly
incorporated and organised, validly existing and in good standing (where
such concept is legally relevant) under the laws of its jurisdiction of
incorporation and of the jurisdiction of its place of business;
(v) the due compliance with all matters (including without limitation the
obtaining of the necessary consents, licences, approvals and
authorities, the making of the necessary filings, lodgements,
registrations and notifications and the payment of stamp duties and
other taxes) under any law, other than that of The Netherlands, as may
relate to or be required in respect of: (a) the Indentures and the New
Notes (including the creation, issuance and distribution of the New
Notes); (b) their lawful execution; (c) the parties thereto (including
the Company) or other persons affected thereby; (d) any borrowing
thereunder; (e) the performance or enforcement of the New Notes by or
against the parties (including the Company) or such other persons; (f)
the distribution of the Prospectus or (g) the creation of valid and
legally binding obligations of all parties to the Indentures and the
New Notes (including the Company) enforceable against such parties in
accordance with their respective terms;
(vi) that any obligations under the New Notes which are to be performed in any
jurisdiction outside The Netherlands will not be illegal or contrary to
public policy under the laws of such jurisdiction;
(vii) that under the laws of the State of New York to which the New Notes and
the Indentures (including the Guarantees) are expressed to be subject,
and under all other relevant laws (other than those of The Netherlands):
(a) the New Notes and the Indentures constitute and will at all times
constitute the valid and legally binding obligations of all the
parties thereto (including the
<PAGE> 4
-4-
Company),
(b) the choice of the laws of the State of New York as the governing
law of the New Notes and the Indentures is a valid and binding
selection,
(c) none of the New Notes, the Indentures or any of the transactions
contemplated thereby (whether individually or seen as a whole)
are in breach of or will result in a breach of such laws
(including, for the avoidance of doubt, the tax laws) or of any
other relevant jurisdiction (other than The Netherlands), or are
intended to avoid the applicability or the consequences of such
laws in a manner that is not permitted thereunder.
(viii) that the New Notes will be issued, offered, sold and delivered in The
Netherlands only (i) after the STE has granted the Issuer a
dispensation (ontheffing) pursuant to Article 4 of the Securities
Market Supervision Act 1995 on the basis of the Registration
Statement after it has been declared effective by the SEC or (ii)
pursuant to and in accordance with a selling restriction permitting
offers of New Notes in The Netherlands only to professionals;
(ix) that the New Notes will be executed in accordance with the forms set
forth in, and in accordance with the terms of, the Indentures and that
the Registration Statement and the Prospectus will be finalised
substantially in the form of the draft, which we reviewed for the
purpose of rendering this opinion;
(x) that the New Notes will be issued, offered, sold in the form and
denominations set out in, on the terms of and in accordance with the
provisions of the Indentures and the Registration Statement and that
the distribution of the Prospectus (whether electronically or
otherwise), any circulars, documents or information relating to the
Company, the Parent, the Issuer and/or the New Notes and any and all
invitations, offers, sales and deliveries of the New Notes have been
and will continue to be made in conformity with the provisions of the
Prospectus and in particular with the selling restrictions set out (or
referred to) therein with respect of the laws of The Netherlands;
(xi) that the Indentures have been executed on behalf of the Company by its
sole Managing Director (being as at the time of execution of the
Indentures: AA Trust) represented by any two proxyholders of AA Trust
who were at the time of execution authorized to represent AA Trust
acting jointly, on the basis of and in accordance with their proxies
granted by AA Trust and that under the laws governing the existence
and extent of the authorization set out therein towards third parties
(if other than those of The Netherlands), as determined pursuant to
the rules of The Hague Convention on the Law Applicable to Agency,
such proxies authorize such proxyholders to create binding obligations
for AA Trust towards the parties with whom such proxyholders act in
the name of and on behalf of AA Trust;
<PAGE> 5
-5-
(xii) that the Parent validly executed the Shareholder's Confirmation, that
the Shareholder's Confirmation remains in full force and effect and
unaltered and that all factual statements made therein were true and
accurate and remains true and accurate;
(xiii) that all parties entered into the Indentures and the New Notes for
bona fide commercial reasons and at arm's length terms;
(xiv) that the execution of the Indentures (in particular, but without any
limitation, the granting of the Guarantees) and the performance of the
obligations and transactions contemplated thereby are in the Company's
best corporate interest and not prejudicial to its creditors (present
and future); and
(xv) that the courts of The Netherlands will, in giving effect to the
choice for the laws of the State of New York as the law governing the
New Notes and the Indentures, apply such chosen law correctly.
With respect to certain matters of Polish law, United States federal and New
York State law and Luxembourg law, we note that you have been provided with and
are relying upon the opinion dated the date hereof, of Clifford Chance Punder
Sp. z o.o. --Warsaw, special Polish counsel to the Parent, Faltz & Kremer --
Luxembourg, special Luxemborg counsel to the Issuer and Clifford Chance Rogers
& Wells LLP -- New York, special United States counsel to the Company and the
Issuer delivered to you today.
The issue and offering of the New Notes and the Indentures (including the
Guarantees) are expressed to be governed by the laws of the State of New York.
The Issuer of the New Notes is, we understand, a company incorporated under the
laws of Luxembourg, and the Parent is a company incorporated under the laws of
Poland. As Dutch lawyers we are not qualified to assess the meaning and
consequences of the terms of the New Notes and the Indentures under New York
law and we have made no investigation into the laws of the State of New York,
of Luxembourg or of Poland as a basis for the opinion expressed hereinafter and
we do not express or imply any opinion thereon. Accordingly, our review of the
New Notes and the Indentures has been limited to the terms of such documents as
they appear on the face thereof without reference to the general body of law
incorporated into or made applicable to such documents by the choice of law
clause contained therein. We express no opinion:
- -- as to any law other than the laws of The Netherlands in force as at the
date hereof as applied and interpreted according to present published
case-law of The Netherlands courts, administrative rulings, regulations
of, notices from and communications with the Dutch Central Bank (De
Nederlandsche Bank, hereinafter "DNB"), the Dutch Ministry of Finance,
the STE and authoritative literature; or
- -- that the future or continued performance of any of the Company's
obligations or the consummation of the transactions contemplated by the New
Notes or the Indentures will not contravene such laws, application or
interpretation if altered in the future; or
<PAGE> 6
-6-
- - on the tax laws of The Netherlands, on international law, including
(without limitation) the rules of or promulgated under or by any bi- or
multi-lateral treaty or treaty organisation (unless implemented into the
laws of The Netherlands), or on anti-trust or competition laws; or
- - with regard to the effect of any systems of law (other than the laws of The
Netherlands), even in cases where, under Netherlands law, any foreign law
should be applied and we assume that any applicable law (other than
Netherlands law) would not affect or qualify our opinion as set out below;
- - on any commercial, accounting or other non-legal matter or on the ability
of the Company to meet its financial or other obligations under the New
Notes or the Indentures; or
- - on any other agreements or documents to which the Company is a party and
which are referred to in the Prospectus.
We have not been concerned with investigating or verifying the accuracy of any
facts, representations or warranties set out in any of the New Notes or the
Indentures (with the exception of those matters on which we have specifically
and expressly given our opinion). To the extent that the accuracy of such
facts, representations and warranties not so investigated or verified and of
any facts stated in any of the documents listed above (or orally confirmed) is
relevant to the contents of this opinion, we have assumed, with your
permission, that such facts, representations and warranties were true and
accurate when made and remain true and accurate.
Other than to review the documents listed above, we have not examined any
contracts, instruments or other documents entered into by or affecting the
Company or any corporate records of the Company. Although in giving this opinion
we have made the enquiries referred to in (a) above and in Section 1 below, we
have not undertaken any factual investigations or made any other searches or
enquiries concerning the Company and we have otherwise assumed that no effective
resolution has been passed approving a voluntary winding-up, a statutory merger
(juridische fusie) or de-merger (splitsing) of the Company (where, in either of
the latter cases, the Company would be the disappearing entity) and that no
petition has been presented to a competent court for the bankruptcy
(faillissement), dissolution (ontbinding en vereffening), or moratorium of
payments (surseance van betaling) of the Company.
Where an assumption is stated to be made in this opinion, we have not verified
or made any investigation or enquiry with respect to the matters that are the
subject of such assumption and we express no views as to such matters.
Based upon and subject to the foregoing and to the further qualifications set
out below and subject to any factual matters, documents or events not disclosed
to us by the parties concerned, having regard to such legal considerations as
we deem relevant, we are at the time and date hereof of the following opinion:
<PAGE> 7
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1. CORPORATE STATUS, POWER AND CAPACITY
1.1 The Company is registered as: (i) a private company with limited liability
(besloten vennootschup); (ii) dully incorporated on 5 November 1999 and;
(iii) validly existing under the laws of The Netherlands.
1.2 The office of the Bankruptcy Registrar (faillissementsgriffie) of the
District Court (Arrondissementsrechtbank) of Amsterdam has confirmed to
us by telephone on the date hereof that the Company has not been
declared bankrupt (faillier) at the time and date hereof. The office of
the Civil Registrar (Civiele Griffie) of the District Court
(Arrondissementsrechtbank) of Amsterdam has confirmed to us by telephone
at the time and date hereof that no order has been made by the District
Court for the dissolution (ontbinding en vereffening) of the Company.
1.3 The Chamber has confirmed to us by telephone on the time and date hereof:
(a) that the Company has not registered a voluntary winding-up resolution;
(b) that there has been no registration of any assets of the Company
having been placed under administration (onderbewindstelling); and
(c) it has not itself taken any action in respect of the Company's
dissolution.
1.4 The searches and enquiries referred to above do not determine conclusively
whether or not the matters or events enquired after have occurred or not.
There is no formal register of judgments, declarations or orders referred
to in Section 1.2 above.
2. EXECUTION AND VALIDITY
The New Notes will, when duly executed by or on behalf of the Issuer,
constitute valid and legally binding obligations of the Issuer.
Each of the Indentures (including the Guarantees) has been duly executed
on the Company's behalf and constitutes the valid and legally binding
obligations of the Company enforceable against it in accordance with their
respective terms.
The opinion expressed above is subject to the following qualifications:
A. our opinion is subject to and limited by the provisions of any applicable
bankruptcy, insolvency, liquidation, reorganisation, voidable preference,
moratorium and other similar laws of general application relating to or
affecting creditors' rights and remedies from time to time in effect and to
general equity principles;
<PAGE> 8
-8-
B. The Courts of The Netherlands will observe and give effect to the choice of
(i) the laws of the State of New York as the law governing the New Notes
and the Indentures in any proceedings in relation to such documents, but
when applying New York as the law governing the New Notes and the
Indentures, the courts of competent jurisdiction of The Netherlands, if
any, by virtue of the limitations imposed by the 1980 Rome Convention on
the Law Applicable to Contractual Obligations (the "Rome Convention"):
- may give effect to the mandatory rules of law of another country with
which the situation has a close connection, if and insofar as, under
the law of the latter country, those rules must be applied whatever
the applicable law to the New Notes and the Indentures;
- will apply to the laws of The Netherlands in a situation where it is
mandatory irrespective of the law otherwise applicable to the New
Notes and the Indentures;
- may refuse to apply New York law if such application is manifestly
incompatible with the public policy of The Netherlands; and
- shall have regard to the law of the country in which performance takes
place in relation to the manner of performance and the steps to be
taken in the event of defective performance.
With the express reservation that as Dutch lawyers we are not qualified to
assess the exact meaning and consequences of the terms of the New Notes and
the Indentures under New York law on the face of such documents we are not
aware of any provision that is likely to be manifestly incompatible with
Netherlands' public policy (a limitation on the chosen law permitted under
article 16 of the Rome Convention) or that is likely to give rise to
situations in which mandatory rules of Netherlands law will prevail over
the chosen law of such documents (a limitation on the chosen law permitted
under article 7(2) of the Rome Convention). It should also be noted that
we are not aware of any published order, ruling or decision of a
Netherlands court in which such court has given overriding effect to
foreign mandatory rules pertaining to a law other than the chosen or
applicable law (article 7(1) Rome Convention) in commercial or financial
litigation brought before such courts.
C. any provision that the holder of a Note may be treated as the absolute
owner of the Note may not be enforceable under all circumstances. If the
laws of The Netherlands are applicable, title to a Note would pass upon
delivery (levering) thereof, provided that (i) the transferor is the owner
of the New Note or may reasonably be held by the transferee to be the owner
and (ii) the transfer is made pursuant to a valid agreement. The courts of
The Netherlands may apply the laws of another jurisdiction if questions
of title to a Note are submitted to them;
D. Netherlands law does not recognize the Anglo-American concept of "trust;"
although this
<PAGE> 9
-9-
does not invalidate any rights of or against a Dutch company vested in a
trustee located in (and pursuant to a trust arrangement governed by the
laws of) a jurisdiction which does recognize that concept, in respect of
assets that are subject to and/or governed by the laws of such
jurisdiction, this lack of recognition may have adverse consequences in
relation to any provision in the New Notes requiring the Company to hold
property or money in trust; nevertheless, any trust validly created under
its governing law by the New Notes or the Indentures will be recognised by
the courts of The Netherlands in accordance with, and subject to the
limitations of, the rules of the The Hague Convention of the law Applicable
to Trusts and on their Recognition; thus, where the New Notes or the
Indentures provide that the Company shall hold certain assets and rights in
trust for (or for the benefit of) other parties, then under Netherlands
law such provisions will be effective to create a trust in respect of such
assets provided that such assets and rights are held by the Company outside
The Netherlands in, or governed by the laws of, a jurisdiction the domestic
laws of which allow for the creation of trusts of the type contemplated by
the New Notes or the Indentures; in all other cases such parties may merely
have an unsecured claim against the Company, which claim will rank pari
passu with the claims of other unsecured and unsubordinated creditors of
the Company;
E. the concept of "delivery" of a document is not known or required under the
laws of The Netherlands to render a document valid, legally binding and
enforceable; furthermore, the question whether or not any provisions in the
Indentures or the New Notes which are invalid or void may be severed from
the other provisions thereof in order to save those other provisions would
be determined by The Netherlands courts in their discretion; the Indentures
and the New Notes may be amended, to the extent that Netherlands law is
applicable, orally by the parties thereto, notwithstanding provisions
therein to the contrary; and
F. in issuing this opinion we do not assume any obligation to notify or to
inform you of any development subsequent to its date that might render its
contents untrue or inaccurate in whole or in part at such time.
This opinion:
(a) expresses and describes Netherlands legal concepts in English and not in
their original Dutch terms; these concepts may not be identical to the
concepts described by the English translations; consequently, this opinion
is issued and may only be relied upon on the express condition that it
shall be governed by and that all words and expressions used herein shall
be construed and interpreted in accordance with the laws of The
Netherlands;
(b) speaks as of 9 a.m. Amsterdam time on the date stated above;
(c) is addressed to you and is solely for your benefit;
<PAGE> 10
- 10 -
(d) is strictly limited to the matters set forth herein and no opinion may
be inferred or implied beyond that expressly stated herein and in
particular, but without any limitation, we have not investigated or
verified statements of fact or the reasonableness of any statements of
opinion contained in the Prospectus;
(e) may not be relied upon by or disclosed to any other person, company,
enterprise or institution, except that we hereby consent to the filing
of this opinion as an exhibit to the Registration Statement, and to the
reference to us in the Prospectus under the headings "Enforcement of
Liabilities and Service of Process" and "Legal Manners". In giving such
consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Act; and
(f) may not be used for any purpose other than in connection with the New
Notes and the Indentures.
Yours faithfully,
F.G.B. GRAAF
CLIFFORD CHANCE LIMITED LIABILITY PARTNERSHIP
<PAGE> 1
Exhibit 5.2
[LETTERHEAD OF CLIFFORD CHANCE LIMITED LIABILITY PARTNERSHIP]
March 10, 2000
Polska Telefonia Cyfrowa Sp. z o.o.
Al Jerozolimskie 53
P O Box 37
00-963 Warsaw 81
Poland
PTC International Finance II S.A.
41 Avenue de la Gare
L-1611 Luxembourg
PTC International Finance (Holding) B.V.
Strawinskylaan 3705
1077 ZX Amsterdam
The Netherlands
Dear Ladies and Gentlemen:
We have acted as special United States counsel to Polska Telefonia Cyfrowa Sp.
z o.o., a Polish limited liability company (the "Company"), PTC International
Finance (Holding) B.V., a private company with limited liability under the laws
of The Netherlands and a wholly-owned subsidiary of the Company ("Holdings"),
and PTC International Finance II S.A., a societe anonyme (limited liability
company), organized under the laws of Luxembourg and a wholly-owned subsidiary
of Holdings (the "Issuer"), in connection with the preparation and filing with
the U.S. Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), of a Registration
Statement on Form F-4 (as the same may be amended and supplemented from time to
time, the "Registration Statement") relating to an exchange offer for all of the
Issuer's outstanding US$ 150,000,000 11 1/4% Senior Subordinated Guaranteed
Notes due December 1, 2009 (the "Dollar Notes") and Euro 300,000,000 11 1/4%
Senior Subordinated Guaranteed Notes due December 1, 2009 (the "Euro Notes" and
collectively, the "Notes") and the unconditional guarantees of the Notes by the
Company (the "Company Guarantees") and Holdings (the "Holdings Guarantee"). The
Notes will be issued pursuant to the Indentures, dated November 23, 1999 (the
"Indentures"), by and among the Company, the Issuer, Holdings and State Street
Bank and Trust Company, as trustee (the "Trustee").
We have examined such corporate records, certificates and other documents and
such questions of law, as we have considered necessary or appropriate for the
purposes of this opinion.
Upon the basis of such examination, we advise you that, in our opinion, when
(i) the Registration Statement has become effective under the Securities Act,
(ii) the terms of the Notes and of their
<PAGE> 2
Polska Telefonia Cyfrowa Sp.zo.o. Page 2
PTC International Finance II S.A.
PTC International Finance (Holding) B.V.
March 10, 2000
issuance and sale have been duly established in conformity with the Indentures
so as not to violate any applicable law or result in a default under or breach
of any agreement or instrument binding upon the Company, the Issuer or
Holdings, and so as to comply with any requirement or restriction imposed by
any court or governmental body having jurisdiction over the Company, the Issuer
or Holdings and (iii) the Notes have been duly executed and authenticated in
accordance with the Indentures and issued and sold as contemplated in the
Registration Statement and the Parent Guarantees and Holdings Guarantees have
been duly executed and delivered in accordance with the Registration Statement,
(a) the Notes will constitute valid and legally binding obligations of the
Issuer, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles and (b) the Parent
Guarantees will constitute a valid and legally binding obligation of the
Company and the Holdings Guarantees will constitute a valid and legally binding
obligation of Holdings, each subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
The foregoing opinion is limited to the Federal laws of the United States and
the laws of the State of New York and we are expressing no opinion as to the
effect of the laws of any other jurisdiction. With respect to all matters of
Polish, Luxembourg and Dutch law, we note that you have been provided with the
opinions, dated the date hereof, of Clifford Chance Warsaw, Polish counsel to
the Company, Faltz & Kremer, Luxembourg counsel to the Issuer, and Clifford
Chance Amsterdam, The Netherlands counsel to Holdings.
In addition, with respect to the foregoing opinion we have relied as to certain
matters on information obtained from officers of the Company, the Issuer,
Holdings and other sources believed by us to be responsible, and we have
assumed that the Indentures have been duly authorized, executed and delivered by
the Trustee thereunder, an assumption that we have not independently verified.
We hereby consent to the filing of this opinion as an exhibit to the Indentures
and to the reference to us under the heading "Legal Matters" in the Registration
Statement. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act, or the rules or regulations of the Commission thereunder.
Very truly yours,
/s/ CLIFFORD CHANCE LIMITED LIABILITY PARTNERSHIP
<PAGE> 1
[LETTERHEAD OF CLIFFORD CHANCE PUNDER Sp. z o.o.]
Exhibit 5.3
10 March 2000
Polska Telefonia Cyfrowa Sp. z o.o.
Al. Jerozolimskie 181
02-222 Warsaw
Poland
Ladies and Gentlemen:
We have acted as special Polish counsel for Polska Telefonia Cyfrowa Sp. z o.o.
(the "Company") in connection with its guarantee (the "Company Guarantee") of
Euro 300,000,000 aggregate principal amount at maturity of 11 1/4% Senior
Subordinated Guaranteed Notes due December 1, 2009 (the "Euro Notes") and
$150,000,000 aggregate principal amount at maturity of 11 1/4% Senior
Subordinated Guaranteed Notes due December 1, 2009 (the "Dollar Notes") (the
"Notes") issued by the PTC International Finance II S.A. (the "Issuer") and
registered under the United States Securities Act of 1933, as amended (the
"Securities Act").
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of the following documents:
(a) the Articles of Association of the Company as amended;
(b) a copy of each of the Indentures for the Euro Notes and for the Dollar
Notes, dated as of November 23, 1999 (the "Indentures"), by and among the
Issuer, the Company, PTC International Finance (Holding) B.V. and State
Street Bank and Trust Company including the form of Notes and Company
Guarantee attached to the Indentures as Exhibit A;
(c) a draft, dated 2 March 2000 of the registration statement on Form F-4
relating to the Notes (the "Registration Statement").
The opinions herein relate only to Polish law as it exists at the date hereof
and assumes:
(i) the genuineness of all signatures submitted as originals or copies and
the authenticity of all documents submitted to us as originals;
(ii) the completeness and conformity of the originals of all documents
supplied to us as certified or photostatic copies and the authenticity of
the originals of such documents;
(iii) the valid existence and the capacity, power and authority of each of the
parties (other than the Company) to execute and deliver the Indentures;
(iv) the Indentures constitute the legal, valid, binding and enforceable
obligations of each of the parties thereto (other than the Company);
(v) the due authorization (whether corporate or otherwise), execution and
delivery of the Indentures by each party thereto (other than the Company)
on the date thereof;
<PAGE> 2
-2-
(vi) the due compliance with all matters (including, without limitation, the
obtaining of the necessary consents, licences, approvals and
authorities, the making of necessary filings, registrations and
notifications and the payment of stamp duties and other documentary taxes
and charges) under such laws other than Polish law as may relate to, or
be required in respect of (as appropriate), the Company Guarantee the
performance by or enforcement against the parties or such other persons
of such of their obligations or rights as are to be performed or
enforced, as the case may be, outside the Republic of Poland ("Poland");
and
(vii) all information in the constitutional documents of the Company and all
other documents or information provided by the Company is true and
accurate.
We have not independently verified the foregoing assumptions.
We express no opinion as to the laws of any jurisdiction other than Poland as
it stands and has been interpreted in published case law of the courts of
Poland as at the date of this opinion. With respect to certain matters of the
laws of Luxembourg and Dutch law, on the one hand, and United States Federal and
New York State law, on the other hand, we note that you have been provided with
and are relying upon the opinion dated the date hereof, of Faltz & Kremer,
special Luxembourg counsel to the Issuer, Clifford Chance - Amsterdam, special
Dutch counsel to PTC International Finance (Holding) B.V. and Clifford Chance
Rogers & Wells, special United States counsel to the Company and the Issuer,
delivered to you today.
Based upon such examination, we are of the opinion as follows:
1. The Company has been duly incorporated and is validly existing as a legal
entity in the form of a limited liability company ("Spolka z ograniczona
odpowiedzialnoscia") under the laws of Poland, with full corporate power
and authority to conduct its business as described in the Registration
Statement.
2. The Company Guarantee will constitute the valid and legally binding
obligation of the Company.
The opinions set forth above are subject to the following reservations:
(1) the law of Poland, including its tax law, financial laws and collateral
law, set forth general legal principles and Polish commercial, financial
and collateral laws are largely undeveloped, with little precedent upon
which to rely in rendering an opinion as to sophisticated commercial and
financial transactions between private parties. Accordingly, we note that
such law may be interpreted in ways we cannot predict with certainty;
(2) according to the Polish Civil Procedure Code foreign court judgements and
foreign arbitration awards are enforceable in Poland only if reciprocity
is granted to Polish judgements or if their enforceability is envisaged
in a relevant international treaty (bilateral or multilateral) to which
Poland is a party (hereinafter the "international treaty"). Unless the
international treaty provides otherwise, a foreign court judgement or
foreign arbitration award (hereinafter jointly the "judgement") is
enforceable (a Polish court may give a decision as to the enforceability
of such judgements) subject to the following conditions:
(a) the judgement is enforceable in the country where it has been
given;
<PAGE> 3
-3-
(b) the judgement is final and binding in the country where it has been
given;
(c) the matter does not belong, according to Polish law or the
international treaty, to exclusive jurisdiction of Polish courts or the
courts of a third country;
(d) a party to the dispute has not been deprived of the rights of defense
or due representation;
(e) the matter has not been finally adjudicated by a Polish court before
the judgement has become final and binding;
(f) the judgement is not contrary to the basic principles of legal order in
Poland; and
(g) Polish law has been applied in the matter in which such law should have
been applied unless the foreign law applied does not differ essentially
from Polish law;
Poland follows the principle of reciprocity and therefore a foreign
court judgement may be enforced in Poland if Polish court judgements
are enforced in the country in which the foreign judgement was issued.
The Ministry of Justice in Poland has not confirmed whether courts in
the United States grant reciprocity and given the absence of any treaty
regarding enforcement of judgements between Poland and the United
States it is unclear whether New York court judgements are enforceable
in Poland. However, since Poland is a party to the 1958 New York
Convention on Recognition and Enforcement of Arbitration Awards ("NEW
YORK CONVENTION"), foreign arbitration awards are generally recognized
in Poland provided the conditions of enforcement set out in the
Convention or in their absence, the conditions set out in the Polish
Civil Procedure Code, are met;
(4) a court in Poland will not necessarily give full effect to an
indemnity for the costs of litigation or enforcement;
(5) the law of any other jurisdiction will not apply in Poland if its
application would have any effect, which is contrary to the basic
principles of public order in Poland (principles of social co-existence);
(6) our opinion as regards the binding effect of the obligations of the Company
under the Indenture and the Company Guarantee is subject to any limitations
arising from administration, bankruptcy, insolvency, liquidation,
reorganization and similar laws generally affecting the rights of creditors
and general equitable principles relating to or affecting the enforcement
of creditors' rights;
(7) claims may become barred under various statutes of limitation or may be or
become subject to defenses of set-off or counterclaim;
(8) an agreement may be varied, amended or discharged by a further agreement or
affected by a collateral agreement which may be effected by an oral
agreement or a course of dealing;
(9) as used in this opinion, the term "enforceable" means that the relevant
document is of a type and form enforced by the court in Poland. The term
does not address the extent to which a judgement obtained in a court
outside Poland will be enforceable in Poland. Nor is it certain that each
obligation or documents will be enforced in accordance with its terms in
every circumstance, such enforcement being, in any event, subject to the
nature of the remedies available in the courts in Poland, the acceptance by
such courts of
<PAGE> 4
jurisdiction, the powers of such courts to stay proceedings and other
principles of law, equity and procedure of general application; and
(10) Polish law does not recognize the concept of "trust" and, therefore, moneys
received by the Company in Poland will not be held "in trust." This
reservation does not prejudice the right of the Company to hold moneys in
trust in jurisdictions other than Poland, where the concept of trust is
recognized.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus under the
heading "Enforcement of Liabilities and Service of Process." In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Act.
Yours sincerely
CLIFFORD CHANCE PUNDER Sp. Z o.o.
<PAGE> 1
[LETTERHEAD OF KREMER ASSOCIATES CLIFFORD CHANCE]
Exhibit 5.4
PTC International Finance II S.A.
300,000,000-Euro 11 1/4% Senior Subordinated Guaranteed Notes due 2009
150,000,000-US$11 1/4% Senior Subordinated Guaranteed Notes due 2009
guaranteed on a subordinated basis by
Polska Telephonia Cyfrowa Sp. z o.o.
We have acted as legal counsel in the Grand Duchy of Luxembourg to PTC
International Finance II S.A. of 41, avenue de la Gare, L-1611 Luxembourg, Grand
Duchy of Luxembourg (the "Issuer") for the sole purpose of rendering a legal
opinion as to certain matters of Luxembourg law in connection with the
registration under the Securities Act of 1933, as amended (the "Act") of its
300,000,000-Euro 11 1/4% Senior Subordinated Guaranteed Notes due 2009 and
150,000,000-US$ 11 1/4% Senior Subordinated Guaranteed Notes due 2009 (the "New
Notes") and the offer (the "Exchange Offer") by the Issuer to exchange the New
Notes for its 300,000,000-Euro 11 1/4% Senior Subordinated Guaranteed Notes due
2009 and 150,000,000-US$ 11 1/4% Senior Subordinated Guaranteed Notes due 2009
(the "Old Notes").
The obligations of the Issuer under the New Notes will be fully and
unconditionally guaranteed by Polska Telephonia Cyfrowa Sp. z o.o. (the
"Guarantor") on a senior subordinated and unsecured basis pursuant to the
Company Guarantee (as defined below).
We are rendering this legal opinion at your specific request. Capitalised terms
used herein without definition shall, unless the context otherwise requires,
have the same meanings ascribed to them in the New Notes. Headings in this
opinion are for ease of reference only and shall not affect the interpretation
hereof.
In arriving at the opinions expressed below we have examined and relied upon the
following documents:
(a) a copy of an official extract dated 12 November 1999 from the
Luxembourg Register of Companies (the "Register") relating to the
registration of the Issuer under number 72250;
(b) a copy of the deed of Incorporation (acte de constitution) of the
Issuer dated 5 November 1999 containing the Issuer's articles of
association (statuts) which are the currently effective articles of
association according to representations made to us by the board of
directors of the Issuer; a copy of two indentures (the "Indentures")
dated 23 November 1999, between, amongst others, the Issuer, the
Guarantor and the Bank of New York as trustee (the "Trustee");
(c) a draft of the registration statement on Form F-4 (the "Registration
Statement) dated 2 March 2000 including a prospectus (the "Prospectus")
relating to the New Notes and the Indentures; and
(d) the form of Notes as attached to the Indentures as Exhibit A which
includes the form of guarantee by the Guarantor (the "Company
Guarantee").
<PAGE> 2
In examining and in describing the documents listed above and in giving this
opinion we have, with your permission, assumed:
(i) the genuineness of all signatures of all documents or on the originals
thereof;
(ii) the authenticity and completeness of all documents submitted as
originals and the conformity of copy, faxed or specimen documents to
the originals thereof;
(iii) the power, capacity (corporate and other) and the authority of all
parties (other than the Issuer) to enter into and perform their
obligations under the Indenture and the New Notes, the legal capacity
of all individuals who have signed or will sign documents or who have
given confirmations on which we have expressed reliance (including
those individuals acting on the Issuer's behalf) and that the Indenture
and the New Notes and all other agreements and documents relating
thereto have been or will be (where appropriate) duly authorized,
executed and delivered by all parties thereto (other than the Issuer)
and create valid and legally binding obligations for all such parties
as a matter of applicable law (if other than Luxembourg law and the
chosen governing law of the New Notes);
(iv) that each party to any document (other than the Issuer) is duly
incorporated and organized, validly existing and in good standing
(where such concept is legally relevant) under the laws of its
jurisdiction of incorporation and of the jurisdiction of its place of
business;
(v) the due compliance with all matters (including without limitation of
the obtaining of the necessary consents, licenses, approvals and
authorities, the making of the necessary filings, lodgements,
registration and notifications and the payment of stamp duties and
other taxes) under any law, other than that of Luxembourg, as may
relate to or be required in respect of: (a) the Indentures and the New
Notes (including the creation issuance and distribution of the New
Notes), (b) their lawful execution, (c) the parties thereto (including
the Issuer) or other persons affected thereby, (d) any borrowing
thereunder, (e) the performance or enforcement of the New Notes by or
against the parties (including the Issuer) or such other persons, (f)
the distribution of the Prospectus or (g) the creation of valid and
legally binding obligations of all parties to the New Notes (including
the Issuer) enforceable against such parties in accordance with their
respective terms;
(vi) that the Guarantor is the Issuer's ultimate parent company;
(vii) that any obligations under the New Notes which are to be performed in
any jurisdiction outside Luxembourg will not be illegal or contrary to
the public policy under the laws of such jurisdiction;
(viii) that under the laws of the State of New York to which the New Notes are
expressed to be subject and under all other relevant laws (other than
those of Luxembourg):
(a) the New Notes constitute and will at all times constitute the
valid and legally binding obligations of all the parties thereto
(including the Issuer);
<PAGE> 3
(b) the choice of the laws of the State of New York as the governing law
of the New Notes is a valid and binding selection;
(c) none of the New Notes or any of the transaction contemplated thereby
(whether individually or seen as a whole) are in breach of or will
result in a breach of such laws (including, for the avoidance of
doubt, the tax laws) or of any other relevant jurisdictions (other
than Luxembourg), or are intended to avoid the applicability or the
consequences of such laws in a manner that is not permitted
thereunder;
(ix) that the New Notes will be executed substantially in the forms, and in
accordance with the terms of, set forth in the Indenture, and that the
Registration Statement and the Prospectus will be finalised substantially
in the form of the draft, which we reviewed for the purpose of rendering
this opinion;
(x) that the New Notes will be issued, offered, sold and delivered (a) as
contemplated by and in accordance with the Indenture and the Registration
Statement, (b) in accordance with any applicable law other than
Luxembourg and (c) with such terms so as not to violate any applicable
law other than Luxembourg (including for the avoidance of doubt, any law
applicable at the time of such issue, offer, sale and delivery);
(xi) that all Luxembourg parties have separately signed a specific acceptance
provision in relation to jurisdiction clauses granting jurisdiction to
non-Luxembourg courts;
(xii) that the signing and performance of the Indentures is in the corporate
interest of the Issuer, and, in particular, that it has the financial
capability to meet all its obligations thereunder;
(xiii) that the Issuer does not and would not be considered to grant guarantees
on a regular basis and would not be deemed to exercise an activity of the
financial sector on a professional basis, as referred to in the
Luxembourg Banking Act of 5 April 1993, as amended;
(xiv) that no public announcement, offer or sale of the Notes is made in or
from Luxembourg; and
With respect to certain matters of Polish law, on the one hand, and United
States Federal and New York State law, on the other hand, we note that you have
been provided with and are relying upon the opinion dated the date hereof, of
Clifford Chance - Warsaw, special Polish counsel to the Company, Clifford Chance
Rogers & Wells - New York, special United States counsel to the Company and the
Issuer, delivered to you today.
The issue and offering of the New Notes are expressed to be governed by the law
of the State of New York. We have made no investigation into the laws of the
State of New York or Poland as a basis for the opinion expressed hereinafter and
do not express or imply any opinion thereon according, our review of the New
Notes has been limited to the terms of such documents as they appear on the face
thereof without reference to the general body of law incorporated into or made
applicable to such documents by the choice of law clause contained therein. We
express no opinion:
<PAGE> 4
- - as to any law other than the laws of Luxembourg in force as at the date
hereof as applied and interpreted according to present published case-law
of Luxembourg courts, administrative rulings, regulations of, notices from
and communications with CSSF and authoritative literature;
- - that the future or continued performance of any of the Issuer's obligations
or the consummation of the transactions contemplated by the New Notes will
not contravene such laws, application or interpretation if altered in the
future;
- - save as set out below, on the tax laws of Luxembourg, on international law,
including (without limitation) the rules of or promulgated under or by any
bi- or multilateral treaty or treaty organization (unless implemented into
the laws of Luxembourg), or on anti-trust laws;
- - with regard to the effect of any systems of law (other than the laws of
Luxembourg), even in cases where, under Luxembourg law, any foreign law
should be applied and we assume that any applicable law (other than
Luxembourg law) would not affect or qualify our opinion as set out below;
- - on any commercial, accounting or other non-legal matter or on the ability
of the Issuer to meet its financial or other obligations under the New
Notes.
We have not been concerned with investigating or verifying the accuracy of any
facts, representations or warranties set out in any of the New Notes (with the
exception of those matters on which we have specifically and expressly given
our opinion). To the extent that the accuracy of such facts, representations
and warranties not so investigated or verified and of any facts stated in any
of the documents listed above (or orally confirmed) is relevant to the contents
of this opinion, we have assumed, with your permission, that such facts,
representations and warranties were true and accurate when made and remain true
and accurate.
Other than to review the documents listed above, we have not examined any
contracts, instruments or other documents entered into by or affecting the
Issuer or any corporate records of the Issuer and although in giving this
opinion we have made the enquiries referred to in (a) and (c) above and in
Section 1 below (which are enquiries customary in Luxembourg in order to render
a legal opinion of this nature) we have not undertaken any factual
investigations or made any other searches or enquiries concerning the Issuer and
we have otherwise assumed that the Issuer's shareholder has not passed a
shareholders' resolution approving a voluntary winding-up of the Issuer or a
statutory merger (as disappearing entity) and that no petition has been
presented to a competent court for the bankruptcy, dissolution or moratorium of
payments of the Issuer.
Where an assumption is stated to be made in this opinion, we have not verified
or made any investigation or enquiry with respect to the matters that are the
subject of such assumption and we express no views as to such matters.
Based upon and subject to the foregoing and to the further qualifications set
out below and subject to any factual matters, documents or events not disclosed
to us by the parties concerned, having regards to such legal considerations as
we deem relevant, we are at the
<PAGE> 5
time and date hereof of the following opinion, subject to the same assumptions
and reservations as expressed in our legal opinion of November 23, 1999, where
applicable:
1. CORPORATE STATUS, POWER AND CAPACITY
1.1 The Issuer is registered as: (i) a corporation with limited liability
(societe anonyme), (ii) duly incorporated on 5 November 1999 and (iii)
validly existing under the laws of Luxembourg.
1.2 The office of the District Court of the District Court of Luxembourg has
confirmed to us by telephone on the date hereof that the Issuer has not
been declared bankrupt at the time and date hereof. The office of the
District Court of Luxembourg has also confirmed to us by telephone at the
time and date hereof that no order has been made by the District Court for
the dissolution of the Issuer.
1.3 The Register has confirmed to us by telephone at the time and date hereof
that the Issuer has not registered a voluntary winding-up resolution;
1.4 The searches and enquiries referred to above do not determine conclusively
whether or not the matters or events enquired after have occurred or not.
There is no formal register of judgements, declarations or orders referred
to in Section 1.2 above.
2. VALIDITY OF NEW NOTES
The New Notes will, when duly executed by or on behalf of the Issuer,
assuming the Luxembourg Courts would correctly apply the laws of the State
of New York, constitute valid and legally binding obligations of the
Issuer.
After valid registration, the New Notes, when sold, are legally issued,
fully paid and non-assessable.
The opinion expressed above is subject to the following qualifications:
A. our opinion is subject to and limited by the provisions of any applicable
bankruptcy, insolvency, liquidation, reorganization, voidable preference,
moratorium and other similar laws of general application relating to or
affecting creditor's rights and remedies from time to time in effect and to
general equity principles;
B. the Courts of Luxembourg will observe and give effect to the choice of the
laws of the State of New York as the law governing the New Notes in any
proceedings in relation to such documents on the basis and within the scope
of and subject to the limitations imposed by the 1980 Rome Convention on
the Law applicable to Contractual Obligations (the "Rome Convention").
When applying the laws of the State of New York as the law governing the
New Notes, the courts of Luxembourg may not give effect to any provision
that is likely to be manifestly incompatible with Luxembourg public policy
or with mandatory rules of Luxembourg law.
<PAGE> 6
C. any provision that the holder of a Note may be treated as the absolute owner
of the Note may not be enforceable under all circumstances; if the laws of
Luxembourg are applicable, title to a Note would pass upon delivery
(levering) thereof, provided that (i) the transferor is the owner of the
Note or may reasonably be held by the transferee to be the owner and (ii)
the transfer is made pursuant to a valid agreement; the courts of Luxembourg
may apply the laws of another jurisdiction, if question of title to a Note
are submitted to them;
D. Luxembourg law does not recognize the Anglo-American concept of "trust";
although this does not invalidate any rights of or against a Luxembourg
company vested in a trustee located in (and pursuant to a trust arrangement
governed by the laws of) a jurisdiction which does recognize that concept,
in respect of assets that are subject to and/or governed by the laws of such
jurisdiction, this lack of recognition may have adverse consequences in
relation to any provision in the New Notes requiring the issuer to hold
property or money on trust;
E. whilst, in the event of any proceedings being brought in a Luxembourg Court
in respect of any monetary obligation expressed to be payable in a currency
other than Luxembourg francs, a Luxembourg Court would have power to give
judgment expressed as an order to pay a currency other than Luxembourg
francs, enforcement of the judgement against the Issuer in Luxembourg would
be available only in Luxembourg francs and for such purposes all claims or
debts would be converted into Luxembourg francs;
F. in case of court proceedings in Luxembourg, a Court may require registration
of the underlying agreements, in which case an ad valorem registration duty
of 0.24% calculated on the amounts mentioned in the agreements would be
payable by the party being ordered to register the agreements.
G. a Luxembourg Court may stay proceedings if concurrent proceedings are being
brought elsewhere;
H. the enforcement of any agreement and the rights and obligations of the
parties thereto will be subject to the general statutory principles of
Luxembourg law: a remedy such as specific performance or the issue of an
injunction or a remedy such as termination for breach of contract are
discretionary. Notwithstanding any agreement purporting to confer the
availability of any remedy, such remedy may not be available where damages
instead of specific performance or specific performance instead of
termination for breach of contract are considered by the court to be an
adequate alternative remedy;
I. claims may become barred under the statute of limitations or may be or
become subject to defenses of set off or counterclaim;
J. as regards the enforcement in Luxembourg of a civil judgement delivered in a
court of the State of New York, such enforcement would make it necessary to
commence recognition and enforcement proceedings before the Luxembourg
Courts;
<PAGE> 7
K. the admissibility as evidence of any agreement before a Luxembourg Court or
Public Authority to which an agreement is produced may require that the
agreement be accompanied by a complete or partial translation in the French
or German language;
L. a contractual provision allowing the service of process against the Issuer
to a service agent could be overridden by Luxembourg statutory provisions
allowing the valid servicing of process against the Issuer in accordance
with applicable laws at the registered office of the Issuer;
M. the revocation of a power of attorney or agency provision expressed to be
irrevocable is nevertheless effective;
N. In issuing this opinion we do not assume any obligation to notify or to
inform you of any development subsequent to its date that might render its
contents untrue or inaccurate in whole or in part at such time.
This opinion:
(a) expresses and describes Luxembourg legal concepts in English and not in
their original Luxembourg terms; these concepts may not be identical to the
concepts described by the English translations; consequently, this opinion
is issued and may only be relied upon on the express condition that it
shall be governed by and that all words and expressions used herein shall
be construed and interpreted in accordance with the laws of Luxembourg;
(b) speaks as of 9:30 hrs. Luxembourg time on the stated above;
(c) is addressed to you and is solely for your benefit;
(d) is strictly limited to the matters set forth herein and no opinion may be
inferred or implied beyond that expressly stated herein and particular
but without any limitation we have not investigated or verified statements
of fact or the reasonableness of any statements of opinion in the
Prospectus;
(e) may not be relied upon by or disclosed to any other person, company,
enterprise or institution, except that we hereby consent to the filing of
this opinion as an exhibit to the Registration Statement and to the
reference to us in the Prospectus under the heading "Legal Matters". In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act; and
(f) may not be used for any purpose other than in connection with the New
Notes.
Yours faithfully,
Luxembourg, March 10, 2000
Kremer Associates Clifford Chance
By Christian Kremer
<PAGE> 1
EXHIBIT 10.9
AMENDMENT NO. 1
TO INDENTURE DATED JULY 1, 1997
BETWEEN PTC INTERNATIONAL FINANCE B.V.,
POLSKA TELEFONIA CYFROWA SP. Z O. O.
AND THE BANK OF NEW YORK
AS TRUSTEE
Dated as of November 19, 1999
Reference is made to the Indenture dated July 1, 1997 between PTC International
Finance B.V., Polska Telefonia Cyfrowa Sp. z o.o. and The Bank of New York as
Trustee (the "Indenture"). Capitalized terms used but not defined herein have
the meanings given to them in the Indenture.
SECTION 1 AMENDMENT
Section 1.01 of the Indenture is hereby amended as follows:
Under the definition of "Permitted Investment," item (a) shall be amended
in its entirety to read as follows:
(a) (i) the form of loans or advances to the Company or (ii) a Restricted
Subsidiary, or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary; provided, however, that
the primary business of such Restricted Subsidiary is a
Telecommunications Business;
SECTION 2 GOVERNING LAW
This Amendment shall be governed by, and construed in accordance with, the laws
of the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
SECTION 3 OTHER PROVISIONS
This Amendment incorporates all other provisions of the Indenture as if set
forth herein.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
as of the date first written above.
PTC INTERNATIONAL FINANCE B.V.,
as Issuer,
by
--------------------------------------
Name:
Title:
by
--------------------------------------
Name:
Title:
POLSKA TELEFONIA CYFROWA SP. Z O.O.,
by
--------------------------------------
Name:
Title:
by
--------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee,
by
--------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.10
-------------
[Form of Waiver Letter]
[ON LETTERHEAD OF POLSKA TELEFONIA CYFROWA SP. Z O.O.]
To: Citibank International plc and Citibank (Poland) S.A.
as Agents on behalf of the Banks party to the Loan Agreement
referred to below
, 1999
Dear Sir/Madam
We refer to:
(i) the Loan Agreement dated 17th December, 1997 between Polska Telefonia
Cyfrowa Sp. z o.o. as Borrower, the Arrangers and the Banks referred to
therein, Citibank International plc and Citibank (Poland) S.A. as
Agents, Citibank (Poland) S.A. and Citibank, N.A. as Security Agents and
Citibank, N.A. as Co-ordinator (the "LOAN AGREEMENT"); and
(ii) the waiver and consent (the "ORIGINAL WAIVER") granted to the Borrower
by the Majority Banks on 4 August, 1999.
Terms defined in the Loan Agreement shall have the same meaning where used in
this letter, unless otherwise defined or the context otherwise requires.
We are writing to advise as follows:
(i) The Borrower, acting through its Luxembourg Subsidiary established by it
for this purpose ("PTC INTERNATIONAL FINANCE II S.A.") is contemplating
incurring Financial Indebtedness by the issue of further high yield debt
("FURTHER HIGH YIELD DEBT"):
(a) the aggregate face value of which, less the Escrow Amounts (as
defined below), will be at least US$150,000,000 (or its
equivalent in any other currency or currencies);
(b) the maturity of which will be not earlier than the maturity of
the existing high yield debt issued pursuant to the High Yield
Debt Documents (the "EXISTING HIGH YIELD DEBT"), being July 1,
2007;
(c) which will be (a) guaranteed by the Borrower (b) subordinated in
right of payment and priority to amounts outstanding under the
Senior Finance Documents on terms substantially similar to the
subordination terms contained in the High Yield Debt Documents
relating to the Existing High Yield Debt and (c) rank pari passu
with the Existing High Yield Debt;
(d) the proceeds of which in an amount equal to the aggregate face
amount
-1
<PAGE> 2
of the notes issued in relation thereto less any discounts,
commissions, fees, costs and expenses will be disbursed by PTC
International Finance II S.A. to a Dutch Subsidiary established
for this purpose of the Borrower ("PTC INTERNATIONAL FINANCE
(HOLDING) B.V.") and an intercompany loan from PTC International
Finance II S.A. to PTC International Finance (Holding) B.V. will
arise in an amount equal to such aggregate face amount of such
notes (the "FIRST ON-LOAN");
(e) the proceeds of the First On-loan less any discounts,
commissions, fees, costs, expenses and amounts placed by PTC
International Finance (Holding) B.V. in an Escrow Account(s) (as
defined below) will be disbursed by PTC International Finance
(Holding) B.V. to the Borrower and an intercompany loan from PTC
International Finance (Holding) B.V. to the Borrower will arise
in an amount equal to the aggregate face amount of such notes
less amounts held in the Escrow Account(s) (the "SECOND
ON-LOAN");
(f) which will involve an escrow arrangement pursuant to which:
(a) amounts ("ESCROW AMOUNTS") which (together with interest
and/or investment gains or income accruing or arising
thereon or in relation thereto sufficient to cover the
first five semi-annual instalments of interest payable
on the Further High Yield Debt) will be placed by or on
behalf of PTC International Finance (Holding) B.V. in an
account or accounts (each an "ESCROW ACCOUNT") from
which amounts equal to each of the first five
instalments of interest payable on the Further High
Yield Debt shall be debited and applied in payment of
each such instalment; and
(b) a first priority Security Interest will be created over
the Escrow Account(s) and any balance from time to time
standing to the credit thereof in favour of the
noteholders holding such Further High Yield Debt or the
trustee of such noteholders.
Incurring Financial Indebtedness in a manner referred to in this
paragraph (A), giving a guarantee as referred to in this paragraph (A)
and creating security referred to in sub-paragraph (b) of paragraph
(A)(vi) above, would constitute a breach of undertakings under Clauses
20.26 (Financial Indebtedness), 20.8 (Negative Pledge) and 20.12 (Loans
and Guarantees) and, in each case, a resulting Event of Default under
Clause 23.3 (Breach of Obligations) of the Loan Agreement.
(b) The Borrower is contemplating incurring Financial Indebtedness by
entering into arrangements with its vendors ("VENDOR FINANCING
ARRANGEMENTS") whereby payments to such vendors may be deferred for
periods which would or might constitute a breach of undertakings under
Clause 20.26(a)(iv) and a resulting Event of Default under Clause 23.3
(Breach of Obligations) of the Loan Agreement.
(c) The Borrower is contemplating entering into hedging transactions
("RELEVANT HEDGING
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<PAGE> 3
TRANSACTIONS") in accordance with Clause 20.14 of the Loan Agreement and
otherwise in accordance with the Hedging Policy with Banks or other
financial institutions which are underwriters of the Further High Yield
Debt, certain of which Relevant Hedging Transactions will be unsecured
and not designated Senior Finance Documents.
Incurring Financial Indebtedness by the Borrower in a manner referred to
in this paragraph (C) would or might constitute a breach of undertakings
under Clause 20.26 (Financial Indebtedness) and a resulting Event of
Default under Clause 23.3 (Breach of Obligations) of the Loan Agreement.
(d) The Borrower is hereby requesting the consent of the Majority Banks to
permit the Borrower to utilise the entire undrawn portion of the Total
Commitments under the Loan Agreement.
(e) The Borrower is contemplating incurring Financial Indebtedness by:
(A) borrowing from its Shareholders;
(B) borrowing or obtaining other forms of credit from any reputable
bank or other financial institution; or
(C) a combination of the foregoing.
(together "ADDITIONAL FINANCING ARRANGEMENTS").
Incurring Financial Indebtedness by the Borrower in a manner referred to
in paragraph (E)(i) above is permitted under Clause 20.26(a)(iii)
provided that such Financial Indebtedness is subordinated to the amounts
outstanding under the Loan Agreement on terms reasonably satisfactory to
the Majority Banks. Incurring Financial Indebtedness by the Borrower in
the manner referred to in paragraph (E)(ii) and (E)(iii) would
constitute a breach of undertaking under Clause 20.26 (Financial
Indebtedness) and a resulting Event of Default under Clause 23.3 (Breach
of Obligations) of the Loan Agreement.
(A) In connection with the Loan Agreement we hereby request that you sign
this letter as evidence of your agreement to the following:
(A) In relation to the matters set out in paragraph (A) above, you agree to
waive a breach of undertakings under Clauses 20.26 (Financial
Indebtedness), Clause 20.8 (Negative Pledge) and 20.12 (Loans and
Guarantees) of the Loan Agreement and any resulting Event of Default
under Clause 23.3 (Breach of Obligations) of the Loan Agreement, arising
as a result of the issue of the Further High Yield Debt and the related
guarantee given by the Borrower and security in relation to the Escrow
Account(s) provided by PTC International Finance (Holding) B.V.,
provided that:
(a) PTC International Finance (Holding) B.V. and PTC International
Finance II S.A. are deemed to be Principal Members of the Group
for the purposes of the Senior Finance Documents; and
-3
<PAGE> 4
(b) securities and guarantees in favour of the Finance Parties on
terms substantially similar to those existing in relation to PTC
International Finance B.V. are given by the Borrower, PTC
International Finance (Holding) B.V. and PTC International
Finance II S.A. (including, without limitation, a pledge by the
Borrower of its shares in PTC International Finance (Holding)
B.V., a pledge by PTC International Finance (Holding) B.V. of
its shares in PTC International Finance II S.A., a pledge by PTC
International Finance (Holding) B.V. of its accounts (other than
the Escrow Account(s)), a pledge by PTC International Finance II
S.A. of its accounts, pledges by PTC International Finance
(Holding) B.V. and PTC International Finance II S.A. of all
receivables, and guarantees by PTC International Finance
(Holding) B.V. and PTC International Finance II S.A. of the
Borrower's obligations under the Senior Finance Documents);
(A) (c) the Further High Yield Debt (including the guarantee, the First
On-loan and the Second On-loan) is subordinated in right of
payment and priority to amounts outstanding under the Senior
Finance Documents in a manner substantially similar to the
subordination terms contained in the Existing High Yield other
than in relation to the amounts standing to the credit of each
Escrow Account;
(d) any amounts released from the Escrow Account(s) to PTC
International Finance (Holding) B.V. are promptly on-lent to the
Borrower, except to the extent that such amounts represent
payments of any amounts due on the High Yield Debt (including
each of the first five instalments of interest) in accordance
with the terms of the Escrow Account(s). Any such further
on-loan shall be subordinated in right of payment and priority
to amounts outstanding under the Senior Finance Documents in a
manner substantially similar to the subordination terms
contained in the Existing High Yield;
(B) (e) the documentation relating to the issue of the Further High
Yield Debt is substantially similar to the High Yield Debt
Documents (other than as regards the covenants and other
commercial terms of the Further High Yield Debt and provisions
relating to the Escrow Amounts and Escrow Account(s)) and is
designated as High Yield Debt Documents for the purposes of
paragraph (f) of the definition of High Yield Debt Documents in
the Loan Agreement; and
(f) the aggregate face value of the notes issued in relation to the
Further High Yield Debt less the Escrow Amounts is not less than
US$150,000,000 (or its equivalent in any other currency or
currencies).
(A) In relation to the matters set out in paragraph B above, you agree that
(a) the reference to 90 days in paragraph (e) of the definition of
"FINANCIAL INDEBTEDNESS" in Clause 1.1 of the Loan Agreement shall
henceforth be read and construed as though it were a reference to 180
days and (b) Clause 20.26(a)(iv) of the Loan Agreement shall henceforth
be read and construed as though the vendor financings therein referred
to were vendor financings with payment terms of 180 days or more.
-4
<PAGE> 5
(B) In relation to the matters set out in paragraph (C) above, you agree to
waive a breach of undertakings under Clause 20.26 (Financial
Indebtedness) and a resulting Event of Default under Clause 23.3 (Breach
of Obligations) of the Loan Agreement arising as a result of the
Borrower incurring any Financial Indebtedness under any Relevant Hedging
Transactions provided that (a) such Relevant Hedging Transactions are
entered into with Banks or other financial institutions which are
underwriters of the further High Yield Debt, (b) are within the terms of
the Hedging Policy and (c) the Borrower procures that the details of the
exposure under each such Relevant Hedging Transaction is reported
pursuant to Clause 20.2(a)(ii) (B) whether or not such Relevant Hedging
Transaction is designated as a "Senior Finance Document" pursuant to
Clause 20.14(c).
(C) You hereby confirm that the updated Hedging Policy dated 20th October,
1999 is acceptable to you.
(D) In relation to the matters set out in paragraph (D) above, you hereby
agree that:
(a) you have received the updated Business Plan dated 21st October,
1999 ("UPDATED BUSINESS Plan") and you agree that
notwithstanding the requirements of Clause 4.2(c) of the Loan
Agreement, the proceeds of future Utilisations may be applied
for the purposes provided in Clause 3.1(c) of the Loan
Agreement;
(b) Clause 4.2(d)(ii) shall cease to apply and Clause 4.2(d) shall
be read and construed as if the words "the lower of" in line 6
of Clause 4.2(d) were omitted; and
(c) notwithstanding that the Borrower's financial performance as
projected by the Updated Business Plan may result in breaches of
financial covenants in the Loan Agreement and indicates the
necessity of a refinancing of the December 2000 principal
repayments, you agree that neither those prospective breaches
nor that potential refinancing shall be taken as an event which,
with the lapse of time, would constitute an Event of Default for
the purposes of the term "Default" in Clause 4.2(a) of the Loan
Agreement, but this shall not prevent the operation of the
drawstop under Clause 4.2(a) if those breaches actually occur or
if any such principal repayment is not made, nor shall they
affect any other conditions to drawing under the Loan Agreement,
nor shall the operation of Clause 4.2(a) be affected in relation
to any other breach or default.
However, subject to the foregoing, it is the intention that
within the current terms of the Senior Finance Documents,
further Utilisations of the unutilised Total Commitments be made
available to the Borrower notwithstanding its predicted
financial condition under the Updated Business Plan
(d) Provided always that your agreement to (a), (b) and (c) above
shall take effect only if and when the Borrower shall have
received proceeds of the Further High Yield Debt which after
deducting the Escrow Amounts shall be
-5
<PAGE> 6
at least US$150,000,000 (less only the amount of any discounts,
commissions, fees, costs and expenses incurred directly in
relation to the same).
(b) In relation to the matters set out in paragraph (E) above, you agree to
waive any breach of undertaking under Clause 20.26 (Financial
Indebtedness) and any resulting Event of Default under Clause 23.3
(Breach of Obligations) of the Loan Agreement arising as a result of the
Borrower incurring Financial Indebtedness as a result of entering into
any Additional Financing Arrangements provided that such Financial
Indebtedness is subordinated pursuant to a subordination agreement
substantially similar in all material respects to the Subordination
Agreements dated August 24, 1999 and entered into between the Security
Agent, the Borrower and each Subordinated Lender party thereto
("EXISTING SUBORDINATION AGREEMENTS").
(c) You agree that any Financial Indebtedness incurred under the Further
High Yield Debt, or any Additional Financing Arrangement subordinated as
provided in 6 above, shall be disregarded for the purposes of the
definition of "Senior Debt" set out in Clause 1.1 of the Loan Agreement.
(d) You agree that interest accruing on the Further High Yield Debt during
the period commencing on the issue date thereof and ending on the date
on which the fifth semi-annual instalment of interest falls to be made
shall be disregarded from the "INTEREST" element of the calculation of
"INTEREST EXPENSE" set out in Clause 1.1 of the Loan Agreement.
(e) You hereby agree that the documentation relating to the issue of the
Further High Yield Debt shall be designated as "HIGH YIELD DEBT
DOCUMENTS" for the purposes of paragraph (f) of the definition of "HIGH
YIELD DEBT DOCUMENTS" in the Loan Agreement.
(f) You hereby agree that for the purposes of paragraph 1(c) and paragraph 6
any determination by the Agent (i) that the Further High Yield Debt has
been subordinated on terms substantially similar to the subordination
terms contained in the High Yield Debt Documents relating to the
Existing High Yield Debt and/or (ii) that for the purposes of paragraph
6 any Financial Indebtedness arising out of any Additional Financing
Arrangements has been subordinated pursuant to a subordination agreement
substantially similar in all material respects to the Existing
Subordination Agreement shall be binding on the Banks (the Banks
agreeing that the Agent's determination relates only to the wording of
the express terms relating to subordination, as identified to the Agent
by Allen & Overy, contained in those documents).
The Borrower hereby confirms the following:
I Except as provided herein and in the Original Waiver, the provisions of
Clause 22 (Financial Undertakings) of the Loan Agreement are complied
with and will continue to be complied with following the issue of the
Further High Yield Debt, entry into any of the Vendor Financing
Arrangements and any of the Relevant Hedging Transactions, and the
utilisation of the unutilised portion of the Total Commitments
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<PAGE> 7
under the Loan Agreement.
II Except as waived by or consented to in this letter, no Default is
outstanding and continuing.
III Except for the waivers and consents specifically referred to in this
letter, the Loan Agreement remains in full force and effect without any
further waiver.
IV Your agreement to the waivers and consent sought in this letter shall
not in any way be construed as a waiver of any other term of the Loan
Agreement.
This letter and the waivers and consents herein shall be governed by, and
construed in accordance with, English law.
Please sign and return a copy of this letter to Mr. Paul Thompson, Citibank
Loans Agency, by facsimile to 44 171 500 4482 by not later than Thursday
11 November, 1999.
Yours faithfully
For and on behalf of
POLSKA TELEFONIA CYFROWA SP. Z O.O.
We agree to the above
For and on behalf of
[name of Bank]
-7
<PAGE> 1
EXHIBIT 10.15
[FORM OF REGISTRATION RIGHTS AGREEMENT]
PTC INTERNATIONAL FINANCE II S.A.
* -- % SENIOR SUBORDINATED GUARANTEED NOTES DUE 2009
REGISTRATION RIGHTS AGREEMENT
November 23, 1999
Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Salomon Brothers International Limited
Victoria Plaza
111 Buckingham Palace Road
London
SW1W 0SB
England
Ladies and Gentlemen:
PTC International Finance II S.A., a Luxembourg corporation with limited
liability (the "Issuer"), proposes to issue and sell to you (the "Initial
Purchasers"), upon the terms set forth in a purchase agreement of even date
herewith (the "Purchase Agreement") among the Initial Purchasers, the Issuer,
PTC International Finance (Holding) B.V. ("Holdings") and Polska Telefonia
Cyfrowa Sp. z o.o. (the "Company"), its * -- % Senior Subordinated Guaranteed
Notes due 2009 (the "Securities"), unconditionally guaranteed by the Company
(the "Initial Placement"). As an inducement to the Initial Purchasers to enter
into the Purchase Agreement and in satisfaction of a condition to your
obligations thereunder, the Issuer and the Company agree with you, (i) for your
benefit and the benefit of any other Initial Purchasers and (ii) for the benefit
of the holders from time to time of the Transfer Restricted Securities (as
defined herein) (including, if and for so long as an Initial Purchaser holds
Transfer Restricted Securities, such Initial Purchaser) (each of the foregoing
holders a "Holder" and together the "Holders"), as follows:
1. DEFINITIONS. Capitalized terms used herein without definition shall
have their respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following capitalized defined terms shall have the following
meanings:
"Act "means the U.S. Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such specified person. For purposes of this definition, control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person whether by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Commission" means the U.S. Securities and Exchange Commission.
"Designated Counsel" has the meaning set forth in Section 5 hereof.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
<PAGE> 2
"Exchange Offer Registration Period" means the 180-day period following the
consummation of the Registered Exchange Offer, exclusive of any period during
which any stop order shall be in effect suspending the effectiveness of the
Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration statement of
the Company on an appropriate form under the Act with respect to the Registered
Exchange Offer, all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Exchanging Dealer" means any Holder (which may include the Initial
Purchasers) which is a broker-dealer, electing to exchange in the Registered
Exchange Offer Securities acquired for its own account as a result of
market-making activities or other trading activities, for New Securities.
"Final Memorandum" has the meaning set forth in the Purchase Agreement.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the Indenture relating to the Securities, dated as of
November -- 1999 and among the Issuer, the Company and State Street Bank and
Trust Company, as trustee, as the same may be amended from time to time in
accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble hereto.
"Initial Purchaser" has the meaning set forth in the preamble hereto.
"Losses" has the meaning set forth in Section 6(d) hereof.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of securities eligible to be registered under a Shelf
Registration Statement pursuant to this Agreement.
"Managing Underwriters" means the investment banker or investment bankers
and manager or managers, appointed by the Majority Holders, that shall
administer an underwritten offering, if any.
"New Securities" means debt securities of the Company identical in all
material respects to the Securities (except that the cash interest and interest
rate step-up provisions and the transfer restrictions will be modified or
eliminated, as appropriate), to be issued under the Indenture.
"Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A under the Act), as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of any
portion of the Securities or the New Securities covered by such Registration
Statement, and all amendments and supplements to the Prospectus, including post-
effective amendments.
"Registered Exchange Offer" means the proposed offer to the Holders to
issue and deliver to such Holders, in exchange for the Securities, a like
principal amount of the New Securities.
"Registration Statement" means any Exchange Offer Registration Statement or
Shelf Registration Statement filed with the Commission that covers any of the
Securities or the New Securities pursuant to the provisions of this Agreement,
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Securities" has the meaning set forth in the preamble hereto.
"Securities Board" means the Securities Board of The Netherlands
("Stichting Toezicht Effectenverkeer").
"Shelf Registration" means a registration effected pursuant to Section 3
hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
hereof.
<PAGE> 3
"Shelf Registration Statement" means a "shelf" registration statement of
the Company pursuant to the provisions of Section 3 hereof which covers some or
all of the Securities or New Securities, as applicable, on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Transfer Restricted Security" means (i) each Security until the date on
which such Security has been exchanged by a person other than a broker-dealer
for a New Security in the Registered Exchange Offer, (ii) each New Security that
is received by a broker-dealer in the Registered Exchange Offer, until the date
on which such New Security is sold to a purchaser, (iii) in the case of a
Security registered on a Shelf Registration Statement, such security until the
date on which such security has been disposed of in accordance with the Shelf
Registration Statement; provided, however, that in the case of each of (i), (ii)
and (iii) above, such Security or New Security shall cease to be a Transfer
Restricted Security on the date (if such date occurs prior to the event referred
to in (i), (ii) and (iii) above) on which such security is sold in reliance on
Rule 144 under the Act or is saleable pursuant to Rule 144(k) under the Act.
"Trustee" means the trustee with respect to the Securities under the
Indenture.
"Underwriter" means any underwriter of Securities in connection with an
offering thereof under a Shelf Registration Statement.
2. REGISTERED EXCHANGE OFFER; RESALES OF NEW SECURITIES BY EXCHANGING
DEALERS; PRIVATE EXCHANGE.
(a) The Issuer and the Company shall prepare and, not later than 90 days
following the original issuance date of the Securities, shall file
with the Commission the Exchange Offer Registration Statement with
respect to the Registered Exchange Offer. The Issuer and the Company
shall take all reasonable steps to cause the Exchange Offer
Registration Statement to become effective under the Act within 150
days after the date of original issuance of the Securities. The
Issuer and the Company shall take all reasonable steps to consummate
the Registered Exchange Offer within 180 days after the date of
original issuance of the Securities.
(b) Upon the effectiveness of the Exchange Offer Registration Statement,
the Issuer and the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange
Offer to enable each Holder electing to exchange Securities for New
Securities (assuming that such Holder is not an affiliate of the
Company within the meaning of the Act, acquires the New Securities in
the ordinary course of such Holder's business and has no arrangements
with any person to participate in the distribution of the New
Securities) to trade such New Securities from and after their receipt
without any limitations or restrictions under the Act and without
material restrictions under the securities laws of a substantial
proportion of the several states of the United States.
(c) In connection with the Registered Exchange Offer, the Issuer and the
Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less than 30 days
after the date notice thereof is mailed to the Holders (or longer
if required by applicable law);
(iii) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of
New York; and
(iv) comply in all respects with all laws of the United States,
Luxembourg, The Netherlands and Poland applicable to the
Registered Exchange Offer.
(d) As soon as practicable after the close of the Registered Exchange
Offer, the Issuer shall:
(i) accept for exchange all Securities properly tendered and not
validly withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
<PAGE> 4
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder of Securities, New Securities equal in principal amount to
the Securities of such Holder so accepted for exchange.
(e) The Initial Purchasers, the Issuer and the Company acknowledge that,
pursuant to interpretations by the Commission's staff of Section 5 of
the Act, and in the absence of an applicable exemption therefrom,
each Exchanging Dealer is required to deliver a Prospectus in
connection with a sale of any New Securities received by such
Exchanging Dealer pursuant to the Registered Exchange Offer in
exchange for Securities acquired for its own account as a result of
market-making activities or other trading activities. Accordingly,
the Issuer and the Company shall:
(i) include the information set forth in Annex A hereto on the cover
of the Exchange Offer Registration Statement, in Annex B hereto in
the forepart of the Exchange Offer Registration Statement in a
section setting forth details of the Exchange Offer, and in Annex
C hereto in the underwriting or plan of distribution section of
the Prospectus forming a part of the Exchange Offer Registration
Statement, and include the information set forth in Annex D hereto
in the Letter of Transmittal delivered pursuant to the Registered
Exchange Offer; and
(ii) take all reasonable steps to keep the Exchange Offer Registration
Statement continuously effective under the Act during the
Exchange Offer Registration Period for delivery of the Prospectus
contained therein by Exchanging Dealers in connection with sales
of New Securities received pursuant to the Registered Exchange
Offer, as contemplated by Section 4(h) below.
The Issuer and the Company shall be deemed not to have taken all
reasonable steps to keep the Exchange Offer Registration Statement
effective during the Exchange Offer Registration Period if they
voluntarily take any action that would result in Exchanging Dealers
holding New Securities received in the Registered Exchange Offer being
unable to offer and sell such securities during that period, unless (x)
such action is required by applicable law, or (y) such action is taken
by the Issuer or the Company in good faith and for valid business
reasons (not including avoidance of the Issuer's or the Company's
obligations hereunder), including the acquisition or divestiture of
assets, so long as the Issuer and the Company promptly thereafter comply
with the requirements of Section 4(k), if applicable.
(f) In the event that any Initial Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect
to the exchange of Securities constituting any portion of an unsold
allotment, at the request of such Initial Purchaser, the Issuer and
the Company shall as soon as possible issue and deliver to such
Initial Purchaser, for distribution pursuant to a Shelf Registration
Statement as contemplated by Section 3 hereof, or to the party
purchasing New Securities registered under such Shelf Registration
Statement, in exchange for such Securities, a like principal amount
of New Securities. The Issuer and the Company shall seek to cause the
CUSIP Service Bureau to issue the same CUSIP number for such New
Securities as for New Securities issued pursuant to the Registered
Exchange Offer.
(g) The Issuer and the Company shall submit the Exchange Offer
Registration Statement or a Shelf Registration Statement, as the case
may be, to the Securities Board not later than 90 days following the
date of original issuance of the Securities and shall take all
reasonable steps to cause the Securities Board to grant a
dispensation with respect thereto so that the transfer restrictions
imposed by Netherlands law shall cease to apply within 150 days after
the date of original issuance of the Securities.
3. SHELF REGISTRATION. If, (i) because of any change in law or applicable
interpretations thereof by the Commission's staff, the Issuer determines upon
advice of outside counsel that it is not permitted to effect the Registered
Exchange Offer as contemplated by Section 2 hereof, or (ii) if for any other
reason the Registered Exchange Offer is not consummated within 180 days after
the date of original issuance of the Securities, or (iii) if any Holder (other
than an Initial Purchaser) is not eligible under U.S. state or federal
securities laws to participate in the Registered Exchange Offer (other than
because such Holder is unable or unwilling to make the representation set forth
in Rider B to Annex D hereto) or (iv) any Initial Purchaser that holds any
Securities
<PAGE> 5
constituting any portion of an unsold allotment or otherwise acquired by such
Initial Purchaser in connection with the Initial Placement (or any New
Securities issued in exchange therefor in the Registered Exchange Offer to such
Initial Purchaser) so requests (it being understood that, for purposes of this
Section 3, (x) the requirement that an Initial Purchaser deliver a Prospectus
containing the information required by Items 507 and/or 508 of Regulation S-K
under the Act in connection with sales of New Securities acquired in exchange
for such Securities shall result in such New Securities being not "freely
tradeable" but (y) the requirement that an Exchanging Dealer deliver a
Prospectus in connection with sales of New Securities acquired in the Registered
Exchange Offer in exchange for Securities acquired as a result of market-making
activities or other trading activities shall not result in such New Securities
being not "freely tradeable"), the following provisions shall apply:
(a) The Issuer and the Company shall as promptly as practicable (but in
no event more than 30 days after so required or requested pursuant to
this Section 3), file with the Commission and thereafter shall take
all reasonable steps to cause to be declared effective under the Act
by the 180th day after the original issuance of the Securities a
Shelf Registration Statement relating to the offer and sale of the
Securities or the New Securities, as applicable, by the Holders from
time to time in accordance with the methods of distribution elected
by such Holders and set forth in such Shelf Registration Statement;
provided, that with respect to New Securities received by an Initial
Purchaser in exchange for Securities constituting any portion of an
unsold allotment, the Issuer and the Company may, if permitted by
current interpretations by the Commission's staff, file a
post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Regulation S-K Items 507
and/or 508, as applicable, in satisfaction of their obligations under
this paragraph (a) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein
as, and governed by the provisions herein applicable to, a Shelf
Registration Statement; provided, further, that the Company and the
Issuer shall not be required to file more than one Shelf Registration
Statement pursuant to this Agreement.
(b) The Issuer and the Company shall take all reasonable steps to keep
the Shelf Registration Statement continuously effective in order to
permit the Prospectus forming part thereof to be usable by Holders
for a period from the date of its effectiveness until (i) two years
from the Issue Date, (ii) if such Shelf Registration Statement is
filed at the request of an Initial Purchaser, one year from the Issue
Date, or (iii) if applicable, such shorter period that will terminate
when all the Securities or New Securities, as applicable, covered by
the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement (in any such case, such period being called
the "Shelf Registration Period"). The Issuer and the Company shall be
deemed not to have taken all reasonable steps to keep the Shelf
Registration Statement effective during the requisite period if
either of them voluntarily takes any action that would result in
Holders of securities covered thereby not being able to offer and
sell such securities during that period, unless (i) such action is
required by applicable law, or (ii) such action is taken by the
Company in good faith and for valid business reasons (not including
avoidance of the Issuer's or the Company's obligations hereunder),
including the acquisition or divestiture of assets, so long as the
Issuer and the Company promptly thereafter comply with the
requirements of Section 4(k) hereof, if applicable.
4. REGISTRATION PROCEDURES. In connection with any Shelf Registration
Statement and, to the extent applicable, any Exchange Offer Registration
Statement, the following provisions shall apply:
(a) The Issuer and the Company shall furnish to you, prior to the filing
thereof with the Commission, a copy of any Shelf Registration
Statement and any Exchange Offer Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein and shall use its reasonable best efforts
to reflect in each such document, when so filed with the Commission,
such comments as you reasonably and timely may propose.
(b) The Issuer and the Company shall ensure that (i) any Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto complies in all
material respects with the Act and the rules and regulations
thereunder, (ii) any Registration
<PAGE> 6
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any Prospectus forming part
of any Registration Statement, and any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements,
in the light of the circumstances under which they were made, not
misleading.
(c)(1) The Issuer and the Company shall advise you and, in the case of a
Shelf Registration Statement, the Holders of securities covered
thereby, and, if requested by you or any such Holder, confirm such
advice in writing:
(i) when a Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or
any post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus included therein or
for additional information.
(2) The Issuer and the Company shall advise you and, in the case of a
Shelf Registration Statement, the Holders of securities covered
thereby, and, in the case of an Exchange Offer Registration
Statement, any Exchanging Dealer which has provided in writing to the
Issuer or the Company a telephone or facsimile number and address for
notices, and, if requested by you or any such Holder or Exchanging
Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose;
(ii) of the receipt by the Issuer or the Company of any notification
with respect to the suspension of the qualification of the
securities included therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(iii) of the happening of any event that requires the making of any
changes in the Registration Statement or the Prospectus so that,
as of such date, the statements therein are not misleading and do
not omit to state a material fact required to be stated therein
or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were
made) not misleading (which advice shall be accompanied by an
instruction to suspend the use of the Prospectus until the
requisite changes have been made).
(d) The Issuer and the Company shall take all reasonable steps to obtain
the withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Issuer and the Company shall furnish to each Holder of securities
included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration
Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in
writing, all exhibits (including those incorporated by reference).
(f) The Issuer and the Company shall, during the applicable Shelf
Registration Period, deliver to each Holder of Securities registered
pursuant to any Shelf Registration Statement, without charge, as many
copies of the Prospectus (including preliminary Prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and each of the Issuer
and the Company consents to the use of such Prospectus or any
amendment or supplement thereto by each of the Holders of Transfer
Restricted Securities in connection with the offering and sale of the
Securities covered by such Prospectus or any amendment or supplement
thereto.
(g) The Issuer and the Company shall furnish to each Exchanging Dealer
which so requests, without charge, at least one copy of the Exchange
Offer Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, any documents
incorporated by
<PAGE> 7
reference therein, and, if the Exchanging Dealer so requests in writing,
all exhibits (including those incorporated by reference).
(h) The Issuer and the Company shall, during the Exchange Offer
Registration Period, promptly deliver to each Exchanging Dealer,
without charge, as many copies of the Prospectus included in such
Exchange Offer Registration Statement and any amendment or supplement
thereto as such Exchanging Dealer may reasonably request for delivery
by such Exchanging Dealer in connection with a sale of New Securities
received by it pursuant to the Registered Exchange Offer; and each of
the Issuer and the Company consents to the use of such Prospectus or
any amendment or supplement thereto by any such Exchanging Dealer in
connection with the offering and sale of the New Securities covered
by such Prospectus or any amendment or supplement thereto, as
aforesaid.
(i) The Issuer and the Company shall register or qualify or cooperate
with the Exchanging Dealers that are holders of New Securities
covered by the Prospectus contemplated by Section 2(g) hereof and
with the Holders of Securities registered on any Shelf Registration
Statement and their Designated Counsel in connection with the
registration or qualification of such securities for offer and sale
under the securities or blue sky laws of such jurisdictions in the
United States as any such Holders reasonably request in writing and
do any and all other acts or things necessary or advisable to enable
the offer and sale in such jurisdictions of the securities covered by
such Registration Statement or Prospectus, as the case may be;
provided, however, that neither the Issuer nor the Company will be
required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
(j) The Issuer and the Company shall cooperate with the Holders of
Securities to facilitate the timely preparation and delivery of
certificates representing Securities or New Securities, as the case
may be, to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations (subject only to the
provisions of the Indenture regarding minimum denominations) and
registered in such names as Holders may request prior to sales of
securities pursuant to such Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above, the Issuer and the Company shall promptly prepare
a post-effective amendment to any Registration Statement or an
amendment or supplement to the related Prospectus or file any other
required document so that, as thereafter delivered to purchasers of
the Securities or New Securities, as the case may be, included
therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading.
(1) Not later than the effective date of any such Registration Statement
hereunder, the Issuer and the Company shall provide a CUSIP number
for the Securities or New Securities, as the case may be, registered
under such Registration Statement, and provide the applicable trustee
with printed certificates for such Securities or New Securities, in a
form eligible for deposit with The Depository Trust Company.
(m) The Issuer and the Company shall take all reasonable steps to comply
with all applicable rules and regulations of the Commission and the
Securities Board and shall make generally available to Holders as soon
as practicable after the effective date of the applicable Registration
Statement an earnings statement (which need not be audited) satisfying
the provisions of Section 11(a) under the Act.
(n) The Issuer and the Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely
manner.
(o) The Issuer and the Company may require each Holder of Securities to
be sold pursuant to any Shelf Registration Statement to furnish to
the Company such information regarding the Holder and the
distribution of such securities as the Company may from time to time
reasonably require for inclusion in such Registration Statement.
<PAGE> 8
(p) The Issuer and the Company shall promptly incorporate in a Prospectus
supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters and Majority
Holders agree and reasonably request should be included therein and
shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as notified of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment.
(q) In the case of any Shelf Registration Statement, the Issuer and the
Company shall, if requested by the Majority Holders, enter into such
agreements (including underwriting agreements) and take all other
appropriate actions in order to expedite or facilitate the
registration or the disposition of the Securities, and in connection
therewith, if an underwriting agreement is entered into, cause the
same to contain indemnification provisions and procedures no less
favorable than those set forth in Section 6 hereof (or such other
provisions and procedures reasonably acceptable to the Majority
Holders and the Managing Underwriters, if any, with respect to all
parties to be indemnified pursuant to Section 6 hereof.
(r) In the case of any Shelf Registration Statement, the Issuer and the
Company shall (i) make reasonably available for inspection by the
Holders of Securities to be registered thereunder who shall certify
to the Company that they have a current intent to sell such
securities pursuant to such Registration Statement, any underwriter
participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by
the Majority Holders or any such underwriter, all relevant financial
and other records, pertinent corporate documents and properties of
the Company and its subsidiaries; (ii) cause the Issuer's, the
Company's and the Company's subsidiaries' officers, directors and
employees to supply all relevant information reasonably requested by
the Majority Holders or any such underwriter, attorney, accountant or
agent in connection with any such Registration Statement as is
customary for similar due diligence examinations; provided, however,
that any information provided pursuant to clause (i) or clause (ii)
hereof that is designated in writing by the Issuer or the Company, in
good faith, as confidential at the time of delivery of such
information shall be kept confidential by the Holders and any such
underwriter, attorney, accountant or agent (from whom the Company and
the Issuer shall be entitled to receive written confidentiality
undertakings substantially to the same effect as those set forth in
this Section 4(r)), unless such disclosure is required to be made in
connection with a court proceeding pursuant to the subpoena or order
of any court or other governmental agency or body having jurisdiction
over the matter or is required by law (in which case such party shall
promptly and prior to such disclosure notify the Company of such
disclosure requirement and cooperate with the Company and the Issuer
in seeking to stay or limit such disclosure requirement), or such
information becomes available to the public generally or through a
third party without an obligation of confidentiality; (iii) make such
representations and warranties to the Holders of securities
registered thereunder and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase
Agreement; (iv) obtain opinions of counsel to the Issuer, Holdings
and the Company and updates thereof (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the
Managing Underwriters, if any) addressed to each selling Holder and
the underwriters, if any, covering such matters as are customarily
covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Holders and
underwriters; (v) obtain "cold comfort" letters and updates thereof
from the independent certified public accountants of the Issuer and
the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Issuer or the Company or
of any business acquired by the Issuer, Holdings or the Company for
which financial statements and financial data are, or are required to
be, included in such Registration Statement), addressed to each
selling Holder of securities registered thereunder and the
underwriters, if any, in form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
primary underwritten offerings; and (vi) deliver such documents and
certificates as may be reasonably requested by the Majority Holders
and the Managing Underwriters, if any, including those to evidence
compliance with Section 4(k) hereof and with any customary conditions
contained in the underwriting agreement or other agreement entered
into by the Issuer, Holdings or
<PAGE> 9
the Company. The foregoing actions set forth in clauses (iii), (iv), (v)
and (vi) of this Section 4(r) shall be performed at (A) the
effectiveness of such Registration Statement and each post-effective
amendment thereto and (B) each closing under any underwriting or similar
agreement as and to the extent required thereunder.
(s) In the case of any Exchange Offer Registration Statement, the Issuer
and the Company shall (i) make reasonably available for inspection by
each Exchanging Dealer, and any counsel, accountant or other agent
retained by Exchanging Dealers holding a majority of the aggregate
principal amount of New Securities for which delivery of a Prospectus
as contemplated by Section 2(e) hereof is required, all relevant
financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries; (ii) cause the
Issuer's, the Company's and the Company's subsidiaries' officers,
directors and employees to supply all relevant information reasonably
requested by such Exchanging Dealers or any such counsel, accountant
or agent, in connection with any such Registration Statement as is
customary for similar due diligence examinations; provided, however,
that any information provided pursuant to clause (i) or clause (ii)
hereof that is designated in writing by the Issuer or the Company, in
good faith, as confidential at the time of delivery of such
information shall be kept confidential by each Exchanging Dealer or
any such counsel, accountant or agent (from whom the Company and the
Issuer shall be entitled to receive written confidentiality
undertakings substantially-to the same effect as those set forth in
this Section 4(s)), unless such disclosure is made in connection with
a court proceeding or required by law, or such information becomes
available to the public generally or through a third party without an
obligation of confidentiality; (iii) make such representations and
warranties to such Exchanging Dealers, in form, substance and scope
as are customarily made by issuers to underwriters in primary
underwritten offerings and covering matters including, but not
limited to, those set forth in the Purchase Agreement; (iv) obtain
opinions of counsel to the Issuer, Holdings and the Company and
updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to such Exchanging
Dealers and such counsel), addressed to such Exchanging Dealers,
covering such matters as are customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by such Exchanging Dealers or such counsel; (v)
obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Issuer, Holdings and
the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Issuer or the Company or
of any business acquired by the Issuer, Holdings or the Company for
which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to such
Exchanging Dealers, in customary form and covering matters of the
type customarily covered in "cold comfort" letters in action with
primary underwritten offerings, or if requested by such Exchanging
Dealers or such counsel in lieu of a "cold comfort" letter, an
agreed-upon procedures letter under Statement on Auditing Standards
No. 35, covering matters requested by such Exchanging Dealers or such
counsel; and (vi) deliver such documents and certificates as may be
reasonably requested by such Exchanging Dealers or such counsel,
including those to evidence compliance with Section 4(k) hereof and
with conditions customarily contained in underwriting agreements. The
foregoing actions set forth in clauses (iii), (iv), (v), and (vi) of
this Section 4(s) shall be performed at the close of the Registered
Exchange Offer and the effective date of any post-effective amendment
to the Exchange Offer Registration Statement.
5. REGISTRATION EXPENSES. The Issuer and the Company shall bear all
expenses incurred in connection with the performance of its obligations under
Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement
or any requirement for an Exchanging Dealer to deliver a Prospectus included in
the Exchange Offer Registration Statement, will reimburse the Holders for the
reasonable fees and disbursements of one firm or counsel designated by the
Majority Holders or by Exchanging Dealers holding a majority of the aggregate
principal amount of New Securities covered by such Prospectus, as the case may
be, to act as counsel for the Holders in connection therewith ("Designated
Counsel").
6. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any
Registration Statement, the Issuer and the Company agree, and the Company agrees
to cause Holdings, to indemnify and hold harmless each Holder
<PAGE> 10
selling securities covered thereby (including with respect to any Prospectus
delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer), the
directors, officers, employees and agents of each such Holder and each person
who controls any such Holder within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement as originally filed or in any amendment thereof, or in any preliminary
Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees, and the Company agrees to cause
Holdings, to reimburse each such indemnified party for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Issuer, Holdings and the Company will not be liable in any case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Issuer, Holdings or the Company by or on behalf of
any such Holder specifically for inclusion therein; provided, further, that
neither the Issuer nor Holdings nor the Company will be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based on an untrue statement or omission in any Prospectus which was corrected
in a subsequent Prospectus where the relevant Exchanging Dealer sold the
securities to a person to whom it is established that such Exchanging Dealer
failed to send or otherwise deliver, at or prior to the written confirmation of
such sale, a copy of the subsequent Prospectus, as then amended or supplemented.
This indemnity shall not extend to any losses, damages, claims or other
liabilities that may result from the settlement or compromise by any indemnified
party of any action or claim, or any admission by such indemnified party of any
liability, in each case without the prior consent of the Company, which consent
shall not be unreasonably withheld or delayed. This indemnity agreement will be
in addition to any liability which the Issuer and the Company may otherwise
have.
The Issuer and the Company also agree, if requested by the Majority
Holders, to enter into an underwriting agreement that includes an undertaking to
indemnify or contribute to Losses of, as provided in Section 6(d) hereof, any
underwriters of Securities registered under a Shelf Registration Statement,
their officers and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the selling
Holders provided in this Section 6(a), as provided in Section 4(q) hereof.
(b) Each Holder of securities covered by a Registration Statement
(including with respect to any Prospectus delivery as contemplated in
Section 4(h) hereof, each Exchanging Dealer) severally agrees to
indemnify and hold harmless (i) the Issuer, (ii) the Company, (ii)
Holdings, (iii) each of their respective directors, (iv) each of
their respective officers who signs such Registration Statement and
(v) each person who controls the Issuer, Holdings or the Company
within the meaning of either the Act or the Exchange Act to the same
extent as the foregoing indemnity from the Issuer, Holdings and the
Company to each such Holder, but only with reference to written
information relating to such Holder furnished to the Issuer, Holdings
or the Company by or on behalf of such Holder specifically for
inclusion in the documents referred to in the foregoing indemnity.
This indemnity agreement will be in addition to any liability which
any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 6
of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying
party in writing of the commencement thereof; but the failure so to
notify the indemnifying party (i) will not relieve it from liability
under paragraph (a) or (b) above unless and to the extent such
failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided
in paragraph (a) or (b) above. The indemnifying party shall be
entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in
any action for which indemnification is sought (in which case the
indemnifying
<PAGE> 11
party shall not thereafter be responsible for the fees and expenses of
any separate counsel retained by the indemnified party or parties except
as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the
right to employ counsel (including local counsel) separate from counsel
appointed by the indemnifying party, and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel
(and local counsel) if (i) the use of counsel chosen by the indemnifying
party to represent the indemnified party would present such counsel with
a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after
notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not,
without the prior written consent of the indemnified parties (which
consent shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding and (ii) does not
include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of any indemnified party.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall have a
joint and several obligation to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending
same) (collectively "Losses") to which such indemnified party may be
subject in such proportion as is appropriate to reflect the relative
benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement
and the Registration Statement which resulted in such Losses;
provided, however, that in no case shall any Holder of any Security
or New Security be responsible, in the aggregate, for any amount in
excess of the purchase discount or commission applicable to such
Security, or in the case of a New Security, applicable to the
Security which was exchangeable into such New Security, as set forth
on the cover page of the Final Memorandum, nor shall any underwriter
be responsible for any amount in excess of the underwriting discount
or commission applicable to the securities purchased by such
underwriter under the Registration Statement which resulted in such
Losses. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the indemnifying party and
the indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the
statements or omissions which resulted in such Losses as well as any
other relevant equitable considerations. Benefits received by the
Company shall be deemed to be equal to the total net proceeds from
the Initial Placement (before deducting expenses) as set forth on the
cover page of the Final Memorandum. Benefits received by the selling
Holders shall be deemed to be equal to the value of receiving
Securities or New Securities, as applicable, registered under the
Act. Benefits received by any underwriter shall be deemed to be equal
to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration
Statement which resulted in such Losses. Relative fault shall be
determined by reference to whether any alleged untrue statement or
omission relates to information provided by the indemnifying party,
on the one hand, or by the indemnified party, on the other hand. The
parties agree that it would not be just and equitable if contribution
were determined by pro rata allocation or any other method of
allocation which does not
<PAGE> 12
take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section ll(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this
Section 6, each person who controls a Holder within the meaning of
either the Act or the Exchange Act and each director, officer, employee
and agent of such Holder shall have the same rights to contribution as
such Holder, and each person who controls the Issuer, Holdings or the
Company within the meaning of either the Act or the Exchange Act, each
officer of the Issuer, Holdings or the Company who shall have signed the
Registration Statement and each director of the Issuer, Holdings or the
Company shall have the same rights to contribution as the Issuer,
Holdings and the Company, subject in each case to the applicable terms
and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any
Holder or the Issuer, Holdings or the Company or any of the officers,
directors or controlling persons referred to in Section 6 hereof, and
will survive the sale by a Holder of securities covered by a
Registration Statement.
7. MISCELLANEOUS.
(a) No Inconsistent Agreements. Each of the Issuer, the Company and the
Company's subsidiaries has not, as of the date hereof, entered into,
nor shall it, on or after the date hereof, enter into, any agreement
with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Issuer or the
Company has obtained the written consent of the Holders of at least a
majority of the then outstanding aggregate principal amount of
Securities (or, after the consummation of any Exchange Offer in
accordance with Section 2 hereof, of New Securities); provided that,
with respect to any matter that directly or indirectly affects the
rights of any Initial Purchaser hereunder, the Issuer and the Company
shall obtain the written consent of each such Initial Purchaser
against which such amendment, qualification, supplement, waiver or
consent is to be effective. Notwithstanding the foregoing (except the
foregoing proviso), a waiver or consent to departure from the
provisions hereof with respect to a matter that relates exclusively
to the rights of Holders whose securities are being sold pursuant to
a Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by the Majority
Holders determined on the basis of securities being sold rather than
registered under such Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier, or air courier guaranteeing
overnight delivery.
(1) if to a Holder, at the address of such Holder maintained by the
Registrar under the relevant Indenture;
(2) if to you or another Initial Purchaser, initially at the
respective addresses set forth in the Purchase Agreement; and
(3) if to the Issuer, initially at its address set forth in the
Purchase Agreement.
(4) if to the Company, initially at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
The Initial Purchasers, the Issuer or the Company by notice to the other
may designate additional or different addresses for subsequent notices
or communications.
<PAGE> 13
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of
the parties, including, without the need for an express assignment or
any consent by the Issuer or the Company thereto, subsequent Holders
of Securities and/or New Securities. The Issuer and the Company
hereby agree to extend the benefits of this Agreement to any Holder
of Securities and/or New Securities and any such Holder may
specifically enforce the provisions of this Agreement as if an
original party hereto.
(e) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all
of which taken together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience or
reference only and shall not limit or otherwise affect the meaning
hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
(h) Jurisdiction. Each of the Issuer and the Company agrees that any
suit, action or proceeding against the Issuer or the Company brought
by any Initial Purchaser, the directors, officers, employees and
agents of any Initial Purchaser, or by any person who controls any
Initial Purchaser, arising out of or based upon this Agreement or the
transactions contemplated hereby may be instituted in any state or
federal court in the Borough of Manhattan, City of New York, New
York, and waives any objection which it may now or hereafter have to
the laying of venue of any such proceeding, and irrevocably submits
to the nonexclusive jurisdiction of such courts in any suit, action
or proceeding. Each of the Issuer and the Company has appointed CT
Corporation System, with offices on the date hereof at 111 Eighth
Avenue, New York, New York 10011, as its authorized agent (the
"Authorized Agent"), upon whom process may be served in any suit,
action or proceeding arising out of or based upon this Agreement or
the transactions contemplated herein which may be instituted in any
state or federal court in the Borough of Manhattan, City of New York,
New York, by any Initial Purchaser, the directors, officers,
employees and agents of any Initial Purchaser, or by any person, if
any, who controls any Initial Purchaser, and expressly accepts the
nonexclusive jurisdiction of any such court in respect of any such
suit, action or proceeding. Each of the Issuer and the Company hereby
represents and warrants that the Authorized Agent has accepted such
appointment and has agreed to act as said agent for service of
process, and each of the Issuer and the Company agrees to take any
and all action, including the filing of any and all documents that
may be necessary to continue such appointment in full force and
effect as aforesaid. Service of process upon the Authorized Agent
shall be deemed, in every respect, effective service of process upon
the Issuer and the Company. Notwithstanding the foregoing, any action
involving the Company arising out of or based upon this Agreement may
be instituted by any Initial Purchaser, the directors, officers,
employees and agents of any Initial Purchaser, or by any person who
controls any Initial Purchaser in any court of competent jurisdiction
in Luxembourg, The Netherlands or the Republic of Poland.
(i) Severability. In the event that any one of more of the provisions
contained herein, or the application thereof in any circumstances, is
held valid, illegal or unenforceable in any respect for any reason,
the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions hereof shall not
be in any way impaired or affected thereby, it being intended that
all of the rights and privileges of the parties shall be enforceable
to the fullest extent permitted by law.
(j) Securities Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of
Securities or New Securities is required hereunder, Securities or New
Securities, as applicable, held by the Company or its Affiliates
(other than subsequent Holders of Securities or New Securities if
such subsequent Holders are deemed to be Affiliates solely by reason
of their holdings of such Securities or New Securities) shall not be
counted in determining whether such consent or approval was given by
the Holders of such required percentage.
<PAGE> 14
Please confirm that the foregoing correctly sets forth the agreement
between the Issuer, the Company and you.
Very truly yours,
PTC INTERNATIONAL FINANCE II S.A.
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
POLSKA TELEFONIA CYFROWA SP. Z 0.0
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
The foregoing Agreement is
hereby accepted as of the date
first above written.
MERRILL LYNCH INTERNATIONAL
By:
- --------------------------------------
Name:
Title:
SALOMON BROTHERS INTERNATIONAL
LIMITED
By:
- --------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.16
AGREEMENT TO PROVIDE SHAREHOLDER LOAN
THIS AGREEMENT is dated 24 August, 1999 and made between:
(1) Polska Telefonia Cyfrowa Sp. Z.o.o (the "COMPANY");
(2) Deutsche Telekom Mobil Net GMBH ("DETEMOBIL");
(3) MediaOne International B.V. ("MEDIAONE"); and
(4) Elektrim, S.A. ("ELEKTRIM"),
WHEREAS, the Company requires approximately 75 million Euros to fund its
increased operating costs including 55 million Euros of funding via shareholder
loans in order to accept a DCS 1800 license without breaching the provisions of
the Loan Agreement dated 17 December 1997 between Polska Telefonia Cyfrowa Sp.
z o.o. as Borrower, the Arrangers and the Banks referred to therein, Citibank
International plc and Citibank (Poland) S.A. as Agents, Citibank (Poland) S.A.
and Citibank, N.A. as Security Agents and Citibank, N.A. as Co-ordinator (the
"LOAN AGREEMENT"). Unless otherwise stated herein, all terms defined in the Loan
Agreement have the same meaning herein.
WHEREAS, the Company has requested a waiver of certain provisions of the Loan
Agreement in its letter addressed to the Agent dated 28 July 1999 and the
Majority Banks have granted such waiver allowing the Company to borrow from its
shareholders a minimum amount of 55 million Euros.
WHEREAS, the Company requires some incremental amount of additional funding to
keep it liquid pending a re-financing.
NOW THEREFORE, it is agreed as follows:
1. For good and valuable consideration received each of DeTeMobil and
MediaOne agrees that it shall loan the Company U.S.$17,578,125 in
accordance with the terms of a loan agreement to be signed with the
Company on or about 24 August, 1999. Each such loan agreement shall be
substantially in the form of Schedule 1 attached hereto.
2. For good and valuable consideration received Elektrim agrees that it
shall loan the Company the Zloty Equivalent (as defined below) of
US$39,843,750 in accordance with the terms of a loan agreement to be
signed with the Company on or about 24 August, 1999. Such loan agreement
shall be substantially in the form of Schedule 2 attached hereto.
3. The Company agrees to execute each of the loan agreements referred to in
paragraphs 1 and 2 above. The Company confirms that it will apply its
own available cash and, if necessary, any amounts it receives under
paragraphs 1 and 2 above to the first instalment of the DCS-1800 licence
fee payable under the DCS-1800 licence granted to the Company (such
instalment being in amount of approximately 50 million Euros).
-1
<PAGE> 2
4. The Company agrees that it shall repay the loans referred to in
paragraphs 1 and 2 above on a pro-rata basis to DeTeMobil, MediaOne and
Elektrim.
For the purposes of this letter "Zloty Equivalent" shall mean, in relation to
any amount denominated in U.S. Dollars, the amount of Zloty which would be
realised upon the sale of such Dollar amount for Zlotys at the average exchange
rate quoted by the National Bank of Poland for accounting purposes (also known
as the "fixing rate") prevailing on the date falling five Business Days prior to
the date on which (i) the loan is advanced under the loan agreement referred to
in paragraph 2 above or (ii) any payment of interest or principal is made under
the loan agreement referred to in paragraph 2 above.
This Agreement may be executed in any number of counterparts in which case this
Agreement will be as effective as if all the signatures on the counterparts were
on a single copy of this Agreement.
This Agreement shall become effective on the date it is executed by all four
parties listed below.
IN WITNESS WHEREOF the parties to this Agreement have caused this Agreement to
be duly executed on the date first written above.
POLSKA TELEFONIA CYFROWA SP. Z.O.O
By:
DEUTSCHE TELEKOM MOBIL NET GMBH
By:
MEDIAONE INTERNATIONAL B.V.
By:
ELEKTRIM, S.A.
By:
-2
<PAGE> 1
EXHIBIT 10.17
- --------------------------------------------------------------------------------
PTC INTERNATIONAL FINANCE II S.A.
(a private company with limited liability
incorporated under the laws of Luxembourg)
PTC INTERNATIONAL FINANCE (HOLDING) B.V.
(a private company with limited liability
incorporated under the laws of The Netherlands)
POLSKA TELEFONIA CYFROWA SP. Z O.O.
(a company incorporated as a limited liability company
under the laws of the Republic of Poland)
*300,000,000 11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE 2009
$150,000,000 11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE 2009
PURCHASE AGREEMENT
Dated: November 16, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
SECTION 1. Representations and Warranties..............................
(a) Representations and Warranties of the Issuer, the Guarantor
and Holdings................................................
(i) Similar Offerings................................
(ii) Offering Memorandum.............................
(iii) Independent Accountants.........................
(iv) Financial Statements.............................
(v) No Material Adverse Change in Business...........
(vi) Incorporation....................................
(vii) Good Standing....................................
(viii) Capitalization..................................
(ix) Authorization of Agreement.......................
(x) Authorization of the Indentures..................
(xi) Authorization of Notes...........................
(xii) Authorization of the Escrow Agreements...........
(xiii) Authorization of the Registration Rights
Agreement.......................................
(xiv) Authorization of the Guarantees..................
(xv) Authorization of the Security Agreements.........
(xvi) Authorization of the Limited Recourse
Guarantees.......................................
(xvii) Description of the Indentures, the Notes, the
Escrow Agreements, the Registration Rights Agreement, the
Security Agreements, the Guarantees and the
Limited Recourse Guarantees......................
(xviii) Absence of Defaults and Conflicts...............
(xix) Absence of Labor Dispute.........................
(xx) Absence of Proceedings...........................
(xxi) Possession of Intellectual Property..............
(xxii) Absence of Further Requirements..................
(xxiii) Possession of Licenses and Permits..............
(xxiv) Title to Property................................
(xxv) No Withholding Tax................................
(xxvi) Tax Returns......................................
(xxvii) Investment Company Act...........................
(xxviii) PFIC Status......................................
(xxix) Internal Controls................................
(xxx) No Additional Documents...........................
(xxxi) Insurance........................................
(xxxii) Taxes on Subsidiary Indebtedness.................
(xxxiii) Rule 144A Eligibility............................
(xxxiv) General Solicitation..............................
(xxxv) No Substantial U.S. Market Interest or Directed
Selling Efforts...................................
(xxxvi) No Registration Required..........................
(xxxvii) No Stabilization.................................
(xxxviii) Forward-Looking Statement........................
(xxxix) Luxembourg Listing................................
(x1) Submission to Jurisdiction.......................
(xli) No Liquidation...................................
(xlii) Offering Material...............................
(xliii) Year 2000.......................................
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(xlv) No Sales Except in Accordance with the Dutch
Securities Act...................................
(b) Officer's Certificates......................................
SECTION 2. Sale and Delivery to Initial Purchasers; Closing............
SECTION 3. Covenants of the Issuer, the Guarantor and Holdings.........
(a) Offering Memorandum.........................................
(b) Notice and Effect of Material Events........................
(c) Amendment to Offering Memorandum and Supplements............
(d) Qualification of Notes for Offer and Sale...................
(e) No General Solicitation.....................................
(f) Rating of Notes.............................................
(g) Luxembourg Stock Exchange Approval..........................
(h) DTC and Euroclear...........................................
(i) Investment Company..........................................
(j) Use of Proceeds.............................................
(k) Directed Selling Efforts....................................
(l) Press Releases..............................................
(m) Regulation M................................................
(n) Restriction on Sale of Notes................................
(o) PORTAL......................................................
(p) Restriction on Resale of Notes..............................
SECTION 4. Payment of Expenses.........................................
(a) Expenses....................................................
(b) Termination of Agreement....................................
SECTION 5. Conditions of Initial Purchasers' Obligations...............
(a) Offering Memorandum.........................................
(b) Opinions of Counsel for the Issuer and the Guarantor........
(i) Opinion of Issuer's U.S. Counsel.................
(ii) Opinion of Guarantor's Polish Counsel...........
(iii) Opinion of Holdings's Netherlands Counsel.......
(iv) Opinion of Issuer's Luxembourg Counsel...........
(c) Opinion of United States Counsel for the Initial
Purchasers..................................................
(d) Officers' Certificate.......................................
(e) Accountants' Comfort Letter.................................
(f) Bring-Down Comfort Letter...................................
(g) Luxembourg Listing..........................................
(h) Clearance and Settlement....................................
(i) Maintenance and Rating......................................
(j) PORTAL......................................................
(k) Additional Documents........................................
(l) Termination of Agreement....................................
SECTION 6. Subsequent Offers and Resales of the Notes..................
(a) Initial Purchasers' Obligations.............................
(i) Offers and Sales only to Qualified Institutional
Buyers or non-U.S. Persons.......................
(ii) No General Solicitation.........................
(iii) Purchases by Non-Bank Fiduciaries...............
(iv) Subsequent Purchaser Notification................
(v) Restrictions on Transfer.........................
(vi) Actions Regarding Other Offerings................
(vii) Restrictions Under United Kingdom Securities
Regulations......................................
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(viii) No Sales of the Notes in Poland.................
(ix) Compliance with Applicable Laws..................
(b) Covenants of the Issuer, the Guarantor and Holdings.........
(i) Due Diligence....................................
(ii) Integration.....................................
(iii) Rule 144A Information...........................
(c) Resale Pursuant to Rule 903 of Regulation S, Rule 144A or
Other Exemption.............................................
SECTION 7. Indemnification.............................................
(a) Indemnification of Initial Purchasers.......................
(b) Indemnification of Issuer, Guarantor, Holdings and their
Directors and Officers......................................
(c) Actions Against Parties; Notification.......................
(d) Settlement Without Consent if Failure to Reimburse..........
SECTION 8. Contribution................................................
SECTION 9. Representations, Warranties and Agreements to Survive
Delivery....................................................
SECTION 10. Termination of Agreement....................................
(a) Termination; General........................................
(b) Liabilities.................................................
SECTION 11. Default by One or More of the Initial Purchasers............
SECTION 12. Notices.....................................................
SECTION 13. Parties.....................................................
SECTION 14. Governing Law And Time......................................
SECTION 15. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities..................................................
SECTION 16. Judgment Currency...........................................
SECTION 17. Counterparts................................................
SECTION 18. Effect of Headings..........................................
Schedule A Initial Purchasers
Schedule B Pricing Terms
Exhibit A Form of Euro Registration Rights Agreement
Exhibit A-1 Form of Dollar Registration Rights Agreement
Exhibit B Form of Opinion of U.S. Counsel
Exhibit C Form of Polish Law Opinion of Company's Counsel
Exhibit D Form of Opinion of Holders' Netherlands Counsel
Exhibit E Form of Opinion of Issuer's Luxembourg Counsel
Exhibit F Form of Arthur Andersen Comfort Letter
</TABLE>
<PAGE> 5
PTC INTERNATIONAL FINANCE II S.A.
(a private company with limited liability
incorporated under the laws of Luxembourg)
PTC INTERNATIONAL FINANCE (HOLDING) B.V.
(a private company with limited liability
incorporated under the laws of The Netherlands)
POLSKA TELEFONIA CYFROWA SP. Z O. O.
(a company incorporated as a limited liability company
under the laws of the Republic of Poland)
*300,000,000 11 1/4% Senior Subordinated Guaranteed Notes Due 2009
$150,000,000 11 1/4% Senior Subordinated Guaranteed Notes Due 2009
PURCHASE AGREEMENT
To: Merrill Lynch International November 16, 1999
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
Salomon Brothers International Limited
Victoria Plaza
111 Buckingham Palace Road
London SW1W 0SB
England
Ladies and Gentlemen:
PTC International Finance II S.A., a company with limited liability
incorporated under the laws of Luxembourg (the "Issuer"), PTC International
Finance (Holding) B.V. ("Holdings"), a company incorporated under the laws of
The Netherlands and Polska Telefonia Cyfrowa Sp. z o.o., a limited liability
company under the laws of the Republic of Poland (the "Guarantor"), pursuant to
this agreement (the "Agreement") each hereby confirm their agreement with
Merrill Lynch International and Salomon Brothers International Limited
(collectively, the "Initial Purchasers", which term shall also include any
initial purchaser substituted as hereinafter provided in Section 11 hereof),
with respect to the issue and sale by the Issuer and the purchase by the Initial
Purchasers (the "Offering"), acting severally and not jointly, of the respective
principal amounts set forth in Schedule A hereto of *300,000,000 aggregate
principal amount of the Issuer's 11 1/4 % Senior Subordinated Guaranteed Notes
due 2009 (the "Euro Notes") and of $150,000,000 aggregate principal amount of
the Issuer's 11 1/4% Senior Subordinated Guaranteed Notes due 2009 (the "Dollar
Notes" and, along with the Euro Notes, the "Notes"). The Euro Notes are to be
issued pursuant to an indenture dated as of November 23, 1999 (the "Euro Notes
Indenture") among the Issuer, the Guarantor, Holdings and State Street Bank and
Trust Company, as trustee (the "Euro Notes Trustee"), and the Dollar Notes are
to be issued pursuant to an indenture dated as of November 23, 1999 (the "Dollar
Notes Indenture" and, along with the Euro Notes Indenture, the "Indentures")
among the Issuer, the Guarantor, Holdings and State Street Bank and Trust
Company, as trustee (the "Dollar Notes Trustee" and, together with the Euro
Notes Trustee, the "Trustees"). The obligations of the Issuer under the Euro
Notes Indenture and the Euro Notes will be fully and unconditionally guaranteed
pursuant to a guarantee (the "Euro Notes Guarantee") made by the Guarantor. The
obligations of the Issuer under the Dollar Notes Indenture and the Dollar Notes
will be fully and unconditionally guaranteed pursuant to a guarantee (the
"Dollar Notes Guarantee", and, together with the Euro Notes Guarantee, the
"Guarantees") made by the Guarantor. Notes issued in book-entry form pursuant to
Rule 144A (as defined below) and Dollar Notes issued in book-entry
<PAGE> 6
form pursuant to Regulation S (as defined below) will be deposited with the
relevant Trustee as custodian for, and registered in the name of Cede & Company
as nominee of, The Depository Trust Company ("DTC") pursuant to a letter
agreement, to be dated as of the Closing Time (as defined in Section 2(b)
hereof) (the "DTC Agreement"), among the Issuer, the Guarantor, the relevant
Trustee and DTC. Euro Notes issued in book-entry form pursuant to Regulation S
will be deposited with the relevant Trustee as common depositary for, and
registered in the name of a nominee of, Euroclear and Cedelbank.
The holders of Notes will be entitled to the benefits of a Registration
Rights Agreement, in substantially the form attached hereto as Exhibit A and A-1
with such changes as shall be agreed to by the parties hereto (the "Registration
Rights Agreement"), pursuant to which the Issuer and the Guarantor will agree to
file a registration statement (the "Registration Statement") with the United
States Securities and Exchange Commission (the "Commission") registering the
Notes or the Exchange Notes referred to in the Registration Rights Agreement
under the Securities Act of 1933, as amended (the "Securities Act").
Concurrently with the closing of the offering of the Notes, Holdings will
deposit in accounts (the "Escrow Accounts") pursuant to escrow agreements (the
"Escrow Agreements"), each to be entered into by Holdings in favor of the
relevant Trustee for the benefit of the holders of the relevant Notes, an amount
in cash, European government securities or U.S. government securities that,
together with the interest received thereon, will be sufficient to pay when due
the first five interest payments on the Notes. The Notes will be secured by a
first priority security interest in the Escrow Accounts granted pursuant to
security agreements (the "Security Agreements") each made by Holdings in favour
of State Street Bank and Trust Company as collateral agent (the "Collateral
Agent") for the benefit of the Euro Notes Trustee or the Dollar Notes Trustee,
as the case may be. Holdings will also provide guarantees (the "Limited Recourse
Guarantees") of the Issuer's obligations under the Notes, the recourse under
which will be limited to amounts deposited in the Escrow Accounts.
The Issuer will advance all of the net proceeds from the issue and sale of
the Notes to Holdings who, following its purchase of European government
securities or U.S. government securities as referred to above and/or the deposit
of cash and any such purchased securities in the Escrow Accounts, will advance
the remainder of such net proceeds to the Guarantor. The advances by the Issuer
of such net proceeds to Holdings and by Holdings of the remainder of such net
proceeds to the Guarantor will each be made against the issuance by Holdings and
the Guarantor of intercompany notes.
The Issuer, the Guarantor and Holdings understand that the Initial
Purchasers propose to make an offering of the Notes on the terms and in the
manner set forth herein and in reliance upon an exemption from the registration
requirements of the Securities Act, and agree that the Initial Purchasers may
resell, subject to the conditions set forth herein, all or a portion of the
Notes to purchasers ("Subsequent Purchasers") at any time on or after the date
of this Agreement. The Notes are to be offered and sold to the Initial
Purchasers without being registered under the Securities Act, in reliance upon
exemptions therefrom. Pursuant to the terms of the Notes and the Indentures,
investors that acquire Notes may only resell or otherwise transfer such Notes if
such Notes are hereafter registered under the Securities Act or if an exemption
from the registration requirements of the Securities Act is available (including
the exemption afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation
S") of the rules and regulations promulgated under the Securities Act by the
Commission).
The Issuer, the Guarantor and Holdings have prepared and delivered to each
Initial Purchaser copies of a preliminary offering memorandum dated November 1,
1999 (the "Preliminary Offering Memorandum") and have prepared and will deliver
to each Initial Purchaser promptly upon its being completed copies of a final
offering memorandum dated November 16, 1999 (the "Final Offering Memorandum"),
each for use by such Initial Purchaser in connection with its solicitation of
purchases of, or Offering of, the Notes. "Offering Memorandum" means, with
respect to any date or time referred to in this Agreement, the most recent
offering memorandum (whether the Preliminary Offering Memorandum or the Final
Offering Memorandum, or any amendment or supplement to either such document),
which has been prepared and delivered by the Issuer, the Guarantor and Holdings
to the Initial Purchasers in connection with their solicitation of purchases of,
or the Offering of, the Notes.
<PAGE> 7
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties of the Issuer, the Guarantor and
Holdings. Each of the Issuer, the Guarantor and Holdings jointly and severally
represents and warrants to each Initial Purchaser as of the date hereof and as
of the Closing Time referred to in Section 2(b) hereof, and agrees with each
Initial Purchaser, as follows:
(i) Similar Offerings. The Guarantor and its affiliates, as such
term is defined in Rule 501(b) of Regulation D under the
Securities Act ("Affiliates"), have not, directly or indirectly,
solicited any offer to buy, sold or offered to sell or otherwise
negotiated in respect of, and will not, directly or indirectly,
solicit any offer to buy or offer to sell or otherwise negotiate
in respect of, in the United States or to any United States
citizen or resident, any security which is or would be integrated
with the sale of the Notes in a manner that would require the
Notes to be registered under the Securities Act.
(ii) Offering Memorandum. The Offering Memorandum does not, and at
the Closing Time will not, contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided that this representation, warranty
and agreement shall not apply to statements in or omissions from
the Offering Memorandum made in reliance upon and in conformity
with information furnished to the Issuer, the Guarantor or
Holdings in writing by any Initial Purchaser expressly for use in
the Offering Memorandum.
(iii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules thereto included
in the Offering Memorandum are independent certified public
accountants with respect to the Guarantor, Holdings and the
Issuer (Holdings, PTC International Finance B.V. and the Issuer
each being a "Subsidiary" and collectively the "Subsidiaries")
within rule 101 of the AICPA's Code of Professional Conduct and
its interpretations and rulings.
(iv) Financial Statements. The financial statements, together with
the related schedules and notes, included in the Offering
Memorandum present fairly the financial position of the Guarantor
and the Subsidiaries at the dates indicated and the statement of
operations, stockholders' equity and cash flows of the Guarantor
and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with
International Accounting Standards ("IAS") applied on a
consistent basis throughout the periods involved. The selected
financial data and the summary financial information included in
the Offering Memorandum present fairly the information shown
therein and have (other than "Subscribers at End of Period" and
"Monthly Churn Rate") been compiled on a basis consistent with
that of the audited financial statements included in the Offering
Memorandum.
(v) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (A) there has
been no material adverse change in the condition, financial or
otherwise, in the earnings, business affairs or business
prospects of the Guarantor and the Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no
transactions entered into by the Guarantor or any of the
Subsidiaries, other than those arising in the ordinary course of
business, which are material with respect to the Guarantor and
the Subsidiaries considered as one enterprise, and (C) there has
been no dividend or distribution of any kind declared, paid or
made by either the Issuer or the Guarantor on any class of its
capital stock.
(vi) Incorporation. The Issuer has been duly incorporated and is
validly existing as a legal entity in the form of a private
company with limited liability ("societe anonyme") under the laws
of Luxembourg, with full corporate power and authority to own its
material properties, to conduct its business as described in the
Offering Memorandum and to enter into and perform its obligations
under this Agreement, the Registration Rights Agreement, the
Indentures and the Notes. Holdings has been duly incorporated and
is validly existing as a legal entity in the form of a private
company
<PAGE> 8
with limited liability ("besloten vennootschap met beperkte aansprake
lijkheid") under the laws of the Netherlands with full corporate power
and authority to own its material properties, to conduct its business
as described in the Offering Memorandum and to enter into and perform
its obligations under this Agreement, the Indentures, the Escrow
Agreements, the Security Agreement, and the Limited Recourse
Guarantees. The Guarantor has been duly organized and is validly
existing as a limited liability company ("spolka z ograniczona
odpowiedzialnoscia") under the laws of the Republic of Poland, with
full power and authority to own its material properties and conduct
its business as described in the Offering Memorandum and to enter into
and perform its obligations under this Agreement, the Registration
Rights Agreement, the Indentures and the Guarantees. Neither the
Issuer nor Holdings nor the Guarantor is in liquidation, bankruptcy,
administration or receivership nor has any petition been presented for
the winding up of the Issuer, the Guarantor or Holdings.
(vii) Good Standing. Each of the Issuer, the Guarantor and Holdings is
duly qualified as a foreign corporation to transact business and
is in good standing in every jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure to so qualify or to be in good standing would not result
in a Material Adverse Effect. The Issuer has no subsidiaries, and
is the only subsidiary of Holdings. Holdings and PTC International
Finance B.V. are the only subsidiaries of the Guarantor. The
Guarantor has no subsidiaries other than Holdings, PTC
International Finance B.V. and the Issuer.
(viii) Capitalization. The authorized, issued and outstanding capital
stock of the Issuer is as set forth in the Offering Memorandum
under the heading "The Issuer", the authorized, issued and
outstanding capital stock of the Guarantor is as set forth in the
Offering Memorandum under the heading "Capitalization". The shares
of issued and outstanding capital stock of each of the Issuer, the
Guarantor and Holdings have been duly authorized and validly
issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Issuer, the Guarantor
or Holdings was issued by them in violation of the preemptive or
other similar rights of any securityholder of the Issuer, the
Guarantor or Holdings; there are no outstanding securities
convertible into or exchangeable for, or warrants, rights or
options to purchase from the Issuer, the Guarantor or Holdings,
shares of common stock or any other class of capital stock. Except
as otherwise disclosed in the Offering Memorandum, all of the
issued shares of each Subsidiary are owned directly or indirectly
by the Guarantor, free and clear of all liens, encumbrances,
equities or claims.
(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by each of the Issuer, the
Guarantor and Holdings.
(x) Authorization of the Indentures. Each of the Indentures has been
duly authorized by each of the Issuer, the Guarantor and Holdings
and at the Closing Time, will have been duly executed and delivered
by each of the Issuer, the Guarantor and Holdings and (assuming the
due authorization, execution and delivery in accordance with its
terms by the relevant Trustee) will constitute a valid and binding
agreement of each of the Issuer, the Guarantor and Holdings,
enforceable against each of them in accordance with its terms,
except as may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting creditors'
rights generally and is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law).
(xi) Authorization of Notes. The Euro Notes and Dollar Notes have been
duly authorized by the Issuer and, at the Closing Time, will have
been duly executed by the Issuer and, when authenticated, issued
and delivered in the manner provided for in the relevant
Indentures, and delivered against payment of the purchase price
therefor as provided in this Agreement will be duly and validly
issued and will constitute legal, valid and binding obligations of
the Issuer, enforceable against the Issuer in accordance with
their terms, except as may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
creditors' rights generally and is subject to general principles
of equity
<PAGE> 9
(regardless of whether enforcement is considered in a proceeding in
equity or at law), and will be in the form contemplated by, and
entitled to the benefits of, the Indentures and the Registration
Rights Agreement.
(xii) Authorization of the Escrow Agreements. Each of the Escrow
Agreements have been duly authorized by Holdings and, at the
Closing Time, will have been duly executed and delivered by
Holdings and will constitute a legal, valid and binding agreement
of Holdings enforceable in accordance with its terms, except as
may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting creditors'
rights generally and is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding
in equity or at law).
(xiii) Authorization of the Registration Rights Agreement. The
Registration Rights Agreement has been duly authorized and, at the
Closing Time, will have been duly executed and delivered by each
of the Issuer and the Guarantor and will constitute a legal, valid
and binding agreement of each of the Issuer and the Guarantor,
enforceable against each of the Issuer and the Guarantor in
accordance with its terms, except as may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting creditors' rights generally and is subject to general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and except that
any rights to indemnification and contribution may be limited by
U.S. Federal securities laws and U.S. public policy
considerations.
(xiv) Authorization of the Guarantees. Each of the Guarantees has been
duly authorized and, at the Closing Time, will have been duly
executed and delivered by the Guarantor and will constitute a
legal, valid and binding agreement of the Guarantor, enforceable
against the Guarantor in accordance with its terms, except as may
be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting creditors'
rights generally and is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law).
(xv) Authorization of the Security Agreements. The Security Agreements
have been duly authorized and, at Closing Time, will have been duly
executed and delivered by Holdings and will each constitute a
legal, valid and binding agreement of Holdings, enforceable against
Holdings in accordance with their terms, except as may be limited
by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting creditors' rights generally and is subject
to general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law).
(xvi) Authorization of the Limited Recourse Guarantees. Each of the
Limited Recourse Guarantees has been duly authorized and, at the
Closing Time, will have been duly executed and delivered by
Holdings and will constitute a valid and binding agreement of
Holdings, enforceable against Holdings in accordance with its
terms, except as may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
creditors' rights generally and is subject to general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(xvii) Description of the Indentures, the Notes, the Escrow Agreements,
the Registration Rights Agreement, the Security Agreements, the
Guarantees and the Limited Recourse Guarantees. The Indentures,
the Notes, the Escrow Agreements, the Registration Rights
Agreement, the Security Agreements, the Guarantees and the Limited
Recourse Guarantees will conform in all material respects to the
respective statements relating thereto contained in the Offering
Memorandum and will be in substantially the respective forms
previously delivered to the Initial Purchasers.
(xviii) Absence of Defaults and Conflicts. Except as otherwise set forth
in the Offering Memorandum, the (A) issuance and sale of the Notes
to the Initial Purchasers by the Issuer pursuant to this
<PAGE> 10
Agreement, (B) execution, delivery and performance of the Registration
Rights Agreement by each of the Issuer And the Guarantor, (C)
execution, delivery and performance of this Agreement, and the
Indentures by each of the Issuer, the Guarantor and Holdings, (D) the
execution, delivery and performance of the Guarantees by the
Guarantor, (E) the execution, delivery and performance of the Escrow
Agreements, the Security Agreements and the Limited Recourse
Guarantees by Holdings, (F) compliance by each of the Issuer, the
Guarantor and Holdings with all the provisions hereof and thereof, and
(G) consummation of the transactions contemplated hereby and thereby
by each of the Issuer, the Guarantor and Holdings do not require any
consent, authorization, approval or order of, or filing or
registration with or notice to, any court, regulatory body, central
bank, administrative agency or other governmental body (except as many
be required under blue sky laws of the various states of the United
States and those consents, authorizations, approvals, orders, filing,
registrations or notices which have been obtained or made, as the case
may be, or may be obtained or made, as the case may be, pursuant to
the Registration Rights Agreement) and do not conflict with, or
constitute a breach or a violation of any of the terms or provisions
of, or a default under, the memorandum or articles of association or
other constitutive documents of the Issuer, the Guarantor or Holdings,
or any material debenture, note or other evidence of indebtedness or
any material indenture, agreement, or other instrument to which they
may be party or by which they may be bound or to which any of their
respective properties is subject or any law, statute, rule,
regulation, judgment or decree applicable to any of them.
(xix) Absence of Labor Dispute. No labor dispute with the employees of
the Guarantor or the Subsidiaries exists or, to the knowledge of
the Guarantor or the Subsidiaries, is imminent and neither the
Guarantor nor the Subsidiaries is aware of any existing or imminent
labor disturbance by the employees of any of their principal
suppliers, manufacturers, customers or contractors, which, in
either case, may reasonably be expected to result in a Material
Adverse Effect. Other than agreements with individual employees,
there are no general or individual labor agreements or
arrangements, or customs or practices of the Guarantor or the
Subsidiaries and there has been no proposal to establish any such
agreement, arrangement, custom or practice which could reasonably
be expected to result in a Material Adverse Effect.
(xx) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or by any court or governmental
agency or body, domestic or foreign, now pending, or, to the
knowledge of the Issuer, the Guarantor or Holdings, threatened,
against or affecting the Guarantor or any of the Subsidiaries, or
to which the Guarantor or any of the Subsidiaries is a party, which
might reasonably be expected to result in a Material Adverse
Effect, or which might reasonably be expected to adversely affect
the properties or assets of the Guarantor or any of the
Subsidiaries in a manner that is material and adverse to the
Guarantor and the Subsidiaries considered as one enterprise or the
consummation of this Agreement, the Indentures, the Notes, the
Escrow Agreements, the Registration Rights Agreement, the Security
Agreements, the Guarantees and the Limited Recourse Guarantees or
the performance by the Issuer, the Guarantor or Holdings of their
obligations hereunder or thereunder. The aggregate of all pending
legal or governmental proceedings to which the Guarantor or any
Subsidiary is a party or of which any of their respective property
or assets is the subject which are not described in the Offering
Memorandum, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.
(xxi) Possession of Intellectual Property. The Guarantor and the
Subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them, and
neither the Guarantor nor any of the Subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property
<PAGE> 11
invalid or inadequate to protect the interest of the Guarantor or any
of the Subsidiaries therein, and which infringement or conflict (if
the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result in
a Material Adverse Effect.
(xxii) Absence of Further Requirements. Except for permits that have
been obtained, no filing with, or authorization, approval,
consent, license, order, registration, qualification or decree of,
any court or governmental authority or agency is necessary or
required (A) for the performance by the Issuer, the Guarantor or
Holdings of their respective obligations hereunder, in connection
with the offering, issuance or sale of the Notes hereunder or the
consummation of the Offering or any of the other transactions
contemplated by this Agreement, the Indentures, the Escrow
Agreements, the Registration Rights Agreement, the Security
Agreements, the Guarantees, the Limited Recourse Guarantees or the
Offering Memorandum, or (B) to permit the Issuer, the Guarantor or
Holdings to (1) effect payments of principal of and premium and
interest on the Notes and, if issued, the Exchange Notes referred
to in the Registration Rights Agreement, or (2) perform their
other obligations under the Indentures.
(xxiii) Possession of Licenses and Permits. The Guarantor and the
Subsidiaries possess such permits, licenses, approvals,
concessions, consents and other authorizations (including, without
limitation, all permits required for the operation of the business
of the Guarantor and the Subsidiaries by the Republic of Poland)
(collectively, "Governmental Licenses") issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies,
other governmental authorities or self regulatory organizations
necessary to conduct the business now operated by them except for
such Governmental Licenses the failure of which to obtain,
maintain or possess by the Guarantor and its Subsidiaries would
not have a Material Adverse Effect; the Guarantor and the
Subsidiaries are in compliance with the terms and conditions of
all such Governmental Licenses, except where the failure to so
comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in
full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses
to be in full force and effect would not have a Material Adverse
Effect; and neither the Guarantor nor any of the Subsidiaries has
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling
or finding, would result in a Material Adverse Effect.
(xxiv) Title to Property. The Guarantor or the Subsidiaries have good and
marketable title to all real property owned by the Guarantor or the
Subsidiaries, as the case may be, and good title to all other
properties owned by them, in each case, free and clear of all
mortgages, pledges, liens, security interests, claims, restrictions
or encumbrances of any kind except such as (A) are described in the
Offering Memorandum or (B) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the
Guarantor or any of the Subsidiaries; and all of the leases and
subleases material to the business of the Guarantor and the
Subsidiaries, considered as one enterprise, and under which the
Guarantor or any of the Subsidiaries holds properties described in
the Offering Memorandum, are in full force and effect, and neither
the Guarantor nor any of the Subsidiaries has any notice of any
material claim of any sort that has been asserted by anyone adverse
to the rights of the Guarantor or any of the Subsidiaries under any
of the leases or subleases mentioned above, or affecting or
questioning the rights of such Guarantor or any Subsidiary to the
continued possession of the leased or subleased premises under any
such lease or sublease.
(xxv) No Withholding Tax. Except as disclosed in the Offering
Memorandum, under current laws and regulations (and interpretations
thereof) of the Republic of Poland, The Netherlands and Luxembourg
and any political subdivision thereof, all payments due or made on
the Guarantees or the Limited Recourse Guarantees to holders of
Notes or Exchange Notes (as defined in the Indentures) who are
non-residents of the Republic of Poland, Luxembourg or The
Netherlands and do not have a branch, agency or permanent
establishment nor carry on any trade in the Republic of Poland,
Luxembourg or The Netherlands to which the holding of Notes or
Exchange Notes is
<PAGE> 12
attributable, will not be subject to income, withholding or other
taxes under laws and regulations of the Republic of Poland, Luxembourg
or The Netherlands or any political subdivision or taxing authority
thereof or therein and will otherwise be free and clear of any other
tax, duty, withholding or deduction in the Republic of Poland,
Luxembourg and The Netherlands or any political subdivision or taxing
authority thereof or therein or without the necessity of obtaining any
governmental authorization in the Republic of Poland, Luxembourg and
The Netherlands or any political subdivision or taxing authority
thereof or therein.
(xxvi) Tax Returns. All income and franchise tax returns of the Guarantor
and any of the Subsidiaries, required to be filed by the applicable
laws of Luxembourg, The Netherlands, Poland and any other
jurisdiction in which the Guarantor and its Subsidiaries conduct
their business have been filed and all material taxes shown by such
returns or otherwise assessed, which are due and payable, have been
paid, except assessments against which appeals have been or will be
promptly taken and as to which adequate reserves have been
provided. Each of the Guarantor and the Subsidiaries has filed all
other tax returns that are required to have been filed by it
pursuant to applicable law except insofar as the failure to file
such returns could not have a Material Adverse Effect, and has paid
all taxes due pursuant to such returns or pursuant to any
assessment received by the Guarantor and the Subsidiaries, except
for such taxes, if any, as are being contested in good faith and by
appropriate proceedings and as to which adequate reserves have been
provided. The charges, accruals and reserves on the books of the
Guarantor or any of the Subsidiaries, as the case may be, in
respect of any income and corporation tax liability for any years
not finally determined are adequate to meet any assessments or
re-assessments for additional income tax for any years not finally
determined, except to the extent of any inadequacy that would not
have a Material Adverse Effect.
(xxvii) Investment Company Act. Neither the Issuer nor the Guarantor nor
Holdings is, and upon the issuance and sale of the Notes and the
issuance of the Guarantees and the Limited Recourse Guarantees as
herein contemplated and the application of the net proceeds from
the issuance and sale of the Notes as described in the Offering
Memorandum will not be, an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(xxviii) PFIC Status. Neither the Issuer nor the Guarantor nor Holdings
believes that it is, nor do any of them expect to become, (A)
passive foreign investment companies within the meaning of Section
1296 of the Internal Revenue Code of 1986, as amended (the
"Code"), or (B) foreign personal holding companies within the
meaning of Section 552 of the Code.
(xxix) Internal Controls. The Issuer, the Guarantor and Holdings maintain
a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with IAS and to maintain
accountability of assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and
(D) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(xxx) No Additional Documents. There are no contracts or documents of a
character that would be required to be described in the Offering
Memorandum, if it were a prospectus filed as part of a registration
statement on Form F-1 under the Securities Act, that are not
described as would be so required. All such contracts so described
in the Offering Memorandum to which the Guarantor or any of the
Subsidiaries is party have been duly authorized, executed and
delivered by the Guarantor or the relevant Subsidiary and
constitute valid and binding agreements of the Guarantor or such
Subsidiary.
(xxxi) Insurance. The Guarantor and the Subsidiaries have insurance
covering their respective properties, operations, personnel and
businesses, which insurance the Guarantor believes to be
appropriate and is in amounts and insures against such losses or
risks as are customary in the
<PAGE> 13
industry in which the Guarantor and the Subsidiaries operate. None of
the Guarantor or any of the Subsidiaries has received notice from any
insurer or agent of such insurer that capital improvements or other
expenditures are required or necessary to be made in order to continue
such insurance except such notices as are not reasonably likely to
have a Material Adverse Effect.
(xxxii) Taxes on Subsidiary Indebtedness. Except as described in the
Offering Memorandum, as of the date hereof, no material income,
stamp or other taxes or levies, imposts, deductions, charges,
compulsory loans or withholdings whatsoever are or will be, under
applicable law in the Republic of Poland, under applicable law in
The Netherlands or under applicable law in Luxembourg, imposed,
assessed, levied or collected by the Republic of Poland, The
Netherlands or Luxembourg, or any political subdivision or taxing
authority thereof or therein or on or in respect of principal,
interest, premiums, penalties or other amounts payable under any
indebtedness (A) of the Guarantor held by the Issuer pursuant to
the Guarantees or (B) of Holdings held by the Issuer pursuant to
the Limited Recourse Guarantees.
(xxxiii) Rule 144A Eligibility. The Notes are eligible for resale pursuant
to Rule 144A under the Securities Act and will not be, at the
Closing Time, of the same class as securities held on a national
securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or quoted in
a U.S. automated inter-dealer quotation system.
(xxxiv) General Solicitation. None of the Issuer, its Affiliates or any
person acting on its or their behalf (other than the Initial
Purchasers and their respective Affiliates and any person acting on
their behalf, as to whom the Issuer makes no representation) has
engaged, in connection with the offering of the Notes, in any form
of general solicitation or general advertising within the meaning
of Rule 502(c) of the Securities Act or in any manner involving a
public offering within the meaning of Section 4(2) of the
Securities Act.
(xxxv) No Substantial U.S. Market Interest or Directed Selling
Efforts. With respect to those Notes sold in reliance on
Regulation S, (A) neither the Issuer nor the Guarantor nor Holdings
reasonably believes there is "substantial U.S. market interest" (as
such term is defined in Regulation S) in the Notes at the
commencement of the Offering, (B) none of the Issuer, the
Guarantor, Holdings, their Affiliates or any person acting on its
or their behalf (other than the Initial Purchasers and their
respective Affiliates and anyone acting on their behalf, as to whom
the Issuer, the Guarantor and Holdings make no representation) has
engaged in any directed selling efforts (as that term is defined in
Regulation S) in the United States, and (C) each of the Issuer and
its Affiliates and any person acting on its or their behalf (other
than the Initial Purchasers and their respective Affiliates and
anyone acting on their behalf, as to whom the Issuer makes no
representation) has complied with the offering restrictions
requirement of Regulation S.
(xxxvi) No Registration Required. Subject to compliance by the Initial
Purchasers with the representations and warranties set forth in
Section 2 hereof and the procedures set forth in Section 6 hereof,
it is not necessary in connection with the offer, sale and delivery
of the Notes to the Initial Purchasers, and to each Subsequent
Purchaser in the manner contemplated by this Agreement and the
Offering Memorandum to register the Notes under the Securities Act
or to qualify the Indentures under the Trust Indenture Act of 1939,
as amended (the "1939 Act").
(xxxvii) No Stabilization. Except as described in the Offering Memorandum,
none of the Issuer, the Guarantor or Holdings or any of their
officers, directors or controlling persons has taken or will take,
directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or
manipulation of the price of the Notes to facilitate the sale or
resale of the Notes.
(xxxviii) Forward-Looking Statement. No forward-looking statement (within
the meaning of Section 27A of the Securities Act and Section 21E
of the Exchange Act) contained in the Preliminary Offering
Memorandum or the Offering Memorandum has been made or reaffirmed
without a reasonable basis or has been disclosed other than in
good faith.
<PAGE> 14
(xxxix) Luxembourg Listing. Application has been made to list the Notes on
the Luxembourg Stock Exchange and, in connection therewith, the
Issuer has caused to be prepared and submitted to the Luxembourg
Stock Exchange a listing application with respect to the Notes (the
"Listing Application"). The Listing Application (A) complies in all
material respects with the requirements of the Luxembourg Stock
Exchange and (B) has been submitted to the Luxembourg Stock
Exchange. There is no requirement of the Luxembourg Stock Exchange
to deliver any document other than the Offering Memorandum to
prospective purchasers or purchasers of Notes from the Initial
Purchasers in connection with the offer and sale by the Initial
Purchasers of the Notes.
(x1) Submission to Jurisdiction. Each of the Issuer, the Guarantor and
Holdings has the power to submit, and pursuant to this Agreement,
the Indentures, the Registration Rights Agreement, the Escrow
Agreement, the Security Agreements, the Guarantees, the Limited
Recourse Guarantees and the Notes, as applicable, has legally,
validly, effectively and irrevocably submitted to the non-
exclusive jurisdiction of the New York courts and has validly and
irrevocably appointed CT Corporation System as its authorized agent
for the purpose described in Section 14.09 of each of the
Indentures.
(xli) No Liquidation. No proceedings have been commenced for the
purposes of, and no judgment has been rendered for, the
liquidation, bankruptcy or winding-up of the Guarantor or any of
the Subsidiaries.
(xlii) Offering Material. The Issuer has not distributed and, prior to
the later to occur of (A) the Closing Time and (B) completion of
the distribution of the Notes, will not distribute any offering
material in connection with the offering and sale of the Notes
other than the Offering Memorandum, any preliminary Offering
Memorandum, or other materials, if any, permitted by the
Securities Act and approved by the Initial Purchasers.
(xliii) Year 2000. The Guarantor has reviewed its operations and that of
the Subsidiaries to evaluate the extent to which their respective
businesses or operations will be affected by the Year 2000
Problem. The Year 2000 problem means any significant risk that
computer hardware or software applications used by the Guarantor
and the Subsidiaries will not, in the case of dates or time
periods occurring after December 31, 1999, function at least as
effectively as in the case of dates or time periods occurring
prior to January 1, 2000. As a result of such review, (A) the
Guarantor has no reason to believe, and does not believe, that (1)
there are any issues related to their preparedness to address the
Year 2000 Problem that are of a character required to be described
or referred to in the Offering Memorandum which have not been
accurately described in the Offering Memorandum and (2) except as
otherwise disclosed in the Offering Memorandum, the Year 2000
Problem will have a Material Adverse Effect or result in any
material loss or interference with the business or operations of
the Guarantor and the Subsidiaries, taken as a whole; and (B) the
Guarantor reasonably believes, after due inquiry, that, except as
otherwise disclosed in the Offering Memorandum, the suppliers,
vendors, customers or other material third parties used or served
by the Guarantor and the Subsidiaries which are material to the
earnings, business affairs or business prospects of the Guarantor
and the Subsidiaries, taken as a whole, are addressing or will
address the Year 2000 Problem in a timely manner, except to the
extent that a failure to address the Year 2000 Problem by any
supplier, vendor, customer or material third party would not have
a Material Adverse Effect.
(xliv) Collateral. Upon the acquisition by the relevant Collateral Agent
of a security entitlement in an Escrow Account, in accordance with
the terms of the relevant Escrow Agreement, the pledge of and grant
of a security interest in the Collateral (as defined in the
relevant Escrow Agreement) securing the payment of the Obligations
(as defined in the relevant Escrow Agreement) in favor of the
Collateral Agent will constitute a first priority perfected
security interest in such Collateral, enforceable as such against
all creditors of Holdings, the Issuer or the Guarantor (and any
persons purporting to purchase any of the Collateral from Holdings,
the Issuer or the Guarantor).
(xlv) No Sales Except in Accordance with the Dutch Securities Act. None
of the Issuer, the Guarantor or Holdings (A) has offered or sold
nor shall they offer or sell any Notes, whether directly or
indirectly,
<PAGE> 15
as part of the Offering or at any time thereafter, to any individual
or legal entity anywhere in the world other than to individuals or
legal entities who or which trade or invest in securities in the
conduct of their profession or business within the meaning of the
Exemption Regulation of 21 December 1995 (as amended) issued pursuant
to The Netherlands' Securities Markets Supervision Act 1995 ("Wet
Toezicht Effectenverkeer 1995", hereinafter the "Dutch Securities
Act") (which includes banks, brokers, securities institutions,
insurance companies, pension funds, investment institutions, other
institutional investors and other parties, including treasury
departments of commercial enterprises and finance companies of groups,
which are regularly active in the financial markets in a professional
manner) and (B) has mentioned and will mention upon making any offer
of the Notes and in all offer advertisements, publications and other
documents in which an offer of the Notes is made or a forthcoming
offer is announced that the offer is exclusively made to the said
individuals or legal entities. It is understood that these
restrictions shall cease to apply if Holdings becomes the obligor with
respect to the Notes and the Securities Board of The Netherlands
(Stichting Toezicht Effectenverkeer) shall have granted a dispensation
(ontheffing) to a registration statement filed with the Commission in
connection with an exchange offer for the Notes.
(b) Officer's Certificates. Any certificate signed by any Management or
Supervisory board member, officer or authorized representative of the Guarantor
or any of the Subsidiaries delivered to the Initial Purchasers or to counsel for
the Initial Purchasers shall be deemed a representation and warranty by the
Issuer, the Guarantor or Holdings, as the case may be, to each Initial Purchaser
as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO INITIAL PURCHASERS; CLOSING.
(a) On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Issuer agrees to
sell to each Initial Purchaser, severally and not jointly, and each Initial
Purchaser, severally and not jointly, agrees to purchase from the Issuer, at the
price set forth in Schedule B, the aggregate principal amount of Notes set forth
in Schedule A opposite the name of such Initial Purchasers plus any additional
principal amount of Notes which such Initial Purchasers may become obligated to
purchase pursuant to the provisions of Section 11 hereof.
(b) Payment of the purchase price for the Notes shall be made at the
offices of Clifford Chance, 200 Aldersgate Street, London EC1A 4JJ, United
Kingdom, or at such other place as shall be agreed upon by the Initial
Purchasers, the Issuer and the Guarantor, at 9:00 A.M. (London time) on the
fifth business day after the date hereof (unless postponed in accordance with
the provisions of Section 11), or such other time not later than ten business
days after such date as shall be agreed upon by the Initial Purchasers, the
Issuer and the Guarantor (such time and date of payment and delivery being
herein called the "Closing Time").
Payment shall be made to the Issuer by wire transfer of immediately
available funds to a bank account designated by the Issuer or the Guarantor,
against delivery to the Initial Purchaser for the respective accounts of the
Initial Purchasers of certificates for the Notes to be purchased by them. Each
of Merrill Lynch International and Salomon Brothers International Limited,
individually and not as representative of the Initial Purchasers, may (but shall
not be obligated to) make payment of the purchase price for the Notes to be
purchased by any Initial Purchaser whose funds have not been received by the
Closing Time, but such payment shall not relieve such Initial Purchaser from its
obligations hereunder.
Qualified Institutional Buyer. Each Initial Purchaser hereby represents
and warrants to, and agrees with, the Issuer that it is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act (a
"Qualified Institutional Buyer").
Denominations; Registration. Certificates for the Notes shall be in such
denominations (*1,000 or $1,000, as the case may be, principal amount at
maturity or integral multiples thereof), and registered in such names as the
Initial Purchasers may request in writing at least two full business days before
the Closing Time. The Notes, which may be in temporary form, will be made
available for examination and packaging by the Initial Purchasers in The City of
London not later than 5:00 P.M. on the last business day prior to the Closing
Time.
<PAGE> 16
SECTION 3. COVENANTS OF THE ISSUER, THE GUARANTOR AND HOLDINGS. Each of
the Issuer, the Guarantor and Holdings covenants with each Initial Purchaser as
follows:
(a) Offering Memorandum. The Issuer or the Guarantor, as promptly as
possible, will furnish to each Initial Purchaser, without charge,
such number of copies of the Preliminary Offering Memorandum, the
Final Offering Memorandum and any amendments and supplements thereto
as such Initial Purchaser may reasonably request.
(b) Notice and Effect of Material Events. The Issuer, the Guarantor or
Holdings will immediately notify each Initial Purchaser and confirm
such notice in writing, of (i) any filing made by the Issuer, the
Guarantor or Holdings of information relating to the Offering with
any securities exchange or any other regulatory body in the United
States, Luxembourg or any other jurisdiction, and (ii) prior to the
completion of the placement of the Notes by the Initial Purchasers,
of any material changes in or affecting the earnings or business
affairs or business prospects of the Guarantor or any of the
Subsidiaries which (x) make any statement in the Offering Memorandum
false or misleading in any material respect, or (y) are not disclosed
in the Offering Memorandum. In such event or if during such time any
event shall occur as a result of which it is necessary, in the
opinion of any of the Issuer, Guarantor, Holdings, the Initial
Purchasers or legal counsel for the Issuer, Guarantor or Holdings or
for the Initial Purchasers, to amend or supplement the Offering
Memorandum in order that the Offering Memorandum not include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in
the light of the circumstances then existing or, if, in the opinion
of the Initial Purchasers' legal counsel or legal counsel for the
Issuer, the Guarantor or Holdings, it is necessary to amend or
supplement the Offering Memorandum to comply with applicable law, the
Issuer will forthwith amend or supplement, at its own expense, the
Offering Memorandum by preparing and furnishing to each Initial
Purchaser an amendment or amendments of, or a supplement or
supplements to, the Offering Memorandum (in form and substance
satisfactory in the reasonable opinion of counsel for the Initial
Purchasers) so that, as so amended or supplemented, the Offering
Memorandum will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances then existing,
not misleading or so that such Offering Memorandum as so amended or
supplemented will comply with applicable law, as the case may be, and
furnish each Initial Purchaser such number of copies as such Initial
Purchaser may reasonably request and each Initial Purchaser shall
forthwith furnish such amendment or supplement to each party to which
it has sold or intends to sell the Notes.
(c) Amendment to Offering Memorandum and Supplements. The Issuer or the
Guarantor will advise each Initial Purchaser as soon as possible of
any proposal to amend or supplement the Offering Memorandum and will
not effect such amendment without the Initial Purchasers' prior
written consent. Neither the consent of the Initial Purchasers, nor
the Initial Purchasers' delivery of any such amendment or supplement,
shall constitute a waiver of any of the conditions set forth in
Section 5 hereof.
(d) Qualification of Notes for Offer and Sale. The Issuer, the Guarantor
and Holdings will use their reasonable efforts, in cooperation with
the Initial Purchasers, to qualify the Notes for offering and sale
under the applicable securities laws of such countries, states of the
United States and other jurisdictions as the Initial Purchasers may
designate and will maintain such qualifications in effect as long as
required for the sale of the Notes. The Issuer, the Guarantor and
Holdings will file such statements and reports as may be required by
the laws of each jurisdiction in which the Notes have been qualified
as above provided. The Issuer, the Guarantor and Holdings will also
supply such information as is necessary for the determination of the
legality of the Notes for investment under the laws of such
jurisdictions as the Initial Purchasers may reasonably request.
(e) No General Solicitation. Except in connection with the Exchange
Notes as contemplated in the Registration Rights Agreement, neither
the Issuer nor the Guarantor nor Holdings (i) will solicit or to
cause any of their Affiliates or any person acting on its or their
behalf (other than the Initial Purchasers
<PAGE> 17
and their respective Affiliates and any person acting on their behalf,
as to whom the Issuer, the Guarantor and Holdings make no
representation) to solicit any offer to buy or offer to sell the Notes
by means of any form of general solicitation or general advertising
(within the meaning of Rule 502(c) of the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2) of
the Securities Act and (ii) will not, and will not request their
Affiliates to, offer, sell or solicit offers to buy or otherwise
negotiate in respect of any Security (as defined in the Securities Act)
the offering of which security could be integrated with the sale of the
Notes in a manner that would require the registration of any of the
Notes under the Securities Act.
(f) Rating of Notes. The Issuer, the Guarantor and Holdings shall take
all reasonable action necessary to enable Standard & Poors Ratings
Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), and
Moody's Investors Service, Inc. ("Moody's") to provide their
respective credit ratings of the Notes.
(g) Luxembourg Stock Exchange Approval. The Issuer, the Guarantor and
Holdings will use their best efforts to effect the listing of the
Notes and the Exchange Securities on the Luxembourg Stock Exchange.
(h) DTC and Euroclear. The Issuer, the Guarantor and Holdings will
cooperate with the Initial Purchasers and use their best efforts to
permit the Notes to be eligible for clearance and settlement through
the facilities of DTC and/or Euroclear and/or Cedelbank, as the case
may be.
(i) Investment Company. Neither the Issuer nor the Guarantor nor
Holdings will become an open-end investment company, a unit
investment trust or a face-amount certificate company required to be
registered under the Investment Company Act, and neither will any of
them become a closed-end investment company required to be
registered, but not registered, thereunder.
(j) Use of Proceeds. The Issuer, the Guarantor and Holdings will each
use the net proceeds received by it from the sale of the Notes in the
manner specified in the Offering Memorandum under "Use of Proceeds."
(k) Directed Selling Efforts. Neither the Issuer nor the Guarantor nor
Holdings will engage nor cause any of their Affiliates or any person
acting on its or their behalf (other than the Initial Purchaser, and
any of their Affiliates, or any person acting on their behalf) to
engage in any directed selling efforts (as such term is defined under
Regulation S) in the United States with respect to the Notes, and the
Issuer, the Guarantor and Holdings will comply and request such
affiliate and such other person acting on its or their behalf (except
as aforesaid) to comply with the offering restrictions requirement of
Regulation S.
(l) Press Releases. Neither the Issuer nor the Guarantor nor Holdings
will issue any press release or other communication directly or
indirectly or hold any press conference with respect to the Guarantor
or any of the Subsidiaries, the condition, financial or otherwise
(except for routine oral marketing communications in the ordinary
course of business and consistent with past practice), or the
earnings, business affairs or business prospects of the Guarantor or
any of the Subsidiaries, without the prior consent of the Initial
Purchasers, unless (i) in the period beginning prior to the Closing
Time and for 45 days subsequent to the Closing Time, in the judgment
of the Guarantor or the Issuer and its respective legal counsel, and
after notification to the Initial Purchasers, such press release or
communication is required by law or except as issued in accordance
with Rule 135c of the Securities Act and (ii) during the period
beginning 46 days subsequent to the Closing Time and ending 90 days
subsequent to the Closing Time, in the judgment of the Guarantor or
the Issuer and its respective legal counsel, and after notification
to the Initial Purchasers, except as issued in accordance with the
Securities Act.
(m) Regulation M. In connection with the offering of the Notes, until the
Initial Purchasers shall have notified the Issuer of the completion of
the resale of the Notes, neither the Issuer nor the Guarantor nor
Holdings will cause their affiliated purchasers (as defined in
Regulation M under the Exchange Act) to, either alone or with one or
more other persons, bid for or purchase, for any account in which it
or
<PAGE> 18
any of its affiliated purchasers has a beneficial interest, any Notes,
or attempt to induce any person to purchase any Notes; and neither the
Issuer nor the Guarantor nor Holdings will cause their affiliated
purchasers to, make bids or purchase for the purpose of creating actual,
or apparent, active trading in or of raising the price of the Notes.
(n) Restriction on Sale of Notes. During a period of 180 days from the
date of the Offering Memorandum, neither the Issuer nor the Guarantor
nor Holdings will, without the prior written consent of the Initial
Purchasers, directly or indirectly, issue, sell, offer or agree to
sell, grant any option for the sale of, or otherwise dispose of, any
other debt securities of the Issuer, the Guarantor or Holdings or
securities of the Issuer, the Guarantor or Holdings that are
convertible into, or exchangeable for, the Notes or such other debt
securities.
(o) PORTAL. The Issuer, the Guarantor and Holdings will use their best
efforts to permit the Notes to be designated PORTAL securities in
accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. ("NASD") relating to trading
in the PORTAL Market.
(p) Restriction on Resale of Notes. Neither the Issuer nor the Guarantor
nor Holdings will, nor will they permit any of their Affiliates under
their control, resell any Notes that have been acquired by any of
them.
SECTION 4. PAYMENT OF EXPENSES. (a) Expenses. Each of the Issuer, the
Guarantor and Holdings, jointly and severally, whether or not any sale of the
Notes is consummated, shall pay all expenses incident to the performance of
their obligations under this Agreement including (i) the preparation, printing
and filing of the Offering Memorandum (including financial statements) and each
amendment or supplement thereto, (ii) the preparation, printing and delivery to
the Initial Purchasers of this Agreement, any Agreement among Initial
Purchasers, the Indentures, the Registration Rights Agreement, the Escrow
Agreements, the Security Agreements, the Guarantees, the Limited Recourse
Guarantees and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Notes, (iii) the
preparation, issuance and delivery of the certificates for the Notes to the
Initial Purchasers, including any charges of DTC, Euroclear or Cedelbank in
connection therewith, (iv) the fees and disbursements of the counsel,
accountants and other advisors of the Issuer, the Guarantor and Holdings, (v)
the qualification of the Notes under the securities laws in accordance with the
provisions of Section 3(d) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Initial Purchasers in connection therewith
and in connection with the preparation, printing and delivery of the Blue Sky
Survey, any supplement thereto and any Legal Investment Survey, (vi) the fees
and expenses of the Trustees, registrars and paying agents, including the fees
and disbursements of counsel for such persons in connection with the Indentures
and the Notes; (vii) any fees payable to rating agencies in connection with the
rating of the Notes; (viii) the filing fees incident to, and the reasonable
disbursements of United States counsel to the Initial Purchasers in connection
with, the review by the NASD with respect to the initial and continued
designation of the Notes as PORTAL securities under the PORTAL Market Rules
pursuant to NASD Rule 5322 and (ix) any fees charged by the Luxembourg Stock
Exchange in connection with the listing of the Notes on the Luxembourg Stock
Exchange and expenses incurred with respect to documentation prepared relating
thereto.
(b) Termination of Agreement. If this Agreement is terminated by the
Initial Purchasers in accordance with the provisions of Section 5 or 10(a)(i),
the Issuer, the Guarantor and Holdings shall reimburse the Initial Purchasers
for all their reasonable out-of-pocket expenses, including the reasonable fees
and disbursements of counsel for the Initial Purchasers.
SECTION 5. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations
of the Initial Purchasers hereunder are subject to the accuracy of the
representations and warranties of the Issuer, the Guarantor and Holdings
contained in Section 1 hereof or in certificates of any Management or
Supervisory board member, officer of the Issuer, the Guarantor or Holdings
delivered pursuant to the provisions hereof, to the performance in all material
respects by the Issuer, the Guarantor and Holdings of their covenants and other
obligations hereunder, and to the following further conditions:
<PAGE> 19
(a) Offering Memorandum. The Offering Memorandum (and any amendments or
supplements thereto) shall have been printed and copies distributed to the
Initial Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial Purchasers may
agree.
(b) Opinions of Counsel for the Issuer and the Guarantor. (i) Opinion of
Issuer's U.S. Counsel. At the Closing Time, the Initial Purchasers shall have
received the favorable opinion, dated as of the Closing Time, of Clifford
Chance, U.S. counsel for the Issuer, the Guarantor and Holdings, in form and
substance satisfactory to counsel for the Initial Purchasers together with
signed or reproduced copies of such letter for each of the other Initial
Purchasers, to the effect set forth in Exhibit B hereto and to such further
effect as counsel to the Initial Purchasers may reasonably request.
(ii) Opinion of Guarantor's Polish Counsel. At the Closing Time, the
Initial Purchasers shall have received the favorable opinion, dated
as of the Closing Time, of Clifford Chance, Polish counsel for the
Guarantor in form and substance satisfactory to counsel for the
Initial Purchasers, together with signed or reproduced copies of
such letter for each of the other Initial Purchasers, to the effect
set forth in Exhibit C hereto and to such further effect as counsel
to the Initial Purchasers may reasonably request.
(iii) Opinion of Holdings's Netherlands Counsel. At the Closing Time, the
Initial Purchasers shall have received the favorable opinion, dated
as of the Closing Time, of Clifford Chance, Netherlands counsel to
Holdings, in form and substance satisfactory to counsel for the
Initial Purchasers together with signed or reproduced copies of such
letter for each of the other Initial Purchasers, to the effect set
forth in Exhibit D hereto and to such further effect as counsel to
the Initial Purchasers may reasonably request.
(iv) Opinion of Issuer's Luxembourg Counsel. At the Closing Time, the
Initial Purchasers shall have received the favorable opinion, dated as
of the Closing Time, of Faltz & Kremer, Luxembourg counsel to the
Issuer, in form and substance satisfactory to counsel for the Initial
Purchasers together with signed or reproduced copies of such letter
for each of the other Initial Purchasers, to the effect set forth in
Exhibit E hereto and to such further effect as counsel to the Initial
Purchasers may reasonably request.
(c) Opinion of United States Counsel for the Initial Purchasers. At the
Closing Time, the Initial Purchasers shall have received the favorable opinion,
dated as of the Closing Time, of Shearman & Sterling, U.S. counsel for the
Initial Purchasers, together with signed or reproduced copies of such letter for
each of the other Initial Purchasers, with respect to certain of the matters set
forth in Exhibit B hereto.
(d) Officers' Certificate. At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Guarantor and the Subsidiaries considered as one
enterprise, and the Initial Purchasers shall have received a certificate from
each of an authorized representative of each of the Issuer, Holdings and members
of the relevant Supervisory or Management Board authorized to sign on behalf of
the Guarantor and of the chief operating officer or chief financial officer of
the Guarantor respectively, dated as of the Closing Time, to the effect that (i)
there has been no such material adverse change, (ii) the representations and
warranties in Section 1 hereof are true and correct with the same force and
effect as though expressly made at and as of the Closing Time, and (iii) each of
the Issuer, the Guarantor and Holdings has complied on all material respects
with all agreements and satisfied in all material respects all conditions on its
part to be performed or satisfied at or prior to the Closing Time.
(e) Accountants' Comfort Letter. At the time of the execution of this
Agreement, the Initial Purchasers shall have received from Arthur Andersen Sp. z
o.o. a letter dated such date, in form and substance satisfactory to the Initial
Purchasers, together with signed or reproduced copies of such letter for each of
the other Initial Purchasers to the effect set forth in Exhibit F hereto
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to initial purchasers with respect to the
financial statements and certain financial information contained in the Offering
Memorandum.
<PAGE> 20
(f) Bring-Down Comfort Letter. At the Closing Time, the Initial
Purchasers shall have received from Arthur Andersen Sp. z o.o. a letter, dated
as of the Closing Time, to the effect that they reaffirm the statements made in
the letter furnished pursuant to subsection (e) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to Closing Time.
(g) Luxembourg Listing. At the Closing Time, the Notes shall have been
approved for listing on the Luxembourg Stock Exchange.
(h) Clearance and Settlement. (i) DTC shall have approved the forms of
the Rule 144A Global Securities (as defined in the Indentures) and (ii) Morgan
Guaranty Trust Company of New York, Brussels office, as operator of the
Euroclear system and Cedelbank shall have accepted the Regulation S Global
Securities (as defined in the Indentures) for clearance.
(i) Maintenance and Rating. At the Closing Time, the Notes shall be rated
at least B2 by Moody's and B+ by S&P and the Issuer or the Guarantor shall have
delivered to the Initial Purchasers a letter dated the Closing Time, from each
such rating agency, or other evidence satisfactory to the Initial Purchasers,
confirming that the Notes have such ratings; and since the date of this
Agreement, there shall not have occurred a downgrading in the rating assigned to
the Notes or debt securities of the Guarantor or any Subsidiary by any
"nationally recognized substantial rating agency", as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the Securities Act, and no
such securities rating agency shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of the
Notes or any debt securities of the Guarantor or any Subsidiary.
(j) PORTAL. At the Closing Time, the Notes shall have been designated as
eligible for trading on PORTAL.
(k) Additional Documents. At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents and opinions as they
may require for the purpose of enabling them to pass upon the issuance and sale
of the Notes as herein contemplated, or in order to evidence the accuracy of any
of the representations or warranties, or the fulfillment of any of the
conditions herein contained, and all proceedings taken by the Issuer, the
Guarantor and Holdings in connection with the issuance and sale of the Notes as
herein contemplated shall be satisfactory in form and substance to the Initial
Purchasers and their counsel.
(l) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Initial Purchasers by notice to the Issuer,
the Guarantor and Holdings at any time at or prior to the Closing Time and such
termination shall be without liability of any party to any other party except as
provided in Section 4 and except that Sections 1, 7, 8 and 9 and shall survive
any such termination and remain in full force and effect.
SECTION 6. SUBSEQUENT OFFERS AND RESALES OF THE NOTES.
(a) Initial Purchasers' Obligations. Each of the Initial Purchasers, the
Issuer, the Guarantor and Holdings hereby establish and agree to observe the
following procedures in connection with the offer and sale by the Initial
Purchasers of the Notes:
(i) Offers and Sales only to Qualified Institutional Buyers or non-U.S.
Persons. Offers and sales of the Notes will be made only by the
Initial Purchasers or their respective Affiliates who are qualified
to do so in the jurisdictions in which such offers or sales are made.
Each such offer or sale shall only be made to persons whom the
offeror or seller reasonably believes to be Qualified Institutional
Buyers or to non-U.S. persons acquiring the securities in an offshore
transaction in compliance with Regulation S.
(ii) No General Solicitation. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the Securities
Act) will be used in the United States in connection with the
offering or sale of the Notes.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
Subsequent Purchaser of a Note acting as fiduciary for one or more
third parties, in connection with an offer and sale to such
purchaser
<PAGE> 21
pursuant to clause (b) above, each third party shall, in the judgment of
the applicable Initial Purchaser, be a Qualified Institutional Buyer or
a non-U.S. Person outside the United States.
(iv) Subsequent Purchaser Notification. Each Initial Purchaser will take
reasonable steps to inform, and cause each of its U.S. Affiliates to
take reasonable steps to inform, persons acquiring Notes from such
Initial Purchaser or Affiliate, as the case may be, in the United
States that the Notes (A) have not been and will not be registered
under the Securities Act, (B) are being sold to them without
registration under the Securities Act in reliance on Rule 144A or in
accordance with another exemption from registration under the
Securities Act, as the case may be, and (C) may not be offered, sold
or otherwise transferred prior to (1) the date which is two years (or
such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) after the later
of the date of original issue of the Notes, and (2) such later date,
if any, as may be required under applicable laws except (x) to the
Issuer, (y) outside the United States in accordance with Rule 904 of
Regulation S, or (z) inside the United States in accordance with (I)
Rule 144A to a person whom the seller and any person acting on behalf
of the seller reasonably believes is a Qualified Institutional Buyer
that is purchasing such Notes for its own account or for the account
of a Qualified Institutional Buyer to whom notice is given that the
offer, sale or transfer is being made in reliance on Rule 144A under
the Securities Act or (II) pursuant to another available exemption
from registration under the Securities Act (it being understood that
delivery of the Final Offering Memorandum to such persons shall
constitute such reasonable steps).
(v) Restrictions on Transfer. Each of the Notes will bear, to the extent
applicable, the legend contained under "Notices to Investors" in the
Offering Memorandum for the time period and upon the other terms
stated therein, except after the Notes are resold pursuant to a
registration statement effective under the Securities Act. Following
the sale of the Notes by the Initial Purchasers to Subsequent
Purchasers pursuant to the terms hereof, the Initial Purchasers shall
not be liable or responsible to Holdings, the Guarantor or the Issuer
for any losses, damages or liabilities suffered or incurred by
Holdings, the Guarantor or the Issuer, including any losses, damages
or liabilities under the Securities Act, arising from or relating to
any resale or transfer of any Note.
(vi) Actions Regarding Other Offerings. Each Initial Purchaser
understands that no action has been or will be taken in any
jurisdiction (including Luxembourg) that would permit a public
offering of Notes, or possession or distribution of the Offering
Memorandum or any other offering or publicity materials relating to
the Notes, in any country or jurisdiction where action for that
purpose is required.
(vii) Restrictions Under United Kingdom Securities Regulations. Each
Initial Purchaser represents, warrants and agrees that (x) it has not
offered or sold and prior to the expiration of the period six months
after the date of issue of the Notes will not offer to sell in the
United Kingdom, by means of any document, any Notes to persons in the
United Kingdom except to persons whose ordinary activities involve
them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise
in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (y) it has complied and
will comply with all applicable provisions of the Public Offers of
Securities Regulations 1995 and the Financial Services Act 1986 with
respect to anything done by it in relation to the Notes in, from or
otherwise involving the United Kingdom; and (z) it has only issued or
passed on, and will only issue or pass on to any person, in the
United Kingdom, any document received by it in connection with the
issue of the Notes to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment
Advertisements)(Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.
(viii) No Sales of the Notes in Poland. Each Initial Purchaser represents
warrants and agrees that it has not offered or sold and will not
offer or sell any Notes in the Republic of Poland except under
circumstances that do not constitute a public offering or
distribution under the laws and regulations of the Republic of
Poland.
<PAGE> 22
(ix) Compliance with Applicable Laws. Each Initial Purchaser represents,
warrants and agrees that it will comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers, sells
or delivers the Notes or has in its possession or distributes the
Preliminary Offering Memorandum, the Final Offering Memorandum or any
offering or publicity material relating to the Notes.
(b) Covenants of the Issuer, the Guarantor and Holdings. Each of the
Issuer, the Guarantor and Holdings covenants with each Initial Purchaser as
follows:
(i) Due Diligence. In connection with the original distribution of the
Notes, the Issuer, the Guarantor and Holdings agree that, prior to
any offer or resale of the Notes by the Initial Purchasers, the
Initial Purchasers and counsel for the Initial Purchasers shall have
the right to make reasonable inquiries into the business and legal
matters of the Guarantor and the Subsidiaries. The Issuer, Guarantor
and Holdings also agree to provide answers to each prospective
Subsequent Purchaser of Notes who so requests concerning the
Guarantor and the Subsidiaries (to the extent that such information
is available or can be acquired and made available to prospective
Subsequent Purchasers without unreasonable effort or expense and to
the extent the provision thereof is not prohibited by applicable law)
and the terms and conditions of the offering of the Notes, as
provided in the Offering Memorandum.
(ii) Integration. The Issuer, the Guarantor and Holdings agree that they
will not and will cause their Affiliates not to solicit any offer to
buy or make any offer or sale of, or otherwise negotiate in respect
of, securities of the Issuer of any class if, as a result of the
doctrine of "integration" referred to in Rule 502 under the
Securities Act, such offer or sale would render invalid (for the
purpose of (i) the sale of the Notes by the Issuer to the Initial
Purchasers, (ii) the resale of the Notes by the Initial Purchasers
to Subsequent Purchasers, or (iii) the resale of the Notes by such
Subsequent Purchasers to others) the exemption from the registration
requirements of the Securities Act provided by Section 4(2) thereof
or by Rule 144A or by Regulation S thereunder or otherwise.
(iii) Rule 144A Information. Each of the Issuer, the Guarantor and
Holdings agree that, in order to render the Notes eligible for
resale pursuant to Rule 144A under the Securities Act, while any of
the Notes remain outstanding, it will make available, upon request,
to any holder of Notes or prospective purchasers of Notes the
information specified in Rule 144A(d)(4), unless it furnishes
information to the Commission pursuant to Section 13 or 15(d) of the
Exchange Act (such information, whether made available to holders or
prospective purchasers or furnished to the Commission, is herein
referred to as "Additional Information"). For a period of two years
after the Closing Time, each of the Issuer, the Guarantor and
Holdings will make available upon request copies of all Additional
Information, together with such other documents, reports and
information as shall be furnished by it to the holders of the Notes.
(c) Resale Pursuant to Rule 903 of Regulation S, Rule 144A or Other
Exemption. Each Initial Purchaser understands that the Notes have not been and
will not be registered under the Securities Act and may not be offered or sold
within the United States except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
Each Initial Purchaser severally represents and agrees that it has not offered
or sold, and will not offer or sell, any Notes constituting part of its
allotment within the United States except in accordance with Rule 903 of
Regulation S under the Securities Act or Rule 144A under the Securities Act or
another applicable exemption under the Securities Act. Accordingly, neither such
Initial Purchaser, its Affiliates nor any persons acting on its behalf have
engaged or will engage in any directed selling efforts with respect to Notes and
the Initial Purchasers, their Affiliates and any person acting on their behalf
have complied and will comply with the offering restriction requirements of
Regulation S. Each Initial Purchaser agrees that, at or prior to confirmation of
a sale of Notes (other than a sale of Notes pursuant to Rule 144A or pursuant to
Section 6(a)(i)(B) hereof), it or its Affiliates will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Notes from it or through it during the restricted
period a confirmation or notice to substantially the following effect:
"The Notes covered hereby have not been registered under the United States
Securities Act of 1933, as amended (the "Securities Act") and may not be
offered or sold within the United States or to or for the account or
benefit of U.S. persons (i) as part of their distribution at any time and
(ii) otherwise until 40 days
<PAGE> 23
after the later of the date upon which the offering of the Notes commenced
and the date of closing, except in either case in accordance with
Regulation S or another exemption from the registration requirements of the
Securities Act. Terms used above have the meaning given to them by
Regulation S."
Terms used in the above paragraph have the meanings given to them by Regulation
S.
SECTION 7. INDEMNIFICATION. (a) Indemnification of Initial
Purchasers. Each of the Issuer, the Guarantor and Holdings, jointly and
severally, agrees to indemnify and hold harmless each Initial Purchaser and each
person, if any, who controls such Initial Purchaser within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Preliminary Offering Memorandum or the Final Offering Memorandum (or
any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 7(d) below) any such settlement is effected
with the written consent of the Issuer, the Guarantor or Holdings;
and
(iii) against any and all expense whatsoever, as incurred (including the
fees and disbursements of counsel chosen by the Initial Purchasers),
reasonably incurred in investigating, preparing or defending against
any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any
such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Issuer, the
Guarantor or Holdings by any Initial Purchaser expressly for use in the Offering
Memorandum (or any amendment or supplement thereto) provided, further, that each
of the Issuer, the Guarantor and Holdings will not be liable to the Initial
Purchasers or any person controlling such Initial Purchasers with respect to any
such untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Offering Memorandum to the extent that each of
the Issuer, the Guarantor and Holdings shall sustain the burden of proving that
any such loss, liability, claim, damage or expense resulted from the fact that
the Book-Running Manager sold securities to a person to whom such Initial
Purchaser failed to send or give, at or prior to the written confirmation of the
sale of such Notes, a copy of the Final Offering Memorandum (as amended or
supplemented) if the Issuer, the Guarantor or Holdings has previously furnished
copies thereof to such Initial Purchaser (as and to the extent required by law
in order to allow for distribution of the Final Offering Memorandum in a timely
manner) and the loss, liability, claim, damage or expense of the Initial
Purchasers resulted from an untrue statement or omission or alleged untrue
statement or omission of a material fact contained in or omitted from such
Preliminary Offering Memorandum (as amended or supplemented) which was corrected
in the Final Offering Memorandum (as amended or supplemented).
(b) Indemnification of Issuer, Guarantor, Holdings and their Directors and
Officers. Each Initial Purchaser agrees to indemnify and hold harmless the
Issuer, the Guarantor, Holdings, their respective directors and each person, if
any, who controls the Issuer, the Guarantor or Holdings within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act against any
and all loss, liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Offering Memorandum (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished
<PAGE> 24
to the Issuer, the Guarantor or Holdings by such Initial Purchaser expressly for
use in the Offering Memorandum (or any amendment or supplement thereto).
(c) Actions Against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this Section
7. In the case of parties indemnified pursuant to Section 7(a) above, counsel to
the indemnified parties shall be selected by the Initial Purchasers, and, in the
case of parties indemnified pursuant to Section 7(b) above, counsel to the
indemnified parties shall be selected by the Issuer, the Guarantor or Holdings.
An indemnifying party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. Except as expressly provided in this Section 7, in no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel, limited to one law firm per country)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 7 or Section 8 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) Settlement Without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel in accordance with the
requirements of this Section 7, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by Section 7(a)(ii)
effected without its written consent if (i) such settlement is entered into more
than 45 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into, and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
SECTION 8. CONTRIBUTION. If the indemnification provided for in Section 7
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuer, the
Guarantor and Holdings on the one hand and the Initial Purchasers on the other
hand from the offering of the Notes pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Issuer, the Guarantor
and Holdings on the one hand and of the Initial Purchasers on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Issuer, the Guarantor and Holdings on
the one hand and the Initial Purchasers on the other hand in connection with the
offering of the Notes pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Notes pursuant to this Agreement (before deducting expenses) received by the
Issuer, the Guarantor and Holdings and the total underwriting discount received
by the Initial Purchasers bear to the aggregate initial offering price of the
Notes.
The relative fault of the Issuer, the Guarantor and Holdings on the one
hand and the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
<PAGE> 25
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Issuer, the Guarantor or Holdings or
by the Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Issuer, the Guarantor, Holdings and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this Section 8
were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 8. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
8 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Notes underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
such Initial Purchaser, and each director of the Issuer, the Guarantor and
Holdings and each person, if any, who controls the Issuer, the Guarantor or
Holdings within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act shall have the same rights to contribution as the Issuer, the
Guarantor or Holdings. The Initial Purchasers' respective obligations to
contribute pursuant to this Section 8 are several in proportion to the principal
amount of Notes set forth opposite their respective names in separate letters in
Schedule A hereto and not joint.
SECTION 9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Guarantor or any Subsidiary, as
the case may be, submitted pursuant hereto shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of the
Initial Purchasers or controlling person, or by or on behalf of the Issuer,
Guarantor or Holdings and shall survive delivery of the Notes to the Initial
Purchasers.
SECTION 10. TERMINATION OF AGREEMENT. (a) Termination; General. This
Agreement shall be subject to termination in the absolute discretion of the
Initial Purchasers by notice given to the Guarantor prior to delivery of and
payment for the Notes, if prior to such time (i) trading in securities generally
on any of the New York Stock Exchange, the American Stock Exchange or the NASDAQ
National Market System shall have been suspended or limited or minimum prices
shall have been established on any such exchange, (ii) a banking moratorium
shall have been declared by the Republic of Poland, U.S. Federal or New York
State authorities, (iii) there has occurred a material adverse change in the
currency exchange rate or exchange controls between the Polish zloty and the
U.S. dollar, which change makes it, in the judgment of the Initial Purchasers,
impracticable to proceed with the offering or delivery of the Notes as
contemplated in the Final Offering Memorandum (exclusive of any supplement
thereto) or would be likely to prejudice materially dealings in the Notes in the
secondary market or (iv) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States, any member state of the European
Union, or the Republic of Poland of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the judgment of the Initial Purchasers, impracticable or inadvisable to
proceed with the offering or delivery of the Notes as contemplated by the Final
Offering Memorandum.
<PAGE> 26
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 7, 8 and 9 hereof shall survive such termination and remain in full force and
effect.
SECTION 11. DEFAULT BY ONE OR MORE OF THE INITIAL PURCHASERS. If one or
more of the Initial Purchasers shall fail at the Closing Time to purchase the
Notes which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the remaining Initial Purchaser shall have the right,
within 24 hours thereafter, to make arrangements for the non-defaulting Initial
Purchaser, or any other Initial Purchasers, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed upon and upon
the terms herein set forth; if, however, the Initial Purchasers shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Notes to be purchased hereunder, the
non-defaulting Initial Purchaser shall be obligated to purchase the full amount
thereof, or
(b) if the number of Defaulted Securities exceeds 10% of the aggregate
principal amount of the Notes to be purchased hereunder, this Agreement shall
terminate without liability on the part of the non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Initial Purchasers or the Issuer shall have the right
to postpone the Closing Time for a period not exceeding seven days in order to
effect any required changes in the Offering Memorandum or in any other documents
or arrangements. As used herein, the term "Initial Purchaser" includes any
person substituted for an Initial Purchaser under this Section 11.
SECTION 12. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to Merrill Lynch International Limited at Ropemaker
Place, 25 Ropemaker Street, London EC2Y 9LY, facsimile no. (+44) 171 892-8601,
attention of Timothy Grell, with a copy to Merrill Lynch, Legal Department,
facsimile no. (+44) 171 867-4291 and to Salomon Brothers International Limited
at Victoria Plaza, 111 Buckingham Palace Road, London SW1W 0SB, facsimile no.
(+44) 171-721 2000, attention of Malcolm Stewart; notices to the Issuer, the
Guarantor or Holdings shall be directed to Polska Telefonia Cyfrowa Sp. z o.o.,
Al. Jerozolimskie 181, 02-222 Warzawa, Poland, facsimile no (+48) 22-573-6289
attention of Stanislaw Majewski, Chief Financial Officer.
SECTION 13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Issuer, the Guarantor and Holdings, and
their respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Initial Purchasers, the Issuer, the Guarantor, Holdings and their
respective successors and the controlling persons and officers and directors
referred to in Sections 7 and 8 hereof and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Initial Purchasers and the Issuer, the Guarantor,
Holdings and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Notes from any
Initial Purchaser shall be deemed to be a successor by reason merely of such
purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO LONDON TIME.
<PAGE> 27
SECTION 15. AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF
IMMUNITIES. Each of the Issuer, the Guarantor and Holdings agrees that any
suit, action or proceeding against the Issuer, the Guarantor or Holdings,
brought by any Initial Purchaser, the directors, officers, employees and agents
of any Initial Purchaser, or by any person who controls any Initial Purchaser,
arising out of or based upon this Agreement or the transactions contemplated
hereby may be instituted in any state or federal court in the Borough of
Manhattan, City of New York, New York, and waives any objection which it may nor
or hereafter have to the laying of venue of any such proceeding, and irrevocably
submits to the non-exclusive jurisdiction of such courts in any suit, action or
proceeding. Each of the Issuer, the Guarantor and Holdings has appointed CT
Corporation System, with offices on the date hereof at 111 Eighth Avenue New
York, NY 10011, as its authorized agent (the "Agent"), upon whom process may be
served in any suit, action or proceeding arising out of or based upon this
Agreement or the transactions contemplated herein which may be instituted in any
state or federal court in the Borough of Manhattan, City of New York, New York,
by any Initial Purchaser, the directors, officers, employees and agents of any
Initial Purchaser, or by any person, if any, who controls any Initial Purchaser,
and expressly accepts the non-exclusive jurisdiction of any such court in
respect of any such suit, action or proceeding. Each of the Issuer, the
Guarantor and Holdings hereby represents and warrants that the Agent has
accepted such appointment and has agreed to act as said agent for service of
process, and each of the Issuer, the Guarantor and Holdings agree to take any
and all action, including the filing of any and all documents that may be
necessary to continue such appointment in full force and effect as aforesaid.
Service of process upon the Agent shall be deemed, in every respect, effective
service of process upon the Issuer, the Guarantor and Holdings. Notwithstanding
the foregoing, any action involving the Guarantor arising out of or based upon
this Agreement may be instituted by any Initial Purchaser, the directors,
officers, employees and agents of any Initial Purchaser, or by any person who
controls any Initial Purchaser, in any court of competent jurisdiction in The
Netherlands, the Republic of Poland or in Luxembourg.
To the extent that the either of the Issuer, the Guarantor or Holdings has
or hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, it hereby irrevocably waives such immunity in respect of its
obligations under the above-referenced documents.
SECTION 16. JUDGMENT CURRENCY. Each of the Issuer, the Guarantor and
Holdings agrees to indemnify each Initial Purchaser, the officers, directors and
agents of such Initial Purchaser and each person, if any, who controls such
Initial Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act against any loss incurred by any of them as a
result of any judgment or order being given or made for any amount due under
this Agreement and such judgment or order being expressed and paid in a currency
(the "Judgment Currency") other than United States dollars and as a result of
any variation as between (i) the rate of exchange at which the United States
dollar amount is converted into the Judgment Currency for the purpose of such
judgment or order and (ii) the spot rate of exchange in the City of New York at
which any such person on the date of payment of such judgment or order is able
to purchase United States dollars with the amount of the Judgment Currency
actually received by such person. The foregoing indemnity shall continue in full
force and effect notwithstanding any such judgment or order as aforesaid. The
term "spot rate of exchange" shall include any premiums and costs of exchange
payable in connection with the purchase of, or conversion into, United States
dollars.
SECTION 17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
SECTION 18. EFFECT OF HEADINGS. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
<PAGE> 28
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Issuer a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Initial Purchasers, the Issuer, the Guarantor and Holdings in accordance
with its terms.
Very truly yours,
PTC INTERNATIONAL FINANCE II S.A.,
By:
--------------------------------------
Name:
Title:
PTC INTERNATIONAL FINANCE (HOLDING)
B.V.,
By:
--------------------------------------
Name:
Title:
POLSKA TELEFONIA CYFROWA SP. Z O.O.,
By:
--------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written
MERRILL LYNCH INTERNATIONAL
By:
- --------------------------------------
Name:
Title:
SALOMON BROTHERS INTERNATIONAL LIMITED
By:
- --------------------------------------
Name:
Title:
<PAGE> 29
SCHEDULE A
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
NAME OF INITIAL PURCHASER EURO NOTES DOLLAR NOTES
- ------------------------- ------------ ------------
<S> <C> <C>
Merrill Lynch International................................. E165,000,000 $ 82,500,000
Salomon Brothers International Limited...................... 135,000,000 67,500,000
------------ ------------
Total....................................................... E300,000,000 $150,000,000
============ ============
</TABLE>
<PAGE> 30
SCHEDULE B
PTC INTERNATIONAL FINANCE II S.A.
*300,000,000 11 1/4% SENIOR SUBORDINATED NOTES DUE 2009
$150,000,000 11 1/4% SENIOR SUBORDINATED NOTES DUE 2009
1. The purchase price to be paid by the Initial Purchasers for the Notes
shall be 98.528% of the principal amount thereof. The Guarantor will pay the
Initial Purchasers *8,250,000 in commission in connection with the sale of the
Euro Notes and $4,125,000 in commission in connection with the sale of the
Dollar Notes.
2. The interest rate on the Euro Notes shall be 11 1/4% per annum;
interest will be payable semi-annually on June 1 and December 1. The interest
rate on the Dollar Notes shall be 11 1/4% per annum; interest will be payable
semi-annually on June 1 and December 1.
3. The Notes will mature on December 1, 2009.
4. The redemption price supplied in the Offering Memorandum (and
correspondingly in the Indentures) with respect to redemptions of Notes from the
proceeds of Equity Offerings shall be 111 1/4% of the principal amount thereof.
5. The redemption prices supplied in the Offering Memorandum (and
correspondingly in the Indentures) relating to the Notes shall be:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2004........................................................ 105.625%
2005........................................................ 103.750%
2006........................................................ 101.875%
2007(and thereafter)........................................ 100.000%
</TABLE>
<PAGE> 31
SCHEDULE B
PTC INTERNATIONAL FINANCE II S.A.
*300,000,000 11 1/4% SENIOR SUBORDINATED NOTES DUE 2009
$150,000,000 11 1/4% SENIOR SUBORDINATED NOTES DUE 2009
1. The purchase price to be paid by the Initial Purchasers for the Notes
shall be 98.528% of the principal amount thereof. The Guarantor will pay the
Initial Purchasers *8,250,000 in commission in connection with the sale of the
Euro Notes and $4,125,000 in commission in connection with the sale of the
Dollar Notes.
2. The interest rate on the Euro Notes shall be 11 1/4% per annum;
interest will be payable semi-annually on June 1 and December 1. The interest
rate on the Dollar Notes shall be 11 1/4% per annum; interest will be payable
semi-annually on June 1 and December 1.
3. The Notes will mature on December 1, 2009.
4. The redemption price supplied in the Offering Memorandum (and
correspondingly in the Indentures) with respect to redemptions of Notes from the
proceeds of Equity Offerings shall be 111 1/4% of the principal amount thereof.
5. The redemption prices supplied in the Offering Memorandum (and
correspondingly in the Indentures) relating to the Notes shall be:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2004........................................................ 105.625%
2005........................................................ 103.750%
2006........................................................ 101.875%
2007(and thereafter)........................................ 100.000%
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
POLSKA TELEFONIA CYFROWA Sp. z o.o.
PTC INTERNATIONAL FINANCE B.V., a private company with limited liability
organized under the laws of The Netherlands.
PTC INTERNATIONAL FINANCE (HOLDING) B.V., a private company with limited
liability organized under the laws of The Netherlands.
PTC INTERNATIONAL FINANCE (HOLDING) B.V.
PTC INTERNATIONAL FINANCE II S.A., a societe anonyme (limited liability
company), organized under the laws of Luxembourg.
PTC INTERNATIONAL FINANCE II S.A.
None.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Polska Telefonia Cyfrowa
Sp. z o.o., PTC International Finance II S.A. and PTC International Finance
(Holding) B.V. on Form F-4 of our report dated March 22, 1999, appearing in the
Registration Statement, and to the reference to us under the headings "Summary
Financial Data," "Selected Financial Data" and "Independent Accountant" in such
Prospectus.
/s/ ARTHUR ANDERSEN SP. Z O.O.
- ----------------------------------------
Arthur Andersen Sp. z o.o.
Warsaw, Poland
March 2, 2000
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
---------------------------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization
if not a U.S. national bank)
</TABLE>
225 FRANKLIN STREET, BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
MAUREEN SCANNELL BATEMAN, ESQ. EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
<TABLE>
<S> <C> <C>
PTC INTERNATIONAL PTC INTERNATIONAL POLSKA TELEFONIA
FINANCE U.S.A. FINANCE (HOLDING) B.V. CYFROWA SP. Z O.O.
(Exact name of Registrant as
specified in its charter)
LUXEMBOURG THE NETHERLANDS POLAND
(State or other jurisdiction of
incorporation or organization)
NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE
(I.R.S. Employer Identification No.)
41 AVENUE DE LA GARE STRAWINSKYLAAN 3705 AL JEROZOLIMSKIE 181
L-1611 Luxembourg 1077 ZX Amsterdam 02-222 Warsaw
011 353 485 0501 011 31 406 4444 011 48 22 573 6000
</TABLE>
$150,000,000 U.S. DOLLARS 11 1/4% SENIOR SUBORDINATED
GUARANTEED NOTES DUE DECEMBER 1, 2009
(Title of Indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to which
it is subject.
Department of Banking and Insurance of The Commonwealth of Massachusetts,
100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent, State
Steel Corporation.
(See note on page 2.)
ITEM 3. THROUGH TO ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as now in effect,
is on file with the Securities Exchange Commission as Exhibit 1 to
Amendment No. 1 to the Statement of Eligibility and Qualification of
Trustee (Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of Massachusetts
that no certificate of authority for the trustee to commence business was
necessary or issued is on file with the Securities and Exchange
Commission as Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as Exhibit
3 to Amendment No. 1 to the Statement of Eligibility and Qualification of
Trustee (Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on file with
the Securities and Exchange Commission as Exhibit 4 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Eastern Edison Company (File No. 33-37823) and
is incorporated herein by reference thereto.
1
<PAGE> 3
5. A copy of each indenture referred to in Item 4, if the obligor is in
default.
Not applicable.
6. The consent of United States institutional trustees required by
Section 321(b) of the Act.
The consents of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item . of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 18(th) day of February, 2000.
STATE STREET BANK AND TRUST COMPANY
By: /s/ SUSAN C. MERKER
Susan C. Merker
Vice President
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by PTC
International Finance II S.A., PTC International Finance (Holding) B.V., and
Polska Telefonia Cyfrowa Sp. z o.o. of its $150,000,000 U.S. Dollars 11 1/4%
Senior Subordinated Guaranteed Notes Due December 1, 2009 we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ SUSAN C. MERKER
------------------------------------
Susan C. Merker
Vice President
February 18, 2000
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business September 30, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
THOUSANDS OF
DOLLARS
------------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin........ 1,510,845
Interest-bearing balances................................. 14,076,224
Securities.................................................. 14,318,348
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and its Edge
subsidiary................................................ 8,365,790
Loans and lease financing receivables:
Loans and leases, net of unearned income.................. 7,916,057
Allowance for loan and lease losses....................... 92,091
Allocated transfer risk reserve........................... 0
Loans and leases, net of unearned income and allowances... 7,833,066
Assets held in trading accounts............................. 1,739,144
Premises and fixed assets................................... 531,098
Other real estate owned..................................... 0
Investments in unconsolidated subsidiaries.................. 603
Customers' liability to this bank on acceptance
outstanding............................................... 125,222
Intangible assets........................................... 236,931
Other assets................................................ 1,468,218
-----------
Total assets................................................ 50,196,389
===========
LIABILITIES
Deposits:
In domestic offices....................................... 10,235,475
Noninterest-bearing.................................... 7,515,809
Interest-bearing....................................... 2,719,666
In foreign offices and Edge subsidiary.................... 21,827,096
Noninterest-bearing.................................... 47,540
Interest-bearing....................................... 21,779,556
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge subsidiary........................................... 11,976,613
Demand notes issued to the U.S. Treasury.................... 431,057
Trading liabilities....................................... 1,250,459
Other borrowed money........................................ 180,568
Subordinated notes and debentures........................... 0
Bank's liability on acceptances executed and outstanding.... 125,222
Other liabilities........................................... 1,313,563
Total liabilities........................................... 47,340,053
===========
EQUITY CAPITAL
Perpetual preferred stock and related surplus............... 0
Common stock................................................ 29,931
Surplus..................................................... 492,756
Undivided profits and capital reserves/Net unrealized
holding gains (losses).................................... 2,373,416
Net unrealized holding gains (losses) on
available-for-sale securities.......................... (35,467)
Cumulative foreign currency translation adjustments......... (4,300)
Total equity capital........................................ 2,856,336
-----------
Total liabilities and equity capital........................ 50,196,389
===========
</TABLE>
4
<PAGE> 6
I, Rex S. Schuetta, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuetta
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE> 1
EXHIBIT 25.2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
---------------------------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization
if not a U.S. national bank)
</TABLE>
225 FRANKLIN STREET, BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
MAUREEN SCANNELL BATEMAN, ESQ. EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
<TABLE>
<S> <C> <C>
PTC INTERNATIONAL PTC INTERNATIONAL POLSKA TELEFONIA
FINANCE U.S.A. FINANCE (HOLDING) B.V. CYFROWA SP. Z O.O.
(Exact name of Registrant as
specified in its charter)
LUXEMBOURG THE NETHERLANDS POLAND
(State or other jurisdiction of
incorporation or organization)
NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE
(I.R.S. Employer Identification No.)
41 AVENUE DE LA GARE STRAWINSKYLAAN 3705 AL JEROZOLIMSKIE 181
L-1611 Luxembourg 1077 ZX Amsterdam 02-222 Warsaw
011 353 485 0501 011 31 406 4444 011 48 22 573 6000
</TABLE>
EURO 300,000,000 U.S. DOLLARS 11 1/4% SENIOR SUBORDINATED
GUARANTEED NOTES DUE DECEMBER 1, 2009
(Title of Indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to which
it is subject.
Department of Banking and Insurance of The Commonwealth of Massachusetts,
100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent, State
Steel Corporation.
(See note on page 2.)
ITEM 3. THROUGH TO ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as now in effect,
is on file with the Securities Exchange Commission as Exhibit 1 to
Amendment No. 1 to the Statement of Eligibility and Qualification of
Trustee (Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of Massachusetts
that no certificate of authority for the trustee to commence business was
necessary or issued is on file with the Securities and Exchange
Commission as Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as Exhibit
3 to Amendment No. 1 to the Statement of Eligibility and Qualification of
Trustee (Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on file with
the Securities and Exchange Commission as Exhibit 4 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Eastern Edison Company (File No. 33-37823) and
is incorporated herein by reference thereto.
1
<PAGE> 3
5. A copy of each indenture referred to in Item 4, if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item . of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 18(th) day of February, 2000.
STATE STREET BANK AND TRUST COMPANY
By: /s/ SUSAN C. MERKER
------------------------------------
Susan C. Merker
Vice President
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by PTC
International Finance II S.A., PTC International Finance (Holding) B.V., and
Polska Telefonia Cyfrowa Sp. z o.o. of its Euro $300,000,000 11 1/4% Senior
Subordinated Guaranteed Notes Due December 1, 2009 we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ SUSAN C. MERKER
------------------------------------
Susan C. Merker
Vice President
February 18, 2000
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business September 30, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
THOUSANDS OF
DOLLARS
------------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin........ 1,510,845
Interest-bearing balances................................. 14,076,224
Securities.................................................. 14,318,348
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and its Edge
subsidiary................................................ 8,365,790
Loans and lease financing receivables:
Loans and leases, net of unearned income.................. 7,916,057
Allowance for loan and lease losses....................... 92,091
Allocated transfer risk reserve........................... 0
Loans and leases, net of unearned income and allowances... 7,833,066
Assets held in trading accounts............................. 1,739,144
Premises and fixed assets................................... 531,098
Other real estate owned..................................... 0
Investments in unconsolidated subsidiaries.................. 603
Customers' liability to this bank on acceptance
outstanding............................................... 125,222
Intangible assets........................................... 236,931
Other assets................................................ 1,468,218
-----------
Total assets................................................ 50,196,389
===========
LIABILITIES
Deposits:
In domestic offices....................................... 10,235,475
Noninterest-bearing.................................... 7,515,809
Interest-bearing....................................... 2,719,666
In foreign offices and Edge subsidiary.................... 21,827,096
Noninterest-bearing.................................... 47,540
Interest-bearing....................................... 21,779,556
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge subsidiary........................................... 11,976,613
Demand notes issued to the U.S. Treasury.................... 431,057
Trading liabilities....................................... 1,250,459
Other borrowed money........................................ 180,568
Subordinated notes and debentures........................... 0
Bank's liability on acceptances executed and outstanding.... 125,222
Other liabilities........................................... 1,313,563
Total liabilities........................................... 47,340,053
===========
EQUITY CAPITAL
Perpetual preferred stock and related surplus............... 0
Common stock................................................ 29,931
Surplus..................................................... 492,756
Undivided profits and capital reserves/Net unrealized
holding gains (losses).................................... 2,373,416
Net unrealized holding gains (losses) on
available-for-sale securities.......................... (35,467)
Cumulative foreign currency translation adjustments......... (4,300)
Total equity capital........................................ 2,856,336
-----------
Total liabilities and equity capital........................ 50,196,389
===========
</TABLE>
4
<PAGE> 6
I, Rex S. Schuetta, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuetta
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER FOR ALL OUTSTANDING
11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE DECEMBER 1, 2009
IN EXCHANGE FOR
11 1/4 SENIOR SUBORDINATED GUARANTEED NOTES DUE DECEMBER 1, 2009
PTC INTERNATIONAL FINANCE II S.A.
PURSUANT TO THE PROSPECTUS DATED MARCH 10, 2000
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON APRIL 25, 2000 OR SUCH LATER DATE AND TIME TO
WHICH THE EXCHANGE OFFER MAY BE EXTENDED BY PTC INTERNATIONAL FINANCE II S.A.
(THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
The Exchange Agent for this Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
Corporate Trust Department
Two Avenue de Lafayette
Fifth Floor
Boston, Massachusetts 02111-1724
Attention: Kellie Mullen
Telephone:
+1 617-662-1523
Facsimile:
+1 617-662-1452
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR FACSIMILE NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR OTHER INFORMATION, YOU
MAY CONTACT THE EXCHANGE AGENT. IN ADDITION, COPIES OF THE PROSPECTUS OR OF THIS
LETTER OF TRANSMITTAL MAY BE OBTAINED FROM KREDIETBANK S.A. LUXEMBOURGEOISE, 43
BOULEVARD ROYAL, L-2955 LUXEMBOURG, TELEPHONE: +352 4797 1, FACSIMILE: +352 4797
73 951, ATTENTION: CORPORATE TRUST AND AGENCIES.
This Letter of Transmittal (the "Letter of Transmittal") relates to the
Prospectus dated March 10, 2000 (as it may be supplemented and amended from time
to time, the "Prospectus") of PTC International Finance II S.A., a societe
anonyme (limited liability company) under the laws of Luxembourg (the "Issuer"),
which together with the Letter of Transmittal constitute the Issuer's offer (the
"Exchange Offer") to exchange E1,000 in principal amount of its 11 1/4% Senior
Subordinated Guaranteed Notes Due December 1, 2009 (the "Euro Notes") and $1,000
in principal amount of its 11 1/4% Senior Subordinated Guaranteed Notes Due
December 1, 2009 (the "Dollar Notes," and together with the Euro Notes, the
"Exchange Notes") which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus is a part, for a like principal amount of its outstanding 11 1/4%
Senior Subordinated Guaranteed Notes due December 1, 2009 (the "Old Notes").
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus.
<PAGE> 2
Upon the terms and subject to the conditions of this Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and the
issuance of the Exchange Notes will be made in accordance with the terms of the
Exchange Offer. For the purposes of the Exchange Offer, the Issuer shall be
deemed to have accepted for exchange validly tendered Old Notes when, as and if
the Issuer has given written notice thereof to the Exchange Agent.
In connection with the Exchange Offer by the Issuer, Book-Entry Interests
in the Old Notes ("Old Book-Entry Interests") may be tendered in exchange for
Book-Entry Interests in the Exchange Notes ("Exchange Book-Entry Interests")
that are traded through the facilities of The Depository Trust Company, New
York, New York ("DTC"), Euroclear or Clearstream (formerly known as
"Cedelbank"), as the case may be. References herein to Old Notes include Old
Book-Entry Interests and references to Exchange Notes include Exchange
Book-Entry Interests.
TO ACCEPT THE EXCHANGE OFFER THROUGH THE FACILITIES OF EUROCLEAR OR
CLEARSTREAM, AN ELECTRONIC INSTRUCTION RELATING TO THE EXCHANGE OFFER MUST BE
SENT TO EUROCLEAR OR CLEARSTREAM IN ACCORDANCE WITH THEIR PROCEDURES IN ORDER TO
TENDER THE OLD NOTES IN PLACE OF SENDING A SIGNED, HARD COPY OF THIS LETTER OF
TRANSMITTAL. THE ELECTRONIC INSTRUCTION TRANSMITTED BY EUROCLEAR OR CLEARSTREAM
TO THE EXCHANGE AGENT MUST CONTAIN A COMPUTER GENERATED MESSAGE BY WHICH THE
PARTICIPANT ACKNOWLEDGES ITS RECEIPT OF, AND AGREES TO BE BOUND BY THE TERMS OF
THIS LETTER OF TRANSMITTAL. ALL DELIVERIES OF BOOK ENTRY INTERESTS MUST BE MADE
IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE PROSPECTUS.
DTC'S AUTOMATED TENDER OFFER PROGRAM ("ATOP") IS THE ONLY METHOD OF
PROCESSING EXCHANGE OFFERS THROUGH DTC. TO ACCEPT THE EXCHANGE OFFER THROUGH
ATOP, PARTICIPANTS IN DTC HOLDING OLD BOOK ENTRY INTERESTS MUST SEND ELECTRONIC
INSTRUCTIONS TO DTC THROUGH DTC'S COMMUNICATION SYSTEM IN PLACE OF SENDING A
SIGNED, HARD COPY OF THIS LETTER OF TRANSMITTAL. DTC IS OBLIGATED TO COMMUNICATE
THOSE ELECTRONIC INSTRUCTIONS TO THE EXCHANGE AGENT. TO TENDER OLD BOOK ENTRY
INTERESTS THROUGH ATOP, THE ELECTRONIC INSTRUCTIONS SENT TO DTC AND TRANSMITTED
BY DTC TO THE EXCHANGE AGENT MUST CONTAIN A COMPUTER GENERATED MESSAGE BY WHICH
THE PARTICIPANT ACKNOWLEDGES ITS RECEIPT OF AND AGREES TO BE BOUND BY THIS
LETTER OF TRANSMITTAL. All deliveries of Old Book-Entry Interests must be made
in accordance with the procedures set forth in the Prospectus.
Upon receipt of an electronic transfer from a participant holding Old Book
Entry Interests (a "Tendering Holder"), DTC, Euroclear or Clearstream, as the
case may be, will block the position of Old Notes that the Tendering Holder has
requested to exchange and upon completion of the Exchange Offer and upon
confirmation of receipt of the Exchange Notes, DTC, Euroclear or Clearstream, as
the case may be, will simultaneously transfer the Old Notes out of the
participant's accounts and replace them with an equivalent amount of Exchange
Notes. By sending such electronic instruction, the holder of the Old Notes
acknowledges receipt of this Letter of Transmittal and the Prospectus and agrees
to be bound by the terms of this Letter of Transmittal, the respective
participant confirms on behalf of itself and the beneficial owners of such Old
Notes all provisions of the Letter of Transmittal applicable to it and such
beneficial owners as fully as if it had completed the information required
herein and executed and transmitted this Letter of Transmittal to the Exchange
Agent.
The Instructions included with this Letter of Transmittal must be followed
in their entirety. Questions and requests for assistance or for additional
copies of this Prospectus or this Letter of Transmittal may be directed to the
Exchange Agent, at the address listed above. In addition, copies of the
prospectus or of this Letter of Transmittal may be obtained from Kredietbank
S.A. Luxembourgeoise, 43 Boulevard Royal, L-2955 Luxembourg, Telephone: +352
4797 1, Facsimile: +352 4797 73 951, Attention: Corporate Trust and Agencies.
EACH PARTICIPANT IN TRANSMITTING AN INSTRUCTION TO EXCHANGE OLD NOTES FOR
EXCHANGE NOTES THROUGH DTC, EUROCLEAR OR CLEARSTREAM ON BEHALF OF ITSELF AND THE
BENEFICIAL OWNER OF THE OLD NOTES TENDERED THEREBY, ACKNOWLEDGES RECEIPT OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL AND AGREES TO BE BOUND BY THE TERMS
AND CONDITIONS OF THE EXCHANGE OFFER AS SET FORTH IN THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL.
2
<PAGE> 3
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
DESCRIPTION OF 11 1/4% SENIOR SUBORDINATED GUARANTEED
NOTES DUE DECEMBER 1, 2009 (THE OLD NOTES)
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
AGGREGATE TENDERED (MUST
PRINCIPAL AMOUNT BE IN INTEGRAL
NAMES AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY MULTIPLES OF
(PLEASE FILL IN, IF BLANK) NUMBER(S)(1) CERTIFICATE(S)(1) $1,000)(2)
- -------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
TOTAL
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by holders tendering by book-entry transfer.
(2) Unless indicated in the column labelled "Principal Amount Tendered," any
tendering Holder of Old Notes (including those tendering by book-entry
transfer) will be deemed to have tendered this entire aggregate principal
amount represented by the column labelled "Aggregate Principal Amount
Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
The minimum permitted tender is E1,000 or $1,000 in principal amount of the
Old Notes. All other tenders must be integral multiples of E1,000 or
$1,000.
HOLDERS OF OLD NOTES WHO WISH TO TENDER AND WHOSE OLD NOTES ARE NOT
IMMEDIATELY AVAILABLE OR WHO CANNOT DELIVER THEIR OLD NOTES AND ALL OTHER
DOCUMENTS REQUIRED HEREBY TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE OR
WHOSE OLD NOTES CANNOT BE DELIVERED ON A TIMELY BASIS PURSUANT TO THE RULES FOR
BOOK-ENTRY TRANSFER MAY TENDER OLD NOTES ACCORDING TO THE GUARANTEED DELIVERY
PROCEDURES SET FORTH IN THE PROSPECTUS UNDER THE CAPITAL, "THE EXCHANGE OFFER --
PROCEDURE FOR TENDERING." SEE INSTRUCTION 1 BELOW.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING
Name of Tendering Institution:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Account Number: Transaction Code Number: ---------------------
------------------------------------------
</TABLE>
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENT
THERETO.
3
<PAGE> 4
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6) (SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for To be completed ONLY if certificates for
Old Notes in a principal amount not Old Notes in a principal amount not
tendered, or Exchange Notes issued in tendered, or Exchange Notes issued in
exchange for Old Notes accepted for exchange for Old Notes accepted for
exchange, are to be issued in the name of exchange, are to be sent to someone other
someone other than the undersigned or if than the undersigned, or to the undersigned
Old Notes tendered by book-entry transfer at an address other than that shown above.
which are not exchanged and/or any Exchange
Notes are to be returned by credit to an Deliver certificate(s) to:
account maintained by DTC other than the
account designated above. Name
------------------------------------------
Issue certificate(s) to: (Please Print)
DTC Account Number Address
----------------------------- --------------------------------------------
Name ------------------------------------------
------------------------------------------
(Please Print) ------------------------------------------
(Include Zip Code)
Address
- -------------------------------------------- ------------------------------------------
(Tax Identification or Social Security No.)
- ------------------------------------------
--------------------------------------------
------------------------------------------
(Include Zip Code)
(Tax Identification or Social Security No.)
- --------------------------------------------
</TABLE>
4
<PAGE> 5
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The Tendering Holder of Old Notes wishing to accept the Exchange Offer
hereby irrevocably constitutes and appoints the Exchange Agent as the true and
lawful agent and attorney in fact of the Tendering Holder with respect to the
Old Notes, with full power of substitution (such power of attorney being deemed
to be an irrevocable power coupled with an interest), to (i) cause ownership of
the Old Notes to be cancelled upon acceptance by the Issuer of the Old Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Old Notes, all in accordance
with the terms of the Exchange Offer.
The Tendering Holder understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
Tendering Holder and the Issuer upon the terms and subject to the conditions of
the Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal
Rights." All authority herein conferred or agreed to be conferred shall survive
the death, dissolution or incapacity of the Tendering Holder and any beneficial
owner(s), and every obligation of the Tendering Holder or any beneficial
owner(s) hereunder shall be binding upon the heirs, representatives, successors,
and assigns of the Tendering Holder and such beneficial owner(s).
The Tendering Holder hereby represents and warrants that the Tendering
Holder has full power and authority to tender, exchange, assign, and transfer
the Old Notes and that the Issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances, and
adverse claims when the Old Notes are acquired by the Issuer as contemplated
herein. The Tendering Holder and each beneficial owner will, upon request,
execute and deliver any additional documents reasonably requested by the Issuer
or the Exchange Agent as necessary or desirable to complete and give effect to
the transactions contemplated hereby.
The Tendering Holder for itself and on behalf of the beneficial holders of
the Old Notes that it is tendering, also acknowledges that this Exchange Offer
is being made by the Issuer in reliance on an interpretation by the staff of the
Securities and Exchange Commission (the "SEC"), as set forth in no-action
letters issued to third parties, that the Exchange Notes issued in exchange for
the Old Notes pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other than a broker-dealer, as set
forth below, or any such Tendering Holder that is an "affiliate" of the Issuer
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Notes are acquired in the ordinary course of such Tendering
Holder's business and such Tendering Holders have no arrangement with any person
to participate in the distribution (within the meaning of the Securities Act) of
such Exchange Notes. By tendering, each Tendering Holder of Old Notes represents
to the Issuer for itself and on behalf of the beneficial holders of the Old
Notes that it is tendering that (i) the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is the holder
of the Old Notes, (ii) neither the Tendering Holder nor any such other person is
engaging in or intends to engage in a distribution of the Exchange Notes, (iii)
neither the Tendering Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes, (iv) neither the Tendering Holder nor any such other person is an
"affiliate," as defined under Rule 405 promulgated under the Securities Act, of
the Issuer and (v) if the beneficial holder of the Old Note is a broker-dealer,
that it acquired the Old Notes as a result of market-making or other trading
activities and that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes, however, by
so acknowledging and by delivering a prospectus, such holder will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Tendering Holder acknowledges that in reliance on an interpretation by the
staff of the SEC, a broker-dealer may fulfill his prospectus delivery
requirements with respect to the Exchange Notes (other than a resale of an
unsold allotment from the original sale of the Old Notes) with the Prospectus
which constitutes part of this Exchange Offer.
IMPORTANT: THE ELECTRONIC TENDER OF OLD NOTES THROUGH THE ATOP SYSTEM OF
DTC OR THROUGH THE ELECTRONIC TENDER SYSTEMS OF EUROCLEAR AND/OR CLEARSTREAM, AS
APPLICABLE, MUST BE RECEIVED PRIOR TO 5:00 P.M., NEW YORK TIME ON THE EXPIRATION
DATE.
5
<PAGE> 6
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
X Date
- -------------------------------------------- --------------------------------------------
X Date
- -------------------------------------------- --------------------------------------------
Signature(s) of Registered Holder(s)
or Authorized Signatory
Area Code and Telephone Number:
- --------------------------------------------------------------------------------------------
</TABLE>
The above lines must be signed by the registered holder(s) as their name(s)
appear(s) on the Old Notes or on a security position listing at the Book-Entry
Transfer Facility as the owner of the Old Notes or by person(s) authorized to
become registered holder(s) by a properly completed bond power from the
registered holder(s), a copy of which must be transmitted with this Letter of
Transmittal. If Old Notes to which this Letter of Transmittal relate are held of
record by two or more joint holders, then all such holders must sign this Letter
of Transmittal. If required by Instruction 4 hereto, the signatures on the above
lines must be guaranteed by an Eligible Institution.
If this letter is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, then such person must (i) set forth his or her full
title below and (ii) unless waived by the Issuer, subject evidence satisfactory
to the Issuer of such person's authority so to act with this letter. See
Instruction 4 regarding the completion of this Letter of Transmittal printed
below.
<TABLE>
<S> <C>
Name(s): Address:
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
(Please print) (include Zip Code)
Capacity: --------------------------------------------
- --------------------------------------------
</TABLE>
SIGNATURE(S) GUARANTEED BY AN ELIGIBLE INSTITUTION (IF REQUIRED BY INSTRUCTION
4):
<TABLE>
<S> <C>
(Name of Firm) (Authorized Signature)
------------------------------------- ------------------------------
(Name) (Title)
- -------------------------------------------- --------------------------------------------
(Address)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
(Area Code and Phone Number) Dated:
-------------------- ---------------------------------------- ,
2000
</TABLE>
6
<PAGE> 7
PTC INTERNATIONAL FINANCE II S.A.
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL. This Letter of Transmittal is
to be read by the beneficial owners of Old Notes who wish to exchange their Old
Notes pursuant to the Exchange Offer. For a Tendering Holder to properly tender
Old Notes pursuant to the Exchange Offer, a properly completed electronic tender
message sent to DTC, Euroclear or Clearstream, as the case may be, must be
received prior to 5:00 p.m., New York time, on the Expiration Date. Neither the
Issuer nor the Exchange Agent is under any obligation to notify any tendering
holder of the Issuer's acceptance of Old Notes prior to the closing of the
Exchange Offer. Delivery of the Old Notes will be deemed made only when actually
received or confirmed by the Exchange Agent.
2. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of E1,000 or $1,000 in principal amount. If less than the
entire principal amount of Old Notes held by the Tendering Holder is tendered,
the Tendering Holder should fill out the applicable items in the electronic
tender message sent to DTC, Euroclear or Clearstream, as the case may be. The
entire principal amount of Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
3. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or on any other
person) will be payable by the Tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the
electronic message sent to DTC, Euroclear or Clearstream, as the case may be,
the amount of such transfer taxes will be billed directly to such Tendering
Holder.
4. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Old Notes
will be determined by the Issuer in its sole discretion, which determination
will be final and binding. The Issuer reserves the right to reject any and all
Old Notes not validly tendered or any Old Notes the Issuer's acceptance of which
would, in the opinion of the Issuer or its counsel, be unlawful. The Issuer also
reserves the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Old Notes or as to any ineligibility of any holder
who seeks to tender Old Notes in the Exchange Offer. The interpretation of the
terms and conditions of the Exchange Offer (including this Letter of Transmittal
and the instructions hereto) by the Issuer shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Issuer shall determine.
Neither the Issuer, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned by the Exchange
Agent to the Tendering Holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Old Notes.
6. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Old Notes will be accepted.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Tendering Holders may also contact their broker, dealer,
commercial bank, trust
7
<PAGE> 8
company or other nominee for assistance concerning the Exchange Offer. Requests
for additional copies of the prospectus or this Letter of Transmittal may also
be directed to Kredietbank S.A. Luxembourgeoise, 43 Boulevard Royal, L-2955
Luxembourg, Telephone: + 352 47 97 1, Facsimile: + 352 47 97 73 951, Attention:
Corporate Trust and Agencies.
8. ACCEPTANCE OF OLD NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF OLD
NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuer
will accept for exchange all validly tendered Old Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Issuer shall be
deemed to have accepted Old Notes when, as and if the Issuer has given written
or oral notice (immediately followed in writing) thereof to the Exchange Agent.
9. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal
Rights."
10. INCORPORATION OF LETTER OF TRANSMITTAL. This Letter of Transmittal
shall be deemed to be incorporated in and acknowledged and accepted by any
tender through procedures established by DTC, Euroclear or Clearstream, as the
case may be, by any participant of DTC, Euroclear or Clearstream, as the case
may be, on behalf of itself and the beneficial owners of any Old Notes so
tendered.
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT OF OLD PRINCIPAL AMOUNT OF OLD
CERTIFICATE SURRENDERED NOTES TENDERED NOTES ACCEPTED
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
Delivery Prepared by:
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OFFER FOR ALL OUTSTANDING
11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE DECEMBER 1, 2009
IN EXCHANGE FOR
11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE DECEMBER 1, 2009
OF
PTC INTERNATIONAL FINANCE II S.A.
To Book-Entry Transfer Facility Participants:
We are enclosing herewith the materials listed below relating to the offer
by PTC International Finance II S.A. (the "Issuer") to exchange the E1,000 and
$1,000 principal amounts of its 11 1/4% Senior Subordinated Guaranteed Notes due
December 1, 2009 (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for the E1000 and
$1,000 principal amounts of its outstanding 11 1/4% Senior Subordinated
Guaranteed Notes due December 1, 2009 (the "Old Notes"), upon the terms and
subject to the conditions set forth in the Issuer's Prospectus, dated March 10,
2000, and the related Letter of Transmittal (which together constitute the
"Exchange Offer").
In connection with the Exchange Offer, book-entry depositary interests in
the Old Notes ("Old Book-Entry Interests") may be tendered to State Street Bank
and Trust Company (the "Book-Entry Depositary" or the "Exchange Agent") in
exchange for book-entry depositary interests in the Exchange Notes ("Exchange
Book-Entry Interests") which are traded through the facilities of The Depository
Trust Company (the "Book-Entry Transfer Facility"). The Book-Entry Depositary
has committed to exchange a like principal amount of Exchange Book-Entry
Interests for the Old Book-Entry Interests so tendered. References below to
Exchange or Old Notes include Exchange or Old Book-Entry Interests.
Enclosed herewith are copies of the following documents:
1. Prospectus dated March 10, 2000;
2. Letter of Transmittal;
3. Letter which may be sent to your clients for whose account you hold
Old Notes in your name or in the name of your nominee, to accompany the
instruction form referred to above, for obtaining such client's
instruction with regard to the Exchange Offer (Annex A); and
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER
WILL EXPIRE AT 5.00 P.M. NEW YORK TIME ON APRIL 25, 2000, UNLESS EXTENDED.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
To participate in the Exchange Offer, a beneficial holder must cause a
Book-Entry Transfer Facility Participant to tender such holder's Old Notes to
the Exchange Agent's account maintained at the Book-Entry Transfer Facility for
the benefit of the Exchange Agent through the procedures established by the
Book-Entry Transfer Facility, including transmission of a computer-generated
message that acknowledges and agrees to be bound by the terms of the Letter of
Transmittal. By complying with the Book-Entry Transfer Facility's procedures
with respect to the Exchange Offer, the Participant confirms on behalf of itself
and the beneficial owners of tendered Old Notes all provisions of the Letter of
Transmittal applicable to it and such beneficial owners as fully as if it
completed, executed and returned the Letter of Transmittal to the Exchange
Agent.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Issuer for itself and on behalf of the beneficial holders of
the Old Notes that it is tendering that (i) the Exchange Notes acquired pursuant
to the Exchange Offer are being obtained in the ordinary course of business of
the person receiving such Exchange Notes, whether or not such person is the
holder of the Old Notes, (ii) neither the holder nor any such other person is
engaging in or intends to engage in a distribution of the Exchange Notes,
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(iii) neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes, (iv) neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 promulgated under the Securities Act, of the Issuer and
(v) if the beneficial holder of the Old Note is a broker-dealer, that it
acquired the Old Notes as a result of market-making or other trading activities
and that it will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such Exchange Notes, however, by so
acknowledging and by delivering a prospectus, such holder will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act. The
holder acknowledges that in reliance on an interpretation by the staff of the
SEC, a broker-dealer may fulfill his prospectus delivery requirements with
respect to the Exchange Notes (other than a resale of an unsold allotment from
the original sale of the Old Notes) with the Prospectus which constitutes part
of this Exchange Offer.
The Issuer will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The Issuer
will pay or cause to be paid any transfer taxes payable on the transfer of Old
Notes to it, except as otherwise provided in Instruction 3 of the enclosed
Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
Exchange Agent at the relevant addresses contained in the Prospectus. These
materials may also be obtained from Kredietbank S.A. Luxembourgeoise at the
address set forth in the Prospectus.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF PTC INTERNATIONAL FINANCE II S.A. OR STATE STREET BANK AND TRUST
COMPANY OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR
BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED
HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
PTC INTERNATIONAL FINANCE II S.A.
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OFFER FOR ALL OUTSTANDING
11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE DECEMBER 1, 2009
IN EXCHANGE FOR
11 1/4% SENIOR SUBORDINATED GUARANTEED NOTES DUE DECEMBER 1, 2009
OF
PTC INTERNATIONAL FINANCE II S.A.
To our Clients:
We are enclosing herewith a Prospectus dated March 10, 2000 of PTC
International Finance II S.A. (the "Issuer") and a related Letter of Transmittal
(which together constitute the "Exchanger Offer") relating to the offer by the
Issuer to exchange the E1,000 and $1,000 principal amounts of its 11 1/4% Senior
Subordinated Guaranteed Notes due December 1, 2009 (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for the E1,000 and $1,000 principal amounts of its
outstanding 11 1/4% Senior Subordinated Guaranteed Notes due December 1, 2009
(the "Old Notes") upon the terms and subject to the conditions set forth in the
Exchange Offer.
In connection with the Exchange Offer by the Issuer, Book-Entry Interests
in the depositary interests in the Old Notes ("Old Book-Entry Interests") may be
tendered to State Street Bank and Trust Company (the "Book-Entry Depositary" or
the "Exchange Agent") in exchange for book-entry depositary interests in the
Exchange Notes ("Exchange Book-Entry Interests") which are traded through the
facilities of The Depository Trust Company (the "Book-Entry Transfer Facility").
The Book-Entry Depositary has committed to exchange a like principal amount of
Exchange Book-Entry Interests for the Old Book-Entry Interests so tendered.
References below to Exchange or Old Notes include Exchange or Old Book-Entry
Interests.
PLEASE NOTE THAT THE OFFER WILL EXPIRE AT 5.00 P.M. NEW YORK TIME ON April
25, 2000, UNLESS EXTENDED BY THE ISSUER.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
We are the holder of Old Notes for your account as a participant in the
Book-Entry Transfer Facility. A tender of such Old Notes can be made only by us
as the participant in the Book-Entry Transfer Facility and pursuant to your
instructions. The Letter of Transmittal is furnished to you for your information
only and cannot be used by you to tender Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account pursuant to the terms and conditions of
the Exchange Offer. We also request that you confirm that we may on your behalf
make the representations contained in the Letter of Transmittal that are to be
made with respect to you as beneficial owner.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Issuer for itself and on behalf of the beneficial holders of
the Old Notes that it is tendering that (i) the Exchange Notes acquired pursuant
to the Exchange Offer are being obtained in the ordinary course of business of
the person receiving such Exchange Notes, whether or not such person is the
holder of the Old Notes, (ii) neither the holder nor any such other person is
engaging in or intends to engage in a distribution of the Exchange Notes, (iii)
neither the holder nor any such other person has an arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iv)
neither the holder nor any such other person is an "affiliate," as defined under
Rule 405 promulgated under the Securities Act, of the Issuer and (v) if the
beneficial holder of the Old Note is a broker-dealer, that it acquired the Old
Notes as a result of market-making or other trading activities and that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes, however, by so acknowledging
and by delivering a prospectus, such holder will not be deemed to admit that it
is an "underwriter" within the
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meaning of the Securities Act. You acknowledge that in reliance on an
interpretation by the staff of the SEC, a broker-dealer may fulfill his
prospectus delivery requirements with respect to the Exchange Notes (other than
a resale of an unsold allotment from the original sale of the Old Notes) with
the Prospectus which constitutes part of this Exchange Offer.
PTC INTERNATIONAL FINANCE II S.A.
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